NOVI, Mich., July 28 /PRNewswire-FirstCall/ --
Highlights
- Net income for the second quarter of $36.3 million, or $0.71 per diluted common share
- Net income for the six months ended June 30, 2010 of $70.5 million, or $1.38 per diluted common share
- Capital investments of $216.0 million for the six months ended June 30, 2010
- 2010 earnings per share guidance increased to $2.70 to $2.75 per diluted common share
(in thousands, except per share data) | Three months ended June 30, | Six months ended June 30, | ||||||
2010 | 2009 | 2010 | 2009 | |||||
OPERATING REVENUES | $ 168,468 | $ 157,238 | $ 329,756 | $ 313,179 | ||||
NET INCOME | $ 36,301 | $ 30,793 | $ 70,505 | $ 59,518 | ||||
DILUTED EPS | $ 0.71 | $ 0.61 | $ 1.38 | $ 1.17 | ||||
ITC Holdings Corp. (NYSE: ITC) today announced its second quarter and year-to-date results for the period ended June 30, 2010. Net income for the quarter was $36.3 million, or $0.71 per diluted common share, compared to $30.8 million, or $0.61 per diluted common share for the second quarter of 2009. Net income for the six months ended June 30, 2010 was $70.5 million, or $1.38 per diluted common share, compared to $59.5 million, or $1.17 per diluted common share for the same period last year.
For the six months ended June 30, 2010, ITC invested $216.0 million in capital projects at its operating companies, including $29.3 million, $65.5 million, $114.1 million and $7.1 million at ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.
"We are very pleased with both our fiscal and operational performance for the first half of 2010," said Joseph L. Welch, chairman, president and CEO of ITC. "ITC continues to deliver on our commitments to our customers and shareholders through the successful execution of our strategic plan. In addition, as we look to the future, we are encouraged by recent regulatory developments that suggest the necessary transmission reforms we have been advocating are beginning to advance, particularly in the areas of planning and cost allocation. We anticipate these regulatory initiatives will facilitate the development of more regional transmission infrastructure to improve energy delivery, reliability and efficiency, and allow for the interconnection of new renewable resources, consistent with our longer term strategic vision."
Reported net income for the second quarter of 2010 increased $5.5 million, or $0.10 per diluted common share, compared to the same period in 2009. For the six months ended June 30, 2010, net income increased $11.0 million, or $0.21 per diluted common share, compared to the same period in 2009. Key drivers that contributed to these results include:
- An increase in net income for the quarter and year-to-date period due to higher rate base and Allowance for Funds Used During Construction (AFUDC) at all operating companies.
- Higher net income for the quarter and year-to-date period due to lower non-recoverable expenses.
- These increases in net income for the quarter and year-to-date period were partially offset by higher interest expense resulting from our recently completed financing activities for ITC Holdings.
EPS and Capital Expenditure Guidance
As a result of ITC's financial performance for the six months ended June 30, 2010, ITC is today raising its 2010 earnings per diluted common share guidance to a range of $2.70 to $2.75, from a previous range of $2.60 to $2.70.
ITC is also revising its capital investment guidance for 2010 to a range of $420 million to $460 million, from a range of $405 million to $460 million. The revised guidance reflects expected capital expenditures of $50 to $60 million, $130 to $140 million, $220 to $235 million and $20 to $25 million for ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.
Second Quarter 2010 Financial Results Detail
ITC's operating revenues for the second quarter increased to $168.5 million from $157.2 million for the same period last year. This increase was a primarily due to higher network revenues attributable to higher rate base at our regulated operating subsidiaries. In addition, the increase resulted from higher regional cost sharing revenues in 2010, due primarily to capital projects placed in-service that have been identified by the Midwest Independent Transmission System Operator, Inc. (MISO) as eligible for regional cost sharing.
Operation and maintenance (O&M) expenses of $28.5 million were $6.6 million higher during the second quarter of 2010 compared to the same period in 2009. This increase was a result of higher vegetation management expenses, equipment and structure maintenance expenses and tower painting expenses.
General and administrative (G&A) expenses of $17.4 million were $2.8 million lower during the second quarter of 2010 compared to the same period in 2009. This decrease was a result of lower general business expenses primarily for information technology support, employee related expenses and professional advisory and consulting services. In addition, G&A expenses for the quarter include $1.5 million of development costs at ITC Grid Development and Green Power Express which were $0.6 million lower than the same period in 2009.
Depreciation and amortization expenses of $22.6 million decreased by $3.6 million during the second quarter of 2010 compared to the same period in 2009. This decrease was due to the implementation of new depreciation rates for ITCTransmission and METC in the third and fourth quarters of 2009, respectively, which served to lower depreciation expense for each of these operating companies. Partially offsetting these reductions were increases in depreciation expense primarily related to a higher depreciable asset base resulting from property, plant and equipment additions.
Interest expense of $35.3 million increased by $2.7 million for the second quarter of 2010 compared to the same period in 2009, due primarily to higher borrowing levels to finance capital expenditures.
The effective income tax rate for the second quarter of 2010 was 36.8 percent compared to 37.7 percent the same period last year.
Year-To-Date 2010 Financial Results Detail
ITC's operating revenues for the six months ended June 30, 2010 increased to $329.8 million from $313.2 million for the same period last year. This increase was primarily due to higher network revenues attributable to higher rate base at our regulated operating subsidiaries. In addition, the increase resulted from higher regional cost sharing revenues in 2010, due primarily to capital projects placed in-service that have been identified by MISO as eligible for regional cost sharing. Lastly, other revenues increased at METC due to incremental revenue recognized in 2010 for utilization of jointly owned transmission lines.
O&M expenses of $52.2 million were $6.6 million higher for the six months ended June 30, 2010 compared to the same period in 2009. This increase was a result of higher vegetation management expenses, equipment and structure maintenance expenses and tower painting expenses.
G&A expenses of $35.2 million for the six months ended June 30, 2010 were $5.0 million lower compared to the same period in 2009. This decrease was a result of lower general business expenses primarily for information technology support, employee related expenses and professional advisory and consulting services. In addition, G&A expenses for the six months ended June 30, 2010 include $3.9 million of development costs at ITC Grid Development and Green Power Express which were $1.2 million lower than the same period in 2009.
Depreciation and amortization expenses of $44.7 million decreased by $8.1 million during the six months ended June 30, 2010, compared to the same period in 2009. This decrease was due to the implementation of new depreciation rates for ITCTransmission and METC in the third and fourth quarters of 2009, respectively, which served to lower depreciation expense for each of these operating companies. Partially offsetting these reductions were increases in depreciation expense primarily related to a higher depreciable asset base resulting from property, plant and equipment additions.
Interest expense of $70.4 million increased $6.1 million in the first six months of 2010 compared to the same period in 2009, due primarily to higher borrowing levels to finance capital expenditures.
The effective income tax rate for the six months ended June 30, 2010 was 36.5 percent compared to 37.4 percent in 2009.
Second Quarter Conference Call
ITC will conduct a conference call to discuss second quarter and year-to-date 2010 earnings results at 11:00 a.m. ET on July 29, 2010. Joseph L. Welch, chairman, president and CEO, will provide a business overview, and Cameron M. Bready, senior vice president, treasurer and CFO, will discuss the financial results. Individuals wishing to participate in the conference call may dial toll-free (877) 644-1296 (domestic) or (914) 495-8555 (international); there is no passcode. The conference call replay, available through August 13, 2010, can be accessed by dialing toll-free (800) 642-1687 (domestic) or (706) 645-9291 (international), passcode 87281817. 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 2010 second quarter results and year-to-date results may be found in ITC's Form 10-Q filing. Once filed with the Securities and Exchange Commission, an electronic copy of our 10-Q can be found at our 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, expand access to markets, lower the overall cost of delivered energy and allow new generating resources to interconnect to its transmission systems. The largest independent electricity transmission company in the country, ITC operates high-voltage transmission systems in Michigan's Lower Peninsula and portions of Iowa, Minnesota, Illinois, Missouri and Kansas, serving a combined peak load in excess of 25,000 megawatts through its regulated operating subsidiaries, ITCTransmission, Michigan Electric Transmission Company (METC), ITC Midwest and ITC Great Plains. ITC also focuses on new areas where significant transmission system improvements are needed through ITC Grid Development and its subsidiaries. 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, plans 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 "will," "may," "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 others, 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. Forward-looking statements 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.
ITC HOLDINGS CORP. AND SUBSIDIARIES | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | |||||||||
(in thousands, except per share data) | Three months ended | Six months ended | |||||||
June 30, | June 30, | ||||||||
2010 | 2009 | 2010 | 2009 | ||||||
OPERATING REVENUES | $168,468 | $157,238 | $329,756 | $313,179 | |||||
OPERATING EXPENSES | |||||||||
Operation and maintenance | 28,494 | 21,919 | 52,223 | 45,660 | |||||
General and administrative | 17,413 | 20,253 | 35,194 | 40,146 | |||||
Depreciation and amortization | 22,567 | 26,187 | 44,682 | 52,735 | |||||
Taxes other than income taxes | 11,626 | 10,612 | 23,934 | 21,710 | |||||
Other operating income and expense — net | (530) | — | (523) | — | |||||
Total operating expenses | 79,570 | 78,971 | 155,510 | 160,251 | |||||
OPERATING INCOME | 88,898 | 78,267 | 174,246 | 152,928 | |||||
OTHER EXPENSES (INCOME) | |||||||||
Interest expense | 35,333 | 32,661 | 70,362 | 64,254 | |||||
Allowance for equity funds used during construction | (3,435) | (3,232) | (6,578) | (5,998) | |||||
Other income | (1,154) | (1,065) | (1,672) | (1,391) | |||||
Other expense | 755 | 463 | 1,031 | 970 | |||||
Total other expenses (income) | 31,499 | 28,827 | 63,143 | 57,835 | |||||
INCOME BEFORE INCOME TAXES | 57,399 | 49,440 | 111,103 | 95,093 | |||||
INCOME TAX PROVISION | 21,098 | 18,647 | 40,598 | 35,575 | |||||
NET INCOME | $36,301 | $30,793 | $70,505 | $59,518 | |||||
Basic earnings per common share | $ 0.72 | $ 0.62 | $ 1.40 | $ 1.19 | |||||
Diluted earnings per common share | $ 0.71 | $ 0.61 | $ 1.38 | $ 1.17 | |||||
Dividends declared per common share | $ 0.320 | $ 0.305 | $ 0.640 | $ 0.610 | |||||
ITC HOLDINGS CORP. AND SUBSIDIARIES | ||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) | ||||
(in thousands, except share data) | June 30, | December 31, | ||
2010 | 2009 | |||
ASSETS | ||||
Current assets | ||||
Cash and cash equivalents | $81,439 | $74,853 | ||
Accounts receivable | 86,263 | 72,352 | ||
Inventory | 39,117 | 36,834 | ||
Deferred income taxes | 30,662 | 23,859 | ||
Regulatory assets – revenue accrual (including accrued interest of $1,843 and $2,652, respectively) | 54,214 | 82,871 | ||
Other | 7,955 | 3,244 | ||
Total current assets | 299,650 | 294,013 | ||
Property, plant and equipment (net of accumulated depreciation and amortization of $1,085,126 and $1,051,045, respectively) | 2,699,275 | 2,542,064 | ||
Other assets | ||||
Goodwill | 950,163 | 950,163 | ||
Intangible assets (net of accumulated amortization of $10,636 and $9,095, respectively) | 50,525 | 51,987 | ||
Regulatory assets – revenue accrual (including accrued interest of $75 and $75, respectively) | 13,305 | 20,406 | ||
Other regulatory assets | 134,448 | 134,924 | ||
Deferred financing fees (net of accumulated amortization of $10,417 and $9,616, respectively) | 21,200 | 21,672 | ||
Other | 15,853 | 14,487 | ||
Total other assets | 1,185,494 | 1,193,639 | ||
TOTAL ASSETS | $4,184,419 | $4,029,716 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Current liabilities | ||||
Accounts payable | $67,834 | $43,508 | ||
Accrued payroll | 8,795 | 13,648 | ||
Accrued interest | 44,519 | 39,099 | ||
Accrued taxes | 26,427 | 21,188 | ||
Regulatory liabilities – revenue deferral (including accrued interest of $230) | 6,854 | — | ||
Refundable deposits from generators for transmission network upgrades | 33,841 | 25,891 | ||
Other | 4,023 | 3,344 | ||
Total current liabilities | 192,293 | 146,678 | ||
Accrued pension and postretirement liabilities | 34,591 | 31,158 | ||
Deferred income taxes | 301,329 | 255,516 | ||
Regulatory liabilities – revenue deferral (including interest of $230 and $186, respectively) | 14,302 | 10,238 | ||
Regulatory liabilities – accrued asset removal costs | 111,369 | 112,430 | ||
Refundable deposits from generators for transmission network upgrades | 4,121 | 17,664 | ||
Other | 11,596 | 10,111 | ||
Long-term debt | 2,457,774 | 2,434,398 | ||
Commitments and contingent liabilities | ||||
STOCKHOLDERS' EQUITY | ||||
Common stock, without par value, 100,000,000 shares authorized, 50,286,030 and 50,084,061 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively | 869,621 | 862,512 | ||
Retained earnings | 188,156 | 149,776 | ||
Accumulated other comprehensive loss | (733) | (765) | ||
Total stockholders' equity | 1,057,044 | 1,011,523 | ||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $4,184,419 | $4,029,716 | ||
ITC HOLDINGS CORP. AND SUBSIDIARIES | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||
(in thousands) | Six months ended | |||
June 30, | ||||
2010 | 2009 | |||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||
Net income | $70,505 | $59,518 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization expense | 44,682 | 52,735 | ||
Revenue accrual and deferral — including accrued interest | 46,676 | (4,817) | ||
Deferred income tax expense | 35,191 | 34,902 | ||
Allowance for equity funds used during construction | (6,578) | (5,998) | ||
Other | 5,937 | 4,955 | ||
Changes in assets and liabilities, exclusive of changes shown separately: | ||||
Accounts receivable | (13,911) | (22,510) | ||
Inventory | (2,283) | (6,822) | ||
Other current assets | (4,711) | (1,425) | ||
Accounts payable | (1,410) | (10,094) | ||
Accrued payroll | (3,421) | (1,990) | ||
Accrued interest | 5,420 | (86) | ||
Accrued taxes | 5,996 | 7,239 | ||
Other current liabilities | 681 | (3,353) | ||
Other non-current assets and liabilities, net | 624 | 6,162 | ||
Net cash provided by operating activities | 183,398 | 108,416 | ||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||
Expenditures for property, plant and equipment | (162,585) | (213,927) | ||
Proceeds from sale of securities | 14,576 | 697 | ||
Purchases of securities | (14,587) | (761) | ||
Other | (78) | (225) | ||
Net cash used in investing activities | (162,674) | (214,216) | ||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Issuance of long-term debt | 90,000 | 100,000 | ||
Borrowings under revolving credit agreements | 213,129 | 276,218 | ||
Repayments of revolving credit agreements | (279,985) | (263,817) | ||
Issuance of common stock | 1,165 | 1,632 | ||
Dividends on common stock | (32,121) | (30,394) | ||
Refundable deposits from generators for transmission network upgrades | 11,439 | 29,633 | ||
Repayment of refundable deposits from generators for transmission network upgrades | (16,778) | (2,291) | ||
Other | (987) | (1,909) | ||
Net cash (used in) provided by financing activities | (14,138) | 109,072 | ||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 6,586 | 3,272 | ||
CASH AND CASH EQUIVALENTS — Beginning of period | 74,853 | 58,110 | ||
CASH AND CASH EQUIVALENTS — End of period | $81,439 | $61,382 | ||
SOURCE ITC Holdings Corp.
