Highlights - Net income for the second quarter of $28.7 million, or $0.57 per diluted share
NOVI, Mich., Aug. 6 /PRNewswire-FirstCall/ -- ITC Holdings Corp.
(NYSE: ITC) today announced its second quarter results for the period ended
June 30, 2008. Net income for the quarter was $28.7 million, or $0.57 per
diluted share, compared to $20.0 million, or $0.46 per diluted share for the
second quarter of 2007. Net income for the first six months of 2008 was $54.2
million, or $1.10 per diluted share, compared to $36.9 million, or $0.85 per
diluted share for the same period last year.
"We are extremely pleased with our second quarter results, having posted
strong growth in both revenues and net income," said Joseph L. Welch,
chairman, president and CEO of ITC. "These positive results were primarily
driven by ITC Midwest's acquisition of Interstate Power and Light Company's
(IPL) electric transmission assets and growth in rate base at ITCTransmission
and METC. Our first six month results further validate the strength of our
growth strategy, and we have updated our 2008 earnings guidance to reflect our
better than expected results. We are continuing in our efforts to further
expand our footprint and remain committed to building the infrastructure and
supporting policies that will improve electric reliability, facilitate access
to renewable resources and provide customers equal access to wholesale energy
markets."
In the second quarter of 2008, ITCTransmission invested $20.2 million,
METC invested $27.9 million, and ITC Midwest invested $31.8 million in their
respective transmission systems. For the six month period, ITCTransmission,
METC and ITC Midwest's respective investments were $72.3 million, $54.1
million and $49.6 million.
In June the Cedar River in Cedar Rapids, Iowa, the location of ITC
Midwest's headquarters, crested to 19 feet above flood stage, flooding
hundreds of city blocks in and around Cedar Rapids and causing the evacuation
of our employees as well as damage to two of our substations. ITC responded
quickly and continues to work closely with IPL and Alliant Energy to restore
reliable electrical service in and around the flood-affected areas. ITC
Midwest suffered approximately $2 million in losses of protective relay and
monitoring equipment. The majority of the damage is expected to be covered by
insurance after a $1 million deductible. "We are very proud of our employees'
and contractors' response and hard work in restoring electric service as soon
as possible," said Jon E. Jipping, executive vice president and chief
operating officer. "Their efforts demonstrate the strong teamwork and customer
focus that is part of the ITC culture."
ITC reported operating revenues of $160.6 million for the second quarter
2008, an increase of $54.3 million over the comparable period last year.
Network revenues increased by $32.5 million due to the December 2007
acquisition by ITC Midwest of the electric transmission assets of IPL, for
which no revenues were included in our results of operations for the three
months ended June 30, 2007. Additionally, METC and ITCTransmission recognized
additional network revenues of $8.9 million and $5.8 million, respectively,
mainly due to higher net revenue requirement as a result of higher rate base,
operating expenses and taxes, among other items. Point-to-point, scheduling,
control and dispatch revenues increased primarily due to $1.8 million of ITC
Midwest revenues. Regional cost sharing revenues became applicable during 2008
and were $3.7 million for the three months ended June 30, 2008.
Operating revenues for the six months ended June 30, 2008, were $302.5
million, an increase of $95.0 million compared to the first six months of
2007. Network revenues billed increased by $60.7 million as a result of the
acquisition by ITC Midwest of the IPL transmission assets. Additionally, METC
and ITCTransmission recognized additional network revenues of $12.9 million
and $7.8 million, respectively, due to higher net revenue requirement as a
result of higher rate base, operating expenses and taxes, among other items.
Point-to-point, scheduling, control and dispatch revenues increased primarily
due to the addition of $3.4 million of ITC Midwest revenues. Regional cost
sharing revenues became applicable during 2008 and were $7.4 million for the
six months ended June 30, 2008.
Operation & maintenance (O&M) expenses of $32.9 million were $11.4 million
higher in the second quarter of 2008 than the same period in 2007. O&M
expenses increased primarily due to expenses incurred by ITC Midwest of $6.6
million that were not included in our results of operations for the three
months ended June 30, 2007. In addition to the increases in O&M expenses
relating to ITC Midwest, METC incurred additional vegetation management
expenses of $4.7 million.
For the six months ended June 30, 2008, O&M expenses of $54.4 million were
$14.3 million higher than for the same period in 2007. O&M expenses increased
by $9.7 million due to amounts incurred by ITC Midwest, for which no amounts
were included in our results of operations for the six months ended June 30,
2007. In addition to the increases in O&M expenses relating to ITC Midwest,
METC incurred additional vegetation management expenses of $5.1 million.
General and administrative (G&A) expenses of $21.4 million for the second
quarter of 2008 were $9.2 million higher than the same period in 2007. G&A
expenses increased primarily due to personnel additions and higher business
expenses, all of which include incremental costs incurred by ITC Midwest.
For the six months ended June 30, 2008, G&A expenses of $39.3 million were
$12.1 million higher than for the same period in 2007. G&A expenses increased
$10.2 million primarily due to personnel additions and higher business
expenses, mainly as a result of the acquisition of IPL transmission assets.
Also, G&A expenses increased by $1.1 million at ITC Grid Development and ITC
Great Plains subsidiaries for salaries, benefits and general business expenses
incurred during the six months ended June 30, 2008.
Depreciation and amortization expenses increased by $6.7 million in the
second quarter of 2008, compared to the same period in 2007. ITC Midwest
recognized depreciation expenses of $4.4 million for the three months ended
June 30, 2008. Depreciation and amortization expenses also increased at
ITCTransmission and METC due to a higher depreciable asset base resulting from
property, plant and equipment additions.
Depreciation and amortization expenses increased $12.9 million in the six
months ended June 30, 2008, compared to the same period in 2007. ITC Midwest
recognized depreciation expenses of $8.5 million for the six months ended June
30, 2008. Depreciation and amortization expenses also increased at
ITCTransmission and METC primarily due to a higher depreciable asset base
resulting from property, plant and equipment additions.
Taxes other than income taxes increased due to property tax expenses at
ITC Midwest of $1.6 million for the three months ended June 30, 2008.
Additionally, property tax expenses at ITCTransmission and METC increased by
$1.1 million primarily due to ITCTransmission and METC's capital additions,
which are included in the assessments for 2008 personal property taxes.
Partially offsetting these increases was a decrease of $0.4 million as a
result of the replacement of the Michigan Single Business Tax.
For the six months ended June 30, 2008, taxes other than income taxes
increased due to property tax expenses at ITC Midwest of $3.2 million.
Additionally, property tax expenses at ITCTransmission and METC increased by
$2.1 million primarily due to ITCTransmission and METC's capital additions,
which are included in the assessments for 2008 personal property taxes.
Partially offsetting these increases was a decrease of $1.0 million as a
result of the replacement of the Michigan Single Business Tax.
During the three and six months ended June 30, 2008, ITCTransmission sold
a permanent easement of land for a gain of $1.4 million.
For three and six months ended June 30, 2008, compared to three and six
months ended June 30, 2007, interest expense increased primarily due to higher
borrowing levels to finance our capital expenditures and to finance the ITC
Midwest acquisition.
Guidance for 2008
For 2008, earnings per diluted share are expected to be between $2.00 and
$2.05. This increase, compared to prior EPS guidance of $1.90 to $2.00, is
mainly due to higher projected rate base, higher load dispatch and ancillary
revenues and a gain on the sale of a permanent easement in the second quarter
of 2008. Investments in property, plant & equipment for 2008 are expected to
be approximately $95-110 million, $105-130 million and $85-100 million for
ITCTransmission, METC and ITC Midwest, respectively, as previously disclosed.
Second Quarter Conference Call
ITC will conduct a conference call to discuss second quarter 2008 earnings
results at 11 a.m. ET August 7, 2008. Joseph L. Welch, chairman, president
and CEO, will provide a business overview and Edward M. Rahill, senior vice
president and CFO, will discuss the financial results of the second quarter of
2008. Individuals wishing to participate in the conference call may dial toll-
free (877) 440-5787 (domestic) or (719) 325-4863 (international); there is no
passcode. The conference call replay, available through Thursday, August 14,
2008 can be accessed by dialing toll-free (888) 203-1112 (domestic) or (719)
457-0820 (international), passcode 1924427. Investors, the news media and the
public may listen to a live internet broadcast of the meeting at
http://investor.itc-holdings.com. The webcast also will be archived on the ITC
website at http://investor.itc-holdings.com.
Other Available Information
More detail about the 2008 second quarter results may be found in ITC's
Form 10-Q filing. Once filed with the Securities and Exchange Commission, an
electronic copy of the 10-Q can be found at ITC's website,
http://investor.itc-holdings.com. Written copies can also be made available by
contacting us either through our website or the phone listings below.
About ITC Holdings Corp.
ITC Holdings Corp. (NYSE: ITC) invests in the electricity transmission
grid to improve electric reliability, improve access to markets, and lower the
overall cost of delivered energy. ITC is the largest independent electricity
transmission company in the country. Through its subsidiaries,
ITCTransmission, Michigan Electric Transmission Company, LLC (METC) and ITC
Midwest LLC, ITC operates regulated, high-voltage transmission systems in
Michigan's Lower Peninsula and portions of Iowa, Minnesota, Illinois and
Missouri serving a combined peak load in excess of 25,000 megawatts. ITC is
also focused on new areas where significant transmission system improvements
are needed through subsidiaries ITC Grid Development, ITC Great Plains and ITC
Panhandle Transmission. For more information, please visit:
http://www.itc-holdings.com . (itc-ITC)
Safe Harbor Statement
This press release contains certain statements that describe our
management's beliefs concerning future business conditions and prospects,
growth opportunities and the outlook for our business and the electricity
transmission industry based upon information currently available. Such
statements are "forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Wherever possible, we have
identified these forward-looking statements by words such as "anticipates",
"believes", "intends", "estimates", "expects", "projects" and similar phrases.
These forward-looking statements are based upon assumptions our management
believes are reasonable. Such forward looking statements are subject to risks
and uncertainties which could cause our actual results, performance and
achievements to differ materially from those expressed in, or implied by,
these statements, including, among other things the risks and uncertainties
disclosed in our annual report on Form 10-K and our quarterly reports on Form
10-Q filed with the Securities and Exchange Commission from time to time.
Because our forward-looking statements are based on estimates and
assumptions that are subject to significant business, economic and competitive
uncertainties, many of which are beyond our control or are subject to change,
actual results could be materially different and any or all of our forward-
looking statements may turn out to be wrong. They speak only as of the date
made and can be affected by assumptions we might make or by known or unknown
risks and uncertainties. Many factors mentioned in our discussion in this
release and in our annual and quarterly reports will be important in
determining future results. Consequently, we cannot assure you that our
expectations or forecasts expressed in such forward-looking statements will be
achieved. Actual future results may vary materially. Except as required by
law, we undertake no obligation to publicly update any of our forward-looking
or other statements, whether as a result of new information, future events, or
otherwise, unless required by law.
ITC HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except share and per share data)
Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
OPERATING REVENUES $160,616 $106,303 $302,530 $207,577
OPERATING EXPENSES
Operation and
maintenance 32,902 21,503 54,357 40,043
General and
administrative 21,361 12,203 39,343 27,226
Depreciation and
amortization23,446 16,711 45,770 32,833
Taxes other than
income taxes10,3138,066 21,198 16,836
Gain on sale of asset(1,445) - (1,445) -
Total operating
expenses 86,577 58,483 159,223 116,938
OPERATING INCOME 74,039 47,820 143,307 90,639
OTHER EXPENSES (INCOME)
Interest expense 29,946 19,940 60,716 39,072
Allowance for
equity funds used
during construction (2,284) (1,613) (5,380) (2,853)
Loss on extinguishment
of debt --- 349
Other income (552) (1,018) (1,062) (1,720)
Other expense 597 3361,434 669
Total other
expenses (income) 27,707 17,645 55,708 35,517
INCOME BEFORE
INCOME TAXES 46,332 30,175 87,599 55,122
INCOME TAX PROVISION 17,671 10,176 33,417 18,268
NET INCOME$28,661 $19,999 $54,182 $36,854
Basic earnings
per share $ 0.58 $ 0.47 $ 1.13 $ 0.87
Diluted earnings
per share $ 0.57$0.46 $ 1.10 $ 0.85
Weighted-average
basic shares 49,002,365 42,269,646 48,153,011 42,180,993
Weighted-average
diluted shares50,205,625 43,424,029 49,355,024 43,432,526
Dividends declared
per common share $0.290 $0.275 $0.580 $0.550
ITC HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
(in thousands, except share data)
June 30, December 31,
2008 2007
ASSETS
Current assets
Cash and cash equivalents$13,400$2,616
Accounts receivable 55,85440,919
Inventory 22,78626,315
Deferred income taxes 12,910 2,689
Other 5,876 3,518
Total current assets 110,82676,057
Property, plant and equipment (net of
accumulated depreciation and amortization
of $898,729 and $879,843, respectively) 2,114,617 1,960,433
Other assets
Goodwill 960,071 959,042
Intangible assets (net of accumulated
amortization of $4,537 and $3,025,
respectively)53,87055,382
Regulatory assets - acquisition adjustments 83,35986,054
Regulatory assets - Attachment O revenue
accrual (including accrued interest of
$1,141 and $552, respectively) 72,49220,537
Other regulatory assets 29,73229,449
Deferred financing fees (net of
accumulated amortization of $6,981
and $5,138, respectively)20,65614,201
Other 21,44112,142
Total other assets 1,241,621 1,176,807
TOTAL ASSETS $ 3,467,064$3,213,297
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $63,493 $47,627
Accrued payroll7,915 8,928
Accrued interest 37,97023,088
Accrued taxes 22,64715,065
ITC Midwest's asset acquisition
additional purchase price accrual 4,960 5,402
Refundable deposits from generators
for transmission network upgrades 9,902 2,352
Other 3,811 3,965
Total current liabilities150,698 106,427
Accrued pension and postretirement
liabilities16,51513,934
Deferred income taxes 135,91790,617
Regulatory liabilities 193,500 189,727
Other4,490 6,093
Long-term debt 2,065,652 2,243,424
STOCKHOLDERS' EQUITY
Common stock, without par value,
100,000,000 shares authorized,
49,463,885 and 42,916,852 shares
issued and outstanding at June 30, 2008
and December 31, 2007, respectively 843,777 532,103
Retained earnings 57,37531,864
Accumulated other comprehensive loss(860) (892)
Total stockholders' equity 900,292 563,075
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,467,064$3,213,297
ITC HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Six months ended
June 30,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $54,182 $36,854
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization expense 45,77032,833
Attachment O revenue accrual -
including accrued interest (51,946) (23,541)
Deferred income tax expense 32,56418,268
Allowance for equity funds used
during construction (5,380) (2,853)
Stock-based compensation expense 3,220 1,622
Amortization of loss on reacquired debt,
deferred financing fees and debt discounts3,075 2,190
Other (1,435) (76)
Changes in assets and liabilities,
exclusive of changes shown separately21,094(6,215)
Net cash provided by operating activities101,14459,082
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant
and equipment (193,793) (148,162)
ITC Midwest's asset acquisition direct fees (981) (1,459)
Other 1,445 926
Net cash used in investing activities (193,329) (148,695)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt 657,782 -
Borrowings under ITC Holdings'
Term Loan Agreement -25,000
Repayment of long-term debt (765,000)-
Borrowings under revolving
credit agreements 282,500 293,300
Repayments of revolving credit agreements (353,200) (209,600)
Issuance of common stock 309,427 1,759
Common stock issuance costs (755) (5)
Dividends on common stock(28,662) (23,363)
Repurchase and retirement of common stock -(1,841)
Debt issuance costs (5,409) (565)
Refundable deposits from generators for
transmission network upgrades 6,286 -
Net cash provided by financing
activities 102,96984,685
NET INCREASE IN CASH AND CASH EQUIVALENTS 10,784(4,928)
CASH AND CASH EQUIVALENTS - Beginning of period 2,61613,426
CASH AND CASH EQUIVALENTS - End of period $13,400$8,498
SOURCE ITC Holdings Corp.
