ITC Holdings Corp. Reports First Quarter 2008 Results

NOVI, Mich., April 30 /PRNewswire-FirstCall/ -- ITC Holdings Corp. NYSE: ITC today announced its first quarter results for the period ended March 31, 2008. Net income for the quarter was $25.5 million, or $0.53 per diluted share, compared to $16.9 million, or $0.39 per diluted share for the first quarter of 2007.

"We are very pleased with ITC's 2008 first quarter results," said Joseph L. Welch, president and CEO of ITC. "These results continue to demonstrate our ability to meet our commitments for the benefits of our customers and shareholders. 2008 is expected to be another strong year for ITC as we continue on our mission of investing in the electric transmission grid to improve electric power quality and reliability, enable the entrance of renewable resources and provide customers with equal access to wholesale power markets."

In the first quarter of 2008, ITCTransmission invested $52.1 million, METC invested $26.2 million and ITC Midwest invested $17.8 million in their respective transmission systems.

ITC reported operating revenues of $141.9 million for the first quarter 2008, an increase of $40.6 million over the comparable period last year. Network revenues increased by $28.2 million due to the December 2007 acquisition by ITC Midwest of the electric transmission assets of Interstate Power & Light (IPL), for which no revenues were included in our results of operations for the three months ended March 31, 2007. Additionally, METC and ITCTransmission recognized additional network revenues of $3.9 million and $2.0 million, respectively, due to higher net revenue requirements primarily due to higher rate base as a result of property, plant and equipment placed in service, among other factors. Point-to-point, scheduling, control and dispatch revenues increased primarily due to $1.7 million of ITC Midwest revenues.

Operation & Maintenance (O&M) expenses of $21.5 million during the first quarter of 2008 were $2.9 million higher than the same period in 2007. O&M expenses increased primarily due to expenses incurred by ITC Midwest that were not included in our results of operations for the three months ended March 31, 2007.

General and administrative (G&A) expenses of $18.0 million for the first quarter of 2008 were $3.0 million higher than the same period in 2007. G&A expenses increased primarily due to higher compensation and benefits mainly resulting from personnel additions and higher business expenses, all of which include incremental costs incurred by ITC Midwest.

Depreciation and amortization expenses increased $6.2 million in the three months ended March 31, 2008 compared to the same period in 2007. ITC Midwest recognized depreciation expenses of $4.1 million for the three months ended March 31, 2008. Depreciation and amortization 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 of $10.9 million in the first quarter of 2008 increased by $2.1 million compared to the same period in 2007. Taxes other than income taxes primarily increased due to property tax expense at ITC Midwest of $1.6 million.

In the first quarter of 2008 interest expense increased $11.6 million compared to the same period in 2007 primarily due to higher borrowing levels to finance our capital expenditures and the acquisition of the IPL transmission assets in December of 2007.

Guidance for 2008

For 2008 earnings per diluted share are expected to be between $1.90 and $2.00, as previously disclosed. Capital expenditures for 2008 are expected to be approximately $95-110 million, $105-130 million and $85-100 million for ITCTransmission, METC and ITC Midwest, respectively.

First Quarter Conference Call

ITC will conduct a conference call to discuss first quarter 2008 earnings results at 11:00 a.m. ET Thursday, May 1, 2008. Joseph L. Welch, president and CEO, will provide a business overview and Edward M. Rahill, senior vice president and CFO, will provide a financial update of the first quarter of 2008. Individuals wishing to participate in the conference call may dial toll-free (877) 675-4749 (domestic) or (719) 325-4905 (international); there is no passcode. The conference call replay, available through May 8, 2008 can be accessed by dialing toll-free (888) 203-1112 (domestic) or (719) 457-0820 (international), passcode 8240784. 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 first quarter results may be found in ITC's Form 10-Q filing. Once filed with the SEC, 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
                                                           March 31,
                                                       2008          2007
    OPERATING REVENUES                              $141,914       $101,274

    OPERATING EXPENSES

      Operation and maintenance                       21,455         18,540
      General and administrative                      17,982         15,023
      Depreciation and amortization                   22,324         16,122
      Taxes other than income taxes                   10,885          8,770
        Total operating expenses                      72,646         58,455

    OPERATING INCOME                                  69,268         42,819

    OTHER EXPENSES (INCOME)

      Interest expense                                30,770         19,132
      Allowance for equity funds
       used during construction                       (3,096)        (1,240)
      Loss on extinguishment of debt                       -            349
      Other income                                      (514)          (702)
      Other expense                                      841            333
        Total other expenses (income)                 28,001         17,872

    INCOME BEFORE INCOME TAXES                        41,267         24,947

    INCOME TAX PROVISION                              15,746          8,092

    NET INCOME                                       $25,521        $16,855


    Basic earnings per share                           $0.54         $ 0.40
    Diluted earnings per share                         $0.53         $ 0.39

    Weighted-average basic shares                 47,296,243     42,091,356
    Weighted-average diluted shares               48,497,189     43,293,874

    Dividends declared per common share               $0.290         $0.275



    ITC HOLDINGS CORP. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
    (in thousands, except share data)

    ASSETS                                           March 31,    December 31,
    Current assets                                     2008           2007
     Cash and cash equivalents                       $19,305         $2,616
     Accounts receivable                              45,021         40,919
     Inventory                                        22,459         26,315
     Deferred income taxes                             2,828          2,689
     Other                                             6,669          3,518
       Total current assets                           96,282         76,057

    Property, plant and equipment (net of
     accumulated depreciation and
     amortization of $893,774 and
     $879,843, respectively)                       2,043,164      1,960,433
    Other assets
     Goodwill                                        960,022        959,042
     Intangible assets (net of accumulated
      amortization of $3,781 and $3,025
      respectively)                                   54,626         55,382
     Regulatory assets - acquisition adjustments      84,707         86,054
     Regulatory assets - Attachment O
      revenue accrual (including accrued
      interest of $800 and $552, respectively)        38,764         20,537
     Other regulatory assets                          30,126         29,449
     Deferred financing fees (net of accumulated
      amortization of $6,500 and
      $5,138 respectively)                            19,850         14,201
     Other                                            10,321         12,142
       Total other assets                          1,198,416      1,176,807
    TOTAL ASSETS                                  $3,337,862     $3,213,297

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities
     Accounts payable                                $53,395        $47,627
     Accrued payroll                                   5,869          8,928
     Accrued interest                                 14,153         23,088
     Accrued taxes                                    14,218         15,065
     ITC Midwest acquisition additional
      purchase price accrual                           5,033          5,402
     Other                                             8,751          6,317
       Total current liabilities                     101,419        106,427
    Accrued pension liability and
     postretirement liabilities                       16,629         13,934
    Deferred income taxes                            106,785         90,617
    Regulatory liabilities                           191,741        189,727
    Other                                              9,768          6,093
    Long-term debt                                 2,027,690      2,243,424

    STOCKHOLDERS' EQUITY
    Common stock, without par value,
     100,000,000 shares authorized, 43,398,488
     and 42,916,852 shares issued and
     outstanding at March 31, 2008 and
     December 31, 2007, respectively                 841,644        532,103
    Retained earnings                                 43,062         31,864
    Accumulated other comprehensive loss                (876)          (892)
       Total stockholders' equity                    883,830        563,075
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $3,337,862     $3,213,297



    ITC HOLDINGS CORP. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
    (in thousands)
                                                       Three months ended
                                                            March 31,
                                                       2008           2007
    CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                       $25,521        $16,855
    Adjustments to reconcile net income to
     net cash provided by operating activities:
       Depreciation and amortization expense          22,324         16,122
       Attachment O revenue accrual -
        including accrued interest                   (18,222)       (17,140)
       Deferred income tax expense                    14,423          8,092
       Allowance for equity funds
        used during construction                      (3,096)        (1,240)
       Stock-based compensation expense                1,762          1,127
       Amortization of loss on reacquired debt,
        deferred financing fees and debt discounts     1,976            953
       Other                                             117            (31)
       Changes in assets and liabilities,
        exclusive of changes shown separately        (10,125)       (14,737)
                 Net cash provided by
                  operating activities                34,680         10,001

    CASH FLOWS FROM INVESTING ACTIVITIES
       Expenditures for property,
        plant and equipment                          (94,564)       (73,788)
       IP&L transmission assets
        direct acquisition fees                         (933)             -
       Other                                               -            925
                 Net cash used in
                  investing activities               (95,497)       (72,863)

    CASH FLOWS FROM FINANCING ACTIVITIES
       Issuance of long-term debt                    557,895              -
       Repayment of long-term debt                  (765,000)             -
       Borrowings under revolving
        credit agreements                            164,500        235,900
       Repayments of revolving credit agreements    (173,200)      (141,700)
       Issuance of common stock                      308,904            341
       Common stock issuance costs                      (734)             -
       Dividends on common stock                     (14,319)       (11,655)
       Repurchase and retirement of common stock           -         (1,841)
       Debt issuance costs                            (4,123)          (333)
       Refundable deposits from generators
        for transmission network upgrades              3,583              -
                 Net cash provided by
                  financing activities                77,506         80,712

    NET INCREASE IN CASH AND CASH EQUIVALENTS         16,689         17,850

    CASH AND CASH EQUIVALENTS - Beginning of period    2,616         13,426

    CASH AND CASH EQUIVALENTS - End of period        $19,305        $31,276