Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Oct. 30, 2015 | |
Entity Information [Line Items] | ||
Entity Registrant Name | ITC HOLDINGS CORP. | |
Entity Central Index Key | 1,317,630 | |
Trading Symbol | ITC | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 153,418,988 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash and cash equivalents | $ 24,167 | $ 27,741 |
Accounts receivable | 124,310 | 100,998 |
Inventory | 29,491 | 30,892 |
Deferred income taxes | 17,002 | 14,511 |
Regulatory assets | 12,378 | 5,393 |
Prepaid and other current assets | 11,598 | 7,281 |
Total current assets | 218,946 | 186,816 |
Property, plant and equipment (net of accumulated depreciation and amortization of $1,466,591 and $1,388,217, respectively) | 5,890,138 | 5,496,875 |
Other assets | ||
Goodwill | 950,163 | 950,163 |
Intangible assets (net of accumulated amortization of $27,411 and $24,917, respectively) | 46,325 | 48,794 |
Regulatory assets | 224,913 | 223,712 |
Deferred financing fees (net of accumulated amortization of $16,504 and $15,972, respectively) | 30,222 | 30,311 |
Other | 44,892 | 37,418 |
Total other assets | 1,296,515 | 1,290,398 |
TOTAL ASSETS | 7,405,599 | 6,974,089 |
Current liabilities | ||
Accounts payable | 108,828 | 107,969 |
Accrued payroll | 20,660 | 23,502 |
Accrued interest | 41,642 | 50,538 |
Accrued taxes | 26,048 | 41,614 |
Regulatory liabilities | 43,607 | 39,972 |
Refundable deposits from generators for transmission network upgrades | 2,657 | 10,376 |
Debt maturing within one year | 694,327 | 175,000 |
Other | 11,531 | 14,043 |
Total current liabilities | 949,300 | 463,014 |
Accrued pension and postretirement liabilities | 70,833 | 69,562 |
Deferred income taxes | 746,179 | 656,562 |
Regulatory liabilities | 210,811 | 160,070 |
Refundable deposits from generators for transmission network upgrades | 9,039 | 9,384 |
Other | 27,695 | 17,354 |
Long-term debt | $ 3,709,878 | $ 3,928,586 |
Commitments and contingent liabilities (Note 11) | ||
STOCKHOLDERS’ EQUITY | ||
Common stock, without par value, 300,000,000 shares authorized, 156,177,085 and 155,140,967 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively | $ 811,037 | $ 923,191 |
Retained earnings | 866,900 | 741,550 |
Accumulated other comprehensive income | 3,927 | 4,816 |
Total stockholders’ equity | 1,681,864 | 1,669,557 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 7,405,599 | $ 6,974,089 |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) (Parentheticals) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Property, plant and equipment, accumulated depreciation and amortization | $ 1,466,591 | $ 1,388,217 |
Intangible assets, accumulated amortization | 27,411 | 24,917 |
Deferred financing fees, accumulated amortization | $ 16,504 | $ 15,972 |
Common stock, par value | $ 0 | $ 0 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 156,177,085 | 155,140,967 |
Common stock, shares outstanding | 156,177,085 | 155,140,967 |
CONDENSED CONSOLIDATED STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
OPERATING REVENUES | $ 273,189 | $ 270,134 | $ 820,734 | $ 791,951 |
OPERATING EXPENSES | ||||
Operation and maintenance | 32,721 | 29,038 | 88,309 | 79,735 |
General and administrative | 33,677 | 28,812 | 107,064 | 87,082 |
Depreciation and amortization | 36,890 | 31,936 | 106,903 | 94,609 |
Taxes other than income taxes | 20,463 | 19,205 | 61,629 | 57,474 |
Other operating (income) and expenses — net | (206) | (289) | (675) | (750) |
Total operating expenses | 123,545 | 108,702 | 363,230 | 318,150 |
OPERATING INCOME | 149,644 | 161,432 | 457,504 | 473,801 |
OTHER EXPENSES (INCOME) | ||||
Interest expense — net | 51,398 | 47,328 | 150,070 | 138,491 |
Allowance for equity funds used during construction | (6,421) | (4,921) | (21,434) | (14,865) |
Loss on extinguishment of debt | 0 | 0 | 0 | 29,074 |
Other income | (384) | (244) | (804) | (618) |
Other expense | 1,372 | 761 | 2,969 | 3,696 |
Total other expenses (income) | 45,965 | 42,924 | 130,801 | 155,778 |
INCOME BEFORE INCOME TAXES | 103,679 | 118,508 | 326,703 | 318,023 |
INCOME TAX PROVISION | 38,106 | 44,635 | 121,662 | 120,678 |
NET INCOME | $ 65,573 | $ 73,873 | $ 205,041 | $ 197,345 |
Basic earnings per common share | $ 0.42 | $ 0.47 | $ 1.32 | $ 1.26 |
Diluted earnings per common share | 0.42 | 0.47 | 1.31 | 1.25 |
Dividends declared per common share | $ 0.1875 | $ 0.1625 | $ 0.5125 | $ 0.4475 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
NET INCOME | $ 65,573 | $ 73,873 | $ 205,041 | $ 197,345 |
OTHER COMPREHENSIVE (LOSS) INCOME | ||||
Derivative instruments, net of tax (Note 6) | (2,169) | 169 | (910) | (413) |
Available-for-sale securities, net of tax (Note 6) | 18 | (86) | 21 | 24 |
TOTAL OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX | (2,151) | 83 | (889) | (389) |
TOTAL COMPREHENSIVE INCOME | $ 63,422 | $ 73,956 | $ 204,152 | $ 196,956 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
NET INCOME | $ 205,041 | $ 197,345 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization expense | 106,903 | 94,609 |
Recognition, refund and collection of revenue accruals and deferrals — including accrued interest | 1,164 | 29,175 |
Deferred income tax expense | 76,103 | 86,935 |
Allowance for equity funds used during construction | (21,434) | (14,865) |
Loss on extinguishment of debt | 0 | 29,074 |
Other | 14,950 | 15,474 |
Changes in assets and liabilities, exclusive of changes shown separately: | ||
Accounts receivable | (24,523) | (24,057) |
Inventory | 1,401 | 1,423 |
Prepaid and other current assets | (4,317) | 3,377 |
Accounts payable | (1,120) | (16,382) |
Accrued payroll | (1,520) | (1,710) |
Accrued interest | (8,896) | (18,161) |
Accrued taxes | (15,566) | (3,156) |
Other current liabilities | 132 | (13,486) |
Other non-current assets and liabilities, net | 57,970 | (4,694) |
Net cash provided by operating activities | 386,288 | 360,901 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Expenditures for property, plant and equipment | (460,110) | (549,599) |
Other | (14,969) | (2,667) |
Net cash used in investing activities | (475,079) | (552,266) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Issuance of long-term debt | 225,000 | 498,664 |
Borrowings under revolving credit agreements | 909,400 | 1,397,800 |
Borrowings under term loan credit agreements | 0 | 110,000 |
Net issuance of commercial paper | 218,983 | 0 |
Retirement of long-term debt — including extinguishment of debt costs | 0 | (248,494) |
Repayments of revolving credit agreements | (1,053,200) | (1,319,500) |
Repayments under term loan credit agreements | 0 | (39,000) |
Issuance of common stock | 12,322 | 19,666 |
Dividends on common and restricted stock | (79,697) | (70,279) |
Refundable deposits from generators for transmission network upgrades | 3,458 | 5,833 |
Repayment of refundable deposits from generators for transmission network upgrades | (11,442) | (22,155) |
Repurchase and retirement of common stock | (21,931) | (108,136) |
Forward contracts of accelerated share repurchase program | (115,000) | (46,000) |
Other | (2,676) | (9,713) |
Net cash provided by financing activities | 85,217 | 168,686 |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (3,574) | (22,679) |
CASH AND CASH EQUIVALENTS — Beginning of period | 27,741 | 34,275 |
CASH AND CASH EQUIVALENTS — End of period | $ 24,167 | $ 11,596 |
GENERAL
GENERAL | 9 Months Ended |
Sep. 30, 2015 | |
GENERAL [Abstract] | |
GENERAL | GENERAL These condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements as of and for the year ended December 31, 2014 included in ITC Holdings’ annual report on Form 10-K for such period. The accompanying condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Rule 10-01 of Securities and Exchange Commission (“SEC”) Regulation S-X as they apply to interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These accounting principles require us to use estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from our estimates. The condensed consolidated financial statements are unaudited, but in our opinion include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results for the interim period. The interim financial results are not necessarily indicative of results that may be expected for any other interim period or the fiscal year. Supplementary Cash Flows Information Nine months ended September 30, (in thousands) 2015 2014 Supplementary cash flows information: Interest paid (net of interest capitalized) $ 153,350 $ 154,410 Income taxes paid — net 49,599 25,744 Supplementary non-cash investing and financing activities: Additions to property, plant and equipment and other long-lived assets (a) $ 85,386 $ 92,557 Allowance for equity funds used during construction 21,434 14,865 ____________________________ (a) Amounts consist of current liabilities for construction, labor and materials that have not been included in investing activities. These amounts have not been paid for as of September 30, 2015 or 2014 , respectively, but have been or will be included as a cash outflow from investing activities for expenditures for property, plant and equipment when paid. |
RECENT ACCOUNTING PRONOUNCEMENT
RECENT ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 30, 2015 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS Revenue Recognition In May 2014, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance requiring entities to apply a new model for recognizing revenue from contracts with customers. The guidance will supersede the current revenue recognition guidance and require entities to evaluate their revenue recognition arrangements using a five step model to determine when a customer obtains control of a transferred good or service. The guidance is effective for annual reporting periods beginning after December 15, 2017 and may be adopted using a full or modified retrospective application. We do not expect the guidance to have a material impact on our consolidated results of operations, cash flows, or financial position. Going Concern In August 2014, the FASB issued authoritative guidance on (1) how to perform a going concern assessment and (2) when going concern disclosures are required under GAAP. The guidance extends the responsibility for performing a going concern assessment to company management; previously this requirement existed only in auditing literature. The standard is expected to enhance the timeliness, clarity, and consistency of going concern disclosures. The guidance is effective for the annual period ending after December 15, 2016, and for interim periods and annual periods thereafter. Early application is permitted. We do not expect the standard to have a material impact on our consolidated financial statements, including our disclosure. Amendments to the Consolidation Analysis In February 2015, the FASB issued authoritative guidance that amends the variable interest entity consolidation analysis under GAAP. The new standard was issued to improve targeted areas of consolidation guidance; though the FASB’s deliberations were largely focused on the investment management industry, the standard is applicable for reporting entities across industries. Specifically, the guidance amends the consolidation analysis for limited partnerships, clarifies when fees paid to a decision maker should be a factor in the consolidation analysis and amends how variable interests held by related parties affect consolidation. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted. We do not expect the standard to have a material impact on our consolidated financial statements. Amendment to the Balance Sheet Presentation of Debt Issuance Costs In April 2015, the FASB issued authoritative guidance that amends the balance sheet presentation of debt issuance costs. This new standard requires debt issuance costs to be shown as a direct deduction from the carrying amount of the related debt, consistent with debt discounts. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015 and will be applied retrospectively. Early adoption is permitted. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. We are currently assessing the impact this guidance may have on our consolidated statements of financial position and disclosures. The standard will not impact our consolidated statements of operations or cash flows. |
REGULATORY MATTERS
REGULATORY MATTERS | 9 Months Ended |
Sep. 30, 2015 | |
Regulated Operations [Abstract] | |
REGULATORY MATTERS | REGULATORY MATTERS Start-Up, Development and Pre-Construction Regulatory Assets ITC Great Plains made a filing with the FERC under Section 205 of the FPA in May 2013 to recover start-up, development and pre-construction expenses, including associated debt and equity carrying charges, in future rates. These expenses included certain costs incurred by ITC Great Plains for the Kansas Electric Transmission Authority (“KETA”) Project and the Kansas V-Plan Project prior to construction. On March 26, 2015, FERC accepted ITC Great Plains’ request to commence amortization of the authorized regulatory assets, subject to refund, as well as set the matter for hearing and settlement judge procedures. During the third quarter of 2015, ITC Great Plains and the settling parties reached an uncontested settlement agreement, which was certified by the presiding administrative law judge but remains subject to acceptance by FERC. As of September 30, 2015 , we had a total of $12.9 million (net of accumulated amortization of $0.7 million ) of regulatory assets for these expenses, including carrying charges. ITC Great Plains has included the unamortized balance of the regulatory assets in its rate base and commenced amortization over a 10 -year period during the second quarter of 2015. The amortization expense will be recovered through ITC Great Plains’ cost-based formula rate template, subject to acceptance by FERC. We do not expect the final resolution of this matter to have a material impact on our consolidated results of operations, cash flows or financial condition. MISO Funding Policy for Generator Interconnections On June 18, 2015, FERC issued an order initiating a proceeding, pursuant to Section 206 of the FPA, to examine MISO’s funding policy for generator interconnections, which allows a transmission owner to unilaterally elect to fund network upgrades and recover such costs from the interconnection customer. In this order, FERC suggested the MISO funding policy be revised to require mutual agreement between the interconnection customer and transmission owner to utilize the election to fund network upgrades. We do not expect the resolution of this proceeding to have a material impact on our consolidated results of operations, cash flows or financial condition. MISO Formula Rate Template Modification Filing On October 30, 2015, ITCTransmission, METC and ITC Midwest (collectively, the “joint applicants”) requested modifications, pursuant to Section 205 of the FPA, to certain aspects of the joint applicants’ respective formula rate templates which included, among other things, changes to ensure that various income tax items are computed correctly for purposes of determining their revenue requirements. The joint applicants requested an effective date of January 1, 2016 for the proposed template changes. The formula rate templates, prior to any proposed modifications, include certain deferred income taxes on contributions in aid of construction in rate base that result in the joint applicants recovering excess amounts from customers. The recognition of this refund liability in the third quarter of 2015 resulted in a reduction in revenues of $8.6 million , which includes amounts recovered for all historical periods through September 30, 2015 , and an increase in interest expense of $0.8 million for the three and nine months ended September 30, 2015. This resulted in an estimated after-tax reduction to net income of $5.5 million for the three and nine months ended September 30, 2015. We do not expect the formula rate modifications, if accepted by FERC, to have a material impact on our consolidated results of operations, cash flows or financial condition. Order on Formula Rate Protocols In 2012, the FERC issued an order initiating a proceeding, pursuant to Section 206 of the FPA, to determine whether the formula rate protocols under the MISO Tariff are sufficient to ensure just and reasonable rates. Our MISO Regulated Operating Subsidiaries were named in the order. In May 2013, the FERC issued an order that determined the formula rate protocols are insufficient to ensure just and reasonable rates and directed MISO and its member transmission owners (“TOs”) to file revised formula rate protocols. In September 2013, MISO and its TOs, including our MISO Regulated Operating Subsidiaries, filed revised formula rate protocols which require our MISO Regulated Operating Subsidiaries to provide additional information for certain aspects of the formula rates used to calculate their respective annual revenue requirements. In March 2014, the FERC issued an order conditionally accepting MISO and its TOs’ September 2013 filing and required a further compliance filing, which MISO and its TOs made in May 2014. On January 22, 2015, the FERC conditionally accepted the May 2014 compliance filing, subject to a further compliance filing, which was made on February 13, 2015. On August 21, 2015, the FERC issued an order accepting the February 13, 2015 compliance filing, effective January 2014. We do not expect these revised formula rate protocols to impact our consolidated results of operations, cash flows or financial condition. Rate of Return on Equity and Capital Structure Complaints See “Rate of Return on Equity and Capital Structure Complaints” in Note 11 for a discussion of the complaints. Cost-Based Formula Rates with True-Up Mechanism The transmission rates at our Regulated Operating Subsidiaries are set annually, using the FERC-approved formula rates, and the rates remain in effect for a one -year period. By completing their formula rate templates on an annual basis, our Regulated Operating Subsidiaries are able to adjust their transmission rates to reflect changing operational data and financial performance, including the amount of network load on their transmission systems (for our MISO Regulated Operating Subsidiaries), operating expenses and additions to property, plant and equipment when placed in service, among other items. The FERC-approved formula rates use approved return on equity (“ROE”) rates and do not require further action or FERC filings for the calculated joint zone rates to go into effect, although the rates are subject to legal challenge at the FERC. Our Regulated Operating Subsidiaries will continue to use formula rates to calculate their respective annual revenue requirements unless the FERC determines the rates to be unjust and unreasonable or another mechanism is determined by the FERC to be just and reasonable. See “Rate of Return on Equity and Capital Structure Complaints” in Note 11 for detail on ROE matters including incentive adders approved by FERC in 2015. Our cost-based formula rate templates include a true-up mechanism, whereby our Regulated Operating Subsidiaries compare their actual revenue requirements to their billed revenues for each year to determine any over- or under-collection of revenue requirements. Revenue is recognized for services provided during each reporting period based on actual revenue requirements calculated using the formula rate templates. Our Regulated Operating Subsidiaries accrue or defer revenues to the extent that the actual revenue requirement for the reporting period is higher or lower, respectively, than the amounts billed relating to that reporting period. The amount of accrued or deferred revenues is reflected in customer bills within two years under the provisions of the formula rate templates. The net changes in regulatory assets and liabilities associated with our Regulated Operating Subsidiaries’ formula rate revenue accruals and deferrals, including accrued interest, were as follows during the nine months ended September 30, 2015 : (in thousands) Total Balance as of December 31, 2014 $ (56,103 ) Net refund of 2013 revenue deferrals and accruals, including accrued interest 26,366 Net revenue deferral for the nine months ended September 30, 2015 (25,983 ) Net accrued interest payable for the nine months ended September 30, 2015 (1,547 ) Balance as of September 30, 2015 $ (57,267 ) Regulatory assets and liabilities associated with our Regulated Operating Subsidiaries’ formula rate revenue accruals and deferrals and associated accrued interest are recorded in the condensed consolidated statements of financial position at September 30, 2015 as follows: (in thousands) Total Current assets $ 12,378 Non-current assets 8,850 Current liabilities (37,415 ) Non-current liabilities (41,080 ) Balance as of September 30, 2015 $ (57,267 ) |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS Goodwill At September 30, 2015 and December 31, 2014 , we had goodwill balances recorded at ITCTransmission, METC and ITC Midwest of $173.4 million , $453.8 million and $323.0 million , respectively, which resulted from the ITCTransmission acquisition, the METC acquisition and ITC Midwest’s asset acquisition, respectively. Intangible Assets We have recorded intangible assets as a result of the METC acquisition in 2006. The carrying value of these assets was $31.9 million and $34.2 million (net of accumulated amortization of $26.5 million and $24.2 million ) as of September 30, 2015 and December 31, 2014 , respectively. We have also recorded intangible assets for payments and obligations made by ITC Great Plains to certain TOs to acquire rights which are required under the SPP tariff to designate ITC Great Plains to build, own and operate projects within the SPP region, including the KETA Project and the Kansas V-Plan Project. The carrying amount of these intangible assets was $14.4 million and $14.6 million (net of accumulated amortization of $0.9 million and $0.7 million ) as of September 30, 2015 and December 31, 2014 , respectively. During the three months ended September 30, 2015 and 2014 , we recognized $0.8 million and $0.9 million , respectively, of amortization expense of our intangible assets and $2.5 million for each of the nine month periods ended September 30, 2015 and 2014 . For each of the next five years, we expect the annual amortization of our intangible assets that have been recorded as of September 30, 2015 to be $3.3 million per year. |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT Derivative Instruments and Hedging Activities We may use derivative financial instruments, including interest rate swap contracts, to manage our exposure to fluctuations in interest rates. The use of these financial instruments mitigates exposure to these risks and the variability of our operating results. We are not a party to leveraged derivatives and do not enter into derivative financial instruments for trading or speculative purposes. The interest rate swaps listed below manage interest rate risk associated with the forecasted future issuance of fixed-rate debt related to the expected refinancing of the maturing ITC Holdings 5.875% Senior Notes, due September 30, 2016 . As of September 30, 2015 , ITC Holdings had $139.3 million outstanding under the 5.875% Senior Notes. Interest Rate Swaps Notional Amount Fixed Rate Original Term Effective Date (Amounts in millions) August 2014 swap $ 25.0 3.217 % 10 years September 2016 October 2014 swap 25.0 3.075 % 10 years September 2016 January 2015 swap 25.0 2.301 % 10 years September 2016 Total $ 75.0 The 10 -year term interest rate swaps call for ITC Holdings to receive interest quarterly at a variable rate equal to LIBOR and to pay interest semi-annually at various fixed rates effective for the 10 -year period beginning September 30, 2016 after the agreements have been terminated. The agreements include a mandatory early termination provision and will be terminated no later than the effective date of the interest rate swaps of September 30, 2016 . The interest rate swaps have been determined to be highly effective at offsetting changes in the fair value of the forecasted interest cash flows associated with the expected debt issuance attributable to changes in benchmark interest rates from the trade date of the interest rate swaps to the issuance date of the debt obligation. As of September 30, 2015 , there has been no material ineffectiveness recorded in the condensed consolidated statement of operations. The interest rate swaps qualify for hedge accounting treatment, whereby any gain or loss recognized from the trade date to the effective date for the effective portion of the hedge is recorded net of tax in accumulated other comprehensive income (“AOCI”). This amount will be accumulated and amortized as a component of interest expense over the life of the forecasted debt. As of September 30, 2015 , the fair value of the derivative instruments was a liability of $4.1 million recorded to other current liabilities. None of the interest rate swaps contain credit-risk-related contingent features. Refer to Note 10 for additional fair value information. ITC Midwest On April 7, 2015, ITC Midwest issued $225.0 million aggregate principal amount of 3.83% First Mortgage Bonds, Series G, due 2055. The proceeds from the issuance were used for general corporate purposes, including the repayment of borrowings under ITC Midwest’s revolving credit agreement. ITC Midwest’s First Mortgage Bonds are issued under its first mortgage and deed of trust and secured by a first mortgage lien on substantially all of its property. ITC Holdings On June 8, 2015, pursuant to the authorization by the Board of Directors, ITC Holdings established an ongoing commercial paper program for the issuance and sale of unsecured commercial paper in an aggregate amount not to exceed $400.0 million outstanding at any one time. As of September 30, 2015 , ITC Holdings had approximately $219.0 million of commercial paper issued and outstanding under the program, with a weighted-average interest rate of 0.450% and weighted average remaining days to maturity of 5 days . The proceeds from the issuance were used for general corporate purposes, including the repayment of borrowings under ITC Holdings’ revolving credit agreement. The amount outstanding as of September 30, 2015 was classified as debt maturing within one year in the consolidated statements of financial position. Revolving Credit Agreements At September 30, 2015 , ITC Holdings and its Regulated Operating Subsidiaries had the following unsecured revolving credit facilities available: (amounts in millions) Total Capacity Outstanding Balance (a) Unused Capacity Weighted Average Interest Rate on Outstanding Balance Commitment Fee Rate (b) ITC Holdings $ 400.0 $ 21.8 $ 378.2 (c) 1.4% (d) 0.175 % ITCTransmission 100.0 41.8 58.2 1.2% (e) 0.10 % METC 100.0 9.3 90.7 1.2% (e) 0.10 % ITC Midwest 250.0 38.5 211.5 1.2% (e) 0.10 % ITC Great Plains 150.0 57.6 92.4 1.2% (e) 0.10 % Total $ 1,000.0 $ 169.0 $ 831.0 ____________________________ (a) Included within long-term debt. (b) Calculation based on the average daily unused commitments, subject to adjustment based on the borrower’s credit rating. (c) ITC Holdings’ revolving credit agreement may be used for general corporate purposes, including to repay commercial paper issued pursuant to the commercial paper program described above, if necessary. While outstanding commercial paper does not reduce available capacity under ITC Holdings’ revolving credit agreement, the unused capacity under this agreement adjusted for the commercial paper outstanding was $159.2 million as of September 30, 2015 . (d) Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.25% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1.00% above the one month LIBOR, plus an applicable margin of 0.25%, subject to adjustments based on ITC Holdings’ credit rating. (e) Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1.00% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating. Covenants Our debt instruments contain numerous financial and operating covenants that place significant restrictions on certain transactions, such as incurring additional indebtedness, engaging in sale and lease-back transactions, creating liens or other encumbrances, entering into mergers, consolidations, liquidations or dissolutions, creating or acquiring subsidiaries, selling or otherwise disposing of all or substantially all of our assets and paying dividends. In addition, the covenants require us to meet certain financial ratios, such as maintaining certain debt to capitalization ratios and maintaining certain interest coverage ratios. As of September 30, 2015 , we were not in violation of any debt covenant. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY The changes in stockholders’ equity for the nine months ended September 30, 2015 were as follows: Accumulated Other Total Common Stock Retained Comprehensive Stockholders’ (in thousands, except share and per share data) Shares Amount Earnings Income (Loss) Equity BALANCE, DECEMBER 31, 2014 155,140,967 $ 923,191 $ 741,550 $ 4,816 $ 1,669,557 Net income — — 205,041 — 205,041 Repurchase and retirement of common stock (667,487 ) (21,931 ) — — (21,931 ) Dividends declared ($0.5125 per share) — — (79,691 ) — (79,691 ) Stock option exercises 1,165,435 10,599 — — 10,599 Shares issued under the Employee Stock Purchase Plan 55,905 1,723 — — 1,723 Issuance of restricted stock 254,711 — — — — Forfeiture of restricted stock (53,197 ) — — — — Issuance of performance shares 287,464 — — — — Forfeiture of performance shares (6,713 ) — — — — Share-based compensation, net of forfeitures — 12,461 — — 12,461 Forward contracts of accelerated share repurchase program — (115,000 ) — — (115,000 ) Other comprehensive loss, net of tax — — — (889 ) (889 ) Other — (6 ) — — (6 ) BALANCE, SEPTEMBER 30, 2015 156,177,085 $ 811,037 $ 866,900 $ 3,927 $ 1,681,864 The changes in stockholders’ equity for the nine months ended September 30, 2014 were as follows: Accumulated Other Total Common Stock Retained Comprehensive Stockholders’ (in thousands, except share and per share data) Shares Amount Earnings Income (Loss) Equity BALANCE, DECEMBER 31, 2013 157,500,795 $ 1,014,435 $ 592,970 $ 6,327 $ 1,613,732 Net income — — 197,345 — 197,345 Repurchase and retirement of common stock (3,018,225 ) (108,136 ) — — (108,136 ) Dividends declared on common stock ($0.4475 per share) — — (70,279 ) — (70,279 ) Stock option exercises 977,491 18,095 — — 18,095 Shares issued under the Employee Stock Purchase Plan 53,056 1,571 — — 1,571 Issuance of restricted stock 305,718 — — — — Forfeiture of restricted stock (87,536 ) — — — — Share-based compensation, net of forfeitures — 11,009 — — 11,009 Forward contract of accelerated share repurchase program — (46,000 ) — — (46,000 ) Other comprehensive loss, net of tax — — — (389 ) (389 ) BALANCE, SEPTEMBER 30, 2014 155,731,299 $ 890,974 $ 720,036 $ 5,938 $ 1,616,948 Accumulated Other Comprehensive Income The following table provides the components of changes in AOCI for the three and nine months ended September 30, 2015 and 2014 : Three months ended Nine months ended September 30, September 30, (in thousands) 2015 2014 2015 2014 Balance at the beginning of period $ 6,078 $ 5,855 $ 4,816 $ 6,327 Derivative instruments Reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense — net (net of tax of $100 and $88 for the three months ended September 30, 2015 and 2014, respectively, and net of tax of $261 and $243 for the nine months ended September 30, 2015 and 2014, respectively) 111 122 372 340 Reclassification of loss relating to interest rate cash flow hedges from AOCI to loss on extinguishment of debt (net of tax of $83 for the nine months ended September 30, 2014) — — — 117 (Loss) gain on interest rate swaps relating to interest rate cash flow hedges (net of tax of $1,639 and $34 for the three months ended September 30, 2015 and 2014, respectively, and net of tax of $920 and $621 for the nine months ended September 30, 2015 and 2014, respectively) (2,280 ) 47 (1,282 ) (870 ) Derivative instruments, net of tax (2,169 ) 169 (910 ) (413 ) Available-for-sale securities Unrealized net gain (loss) on available-for-sale securities (net of tax of $13 and $63 for the three months ended September 30, 2015 and 2014, respectively, and net of tax of $15 and $16 for the nine months ended September 30, 2015 and 2014, respectively) 18 (86 ) 21 24 Available-for-sale securities, net of tax 18 (86 ) 21 24 Total other comprehensive (loss) income, net of tax (2,151 ) 83 (889 ) (389 ) Balance at the end of period $ 3,927 $ 5,938 $ 3,927 $ 5,938 Share Repurchase Program In April 2014, the Board of Directors authorized and ITC Holdings announced a share repurchase program for up to $250.0 million , which expires in December 2015. Pursuant to such authorization, ITC Holdings completed an accelerated share repurchase from June 2014 to December 2014 in which 3.6 million shares were repurchased and retired for a total of $130.0 million . On September 30, 2015, ITC Holdings entered into an accelerated share repurchase program for $115.0 million with Barclays Bank PLC (“Barclays”) (the “ASR program”), which is part of the share repurchase program described above. Under the ASR program, ITC Holdings paid $115.0 million to Barclays on September 30, 2015 and received an initial delivery of 2.8 million shares on October 1, 2015. The fair market value of the initial delivery of shares was $92.0 million , based on the closing market price of $33.34 per share at the commencement of the ASR program. The final number of shares delivered under the ASR program will be based on the volume-weighted average share price of our common stock during the term of the transaction, less an agreed upon discount and adjusted for the initial share delivery. The ASR program is expected to be completed by the end of 2015. As of September 30, 2015 , the $92.0 million pertaining to the initial delivery of shares and the remaining $23.0 million under the ASR program meet the criteria to be accounted for as a physically settled forward contract and a forward contract indexed to our stock, respectively, and qualify as equity instruments. Therefore, ITC Holdings recorded the entire $115.0 million payment as a reduction to common stock as of September 30, 2015 . |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION Long-Term Incentive Plan Grants On May 19, 2015, pursuant to the Second Amended and Restated 2006 Long-Term Incentive Plan (“LTIP”), we granted 473,200 options to purchase shares of our common stock with an exercise price of $35.91 per share, which was the closing price of our common stock on the date of grant. The options vest in three equal annual installments with the first installment vesting on May 19, 2016. In addition, on May 19, 2015, pursuant to the LTIP, we granted 189,299 shares of restricted stock and 287,464 performance shares. One-half of the payout of the performance shares will be based on an external measure for total shareholder return (“TSR”) relative to a predetermined peer group and the remainder will be based on adjusted diluted earnings per share (“EPS”) growth. Payout of the performance shares will range from 0% to 200% of the target number of shares granted, plus additional dividend equivalent shares as described below. The fair value for performance shares with the relative TSR condition was determined using a Monte Carlo simulation valuation model, whereas the fair value for performance shares with the EPS growth condition was based on the closing price of our common stock on the grant date. Holders of outstanding restricted stock and performance shares have all the rights of a holder of common stock of ITC Holdings, including dividend and voting rights. However, performance shares earn and accumulate dividend equivalents, which are settled in the form of additional shares upon vesting of the related award. Dividend equivalents paid on performance shares that do not vest will be forfeited. Restricted stock holders receive cash dividends at each dividend payment date. The restricted stock and performance shares generally vest three years after the grant date . Holders of restricted stock and performance shares may not sell, transfer or pledge their respective shares until vesting occurs. Stock Option Exercises We issued 1,165,435 and 1,011,750 shares of our common stock during the nine months ended September 30, 2015 and the year ended December 31, 2014 , respectively, due to the exercise of stock options. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
EARNINGS PER SHARE | EARNINGS PER SHARE We report both basic and diluted EPS. Our restricted stock contain rights to receive nonforfeitable dividends and thus, are participating securities requiring the two-class method of computing EPS. A reconciliation of both calculations for the three and nine months ended September 30, 2015 and 2014 is presented in the following table: Three months ended Nine months ended September 30, September 30, (in thousands, except share, per share data and percentages) 2015 2014 2015 2014 Numerator: Net income $ 65,573 $ 73,873 $ 205,041 $ 197,345 Less: dividends declared and paid — common and restricted shares (29,230 ) (25,296 ) (79,697 ) (70,279 ) Undistributed earnings 36,343 48,577 125,344 127,066 Percentage allocated to common shares (a) 99.3 % 99.2 % 99.3 % 99.2 % Undistributed earnings — common shares 36,089 48,188 124,467 126,049 Add: dividends declared and paid — common shares 29,036 25,100 79,136 69,708 Numerator for basic and diluted earnings per common share $ 65,125 $ 73,288 $ 203,603 $ 195,757 Denominator: Basic earnings per common share — weighted average common shares outstanding 154,836,673 154,386,994 154,348,478 155,661,516 Incremental shares for stock options and employee stock purchase plan — weighted average assumed conversion 687,035 1,364,896 1,104,516 1,470,041 Diluted earnings per common share — adjusted weighted average shares and assumed conversion 155,523,708 155,751,890 155,452,994 157,131,557 Per common share net income: Basic $ 0.42 $ 0.47 $ 1.32 $ 1.26 Diluted $ 0.42 $ 0.47 $ 1.31 $ 1.25 ____________________________ (a) Weighted average common shares outstanding 154,836,673 154,386,994 154,348,478 155,661,516 Weighted average restricted shares 1,040,212 1,230,250 1,127,490 1,295,812 Total 155,876,885 155,617,244 155,475,968 156,957,328 Percentage allocated to common shares 99.3 % 99.2 % 99.3 % 99.2 % The incremental shares for stock options and employee stock purchase plan (“ESPP”) shares are included in the diluted EPS calculation using the treasury stock method, unless the effect of including them would be anti-dilutive. The outstanding stock options and ESPP shares and the anti-dilutive stock options and ESPP shares excluded from the diluted EPS calculations were as follows: 2015 2014 Outstanding stock options and ESPP shares (as of September 30) 3,857,429 4,637,551 Anti-dilutive stock options and ESPP shares (for the three and nine months ended September 30) 1,059,106 642,507 In addition, the performance shares discussed in Note 7 are not included in the diluted EPS calculation for the three and nine months ended September 30, 2015 because the performance metric had not been met or was not substantively measurable as of September 30, 2015 . Impacts of the Accelerated Share Repurchase Program The forward contracts under the ASR program of $115.0 million are excluded from the diluted earnings per share calculation for the three and nine months ended September 30, 2015 due to the anti-dilutive impact on earnings per share. The initial delivery of 2.8 million shares received on October 1, 2015 and the final settlement amount expected by the end of 2015 will reduce the basic shares outstanding as of December 31, 2015. See further discussion on the ASR program in Note 6 to the condensed consolidated financial statements. |
RETIREMENT BENEFITS AND ASSETS
RETIREMENT BENEFITS AND ASSETS HELD IN TRUST | 9 Months Ended |
Sep. 30, 2015 | |
Compensation and Retirement Disclosure [Abstract] | |
RETIREMENT BENEFITS AND ASSETS HELD IN TRUST | RETIREMENT BENEFITS AND ASSETS HELD IN TRUST Pension Plan Benefits We have a qualified defined benefit pension plan (“retirement plan”) for eligible employees, comprised of a traditional final average pay plan and a cash balance plan. The traditional final average pay plan is noncontributory, covers select employees, and provides retirement benefits based on years of benefit service, average final compensation and age at retirement. The cash balance plan is also noncontributory, covers substantially all employees, and provides retirement benefits based on eligible compensation and interest credits. Our funding practice for the retirement plan is to contribute amounts necessary to meet the minimum funding requirements of the Employee Retirement Income Security Act of 1974, plus additional amounts as we determine appropriate. During the nine months ended September 30, 2015 , we contributed $4.1 million to the retirement plan. We do not expect to make any additional contributions to this plan in 2015. We also have two supplemental nonqualified, noncontributory, defined benefit pension plans for selected management employees (the “supplemental benefit plans” and collectively with the retirement plan, the “pension plans”). The supplemental benefit plans provide for benefits that supplement those provided by the retirement plan. We contributed $9.4 million to the supplemental benefit plans during the nine months ended September 30, 2015 . We do not expect to make any additional contributions to these plans in 2015. Net periodic benefit cost for the pension plans, by component, was as follows for the three and nine months ended September 30, 2015 and 2014 : Three months ended Nine months ended September 30, September 30, (in thousands) 2015 2014 2015 2014 Service cost $ 1,624 $ 1,267 $ 4,872 $ 3,800 Interest cost 924 901 2,772 2,703 Expected return on plan assets (960 ) (885 ) (2,879 ) (2,655 ) Amortization of prior service credit (10 ) (11 ) (31 ) (32 ) Amortization of unrecognized loss 1,061 386 3,182 1,158 Net pension cost $ 2,639 $ 1,658 $ 7,916 $ 4,974 Other Postretirement Benefits We provide certain postretirement health care, dental, and life insurance benefits for eligible employees. During the nine months ended September 30, 2015 , we contributed $6.9 million to the postretirement benefit plan. We expect to make estimated additional contributions of $2.2 million to the postretirement benefit plan in 2015. Net postretirement benefit plan cost, by component, was as follows for the three and nine months ended September 30, 2015 and 2014 : Three months ended Nine months ended September 30, September 30, (in thousands) 2015 2014 2015 2014 Service cost $ 2,121 $ 1,462 $ 6,364 $ 4,385 Interest cost 620 498 1,858 1,494 Expected return on plan assets (463 ) (341 ) (1,389 ) (1,022 ) Amortization of unrecognized loss 125 — 375 — Net postretirement cost $ 2,403 $ 1,619 $ 7,208 $ 4,857 Defined Contribution Plan We also sponsor a defined contribution retirement savings plan. Participation in this plan is available to substantially all employees. We match employee contributions up to certain predefined limits based upon eligible compensation and the employee’s contribution rate. The cost of this plan was $0.8 million and $0.9 million for the three months ended September 30, 2015 and 2014 , respectively, and $3.2 million and $3.0 million for the nine months ended September 30, 2015 and 2014 , respectively. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The measurement of fair value is based on a three-tier hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. For the nine months ended September 30, 2015 and the year ended December 31, 2014 , there were no transfers between levels. Our assets and liabilities measured at fair value subject to the three-tier hierarchy at September 30, 2015 , were as follows: Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (in thousands) (Level 1) (Level 2) (Level 3) Financial assets measured on a recurring basis: Cash and cash equivalents — cash equivalents $ 49 $ — $ — Mutual funds — fixed income securities 35,928 — — Mutual funds — equity securities 877 — — Financial liabilities measured on a recurring basis: Interest rate swap derivatives — (4,136 ) — Total $ 36,854 $ (4,136 ) $ — Our assets and liabilities measured at fair value subject to the three-tier hierarchy at December 31, 2014 , were as follows: Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (in thousands) (Level 1) (Level 2) (Level 3) Financial assets measured on a recurring basis: Cash and cash equivalents — cash equivalents $ 5,452 $ — $ — Mutual funds — fixed income securities 26,715 — — Mutual funds — equity securities 667 — — Financial liabilities measured on a recurring basis: Interest rate swap derivatives — (1,934 ) — Total $ 32,834 $ (1,934 ) $ — As of September 30, 2015 and December 31, 2014 , we held certain assets and liabilities that are required to be measured at fair value on a recurring basis. The assets consist of investments recorded within cash and cash equivalents and other long-term assets, including investments held in a trust associated with our supplemental nonqualified, noncontributory, retirement benefit plans for selected management employees. Our cash and cash equivalents consist of money market mutual funds that are administered similar to money market funds recorded at cost plus accrued interest to approximate fair value. Our mutual funds consist primarily of publicly traded mutual funds and are recorded at fair value based on observable trades for identical securities in an active market. Changes in the observed trading prices and liquidity of money market funds are monitored as additional support for determining fair value, and losses are recorded in earnings for investments classified as trading securities and other comprehensive income for investments classified as available for sale if fair value falls below recorded cost. The liability related to derivatives consist of interest rate swaps as discussed in Note 5 . The fair value of our interest rate swap derivatives as of September 30, 2015 is determined based on a discounted cash flow (“DCF”) method using LIBOR swap rates which are observable at commonly quoted intervals. We also held non-financial assets that are required to be measured at fair value on a non-recurring basis. These consist of goodwill and intangible assets. We did not record any impairment charges on long-lived assets and no other significant events occurred requiring non-financial assets and liabilities to be measured at fair value (subsequent to initial recognition) during the nine months ended September 30, 2015 . For additional information on our goodwill and intangible assets, please refer to the notes to the consolidated financial statements as of and for the year ended December 31, 2014 included in our Form 10-K for such period and to Note 4 of this Form 10-Q. Fair Value of Financial Assets and Liabilities Fixed Rate Debt Based on the borrowing rates obtained from third party lending institutions currently available for bank loans with similar terms and average maturities from active markets, the fair value of our consolidated long-term debt and debt maturing within one year, excluding revolving and term loan credit agreements and commercial paper, was $4,073.8 million and $3,985.6 million at September 30, 2015 and December 31, 2014 , respectively. These fair values represent Level 2 under the three-tier hierarchy described above. The total book value of our consolidated long-term debt and debt maturing within one year, excluding revolving and term loan credit agreements and commercial paper, was $3,855.2 million and $3,629.8 million at September 30, 2015 and December 31, 2014 , respectively. Revolving and Term Loan Credit Agreements At September 30, 2015 and December 31, 2014 , we had a consolidated total of $330.0 million and $473.8 million , respectively, outstanding under our revolving and term loan credit agreements, which are variable rate loans. The fair value of these loans approximates book value based on the borrowing rates currently available for variable rate loans obtained from third party lending institutions. These fair values represent Level 2 under the three-tier hierarchy described above. Other Financial Instruments The carrying value of other financial instruments included in current assets and current liabilities, including cash and cash equivalents, special deposits and commercial paper, approximates their fair value due to the short-term nature of these instruments. |
COMMITMENTS AND CONTINGENT LIAB
COMMITMENTS AND CONTINGENT LIABILITIES | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENT LIABILITIES | COMMITMENTS AND CONTINGENT LIABILITIES Environmental Matters Our Regulated Operating Subsidiaries’ operations are subject to federal, state, and local environmental laws and regulations, which impose limitations on the discharge of pollutants into the environment, establish standards for the management, treatment, storage, transportation and disposal of hazardous materials and of solid and hazardous wastes, and impose obligations to investigate and remediate contamination in certain circumstances. Liabilities to investigate or remediate contamination, as well as other liabilities concerning hazardous materials or contamination, such as claims for personal injury or property damage, may arise at many locations, including formerly owned or operated properties and sites where wastes have been treated or disposed of, as well as at properties currently owned or operated by our Regulated Operating Subsidiaries. Such liabilities may arise even where the contamination does not result from noncompliance with applicable environmental laws. Under some environmental laws, such liabilities may also be joint and several, meaning that a party can be held responsible for more than its share of the liability involved, or even the entire share. Although environmental requirements generally have become more stringent and compliance with those requirements more expensive, we are not aware of any specific developments that would increase our Regulated Operating Subsidiaries’ costs for such compliance in a manner that would be expected to have a material adverse effect on our results of operations, financial position or liquidity. Our Regulated Operating Subsidiaries’ assets and operations also involve the use of materials classified as hazardous, toxic or otherwise dangerous. Many of the properties our Regulated Operating Subsidiaries own or operate have been used for many years, and include older facilities and equipment that may be more likely than newer ones to contain or be made from such materials. Some of these properties include aboveground or underground storage tanks and associated piping. Some of them also include large electrical equipment filled with mineral oil, which may contain or previously have contained polychlorinated biphenyls, or PCBs. Our Regulated Operating Subsidiaries’ facilities and equipment are often situated close to or on property owned by others so that, if they are the source of contamination, others’ property may be affected. For example, aboveground and underground transmission lines sometimes traverse properties that our Regulated Operating Subsidiaries do not own, and, at some of our Regulated Operating Subsidiaries’ transmission stations, transmission assets (owned or operated by our Regulated Operating Subsidiaries) and distribution assets (owned or operated by our Regulated Operating Subsidiaries’ transmission customer) are commingled. Some properties in which our Regulated Operating Subsidiaries have an ownership interest or at which they operate are, and others are suspected of being, affected by environmental contamination. Our Regulated Operating Subsidiaries are not aware of any pending or threatened claims against them with respect to environmental contamination, or of any investigation or remediation of contamination at any properties, that entail costs likely to materially affect them. Some facilities and properties are located near environmentally sensitive areas such as wetlands. Claims have been made or threatened against electric utilities for bodily injury, disease or other damages allegedly related to exposure to electromagnetic fields associated with electric transmission and distribution lines. While our Regulated Operating Subsidiaries do not believe that a causal link between electromagnetic field exposure and injury has been generally established and accepted in the scientific community, if such a relationship is established or accepted, the liabilities and costs imposed on our business could be significant. We are not aware of any pending or threatened claims against our Regulated Operating Subsidiaries for bodily injury, disease or other damages allegedly related to exposure to electromagnetic fields and electric transmission and distribution lines that entail costs likely to have a material adverse effect on our results of operations, financial position or liquidity. Litigation We are involved in certain legal proceedings before various courts, governmental agencies and mediation panels concerning matters arising in the ordinary course of business. These proceedings include certain contract disputes, regulatory matters and pending judicial matters. We cannot predict the final disposition of such proceedings. We regularly review legal matters and record provisions for claims that are considered probable of loss. Michigan Sales and Use Tax Audit The Michigan Department of Treasury has conducted sales and use tax audits of ITCTransmission for the audit periods April 1, 2005 through June 30, 2008 and October 1, 2009 through September 30, 2013. The Michigan Department of Treasury has denied ITCTransmission’s claims of the industrial processing exemption from use tax that it has taken beginning January 1, 2007. The exemption claim denials resulted in use tax assessments against ITCTransmission. ITCTransmission filed administrative appeals to contest these use tax assessments. In a separate, but related case involving a Michigan-based public utility that made similar industrial processing exemption claims, the Michigan Supreme Court ruled in July 2015 that the electric system, which involves altering voltage, constitutes an exempt, industrial processing activity. However, the ruling further held the electric system is also used for other functions that would not be exempt, and remanded the case to the Michigan Court of Claims to determine how the exemption applies to assets that are used in electric distribution activities. ITCTransmission is assessing the recent ruling in light of its specific facts, but cannot estimate the amount or timing of any potential tax assessments or refunds. ITCTransmission believes that the industrial processing exemption will apply to a significant portion and potentially all of the equipment purchases for which it claimed exemption, but it is reasonably possible that portions of the use tax assessments could be sustained upon resolution of this matter. The amount of use tax liability associated with the exemptions taken by ITCTransmission through September 30, 2015 is estimated to be approximately $17.1 million including interest. This amount includes approximately $10.3 million , including interest, assessed for the audit periods noted above. ITCTransmission has not recorded this contingent liability as of September 30, 2015 . METC has also taken the industrial processing exemption, estimated to be approximately $10.1 million for periods still subject to audit and METC has also not recorded any contingent liabilities as of September 30, 2015 associated with this matter. In the event it becomes appropriate to record additional use tax liability relating to this matter, ITCTransmission and METC would record the additional use tax primarily as an increase to the cost of property, plant and equipment, which is a component of revenue requirement, as the majority of purchases for which the exemption was taken relate to equipment purchases associated with capital projects. Rate of Return on Equity and Capital Structure Complaints On November 12, 2013, the Association of Businesses Advocating Tariff Equity, Coalition of MISO Transmission Customers, Illinois Industrial Energy Consumers, Indiana Industrial Energy Consumers, Inc., Minnesota Large Industrial Group, and Wisconsin Industrial Energy Group (collectively, the “complainants”) filed a complaint with the FERC under Section 206 of the FPA (the “Complaint”), requesting that the FERC find the current 12.38% MISO regional base ROE rate (the “base ROE”) for all MISO TOs, including ITCTransmission, METC and ITC Midwest, to no longer be just and reasonable. The complainants sought a FERC order reducing the base ROE used in our MISO Regulated Operating Subsidiaries’ formula transmission rates to 9.15% . The Complaint also alleged that the rates of any MISO TO using a capital structure with greater than 50% for the equity component are likewise not just and reasonable (our MISO Regulated Operating Subsidiaries use their actual capital structures, which target 60% equity, as FERC had previously authorized). The Complaint also alleged the ROE adders currently approved for certain ITC Holdings operating companies, including an adder currently charged by ITCTransmission for being a member of an RTO and adders charged by ITCTransmission and METC for being independent transmission owners, are no longer just and reasonable, and sought to have them eliminated. On June 19, 2014, in a separate Section 206 complaint against the regional base ROE rate for ISO New England TOs, FERC adopted a new methodology for establishing base ROE rates for electric transmission utilities. The new methodology is based on a two-step discounted cash flow analysis (“two-step DCF”) that uses both short-term and long-term growth projections in calculating ROE rates for a proxy group of electric utilities. The previous methodology used only short-term growth projections. FERC also reiterated that it can apply discretion in determining how ROE rates are established within a zone of reasonableness and reiterated its policy for limiting the overall ROE rate for any company, including the base and all applicable adders, at the high end of the zone of reasonableness set by the two-step DCF methodology. The new method presented in the ISO New England ROE case will be used in resolving the MISO ROE case. On October 16, 2014, FERC granted the complainants’ request in part by setting the base ROE for hearing and settlement procedures, while denying all other aspects of the Complaint. FERC found that the complainants failed to show that the use of actual or FERC-approved capital structures that include more than 50% equity are unjust and unreasonable. FERC also denied the request to terminate ITCTransmission’s and METC’s ROE incentives. The order reiterated that any TO’s total ROE rate is limited by the top end of a zone of reasonableness and the TO’s ability to implement the full amount of previously granted ROE adders may be affected by the outcome of the hearing. FERC set the refund effective date as November 12, 2013. During the fourth quarter of 2014, the MISO TOs engaged in the ordered FERC settlement procedures with the complainants but were not able to reach resolution. On January 5, 2015, the Chief Judge issued an order which terminated settlement procedures and set the matter for hearing, with an initial decision within 47 weeks of the order. On April 6, 2015, the MISO TOs filed expert witness testimony in the Complaint proceeding supporting the existing base ROE as just and reasonable. However, in the event that FERC elects to change the base ROE, the testimony included a recommendation of 11.39% base ROE for the period of November 12, 2013 through February 12, 2015 (the “Initial Refund Period”). In resolving the Complaint, we expect FERC to establish a new base ROE to determine any potential refund liability for the Initial Refund Period. The new base ROE as well as any ROE adders, subject to the limitations of the top end of any zone of reasonableness that is established, are expected to be used to calculate the refund liability for the Initial Refund Period. On February 12, 2015, an additional complaint was filed with the FERC under Section 206 of the FPA (the “Second Complaint”) by Arkansas Electric Cooperative Corporation, Mississippi Delta Energy Agency, Clarksdale Public Utilities Commission, Public Service Commission of Yazoo City and Hoosier Energy Rural Electric Cooperative, Inc., seeking a FERC order to reduce the base ROE used in our MISO Regulated Operating Subsidiaries’ formula transmission rates to 8.67% with an effective date of February 12, 2015. On March 11, 2015, the MISO TOs filed an answer to the Second Complaint with the FERC supporting the current base ROE as just and reasonable. On June 18, 2015, FERC accepted the Second Complaint and set it for hearing and settlement procedures. FERC also set the refund effective date for the Second Complaint as February 12, 2015. On October 20, 2015, the MISO TOs filed expert witness testimony in the Second Complaint proceeding supporting the existing base ROE as just and reasonable. However, in the event that FERC elects to change the base ROE, the testimony included a recommendation of 10.75% base ROE for the period of February 12, 2015 through May 11, 2016 (the “Second Refund Period”). The data ultimately used to establish any new base ROE will be filed by the parties to the Second Complaint in January 2016 for the period ending December 31, 2015. In resolving the Second Complaint, we expect FERC to establish a new base ROE to determine any potential refund liability for the Second Refund Period. The base ROE established by FERC for the Second Complaint as well as any ROE adders, subject to the limitations of the top end of any zone of reasonableness established, are expected to be used to calculate the refund liability for the Second Refund Period. We believe it is probable that refunds will be required for these matters and as of September 30, 2015 , the estimated range of refunds on a pre-tax basis is expected to be from $88.0 million to $158.9 million for the period from November 12, 2013 through September 30, 2015 . As of September 30, 2015 and December 31, 2014 , our MISO Regulated Operating Subsidiaries had recorded an aggregate estimated regulatory liability of $88.0 million and $47.8 million , respectively, representing the low end of the range of potential refunds as of those dates, as there is no best estimate within the range of refunds. The recognition of this estimated liability resulted in a reduction in revenues of $18.0 million , $38.8 million and $46.9 million and an increase in interest expense of $0.5 million , $1.4 million and $0.9 million for the three and nine months ended September 30, 2015 and the year ended December 31, 2014 , respectively. This resulted in an estimated after-tax reduction to net income of $11.2 million , $24.5 million and $28.9 million for the three and nine months ended September 30, 2015 and the year ended December 31, 2014 , respectively. No amounts related to these complaints were recorded as of or for the three and nine months ended September 30, 2014 . Based on the estimated range of refunds identified above, we believe that it is reasonably possible that these matters could result in an additional estimated pre-tax refund of up to $70.9 million (or a $43.0 million estimated after-tax reduction of net income) in excess of the amount recorded as of September 30, 2015 . It is also possible the outcome of these matters could differ from the estimated range of losses and materially affect our results of operations due to the uncertainty of the calculation of an authorized base ROE along with the zone of reasonableness under the newly adopted two-step DCF methodology, which is subject to significant discretion by the FERC. As of September 30, 2015 , our MISO Regulated Operating Subsidiaries had a total of approximately $2.8 billion of equity in their collective capital structures for ratemaking purposes. Based on this level of aggregate equity, we estimate that each 10 basis point reduction in the authorized ROE would reduce annual consolidated net income by approximately $2.8 million . In a separate but related matter, in November 2014, METC, ITC Midwest and other MISO TOs filed a request with FERC under FPA Section 205 for authority to include a 50 basis point incentive adder for RTO participation in each of the TOs’ formula rates. On January 5, 2015, FERC approved the use of this incentive adder, effective January 6, 2015. Additionally, ITC Midwest filed a request with FERC under FPA Section 205 in January 2015 for authority to include a 100 basis point incentive adder for independent transmission ownership, which is currently authorized for ITCTransmission and METC. On March 31, 2015, FERC approved the use of a 50 basis point incentive adder for independence, effective April 1, 2015. On April 30, 2015, ITC Midwest filed a request with FERC for clarification and rehearing on the approved incentive adder for independence. The RTO participation incentive adder will be applied to METC’s and ITC Midwest’s base ROEs and the independence incentive adder will be applied to ITC Midwest’s base ROE in establishing their total authorized ROE rates, subject to the limitations of the top end of any zone of reasonableness that is established. Collection of these recently approved incentive adders is being deferred pending the outcome of the complaints relating to the base ROE. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | SEGMENT INFORMATION We identify reportable segments based on the criteria set forth by the FASB regarding disclosures about segments of an enterprise, including the regulatory environment of our subsidiaries and the business activities performed to earn revenues and incur expenses. The following tables show our financial information by reportable segment: Three months ended Nine months ended OPERATING REVENUES: September 30, September 30, (in thousands) 2015 2014 2015 2014 Regulated Operating Subsidiaries $ 273,012 $ 270,062 $ 820,452 $ 792,058 ITC Holdings and other 334 254 720 438 Intercompany eliminations (157 ) (182 ) (438 ) (545 ) Total Operating Revenues $ 273,189 $ 270,134 $ 820,734 $ 791,951 Three months ended Nine months ended INCOME BEFORE INCOME TAXES: September 30, September 30, (in thousands) 2015 2014 2015 2014 Regulated Operating Subsidiaries $ 138,532 $ 151,758 $ 436,990 $ 440,537 ITC Holdings and other (34,853 ) (33,250 ) (110,287 ) (122,514 ) Total Income Before Income Taxes $ 103,679 $ 118,508 $ 326,703 $ 318,023 Three months ended Nine months ended NET INCOME: September 30, September 30, (in thousands) 2015 2014 2015 2014 Regulated Operating Subsidiaries $ 85,971 $ 93,015 $ 269,491 $ 269,865 ITC Holdings and other 65,573 73,873 205,041 197,345 Intercompany eliminations (85,971 ) (93,015 ) (269,491 ) (269,865 ) Total Net Income $ 65,573 $ 73,873 $ 205,041 $ 197,345 TOTAL ASSETS: September 30, December 31, (in thousands) 2015 2014 Regulated Operating Subsidiaries $ 7,282,357 $ 6,867,411 ITC Holdings and other 4,128,485 3,944,318 Reconciliations / Intercompany eliminations (a) (4,005,243 ) (3,837,640 ) Total Assets $ 7,405,599 $ 6,974,089 ____________________________ (a) Reconciliation of total assets results primarily from differences in the netting of deferred tax assets and liabilities at our Regulated Operating Subsidiaries as compared to the classification in our condensed consolidated statements of financial position. |
GENERAL (Tables)
GENERAL (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
GENERAL [Abstract] | |
Supplementary Cash Flows Information | Nine months ended September 30, (in thousands) 2015 2014 Supplementary cash flows information: Interest paid (net of interest capitalized) $ 153,350 $ 154,410 Income taxes paid — net 49,599 25,744 Supplementary non-cash investing and financing activities: Additions to property, plant and equipment and other long-lived assets (a) $ 85,386 $ 92,557 Allowance for equity funds used during construction 21,434 14,865 ____________________________ (a) Amounts consist of current liabilities for construction, labor and materials that have not been included in investing activities. These amounts have not been paid for as of September 30, 2015 or 2014 , respectively, but have been or will be included as a cash outflow from investing activities for expenditures for property, plant and equipment when paid. |
REGULATORY MATTERS (Tables)
REGULATORY MATTERS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Regulated Operations [Abstract] | |
Net Changes in Regulatory Assets and Liabilities | The net changes in regulatory assets and liabilities associated with our Regulated Operating Subsidiaries’ formula rate revenue accruals and deferrals, including accrued interest, were as follows during the nine months ended September 30, 2015 : (in thousands) Total Balance as of December 31, 2014 $ (56,103 ) Net refund of 2013 revenue deferrals and accruals, including accrued interest 26,366 Net revenue deferral for the nine months ended September 30, 2015 (25,983 ) Net accrued interest payable for the nine months ended September 30, 2015 (1,547 ) Balance as of September 30, 2015 $ (57,267 ) |
Schedule of Regulatory Assets and Liabilities | Regulatory assets and liabilities associated with our Regulated Operating Subsidiaries’ formula rate revenue accruals and deferrals and associated accrued interest are recorded in the condensed consolidated statements of financial position at September 30, 2015 as follows: (in thousands) Total Current assets $ 12,378 Non-current assets 8,850 Current liabilities (37,415 ) Non-current liabilities (41,080 ) Balance as of September 30, 2015 $ (57,267 ) |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Schedule of Interest Rate Swap Contracts | The interest rate swaps listed below manage interest rate risk associated with the forecasted future issuance of fixed-rate debt related to the expected refinancing of the maturing ITC Holdings 5.875% Senior Notes, due September 30, 2016 . As of September 30, 2015 , ITC Holdings had $139.3 million outstanding under the 5.875% Senior Notes. Interest Rate Swaps Notional Amount Fixed Rate Original Term Effective Date (Amounts in millions) August 2014 swap $ 25.0 3.217 % 10 years September 2016 October 2014 swap 25.0 3.075 % 10 years September 2016 January 2015 swap 25.0 2.301 % 10 years September 2016 Total $ 75.0 |
Schedule of Revolving Credit Agreements | At September 30, 2015 , ITC Holdings and its Regulated Operating Subsidiaries had the following unsecured revolving credit facilities available: (amounts in millions) Total Capacity Outstanding Balance (a) Unused Capacity Weighted Average Interest Rate on Outstanding Balance Commitment Fee Rate (b) ITC Holdings $ 400.0 $ 21.8 $ 378.2 (c) 1.4% (d) 0.175 % ITCTransmission 100.0 41.8 58.2 1.2% (e) 0.10 % METC 100.0 9.3 90.7 1.2% (e) 0.10 % ITC Midwest 250.0 38.5 211.5 1.2% (e) 0.10 % ITC Great Plains 150.0 57.6 92.4 1.2% (e) 0.10 % Total $ 1,000.0 $ 169.0 $ 831.0 ____________________________ (a) Included within long-term debt. (b) Calculation based on the average daily unused commitments, subject to adjustment based on the borrower’s credit rating. (c) ITC Holdings’ revolving credit agreement may be used for general corporate purposes, including to repay commercial paper issued pursuant to the commercial paper program described above, if necessary. While outstanding commercial paper does not reduce available capacity under ITC Holdings’ revolving credit agreement, the unused capacity under this agreement adjusted for the commercial paper outstanding was $159.2 million as of September 30, 2015 . (d) Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.25% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1.00% above the one month LIBOR, plus an applicable margin of 0.25%, subject to adjustments based on ITC Holdings’ credit rating. (e) Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1.00% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating. |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
Changes in Stockholders' Equity | The changes in stockholders’ equity for the nine months ended September 30, 2015 were as follows: Accumulated Other Total Common Stock Retained Comprehensive Stockholders’ (in thousands, except share and per share data) Shares Amount Earnings Income (Loss) Equity BALANCE, DECEMBER 31, 2014 155,140,967 $ 923,191 $ 741,550 $ 4,816 $ 1,669,557 Net income — — 205,041 — 205,041 Repurchase and retirement of common stock (667,487 ) (21,931 ) — — (21,931 ) Dividends declared ($0.5125 per share) — — (79,691 ) — (79,691 ) Stock option exercises 1,165,435 10,599 — — 10,599 Shares issued under the Employee Stock Purchase Plan 55,905 1,723 — — 1,723 Issuance of restricted stock 254,711 — — — — Forfeiture of restricted stock (53,197 ) — — — — Issuance of performance shares 287,464 — — — — Forfeiture of performance shares (6,713 ) — — — — Share-based compensation, net of forfeitures — 12,461 — — 12,461 Forward contracts of accelerated share repurchase program — (115,000 ) — — (115,000 ) Other comprehensive loss, net of tax — — — (889 ) (889 ) Other — (6 ) — — (6 ) BALANCE, SEPTEMBER 30, 2015 156,177,085 $ 811,037 $ 866,900 $ 3,927 $ 1,681,864 The changes in stockholders’ equity for the nine months ended September 30, 2014 were as follows: Accumulated Other Total Common Stock Retained Comprehensive Stockholders’ (in thousands, except share and per share data) Shares Amount Earnings Income (Loss) Equity BALANCE, DECEMBER 31, 2013 157,500,795 $ 1,014,435 $ 592,970 $ 6,327 $ 1,613,732 Net income — — 197,345 — 197,345 Repurchase and retirement of common stock (3,018,225 ) (108,136 ) — — (108,136 ) Dividends declared on common stock ($0.4475 per share) — — (70,279 ) — (70,279 ) Stock option exercises 977,491 18,095 — — 18,095 Shares issued under the Employee Stock Purchase Plan 53,056 1,571 — — 1,571 Issuance of restricted stock 305,718 — — — — Forfeiture of restricted stock (87,536 ) — — — — Share-based compensation, net of forfeitures — 11,009 — — 11,009 Forward contract of accelerated share repurchase program — (46,000 ) — — (46,000 ) Other comprehensive loss, net of tax — — — (389 ) (389 ) BALANCE, SEPTEMBER 30, 2014 155,731,299 $ 890,974 $ 720,036 $ 5,938 $ 1,616,948 |
Changes in Accumulated Other Comprehensive Income | The following table provides the components of changes in AOCI for the three and nine months ended September 30, 2015 and 2014 : Three months ended Nine months ended September 30, September 30, (in thousands) 2015 2014 2015 2014 Balance at the beginning of period $ 6,078 $ 5,855 $ 4,816 $ 6,327 Derivative instruments Reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense — net (net of tax of $100 and $88 for the three months ended September 30, 2015 and 2014, respectively, and net of tax of $261 and $243 for the nine months ended September 30, 2015 and 2014, respectively) 111 122 372 340 Reclassification of loss relating to interest rate cash flow hedges from AOCI to loss on extinguishment of debt (net of tax of $83 for the nine months ended September 30, 2014) — — — 117 (Loss) gain on interest rate swaps relating to interest rate cash flow hedges (net of tax of $1,639 and $34 for the three months ended September 30, 2015 and 2014, respectively, and net of tax of $920 and $621 for the nine months ended September 30, 2015 and 2014, respectively) (2,280 ) 47 (1,282 ) (870 ) Derivative instruments, net of tax (2,169 ) 169 (910 ) (413 ) Available-for-sale securities Unrealized net gain (loss) on available-for-sale securities (net of tax of $13 and $63 for the three months ended September 30, 2015 and 2014, respectively, and net of tax of $15 and $16 for the nine months ended September 30, 2015 and 2014, respectively) 18 (86 ) 21 24 Available-for-sale securities, net of tax 18 (86 ) 21 24 Total other comprehensive (loss) income, net of tax (2,151 ) 83 (889 ) (389 ) Balance at the end of period $ 3,927 $ 5,938 $ 3,927 $ 5,938 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Schedule of Basic and Diluted Earnings Per Common Share | A reconciliation of both calculations for the three and nine months ended September 30, 2015 and 2014 is presented in the following table: Three months ended Nine months ended September 30, September 30, (in thousands, except share, per share data and percentages) 2015 2014 2015 2014 Numerator: Net income $ 65,573 $ 73,873 $ 205,041 $ 197,345 Less: dividends declared and paid — common and restricted shares (29,230 ) (25,296 ) (79,697 ) (70,279 ) Undistributed earnings 36,343 48,577 125,344 127,066 Percentage allocated to common shares (a) 99.3 % 99.2 % 99.3 % 99.2 % Undistributed earnings — common shares 36,089 48,188 124,467 126,049 Add: dividends declared and paid — common shares 29,036 25,100 79,136 69,708 Numerator for basic and diluted earnings per common share $ 65,125 $ 73,288 $ 203,603 $ 195,757 Denominator: Basic earnings per common share — weighted average common shares outstanding 154,836,673 154,386,994 154,348,478 155,661,516 Incremental shares for stock options and employee stock purchase plan — weighted average assumed conversion 687,035 1,364,896 1,104,516 1,470,041 Diluted earnings per common share — adjusted weighted average shares and assumed conversion 155,523,708 155,751,890 155,452,994 157,131,557 Per common share net income: Basic $ 0.42 $ 0.47 $ 1.32 $ 1.26 Diluted $ 0.42 $ 0.47 $ 1.31 $ 1.25 ____________________________ (a) Weighted average common shares outstanding 154,836,673 154,386,994 154,348,478 155,661,516 Weighted average restricted shares 1,040,212 1,230,250 1,127,490 1,295,812 Total 155,876,885 155,617,244 155,475,968 156,957,328 Percentage allocated to common shares 99.3 % 99.2 % 99.3 % 99.2 % |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The outstanding stock options and ESPP shares and the anti-dilutive stock options and ESPP shares excluded from the diluted EPS calculations were as follows: 2015 2014 Outstanding stock options and ESPP shares (as of September 30) 3,857,429 4,637,551 Anti-dilutive stock options and ESPP shares (for the three and nine months ended September 30) 1,059,106 642,507 |
RETIREMENT BENEFITS AND ASSET24
RETIREMENT BENEFITS AND ASSETS HELD IN TRUST (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Defined Benefit Plans | |
Defined Benefit Plan Disclosure | |
Schedule of Net Defined Benefit Cost Components | Net periodic benefit cost for the pension plans, by component, was as follows for the three and nine months ended September 30, 2015 and 2014 : Three months ended Nine months ended September 30, September 30, (in thousands) 2015 2014 2015 2014 Service cost $ 1,624 $ 1,267 $ 4,872 $ 3,800 Interest cost 924 901 2,772 2,703 Expected return on plan assets (960 ) (885 ) (2,879 ) (2,655 ) Amortization of prior service credit (10 ) (11 ) (31 ) (32 ) Amortization of unrecognized loss 1,061 386 3,182 1,158 Net pension cost $ 2,639 $ 1,658 $ 7,916 $ 4,974 |
Other Postretirement Benefits Plan | |
Defined Benefit Plan Disclosure | |
Schedule of Net Defined Benefit Cost Components | Net postretirement benefit plan cost, by component, was as follows for the three and nine months ended September 30, 2015 and 2014 : Three months ended Nine months ended September 30, September 30, (in thousands) 2015 2014 2015 2014 Service cost $ 2,121 $ 1,462 $ 6,364 $ 4,385 Interest cost 620 498 1,858 1,494 Expected return on plan assets (463 ) (341 ) (1,389 ) (1,022 ) Amortization of unrecognized loss 125 — 375 — Net postretirement cost $ 2,403 $ 1,619 $ 7,208 $ 4,857 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Assets and Liabilities at Fair Value Subject to Three-Tier Hierarchy | Our assets and liabilities measured at fair value subject to the three-tier hierarchy at September 30, 2015 , were as follows: Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (in thousands) (Level 1) (Level 2) (Level 3) Financial assets measured on a recurring basis: Cash and cash equivalents — cash equivalents $ 49 $ — $ — Mutual funds — fixed income securities 35,928 — — Mutual funds — equity securities 877 — — Financial liabilities measured on a recurring basis: Interest rate swap derivatives — (4,136 ) — Total $ 36,854 $ (4,136 ) $ — Our assets and liabilities measured at fair value subject to the three-tier hierarchy at December 31, 2014 , were as follows: Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (in thousands) (Level 1) (Level 2) (Level 3) Financial assets measured on a recurring basis: Cash and cash equivalents — cash equivalents $ 5,452 $ — $ — Mutual funds — fixed income securities 26,715 — — Mutual funds — equity securities 667 — — Financial liabilities measured on a recurring basis: Interest rate swap derivatives — (1,934 ) — Total $ 32,834 $ (1,934 ) $ — |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Schedule of Financial Information by Reportable Segment | The following tables show our financial information by reportable segment: Three months ended Nine months ended OPERATING REVENUES: September 30, September 30, (in thousands) 2015 2014 2015 2014 Regulated Operating Subsidiaries $ 273,012 $ 270,062 $ 820,452 $ 792,058 ITC Holdings and other 334 254 720 438 Intercompany eliminations (157 ) (182 ) (438 ) (545 ) Total Operating Revenues $ 273,189 $ 270,134 $ 820,734 $ 791,951 Three months ended Nine months ended INCOME BEFORE INCOME TAXES: September 30, September 30, (in thousands) 2015 2014 2015 2014 Regulated Operating Subsidiaries $ 138,532 $ 151,758 $ 436,990 $ 440,537 ITC Holdings and other (34,853 ) (33,250 ) (110,287 ) (122,514 ) Total Income Before Income Taxes $ 103,679 $ 118,508 $ 326,703 $ 318,023 Three months ended Nine months ended NET INCOME: September 30, September 30, (in thousands) 2015 2014 2015 2014 Regulated Operating Subsidiaries $ 85,971 $ 93,015 $ 269,491 $ 269,865 ITC Holdings and other 65,573 73,873 205,041 197,345 Intercompany eliminations (85,971 ) (93,015 ) (269,491 ) (269,865 ) Total Net Income $ 65,573 $ 73,873 $ 205,041 $ 197,345 TOTAL ASSETS: September 30, December 31, (in thousands) 2015 2014 Regulated Operating Subsidiaries $ 7,282,357 $ 6,867,411 ITC Holdings and other 4,128,485 3,944,318 Reconciliations / Intercompany eliminations (a) (4,005,243 ) (3,837,640 ) Total Assets $ 7,405,599 $ 6,974,089 ____________________________ (a) Reconciliation of total assets results primarily from differences in the netting of deferred tax assets and liabilities at our Regulated Operating Subsidiaries as compared to the classification in our condensed consolidated statements of financial position. |
GENERAL (Details)
GENERAL (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | ||
Supplementary cash flows information: | |||||
Interest paid (net of interest capitalized) | $ 153,350 | $ 154,410 | |||
Income taxes paid — net | 49,599 | 25,744 | |||
Supplementary non-cash investing and financing activities: | |||||
Additions to property, plant and equipment and other long-lived assets | [1] | 85,386 | 92,557 | ||
Allowance for equity funds used during construction | $ 6,421 | $ 4,921 | $ 21,434 | $ 14,865 | |
[1] | Amounts consist of current liabilities for construction, labor and materials that have not been included in investing activities. These amounts have not been paid for as of September 30, 2015 or 2014, respectively, but have been or will be included as a cash outflow from investing activities for expenditures for property, plant and equipment when paid. |
REGULATORY MATTERS Net Changes
REGULATORY MATTERS Net Changes in Regulatory Assets and Liabilities (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Revenue Accruals and Deferrals | |
Beginning balance | $ (56,103) |
Net refund of 2013 revenue deferrals and accruals, including accrued interest | 26,366 |
Net revenue deferral for the nine months ended September 30, 2015 | (25,983) |
Net accrued interest payable for the nine months ended September 30, 2015 | (1,547) |
Ending balance | $ (57,267) |
REGULATORY MATTERS Schedule of
REGULATORY MATTERS Schedule of Regulatory Assets and Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Schedule of Regulatory Assets and Liabilities [Line Items] | ||
Current regulatory assets | $ 12,378 | $ 5,393 |
Non-current regulatory assets | 224,913 | 223,712 |
Current regulatory liabilities | 43,607 | 39,972 |
Non-current regulatory liabilities | 210,811 | $ 160,070 |
Revenue Deferrals, Including Accrued Interest | ||
Schedule of Regulatory Assets and Liabilities [Line Items] | ||
Current regulatory liabilities | 37,415 | |
Non-current regulatory liabilities | 41,080 | |
Revenue Accruals, Including Accrued Interest | ||
Schedule of Regulatory Assets and Liabilities [Line Items] | ||
Current regulatory assets | 12,378 | |
Non-current regulatory assets | $ 8,850 |
REGULATORY MATTERS Additional I
REGULATORY MATTERS Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Schedule of Regulatory Assets and Liabilities [Line Items] | ||||
Operating revenues | $ 273,189 | $ 270,134 | $ 820,734 | $ 791,951 |
Interest expense | 51,398 | 47,328 | 150,070 | 138,491 |
Net income | 65,573 | $ 73,873 | $ 205,041 | $ 197,345 |
Transmission rate, applicable period | 1 year | |||
Revenue true-up amount reflected in customer bill, period of recognition | 2 years | |||
ITC Great Plains | Start-up, Development and Pre-construction Expenses, Including Associated Carrying Charges | ||||
Schedule of Regulatory Assets and Liabilities [Line Items] | ||||
Regulatory assets | 12,900 | $ 12,900 | ||
Regulatory assets, accumulated amortization | 700 | $ 700 | ||
Regulatory asset, amortization period | 10 years | |||
MISO Formula Rate Template Modification Filing | Impact from Recognition of Liability | ||||
Schedule of Regulatory Assets and Liabilities [Line Items] | ||||
Operating revenues | (8,600) | |||
Interest expense | 800 | |||
Net income | $ (5,500) |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Goodwill and Intangible Assets | |||||
Goodwill | $ 950,163 | $ 950,163 | $ 950,163 | ||
Intangible assets | 46,325 | 46,325 | 48,794 | ||
Accumulated amortization | 27,411 | 27,411 | 24,917 | ||
Amortization expense | 800 | $ 900 | 2,500 | $ 2,500 | |
Expected amortization expense, year one | 3,300 | 3,300 | |||
Expected amortization expense, year two | 3,300 | 3,300 | |||
Expected amortization expense, year three | 3,300 | 3,300 | |||
Expected amortization expense, year four | 3,300 | 3,300 | |||
Expected amortization expense, year five | 3,300 | 3,300 | |||
ITCTransmission | |||||
Goodwill and Intangible Assets | |||||
Goodwill | 173,400 | 173,400 | 173,400 | ||
METC | |||||
Goodwill and Intangible Assets | |||||
Goodwill | 453,800 | 453,800 | 453,800 | ||
Intangible assets | 31,900 | 31,900 | 34,200 | ||
Accumulated amortization | 26,500 | 26,500 | 24,200 | ||
ITC Midwest | |||||
Goodwill and Intangible Assets | |||||
Goodwill | 323,000 | 323,000 | 323,000 | ||
ITC Great Plains | |||||
Goodwill and Intangible Assets | |||||
Intangible assets | 14,400 | 14,400 | 14,600 | ||
Accumulated amortization | $ 900 | $ 900 | $ 700 |
DEBT Interest Rate Swap Agreeme
DEBT Interest Rate Swap Agreements (Details) - USD ($) | Sep. 30, 2015 | Jan. 31, 2015 | Oct. 31, 2014 | Aug. 31, 2014 | Dec. 31, 2014 |
Derivative [Line Items] | |||||
Debt maturing within one year | $ 694,327,000 | $ 175,000,000 | |||
Notional amount | 75,000,000 | $ 25,000,000 | $ 25,000,000 | $ 25,000,000 | |
Fixed rate | 2.301% | 3.075% | 3.217% | ||
Recurring Basis | Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2) | Interest Rate Swap | |||||
Derivative [Line Items] | |||||
Derivative liability | 4,136,000 | $ 1,934,000 | |||
Interest Rate Swap | |||||
Derivative [Line Items] | |||||
Term of contract | 10 years | 10 years | 10 years | ||
Ineffectiveness recorded in the condensed consolidated statement of operations | 0 | ||||
ITC Holdings | Senior Notes due September 30, 2016 | Unsecured Debt | |||||
Derivative [Line Items] | |||||
Debt maturing within one year | $ 139,300,000 |
DEBT Schedule of Revolving Cred
DEBT Schedule of Revolving Credit Agreements (Details) | 9 Months Ended | |
Sep. 30, 2015USD ($) | ||
Line of Credit Facility | ||
Total available capacity | $ 1,000,000,000 | |
Outstanding balance | 169,000,000 | [1] |
Unused capacity | 831,000,000 | |
ITC Holdings | ||
Line of Credit Facility | ||
Total available capacity | 400,000,000 | |
Outstanding balance | 21,800,000 | [1] |
Unused capacity | 378,200,000 | [2] |
Unused capacity, adjusted for commercial paper outstanding | $ 159,200,000 | |
Weighted average interest rate | 1.40% | [3] |
Commitment fee rate | 0.175% | [4] |
Interest rate description | Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.25% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1.00% above the one month LIBOR, plus an applicable margin of 0.25%, subject to adjustments based on ITC Holdings’ credit rating. | |
ITCTransmission | ||
Line of Credit Facility | ||
Total available capacity | $ 100,000,000 | |
Outstanding balance | 41,800,000 | [1] |
Unused capacity | $ 58,200,000 | |
Weighted average interest rate | 1.20% | [5] |
Commitment fee rate | 0.10% | [4] |
Interest rate description | Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1.00% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating. | |
METC | ||
Line of Credit Facility | ||
Total available capacity | $ 100,000,000 | |
Outstanding balance | 9,300,000 | [1] |
Unused capacity | $ 90,700,000 | |
Weighted average interest rate | 1.20% | [5] |
Commitment fee rate | 0.10% | [4] |
Interest rate description | Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating. | |
ITC Midwest | ||
Line of Credit Facility | ||
Total available capacity | $ 250,000,000 | |
Outstanding balance | 38,500,000 | [1] |
Unused capacity | $ 211,500,000 | |
Weighted average interest rate | 1.20% | [5] |
Commitment fee rate | 0.10% | [4] |
Interest rate description | Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating. | |
ITC Great Plains | ||
Line of Credit Facility | ||
Total available capacity | $ 150,000,000 | |
Outstanding balance | 57,600,000 | [1] |
Unused capacity | $ 92,400,000 | |
Weighted average interest rate | 1.20% | [5] |
Commitment fee rate | 0.10% | [4] |
Interest rate description | Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1.00% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating. | |
[1] | Included within long-term debt. | |
[2] | ITC Holdings’ revolving credit agreement may be used for general corporate purposes, including to repay commercial paper issued pursuant to the commercial paper program described above, if necessary. While outstanding commercial paper does not reduce available capacity under ITC Holdings’ revolving credit agreement, the unused capacity under this agreement adjusted for the commercial paper outstanding was $159.2 million as of September 30, 2015. | |
[3] | Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.25% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1.00% above the one month LIBOR, plus an applicable margin of 0.25%, subject to adjustments based on ITC Holdings’ credit rating. | |
[4] | Calculation based on the average daily unused commitments, subject to adjustment based on the borrower’s credit rating. | |
[5] | Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1.00% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating. |
DEBT Additional Information (De
DEBT Additional Information (Details) - USD ($) | Sep. 30, 2015 | Jun. 08, 2015 | Apr. 07, 2015 |
Debt Instrument | |||
Commercial paper program, maximum authorized amount outstanding | $ 400,000,000 | ||
Commercial paper | $ 219,000,000 | ||
Commercial paper, weighted average interest rate | 0.45% | ||
Commercial paper, weighted average days to maturity | 5 days | ||
ITC Midwest | First Mortgage Bonds, Series G, due 2055 | Secured Debt | |||
Debt Instrument | |||
Principal amount | $ 225,000,000 | ||
Interest rate | 3.83% |
STOCKHOLDERS' EQUITY Changes in
STOCKHOLDERS' EQUITY Changes in Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Beginning balance, shares | 155,140,967 | ||||
Beginning balance | $ 1,669,557 | ||||
NET INCOME | $ 65,573 | $ 73,873 | $ 205,041 | $ 197,345 | |
Stock option exercises, shares | 1,165,435 | 1,011,750 | |||
Other comprehensive loss, net of tax | $ (2,151) | $ 83 | $ (889) | $ (389) | |
Ending balance, shares | 156,177,085 | 156,177,085 | 155,140,967 | ||
Ending balance | $ 1,681,864 | $ 1,681,864 | $ 1,669,557 | ||
Parenthetical Disclosures | |||||
Dividends declared per common share | $ 0.1875 | $ 0.1625 | $ 0.5125 | $ 0.4475 | |
Common Stock | |||||
Beginning balance, shares | 155,140,967 | 157,500,795 | 157,500,795 | ||
Beginning balance | $ 923,191 | $ 1,014,435 | $ 1,014,435 | ||
Repurchase and retirement of common stock, shares | (667,487) | (3,018,225) | |||
Repurchase and retirement of common stock | $ (21,931) | $ (108,136) | |||
Stock option exercises, shares | 1,165,435 | 977,491 | |||
Stock option exercises | $ 10,599 | $ 18,095 | |||
Shares issued under the employee stock purchase plan, shares | 55,905 | 53,056 | |||
Shares issued under the employee stock purchase plan | $ 1,723 | $ 1,571 | |||
Issuance of restricted stock, shares | 254,711 | 305,718 | |||
Forfeiture of restricted stock, shares | (53,197) | (87,536) | |||
Issuance of performance shares | 287,464 | ||||
Forfeiture of performance shares | (6,713) | ||||
Share-based compensation, net of forfeitures | $ 12,461 | $ 11,009 | |||
Forward contract of accelerated share repurchase program | (115,000) | $ (46,000) | |||
Other | $ (6) | ||||
Ending balance, shares | 156,177,085 | 155,731,299 | 156,177,085 | 155,731,299 | 155,140,967 |
Ending balance | $ 811,037 | $ 890,974 | $ 811,037 | $ 890,974 | $ 923,191 |
Retained Earnings | |||||
Beginning balance | 741,550 | 592,970 | 592,970 | ||
NET INCOME | 205,041 | 197,345 | |||
Dividends declared on common stock | (79,691) | (70,279) | |||
Ending balance | 866,900 | 720,036 | 866,900 | 720,036 | 741,550 |
Accumulated Other Comprehensive Income (Loss) | |||||
Beginning balance | 4,816 | 6,327 | 6,327 | ||
Other comprehensive loss, net of tax | (889) | (389) | |||
Ending balance | 3,927 | 5,938 | 3,927 | 5,938 | 4,816 |
Total Stockholders' Equity | |||||
Beginning balance | 1,669,557 | 1,613,732 | 1,613,732 | ||
NET INCOME | 205,041 | 197,345 | |||
Repurchase and retirement of common stock | (21,931) | (108,136) | |||
Dividends declared on common stock | (79,691) | (70,279) | |||
Stock option exercises | 10,599 | 18,095 | |||
Shares issued under the employee stock purchase plan | 1,723 | 1,571 | |||
Share-based compensation, net of forfeitures | 12,461 | 11,009 | |||
Forward contract of accelerated share repurchase program | (115,000) | (46,000) | |||
Other comprehensive loss, net of tax | (889) | (389) | |||
Other | (6) | ||||
Ending balance | $ 1,681,864 | $ 1,616,948 | $ 1,681,864 | $ 1,616,948 | $ 1,669,557 |
STOCKHOLDERS' EQUITY Changes 36
STOCKHOLDERS' EQUITY Changes in Accumulated Other Comprehensive Income (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Equity [Abstract] | ||||
Balance at the beginning of period | $ 6,078 | $ 5,855 | $ 4,816 | $ 6,327 |
Derivative instruments | ||||
Reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense — net (net of tax of $100 and $88 for the three months ended September 30, 2015 and 2014, respectively, and net of tax of $261 and $243 for the nine months ended September 30, 2015 and 2014, respectively) | 111 | 122 | 372 | 340 |
Reclassification of loss relating to interest rate cash flow hedges from AOCI to loss on extinguishment of debt (net of tax of $83 for the nine months ended September 30, 2014) | 0 | 0 | 0 | 117 |
(Loss) gain on interest rate swaps relating to interest rate cash flow hedges (net of tax of $1,639 and $34 for the three months ended September 30, 2015 and 2014, respectively, and net of tax of $920 and $621 for the nine months ended September 30, 2015 and 2014, respectively) | (2,280) | 47 | (1,282) | (870) |
Derivative instruments, net of tax | (2,169) | 169 | (910) | (413) |
Available-for-sale securities | ||||
Unrealized net gain (loss) on available-for-sale securities (net of tax of $13 and $63 for the three months ended September 30, 2015 and 2014, respectively, and net of tax of $15 and $16 for the nine months ended September 30, 2015 and 2014, respectively) | 18 | (86) | 21 | 24 |
Available-for-sale securities, net of tax | 18 | (86) | 21 | 24 |
Total other comprehensive (loss) income, net of tax | (2,151) | 83 | (889) | (389) |
Balance at the end of period | 3,927 | 5,938 | 3,927 | 5,938 |
Parenthetical Disclosures | ||||
Reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense, tax | 100 | 88 | 261 | 243 |
Reclassification of loss relating to interest rate cash flow hedges from AOCI to loss on extinguishment of debt, tax | 83 | |||
(Loss) gain on interest rate swaps relating to interest rate cash flow hedges, tax | (1,639) | 34 | (920) | (621) |
Unrealized net gain (loss) on available-for-sale securities, tax | $ 13 | $ (63) | $ 15 | $ 16 |
Dividends declared per common share | $ 0.1875 | $ 0.1625 | $ 0.5125 | $ 0.4475 |
STOCKHOLDERS' EQUITY Additional
STOCKHOLDERS' EQUITY Additional Information (Details) - USD ($) $ / shares in Units, shares in Millions | Oct. 01, 2015 | Sep. 30, 2015 | Dec. 31, 2014 | Apr. 30, 2014 |
Stock Issuance Arrangements [Line Items] | ||||
Stock repurchase program, authorized amount | $ 250,000,000 | |||
Accelerated share repurchase agreement, share delivery and retirement | 3.6 | |||
Accelerated share repurchase agreement, settlement amount | $ 130,000,000 | |||
Accelerated share repurchase agreement amount | $ 115,000,000 | |||
Accelerated share repurchase agreement, cash payment | 115,000,000 | |||
Accelerated share repurchase agreement, fair market value of initial delivery | $ 92,000,000 | |||
Accelerated share repurchases, initial price paid per share | $ 33.34 | |||
Accelerated share repurchase agreement, unsettled amount | $ 23,000,000 | |||
Subsequent Event | ||||
Stock Issuance Arrangements [Line Items] | ||||
Accelerated share repurchase agreement, initial share delivery and retirement | 2.8 |
SHARE-BASED COMPENSATION (Detai
SHARE-BASED COMPENSATION (Details) - $ / shares | May. 19, 2015 | Sep. 30, 2015 | Dec. 31, 2014 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Granted options | 473,200 | ||
Granted options, exercised price | $ 35.91 | ||
Stock option exercises, shares | 1,165,435 | 1,011,750 | |
Stock Options | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting rights | three equal annual installments | ||
Restricted Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting rights | three years after the grant date | ||
Granted restricted stock | 189,299 | ||
Performance Shares | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting rights | three years after the grant date | ||
Granted restricted stock | 287,464 | ||
Performance Shares | Minimum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Payout percentage | 0.00% | ||
Performance Shares | Maximum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Payout percentage | 200.00% |
EARNINGS PER SHARE Schedule of
EARNINGS PER SHARE Schedule of Basic and Diluted Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | ||
Numerator: | |||||
NET INCOME | $ 65,573 | $ 73,873 | $ 205,041 | $ 197,345 | |
Less: dividends declared and paid - common and restricted shares | 29,230 | 25,296 | 79,697 | 70,279 | |
Undistributed earnings | $ 36,343 | $ 48,577 | $ 125,344 | $ 127,066 | |
Percentage allocated to common shares | [1] | 99.30% | 99.20% | 99.30% | 99.20% |
Numerator for basic and diluted earnings per common share | $ 65,125 | $ 73,288 | $ 203,603 | $ 195,757 | |
Denominator: | |||||
Basic earnings per common share — weighted average common shares outstanding | 154,836,673 | 154,386,994 | 154,348,478 | 155,661,516 | |
Incremental shares for stock options and employee stock purchase plan — weighted average assumed conversion | 687,035 | 1,364,896 | 1,104,516 | 1,470,041 | |
Diluted earnings per common share — adjusted weighted average shares and assumed conversion | 155,523,708 | 155,751,890 | 155,452,994 | 157,131,557 | |
Per common share net income: | |||||
Basic | $ 0.42 | $ 0.47 | $ 1.32 | $ 1.26 | |
Diluted | $ 0.42 | $ 0.47 | $ 1.31 | $ 1.25 | |
Percentage allocated to common shares: | |||||
Weighted average restricted shares (participating securities) | 1,040,212 | 1,230,250 | 1,127,490 | 1,295,812 | |
Denominator for percentage allocated to common shares - total weighted-average shares outstanding | 155,876,885 | 155,617,244 | 155,475,968 | 156,957,328 | |
Common Stock | |||||
Numerator: | |||||
Less: dividends declared and paid - common and restricted shares | $ 29,036 | $ 25,100 | $ 79,136 | $ 69,708 | |
Undistributed earnings | $ 36,089 | $ 48,188 | $ 124,467 | $ 126,049 | |
[1] | Weighted average common shares outstanding154,836,673 154,386,994 154,348,478 155,661,516Weighted average restricted shares (participating securities)1,040,212 1,230,250 1,127,490 1,295,812 Total155,876,885 155,617,244 155,475,968 156,957,328 Percentage allocated to common shares99.3% 99.2% 99.3% 99.2% |
EARNINGS PER SHARE Additional I
EARNINGS PER SHARE Additional Information (Details) - USD ($) | Oct. 01, 2015 | Sep. 30, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 |
Earnings Per Share, Basic and Diluted [Abstract] | ||||||
Outstanding stock options and ESPP shares | 3,857,429 | 3,857,429 | 4,637,551 | 3,857,429 | 4,637,551 | |
Anti-dilutive stock options and ESPP shares | 1,059,106 | 642,507 | 1,059,106 | 642,507 | ||
Accelerated share repurchase agreement amount | $ 115,000,000 | |||||
Subsequent Event | ||||||
Subsequent Event [Line Items] | ||||||
Accelerated share repurchase agreement, initial share delivery and retirement | 2,800,000 |
RETIREMENT BENEFITS AND ASSET41
RETIREMENT BENEFITS AND ASSETS HELD IN TRUST Schedule of Net Defined Benefit Cost Components (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Defined Benefit Plans | ||||
Defined Benefit Plan Disclosure | ||||
Service cost | $ 1,624 | $ 1,267 | $ 4,872 | $ 3,800 |
Interest cost | 924 | 901 | 2,772 | 2,703 |
Expected return on plan assets | (960) | (885) | (2,879) | (2,655) |
Amortization of prior service credit | (10) | (11) | (31) | (32) |
Amortization of unrecognized loss | 1,061 | 386 | 3,182 | 1,158 |
Net cost | 2,639 | 1,658 | 7,916 | 4,974 |
Other Postretirement Benefits Plan | ||||
Defined Benefit Plan Disclosure | ||||
Service cost | 2,121 | 1,462 | 6,364 | 4,385 |
Interest cost | 620 | 498 | 1,858 | 1,494 |
Expected return on plan assets | (463) | (341) | (1,389) | (1,022) |
Amortization of unrecognized loss | 125 | 0 | 375 | 0 |
Net cost | $ 2,403 | $ 1,619 | $ 7,208 | $ 4,857 |
RETIREMENT BENEFITS AND ASSET42
RETIREMENT BENEFITS AND ASSETS HELD IN TRUST Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Other Pension Plan | |||||
Retirement Benefits Disclosure | |||||
Employer contributions | $ 4.1 | ||||
Other Pension Plan | Expectation | |||||
Retirement Benefits Disclosure | |||||
Expected additional current year contribution | $ 0 | ||||
Supplemental Employee Retirement Plan | |||||
Retirement Benefits Disclosure | |||||
Employer contributions | 9.4 | ||||
Supplemental Employee Retirement Plan | Expectation | |||||
Retirement Benefits Disclosure | |||||
Expected additional current year contribution | 0 | ||||
Other Postretirement Benefits Plan | |||||
Retirement Benefits Disclosure | |||||
Employer contributions | 6.9 | ||||
Other Postretirement Benefits Plan | Expectation | |||||
Retirement Benefits Disclosure | |||||
Expected additional current year contribution | $ 2.2 | ||||
Defined Contribution Plan | |||||
Retirement Benefits Disclosure | |||||
Plan cost | $ 0.8 | $ 0.9 | $ 3.2 | $ 3 |
FAIR VALUE MEASUREMENTS Assets
FAIR VALUE MEASUREMENTS Assets Measured at Fair Value Subject to Three-Tier Hierarchy (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Fair Value, Assets and Liabilities Measured on Recurring Basis | ||
Fair value, level transfers | $ 0 | $ 0 |
Recurring Basis | Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis | ||
Total - asset | (36,854,000) | (32,834,000) |
Recurring Basis | Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets (Level 1) | Cash Equivalents | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis | ||
Cash and cash equivalents | 49,000 | 5,452,000 |
Recurring Basis | Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed Income Securities | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis | ||
Mutual funds | 35,928,000 | 26,715,000 |
Recurring Basis | Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity Securities | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis | ||
Mutual funds | 877,000 | 667,000 |
Recurring Basis | Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis | ||
Total - net liability | (4,136,000) | (1,934,000) |
Recurring Basis | Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2) | Interest Rate Swap | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis | ||
Derivative liability | $ (4,136,000) | $ (1,934,000) |
FAIR VALUE MEASUREMENTS Additio
FAIR VALUE MEASUREMENTS Additional Information (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Fair Value Disclosures [Abstract] | ||
Fair value of long-term debt and debt maturing within one year, excluding revolving and term loan credit agreements and commercial paper | $ 4,073.8 | $ 3,985.6 |
Book value of long-term debt and debt maturing within one year, excluding revolving and term loan credit agreements and commercial paper | 3,855.2 | 3,629.8 |
Book value of revolving credit agreements and term loan credit agreements | $ 330 | $ 473.8 |
COMMITMENTS AND CONTINGENT LI45
COMMITMENTS AND CONTINGENT LIABILITIES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Oct. 20, 2015 | Apr. 06, 2015 | Mar. 31, 2015 | Jan. 30, 2015 | Jan. 05, 2015 | Nov. 30, 2014 | |
Commitments and Contingent Liabilities | |||||||||||
Non-current regulatory liabilities | $ 210,811,000 | $ 210,811,000 | $ 160,070,000 | ||||||||
Operating revenues | 273,189,000 | $ 270,134,000 | 820,734,000 | $ 791,951,000 | |||||||
Interest expense | 51,398,000 | 47,328,000 | 150,070,000 | 138,491,000 | |||||||
Net income | 65,573,000 | 73,873,000 | 205,041,000 | 197,345,000 | |||||||
Estimated Potential Refund Related to Return on Equity Complaint | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Non-current regulatory liabilities | 88,000,000 | 0 | 88,000,000 | 0 | 47,800,000 | ||||||
Rate of Return on Equity and Capital Structure Complaints | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Additional potential estimated refund, pre-tax | 70,900,000 | 70,900,000 | |||||||||
Additional potential estimated reduction of net income | 43,000,000 | 43,000,000 | |||||||||
Rate of Return on Equity and Capital Structure Complaints | Impact from Recognition of Liability | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Operating revenues | (18,000,000) | 0 | (38,800,000) | 0 | (46,900,000) | ||||||
Interest expense | 500,000 | 0 | 1,400,000 | 0 | 900,000 | ||||||
Net income | (11,200,000) | $ 0 | (24,500,000) | $ 0 | $ (28,900,000) | ||||||
Rate of Return on Equity and Capital Structure Complaints | Minimum | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Estimated potential refund | 88,000,000 | 88,000,000 | |||||||||
Rate of Return on Equity and Capital Structure Complaints | Maximum | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Estimated potential refund | $ 158,900,000 | $ 158,900,000 | |||||||||
Rate of Return on Equity and Capital Structure Complaints | Complaint One | Expert Witness Testimony | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Recommended ROE rate | 12.38% | ||||||||||
Recommended ROE rate in the event FERC elects to change base ROE | 11.39% | ||||||||||
Rate of Return on Equity and Capital Structure Complaints | Complaint Two | Expert Witness Testimony | Subsequent Event | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Recommended ROE rate | 12.38% | ||||||||||
Recommended ROE rate in the event FERC elects to change base ROE | 10.75% | ||||||||||
ITCTransmission | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
ROE rate | 12.38% | 12.38% | |||||||||
FERC approved capital structure, equity percentage | 60.00% | 60.00% | |||||||||
ITCTransmission | Rate of Return on Equity and Capital Structure Complaints | Complaint One | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Reduced ROE rate | 9.15% | 9.15% | |||||||||
Complaint capital structure, equity percentage | 50.00% | 50.00% | |||||||||
ITCTransmission | Rate of Return on Equity and Capital Structure Complaints | Complaint Two | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Reduced ROE rate | 8.67% | 8.67% | |||||||||
ITCTransmission | Sales and Use Tax Audit | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Potential liability | $ 17,100,000 | $ 17,100,000 | |||||||||
Recorded contingent liability | 0 | 0 | |||||||||
ITCTransmission | Sales and Use Tax Audit | Audit Period | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Potential liability | $ 10,300,000 | $ 10,300,000 | |||||||||
METC | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
ROE rate | 12.38% | 12.38% | |||||||||
FERC approved capital structure, equity percentage | 60.00% | 60.00% | |||||||||
Requested incentive adder for RTO participation | 0.50% | ||||||||||
Approved incentive adder for RTO participation | 0.50% | ||||||||||
METC | Rate of Return on Equity and Capital Structure Complaints | Complaint One | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Reduced ROE rate | 9.15% | 9.15% | |||||||||
Complaint capital structure, equity percentage | 50.00% | 50.00% | |||||||||
METC | Rate of Return on Equity and Capital Structure Complaints | Complaint Two | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Reduced ROE rate | 8.67% | 8.67% | |||||||||
METC | Sales and Use Tax Audit | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Potential liability | $ 10,100,000 | $ 10,100,000 | |||||||||
Recorded contingent liability | $ 0 | $ 0 | |||||||||
ITC Midwest | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
ROE rate | 12.38% | 12.38% | |||||||||
FERC approved capital structure, equity percentage | 60.00% | 60.00% | |||||||||
Requested incentive adder for RTO participation | 0.50% | ||||||||||
Approved incentive adder for RTO participation | 0.50% | ||||||||||
Requested incentive adder for independence | 1.00% | ||||||||||
Approved incentive adder for independence | 0.50% | ||||||||||
ITC Midwest | Rate of Return on Equity and Capital Structure Complaints | Complaint One | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Reduced ROE rate | 9.15% | 9.15% | |||||||||
Complaint capital structure, equity percentage | 50.00% | 50.00% | |||||||||
ITC Midwest | Rate of Return on Equity and Capital Structure Complaints | Complaint Two | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Reduced ROE rate | 8.67% | 8.67% | |||||||||
MISO Operating Subsidiaries | |||||||||||
Commitments and Contingent Liabilities | |||||||||||
Equity in capital structure for ratemaking purposes | $ 2,800,000,000 | $ 2,800,000,000 | |||||||||
Effect on net income from 10 basis point reduction in the authorized base return on equity | $ 2,800,000 | $ 2,800,000 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | ||
OPERATING REVENUES: | ||||||
Operating revenues | $ 273,189 | $ 270,134 | $ 820,734 | $ 791,951 | ||
INCOME BEFORE INCOME TAXES: | ||||||
Income before income taxes | 103,679 | 118,508 | 326,703 | 318,023 | ||
NET INCOME: | ||||||
NET INCOME | 65,573 | 73,873 | 205,041 | 197,345 | ||
TOTAL ASSETS: | ||||||
Assets | 7,405,599 | 7,405,599 | $ 6,974,089 | |||
Regulated Operating Subsidiaries | ||||||
OPERATING REVENUES: | ||||||
Operating revenues | 273,012 | 270,062 | 820,452 | 792,058 | ||
INCOME BEFORE INCOME TAXES: | ||||||
Income before income taxes | 138,532 | 151,758 | 436,990 | 440,537 | ||
NET INCOME: | ||||||
NET INCOME | 85,971 | 93,015 | 269,491 | 269,865 | ||
TOTAL ASSETS: | ||||||
Assets | 7,282,357 | 7,282,357 | 6,867,411 | |||
ITC Holdings and other | ||||||
OPERATING REVENUES: | ||||||
Operating revenues | 334 | 254 | 720 | 438 | ||
INCOME BEFORE INCOME TAXES: | ||||||
Income before income taxes | 34,853 | 33,250 | 110,287 | 122,514 | ||
NET INCOME: | ||||||
NET INCOME | 65,573 | 73,873 | 205,041 | 197,345 | ||
TOTAL ASSETS: | ||||||
Assets | 4,128,485 | 4,128,485 | 3,944,318 | |||
Intercompany eliminations | ||||||
OPERATING REVENUES: | ||||||
Operating revenues | 157 | 182 | 438 | 545 | ||
NET INCOME: | ||||||
NET INCOME | 85,971 | $ 93,015 | 269,491 | $ 269,865 | ||
Reconciliations / Intercompany Eliminations | ||||||
TOTAL ASSETS: | ||||||
Assets | [1] | $ 4,005,243 | $ 4,005,243 | $ 3,837,640 | ||
[1] | Reconciliation of total assets results primarily from differences in the netting of deferred tax assets and liabilities at our Regulated Operating Subsidiaries as compared to the classification in our condensed consolidated statements of financial position. |