ITC Holdings Reports Increase In 2009 First Quarter Earnings of 12.6 Percent Over 2008 / Highlights

NOVI, Mich., April 29 /PRNewswire-FirstCall/ -- ITC Holdings Corp. today announced its first quarter results for the period ended March 31, 2009. Net income for the quarter was $28.7 million, or $0.57 per diluted common share, compared to $25.5 million, or $0.52 per diluted common share for the first quarter of 2008.

"In the first quarter of 2009, ITC experienced strong earnings growth compared to the first quarter of 2008 resulting from our on-going capital investment program," said Joseph L. Welch, chairman, president and CEO of ITC. "We are pleased that we continue to deliver solid financial performance year over year, particularly in light of the difficult economic environment in which we are operating."

In the first quarter of 2009, ITCTransmission invested $20.4 million, METC $31.0 million and ITC Midwest $33.8 million in their respective transmission systems.

(in thousands, except per share data) Three months ended March 31, 2009 2008 OPERATING REVENUES $155,941 $141,914 NET INCOME $28,725 $25,521 DILUTED EPS (1) $0.57 $0.52 CAPITAL INVESTMENTS $85,200 $96,100

Reported net income for the first quarter of 2009 increased $3.2 million, or $0.05 per fully diluted common share compared to the same period in 2008. Key drivers that contributed to these results include:

-- Net income increased primarily due to higher rate base at ITCTransmission, METC and ITC Midwest, partially offset by lower allowance for funds used during construction (AFUDC). -- Net income also benefited in 2009 due to lower interest expense at ITC Holdings. The first quarter of 2008 had higher interest expense as a result of the $765 million bridge loan associated with ITC Midwest's asset acquisition that was outstanding most of January. On January 24, 2008, the full amount outstanding under the bridge facility was repaid using the proceeds of ITC Holdings' $385 million senior notes, ITC Midwest's $175 million first mortgage bonds and the issuance of 6.4 million shares of common equity. -- These increases in net income were partially offset by higher non-recoverable G&A expenses, including development expenses at ITC Great Plains, ITC Grid Development and Green Power Express. -- Diluted earnings per common share increased due to the higher net income, partially offset by the impact of higher weighted average common shares outstanding as a result of the equity issuance noted above. 2009 Guidance

For 2009, ITC continues to expect earnings per diluted common share of $2.20 to $2.30 as previously disclosed. Capital investments for 2009 are expected to be approximately $270 million - $325 million, including $70-$85 million, $110-$130 million and $90-$110 million for ITCTransmission, METC and ITC Midwest, respectively.

First Quarter 2009 Financial Results Detail

ITC's operating revenues for the quarter increased $14.0 million to $155.9 million from $141.9 million last year. Network revenues increased by $10.3 million primarily due to higher rate base resulting from higher balances of in-service property, plant and equipment. Regional cost sharing revenues were $5.8 million higher in the first quarter of 2009 compared to 2008. These revenue increases in 2009 resulted from more capital projects being eligible for regional cost sharing under the Midwest ISO's tariff.

Operation & maintenance (O&M) expenses of $23.7 million were $2.3 million higher in the first quarter of 2009 compared to the same period in 2008. O&M expenses increased due primarily to higher transmission equipment inspections, vehicle expenses and vegetation management.

General and administrative (G&A) expenses of $19.9 million for the first quarter of 2009 were $1.9 million higher than the same period in 2008. G&A expenses increased by $2.1 million due to higher professional advisory and consulting services, $0.9 million due to higher compensation expenses primarily resulting from personnel additions and $0.8 million due to higher business expenses primarily for information technology support. General and administrative expenses also increased by $2.1 million at ITC Grid Development and its subsidiaries as a result of increased development activities. Partially offsetting these increases were lower expenses of $2.8 million as a result of higher capitalization of G&A expenses in the quarter and lower bonus-related expenses of $1.6 million.

Depreciation and amortization expenses increased by $4.2 million in the first quarter of 2009 compared to the first quarter of 2008 due primarily to a higher depreciable asset base resulting from property, plant and equipment additions.

The effective income tax rate for the three months ended March 31, 2009 was 37.1 percent compared to 38.2 percent in the first quarter of 2008.

First Quarter Conference Call

ITC will conduct a conference call to discuss first quarter 2009 earnings results at 11:00 a.m. ET on April 30, 2009. 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 of the first quarter 2009. Individuals wishing to participate in the conference call may dial toll-free [phone] (domestic) or [phone] (international); there is no passcode. The conference call replay, available through May 8, 2009 can be accessed by dialing toll-free [phone] (domestic) or [phone] (international), passcode 8144728. 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 2009 first quarter 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. 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, 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.

(1) During 2009, ITC adopted Financial Accounting Standards Board Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities ("FSP EITF 03-6-1"). The retroactive application required under FSP EITF 03-6-1 resulted in a decrease to both basic and diluted earnings per common share amounts of $0.01 per share for the 1st quarter 2008 as compared to the previously reported amounts for that period.

ITC HOLDINGS CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) Three months ended March 31, 2009 2008 OPERATING REVENUES $155,941 $141,914 OPERATING EXPENSES Operation and maintenance 23,741 21,455 General and administrative 19,893 17,982 Depreciation and amortization 26,548 22,324 Taxes other than income taxes 11,098 10,885 Total operating expenses 81,280 72,646 OPERATING INCOME 74,661 69,268 OTHER EXPENSES (INCOME) Interest expense 31,593 30,770 Allowance for equity funds used during construction (2,766) (3,096) Other income (683) (514) Other expense 864 841 Total other expenses (income) 29,008 28,001 INCOME BEFORE INCOME TAXES 45,653 41,267 INCOME TAX PROVISION 16,928 15,746 NET INCOME $28,725 $25,521 Basic earnings per common share $0.58 $0.53 Diluted earnings per common share $0.57 $0.52 Dividends declared per common share $0.305 $0.290 ITC HOLDINGS CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) (in thousands, except share data) ASSETS March 31, December 31, Current assets 2009 2008 Cash and cash equivalents $26,823 $58,110 Accounts receivable 60,026 57,638 Inventory 29,422 25,077 Regulatory assets - Attachment O revenue accrual (including accrued interest of $1,823 and $1,637, respectively) 37,424 22,301 Other 6,594 4,147 Total current assets 160,289 167,273 Property, plant and equipment (net of accumulated depreciation and amortization of $944,475 and $925,890, respectively) 2,369,835 2,304,386 Other assets Goodwill 951,319 951,319 Intangible assets (net of accumulated amortization of $6,806 and $6,050, respectively) 51,601 52,357 Regulatory assets - Attachment O revenue accrual (including accrued interest of $1,377 and $1,512, respectively) 72,900 81,643 Regulatory assets - acquisition adjustments (net of accumulated amortization of $23,740 and $22,393, respectively) 79,318 80,665 Other regulatory assets 40,580 39,848 Deferred financing fees (net of accumulated amortization of $7,300 and $8,048, respectively) 20,893 21,410 Other 19,841 15,664 Total other assets 1,236,452 1,242,906 TOTAL ASSETS $3,766,576 $3,714,565 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $63,803 $79,403 Accrued payroll 4,542 10,331 Accrued interest 15,661 37,779 Deferred income taxes 11,223 6,476 Accrued taxes 16,462 18,104 Refundable deposits from generators for transmission network upgrades 11,895 8,701 Other 2,850 5,384 Total current liabilities 126,436 166,178 Accrued pension and postretirement liabilities 25,342 24,295 Deferred income taxes 158,066 144,889 Regulatory liabilities 198,374 196,656 Other 21,183 5,231 Long-term debt 2,291,315 2,248,253 STOCKHOLDERS' EQUITY Common stock, without par value, 100,000,000 shares authorized, 49,742,769 and 49,654,518 shares issued and outstanding at March 31, 2009 and December 31, 2008, respectively 851,851 848,624 Retained earnings 94,821 81,268 Accumulated other comprehensive loss (812) (829) Total stockholders' equity 945,860 929,063 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,766,576 $3,714,565 ITC HOLDINGS CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Three months ended March 31, CASH FLOWS FROM OPERATING ACTIVITIES 2009 2008 Net income $28,725 $25,521 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 26,548 22,324 Attachment O revenue accrual - including accrued interest (12,088) (18,222) Deferred income tax expense 16,245 14,423 Allowance for equity funds used during construction (2,766) (3,096) Other 2,333 3,855 Changes in assets and liabilities, exclusive of changes shown separately: Accounts receivable (2,314) (2,790) Inventory (4,345) 2,110 Regulatory assets - Attachment O revenue accrual including accrued interest 5,712 - Other current assets (2,447) (3,151) Accounts payable (941) 3,369 Accrued payroll (4,588) (3,512) Accrued interest (22,118) (8,935) Accrued taxes (1,642) (847) Other current liabilities (2,537) 425 Other non-current assets and liabilities, net 1,699 3,206 Net cash provided by operating activities 25,476 34,680 CASH FLOWS FROM INVESTING ACTIVITIES Expenditures for property, plant and equipment (104,687) (94,564) ITC Midwest's assets acquisition direct fees - (933) Net cash used in investing activities (104,687) (95,497) CASH FLOWS FROM FINANCING ACTIVITIES Issuance of long-term debt - 557,895 Repayments of long-term debt - (765,000) Borrowings under revolving credit agreements 142,771 164,500 Repayments of revolving credit agreements (99,792) (173,200) Issuance of common stock 1,031 308,904 Dividends on common stock (15,169) (14,319) Refundable deposits from generators for transmission network upgrades 21,516 3,583 Repayment of refundable deposits from generators for transmission network upgrades (2,291) - Debt issuance costs (142) (4,123) Other - (734) Net cash provided by financing activities 47,924 77,506 NET INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS (31,287) 16,689 CASH AND CASH EQUIVALENTS - Beginning of period 58,110 2,616 CASH AND CASH EQUIVALENTS - End of period $26,823 $19,305

ITC Holdings Corp.

CONTACT: Investors, Pat Wenzel, [phone],
[e-mail], or Media, Cheryl Eberwein, [phone],
[e-mail], both of ITC Holdings Corp.

Web Site: http://www.itc-holdings.com/