ITC Holdings Reports Increased Third Quarter Earnings; Raises 2009 EPS Guidance

• Press Release
• Source: ITC Holdings Corp.
• On 6:55 pm EDT, Wednesday October 28, 2009

NOVI, Mich., Oct. 28 /PRNewswire-FirstCall/ --

Highlights

• Net income for the third quarter of $37.8 million, or $0.74 per diluted common share
• Net income for the nine months ended September 30, 2009 of $97.3 million, or $1.92 per diluted common share
• Capital investments of $300.4 million for the nine months ended September 30, 2009
• 2009 EPS guidance increased to $2.47 to $2.52 per diluted common share and 2009 capital expenditure guidance revised to a range of $320 to $345 million
• 2010 EPS guidance of $2.52 to $2.62 per common share and capital expenditure guidance of $405 million to $460 million reaffirmed

                                    Three months ended     Nine months ended
    (in thousands, except per share   September 30,           September 30,
     data)                            -------------           -------------
                                   2009           2008       2009       2008
                                   ----           ----       ----       ----
    OPERATING REVENUES         $151,328       $163,279   $464,507   $465,809

    NET INCOME                  $37,818        $28,045    $97,336    $82,227

    DILUTED EPS (1)               $0.74          $0.55      $1.92      $1.64

ITC Holdings Corp. (NYSE: ITC - News) today announced its third quarter and year-to-date results for the period ended September 30, 2009. Net income for the quarter was $37.8 million, or $0.74 per diluted common share, compared to $28.0 million, or $0.55 per diluted common share for the third quarter of 2008. Net income for the nine months ended September 30, 2009 was $97.3 million, or $1.92 per diluted common share, compared to $82.2 million, or $1.64 per diluted common share for the same period last year. Diluted earnings per share in the 2009 quarter and year-to-date periods includes $0.11 associated with the recognition of regulatory assets at ITC Great Plains.

For the nine months ended September 30, 2009, ITCTransmission, METC and ITC Midwest's investments in their transmission systems were $70.9 million, $110.2 million and $119.3 million, respectively.

"ITC's ability to continue to deliver strong financial results in a challenging economic environment is further testimony to the strength of our business model and growth strategy," said Joseph L. Welch, chairman, president and CEO of ITC. "Our capital investments are essential to developing a 21st century transmission grid capable of reliably supporting the energy needs of our customers while, at the same time, driving our growth for years to come."

Reported net income for the third quarter of 2009 increased $9.8 million, or $0.19 per diluted common share, compared to the same period in 2008. For the nine months ended September 30, 2009, net income increased $15.1 million, or $0.28 per diluted common share, compared to the same period in 2008.

Key drivers that contributed to these results include:

• An increase in net income for the quarter and nine month periods due to higher rate base at METC and ITC Midwest.
• Higher AFUDC at ITC Midwest in both the quarter and year-to-date periods resulting from our continued investments in this system to improve reliability and interconnect new generating resources.
• An increase in net income for both the quarter and year-to-date periods due to the recognition of regulatory assets at ITC Great Plains which included the reversal of $8.2 million of costs that were previously recorded as expenses, including certain expenses from prior periods.
• In the nine months ended September 30, the 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.
• For the year-to-date period, the increase in EPS was partially offset by higher weighted average diluted shares outstanding in 2009.

EPS and Capital Expenditure Guidance

For 2009, ITC has increased its guidance for full year earnings per diluted common share to a range of $2.47 to $2.52. The increase is primarily due to our updated capital guidance, lower forecasted non-recoverable expenses and a lower expected effective tax rate. Additionally, we have revised our 2009 capital expenditure guidance to a range of $320 to $345 million. We now expect capital expenditures to be approximately $75 to $85 million at ITCTransmission, $120 to $130 million at METC and $125 to $130 million at ITC Midwest.

For 2010, ITC continues to expect earnings per diluted common share of $2.52 to $2.62 as previously disclosed, although earnings are now expected to be at the high end of this guidance range due to progress made in 2009 on capital projects that will likely result in more projects going into service in 2010 than originally anticipated. Capital investments for 2010 are still expected to be approximately $405 to $460 million, including $50 to $60 million, $140 to $155 million, $205 to $225 million and $10 to $20 million for ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.

Third Quarter 2009 Financial Results Detail

ITC's operating revenues for the quarter decreased to $151.3 million from $163.3 million last year. This decrease was primarily a result of lower net revenue requirements during the three months ended September 30, 2009 as compared to the same period in 2008 due to our expense mitigation efforts, other reductions to operating expenses resulting from higher capitalization, the impact of the depreciation study for ITCTransmission which reduced depreciation rates, as discussed below, and an increase in regional cost sharing revenues. Partially offsetting these decreases was an increase due to higher rate base primarily associated with higher balances of property, plant and equipment in-service.

Regional cost sharing revenues increased due primarily to capital projects placed in-service in 2007 and 2008, or those that are expected to be in-service in 2009, that have been identified by Midwest ISO (MISO) as eligible for regional cost sharing.

In addition, point-to-point and control and dispatch revenues decreased due to fewer point to point reservations and lower network peak load at ITCTransmission.

Operation & maintenance (O&M) expenses of $22.1 million were $11.1 million lower during the third quarter of 2009 compared to the same period in 2008. O&M expenses decreased mainly due to our cost mitigation efforts and higher capitalization of O&M expenses in the quarter.

General and administrative (G&A) expenses of $9.5 million were $11.1 million lower during the third quarter of 2009 compared to the same period in 2008 mainly due to the recognition of regulatory assets relating to development activities of ITC Great Plains as well as pre-construction costs for the KETA project which reduced G&A expenses by $8.0 million. G&A expenses also decreased due to our cost mitigation efforts and higher capitalization of G&A expenses in the quarter. G&A expenses for the quarter include $1.9 million of development costs at ITC Grid Development and its subsidiaries which were $0.5 million higher than the same period in 2008 as a result of increased development activities.

Depreciation and amortization expenses decreased by $4.3 million during the third quarter of 2009 compared to the same period in 2008. Depreciation and amortization expense decreased due primarily to the FERC approval in September 2009 of a depreciation study for ITCTransmission which revised the depreciation rates used to calculate depreciation expense for the entire 2009 calendar year at ITCTransmission and resulted in a reduction of depreciation expense of $7.0 million. The effect of the change in the depreciation rate on net income and earnings per share amounts in the quarter is insignificant. Partially offsetting this reduction are increases primarily related to a higher depreciable asset base resulting from property, plant and equipment additions.

Interest expense increased for the three months ended September 30, 2009 compared to the same period in 2008 due primarily to additional interest expense associated with the December 2008 issuances of METC's $50.0 million Senior Secured Notes and ITC Midwest's $40.0 million and $35.0 million First Mortgage Bonds, Series B and Series C, respectively, ITC Holdings' $100 million two year Term Loan Agreement executed in April 2009 and the April 2008 issuance of ITCTransmission's $100.0 million First Mortgage Bonds, Series D. These increases were partially offset by lower interest expense as a result of lower interest rates under our revolving credit agreements.

The effective income tax rate for the three months ended September 30, 2009 was 37.6 percent compared to 38.9 percent in the third quarter of 2008. The rate is lower mainly due to the tax effects of Allowance for Equity Funds Used During Construction (AFUDC Equity) which is not included in the income tax provision.

Third Quarter Year-To-Date 2009 Financial Results Detail

ITC's operating revenues for the nine months ended September 30, 2009 decreased to $464.5 million from $465.8 million last year. This decrease was primarily a result of lower net revenue requirements during the nine months ended September 30, 2009 as compared to the same period in 2008 due to our expense mitigation efforts, other reductions to operating expenses resulting from higher capitalization, the impact of the depreciation study for ITCTransmission, as discussed above, and the increase in regional cost sharing revenues. Partially offsetting these decreases was an increase to higher rate base primarily associated with higher balances of property, plant and equipment in-service.

Regional cost sharing revenues increased due primarily to capital projects placed in-service in 2007, 2008 or are expected to be in-service in 2009 that have been identified by MISO as eligible for regional cost sharing.

Point-to-point revenues decreased due primarily to fewer point to point reservations.

Scheduling, control and dispatch revenues decreased due primarily to lower network peak load at ITCTransmission.

Other revenues decreased due primarily to the elimination of our ancillary service revenues as a result of the establishment of the MISO ancillary service market which began in January 2009.

O&M expenses of $67.8 million were $19.8 million lower in the first nine months of 2009 compared to the same period in 2008. O&M expenses were lower mainly due to our cost mitigation efforts and higher capitalization of O&M expenses in the nine months ended September 30, 2009.

G&A expenses of $49.7 million for September year-to-date 2009 were $10.3 million lower than the same period in 2008 mainly due to the recognition of regulatory assets relating to development activities of ITC Great Plains as well as pre-construction costs for the KETA project which reduced G&A expenses by $8.0 million. G&A expenses also decreased due to our cost mitigation efforts and higher capitalization of G&A expenses in the nine months ended September 30, 2009. G&A expenses for the nine month period include $7.0 million of development costs at ITC Grid Development and its subsidiaries which were $3.8 million higher than the same period in 2008 as a result of increased development activities.

Depreciation and amortization expenses increased by $2.7 million during the nine months ended September 30, 2009 compared to the same period in 2008. Depreciation and amortization increased due primarily to a higher depreciable asset base resulting from property, plant and equipment additions. The effect of the change in the depreciation rate on net income and earnings per share amounts in the year-to-date period is insignificant. The increase was partially offset by the ITCTransmission depreciation study, as described above, and higher capitalization of depreciation expenses in the nine months ended September 30, 2009.

Interest expense increased in the first nine months of 2009 compared to the same period in 2008 due primarily to additional interest expense associated with the December 2008 issuances of METC's $50.0 million Senior Secured Notes and ITC Midwest's $40.0 million and $35.0 million First Mortgage Bonds, Series B and Series C, respectively, ITC Holdings' $100 million two year Term Loan Agreement executed in April 2009 and the April 2008 issuance of ITCTransmission's $100.0 million First Mortgage Bonds, Series D. These increases were partially offset by lower interest expense as a result of lower interest rates under our revolving credit agreements.

The effective income tax rate for the nine months ended September 30, 2009 was 37.5 percent compared to 38.4 percent in 2008. The rate is lower mainly due to the tax effects of AFUDC Equity which is not included in the income tax provision.

Third Quarter Conference Call

ITC will conduct a conference call to discuss third quarter and year-to-date 2009 earnings results at 11:00 a.m. ET on October 29, 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 third quarter and first nine months of 2009. Individuals wishing to participate in the conference call may dial toll-free (800) 967-7188 (domestic) or (719) 457-2657 (international); there is no passcode. The conference call replay, available through November 13, 2009 can be accessed by dialing toll-free (888) 203-1112 (domestic) or (719) 457-0820 (international), passcode 4766199. 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 third quarter 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 - News) 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 computed earnings per share using the two-class method in accordance with guidance set forth by the Financial Accounting Standards Board ("FASB"), formerly FASB Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. The retroactive application required under the two-class method resulted in a decrease in dilutive earnings per share by $0.01 per share as compared to the earnings per share calculation used and disclosed for the three months ended September 30, 2008. The retroactive application did not change the basic earnings per share amount disclosed for the three months ended September 30, 2008. The retroactive application of the two-class method resulted in a decrease of $0.02 per share to both the basic and dilutive earnings per share amounts disclosed for the nine months ended September 30, 2008.

    ITC HOLDINGS CORP. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

    (in thousands, except per         Three months ended   Nine months ended
     share data)                         September 30,       September 30,
                                         -------------       -------------
                                        2009      2008      2009      2008
                                        ----      ----      ----      ----
    OPERATING REVENUES              $151,328  $163,279  $464,507  $465,809

    OPERATING EXPENSES

      Operation and maintenance       22,132    33,271    67,792    87,628
      General and administrative       9,507    20,640    49,653    59,983
      Depreciation and amortization   19,590    23,869    72,325    69,639
      Taxes other than income taxes   11,049    10,552    32,759    31,750
      Other operating income and
       expense-net                        (7)      515        (7)     (930)
                                         ---       ---       ---      ----
        Total operating expenses      62,271    88,847   222,522   248,070
                                      ------    ------   -------   -------

    OPERATING INCOME                  89,057    74,432   241,985   217,739

    OTHER EXPENSES (INCOME)

      Interest expense                32,412    30,547    96,666    91,263
      Allowance for equity funds used
       during construction           (3,764)   (2,672)   (9,762)   (8,052)
      Other income                     (738)     (847)   (2,125)   (1,909)
      Other expense                      521     1,494     1,487     2,928
                                         ---     -----     -----     -----
        Total other expenses (income) 28,431    28,522    86,266    84,230
                                      ------    ------    ------    ------

    INCOME BEFORE INCOME TAXES        60,626    45,910   155,719   133,509

    INCOME TAX PROVISION              22,808    17,865    58,383    51,282
                                      ------    ------    ------    ------

    NET INCOME                        37,818    28,045    97,336    82,227
                                      ======    ======    ======    ======

    Basic earnings per common share    $0.76     $0.57     $1.95     $1.68
    Diluted earnings per common share  $0.74     $0.55     $1.92     $1.64

    Dividends declared per common
     share                            $0.320   $0.305    $0.930    $0.885



    ITC HOLDINGS CORP. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

    (in thousands, except per share data)   September 30,    December 31,
                                                2009            2008
                                                ----            ----
    ASSETS
      Current assets
      Cash and cash equivalents              $54,181         $58,110
      Accounts receivable                     64,055          57,638
      Inventory                               32,365          25,077
      Deferred income taxes                   19,749               -
      Regulatory assets - revenue accrual
       (including accrued interest of $2,203
       and $1,637, respectively)              67,533          22,301
      Other                                    4,946           4,147
                                               -----           -----
         Total current assets                242,829         167,273

    Property, plant and
     equipment (net of
     accumulated depreciation
     and amortization of $992,888
     and $925,890, respectively)           2,541,415       2,304,386
     Other assets
      Goodwill                               951,319         951,319
      Intangible assets (net of
       accumulated amortization
       of $8,319 and $6,050,
       respectively)                          52,668          52,357
      Regulatory assets - revenue
       accrual (including accrued
       interest of $577 and
       $1,512, respectively)                  31,894          81,643
      Regulatory assets-
       acquisition adjustments
       (net of accumulated
       amortization of $26,435 and
       $22,393, respectively)                 76,623          80,665
      Other regulatory assets                 51,329          39,848
      Deferred financing fees
       (net of accumulated
       amortization of $8,840 and
       $8,048, respectively)                  21,136          21,410
      Other                                   11,014          15,664
                                              ------          ------
         Total other assets                1,195,983       1,242,906
                                           ---------       ---------
    TOTAL ASSETS                          $3,980,227      $3,714,565
                                          ==========      ==========

    LIABILITIES AND STOCKHOLDERS' EQUITY
      Current liabilities
      Accounts payable                       $55,053         $79,403
      Accrued payroll                         11,058          10,331
      Accrued interest                        18,962          37,779
      Accrued taxes                           10,032          18,104
      Deferred income taxes                        -           6,476
       Refundable deposits from
       generators for transmission
       network upgrades                       28,649           8,701
      Other                                    2,680           5,384
                                               -----           -----
         Total current liabilities           126,434         166,178

     Accrued pension and
      postretirement liabilities              24,938          24,295
     Deferred income taxes                   233,689         144,889
     Regulatory liabilities -
      revenue deferral                        12,336               -
     Regulatory liabilities -
      accrued asset removal costs            170,699         196,656
     Other                                    17,939           5,231
     Long-term debt                        2,404,439       2,248,253


    STOCKHOLDERS' EQUITY
      Common stock, without par value,
       100,000,000 shares authorized,
       49,992,163 and 49,654,518 shares
       issued and outstanding at
       September 30, 2009 and
       December 31, 2008, respectively       858,328         848,624
      Retained earnings                      132,205          81,268
      Accumulated other comprehensive loss      (780)           (829)
                                                ----            ----
         Total stockholders' equity          989,753         929,063
                                             -------         -------
    TOTAL LIABILITIES AND STOCKHOLDERS'
     EQUITY                               $3,980,227      $3,714,565
                                          ==========      ==========



    ITC HOLDINGS CORP. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

    (in thousands)                              Nine months ended
                                                   September 30,
                                                ------------------
                                                2009          2008
                                                ----          ----
    CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                              $97,336       $82,227
     Adjustments to reconcile net
      income to net cash provided by
      operating activities:
        Depreciation and amortization
         expense                              72,325        69,639
        Revenue accrual and deferral -
         including accrued interest             (275)      (51,619)
        Deferred income tax expense           57,330        49,644
        Allowance for equity funds used
         during construction                  (9,762)       (8,052)
        Recognition of ITC Great Plains
         regulatory assets                    (8,191)            -
        Other                                  8,260         8,012
        Changes in assets and liabilities,
         exclusive of changes shown
         separately:
          Accounts receivable                 (4,717)      (15,353)
          Inventory                          (10,130)       (3,375)
          Regulatory assets - revenue
           accrual including accrued
           interest                           17,136             -
          Other current assets                  (799)       (1,474)
          Accounts payable                    (5,360)       11,844
          Accrued payroll                        234         1,986
          Accrued interest                   (18,817)       (9,445)
          Accrued taxes                       (8,038)       (4,456)
          Other current liabilities           (2,713)        1,659
          Other non-current assets and
           liabilities, net                    2,896        (1,207)
                                               -----        ------
            Net cash provided by operating
             activities                      186,715       130,030

    CASH FLOWS FROM INVESTING ACTIVITIES
     Expenditures for property, plant
      and equipment                         (327,611)     (288,974)
     Other                                    (2,920)          472
                                              ------           ---
            Net cash used in investing
             activities                     (330,531)     (288,502)

    CASH FLOWS FROM FINANCING ACTIVITIES
     Issuance of long-term debt              100,000       657,782
     Repayment of long-term debt                   -      (765,000)
     Borrowings under revolving
      credit agreements                      482,466       480,511
     Repayments under revolving
      credit agreements                     (426,529)     (453,500)
     Issuance of common stock                  2,324       310,237
     Common stock issuance costs                   -          (797)
     Dividends on common stock               (46,389)      (43,793)
     Refundable deposits from
      generators for transmission
      network upgrades                        35,188        14,189
     Repayment of refundable deposits
      from generators for transmission
      network upgrades                        (5,228)       (2,352)
     Debt issuance costs                      (1,945)       (5,409)
                                              ------        ------
            Net cash provided by financing
             activities                      139,887       191,868
                                             -------       -------

    NET INCREASE/(DECREASE) IN CASH
     AND CASH EQUIVALENTS                     (3,929)       33,396

    CASH AND CASH EQUIVALENTS -
     Beginning of period                      58,110         2,616
                                              ------         -----
    CASH AND CASH EQUIVALENTS - End
     of period                               $54,181       $36,012
                                             =======       =======

Buzz up!