Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | Apr. 22, 2016 | |
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 | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 152,777,811 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash and cash equivalents | $ 8,221 | $ 13,859 |
Accounts receivable | 120,533 | 104,262 |
Inventory | 27,577 | 25,777 |
Regulatory assets | 16,937 | 14,736 |
Income tax receivable | 141,323 | 0 |
Prepaid and other current assets | 10,920 | 10,608 |
Total current assets | 325,511 | 169,242 |
Property, plant and equipment (net of accumulated depreciation and amortization of $1,512,637 and $1,487,713, respectively) | 6,246,320 | 6,109,639 |
Other assets | ||
Goodwill | 950,163 | 950,163 |
Intangible assets (net of accumulated amortization of $29,073 and $28,242, respectively) | 44,950 | 45,602 |
Regulatory assets | 249,264 | 233,376 |
Deferred financing fees (net of accumulated amortization of $1,469 and $1,277, respectively) | 3,343 | 2,498 |
Other | 43,691 | 44,802 |
Total other assets | 1,291,411 | 1,276,441 |
TOTAL ASSETS | 7,863,242 | 7,555,322 |
Current liabilities | ||
Accounts payable | 117,461 | 124,331 |
Accrued payroll | 13,985 | 24,123 |
Accrued interest | 39,576 | 52,577 |
Accrued taxes | 33,475 | 44,256 |
Regulatory liabilities | 36,102 | 44,964 |
Refundable deposits from generators for transmission network upgrades | 16,744 | 2,534 |
Debt maturing within one year | 607,058 | 395,105 |
Other | 28,374 | 31,034 |
Total current liabilities | 892,775 | 718,924 |
Accrued pension and postretirement liabilities | 65,907 | 61,609 |
Deferred income taxes | 898,858 | 735,426 |
Regulatory liabilities | 273,564 | 254,788 |
Refundable deposits from generators for transmission network upgrades | 7,522 | 18,077 |
Other | 27,848 | 23,075 |
Long-term debt | $ 3,947,954 | $ 4,034,352 |
Commitments and contingent liabilities (Notes 3 and 10) | ||
STOCKHOLDERS’ EQUITY | ||
Common stock, without par value, 300,000,000 shares authorized, 152,766,017 and 152,699,077 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively | $ 835,513 | $ 829,211 |
Retained earnings | 911,198 | 875,595 |
Accumulated other comprehensive income | 2,103 | 4,265 |
Total stockholders’ equity | 1,748,814 | 1,709,071 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 7,863,242 | $ 7,555,322 |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) (Parentheticals) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Property, plant and equipment, accumulated depreciation and amortization | $ 1,512,637 | $ 1,487,713 |
Intangible assets, accumulated amortization | 29,073 | 28,242 |
Deferred financing fees, accumulated amortization | $ 1,469 | $ 1,277 |
Common stock, par value | $ 0 | $ 0 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 152,766,017 | 152,699,077 |
Common stock, shares outstanding | 152,766,017 | 152,699,077 |
CONDENSED CONSOLIDATED STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
OPERATING REVENUES | $ 280,133 | $ 272,487 |
OPERATING EXPENSES | ||
Operation and maintenance | 24,596 | 25,562 |
General and administrative | 45,708 | 40,894 |
Depreciation and amortization | 38,872 | 34,435 |
Taxes other than income taxes | 23,449 | 22,380 |
Other operating (income) and expenses — net | (264) | (236) |
Total operating expenses | 132,361 | 123,035 |
OPERATING INCOME | 147,772 | 149,452 |
OTHER EXPENSES (INCOME) | ||
Interest expense — net | 50,417 | 48,474 |
Allowance for equity funds used during construction | (7,519) | (7,549) |
Other income | (268) | (253) |
Other expense | 1,162 | 1,188 |
Total other expenses (income) | 43,792 | 41,860 |
INCOME BEFORE INCOME TAXES | 103,980 | 107,592 |
INCOME TAX PROVISION | 39,743 | 40,460 |
NET INCOME | $ 64,237 | $ 67,132 |
Basic earnings per common share | $ 0.42 | $ 0.43 |
Diluted earnings per common share | 0.42 | 0.43 |
Dividends declared per common share | $ 0.1875 | $ 0.1625 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
NET INCOME | $ 64,237 | $ 67,132 |
OTHER COMPREHENSIVE LOSS | ||
Derivative instruments, net of tax (Note 6) | (2,423) | (727) |
Available-for-sale securities, net of tax (Note 6) | 261 | 106 |
TOTAL OTHER COMPREHENSIVE LOSS, NET OF TAX | (2,162) | (621) |
TOTAL COMPREHENSIVE INCOME | $ 62,075 | $ 66,511 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
NET INCOME | $ 64,237 | $ 67,132 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization expense | 38,872 | 34,435 |
Recognition, refund and collection of revenue accruals and deferrals — including accrued interest | (16,581) | (12,484) |
Deferred income tax expense | 160,881 | 27,823 |
Allowance for equity funds used during construction | (7,519) | (7,549) |
Other | 8,550 | 6,777 |
Changes in assets and liabilities, exclusive of changes shown separately: | ||
Accounts receivable | (10,778) | (3,826) |
Inventory | (1,788) | (72) |
Income tax receivable | (141,323) | 0 |
Prepaid and other current assets | (66) | (9,920) |
Accounts payable | 6,373 | (4,855) |
Accrued payroll | (6,463) | (7,540) |
Accrued interest | (13,001) | (13,172) |
Accrued taxes | (10,781) | (11,140) |
Other current liabilities | (3,094) | (1,676) |
Estimated potential refund related to return on equity complaints | 18,900 | 7,960 |
Other non-current assets and liabilities, net | 1,397 | (4,960) |
Net cash provided by operating activities | 87,816 | 66,933 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Expenditures for property, plant and equipment | (203,996) | (172,604) |
Other | 8,754 | (5,637) |
Net cash used in investing activities | (195,242) | (178,241) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Borrowings under revolving credit agreements | 244,100 | 349,800 |
Net issuance of commercial paper, net of discount | 211,360 | 0 |
Repayments of revolving credit agreements | (331,200) | (222,400) |
Dividends on common and restricted stock | (28,585) | (25,220) |
Refundable deposits from generators for transmission network upgrades | 4,820 | 143 |
Repayment of refundable deposits from generators for transmission network upgrades | 0 | (9,178) |
Other | 1,293 | (464) |
Net cash provided by financing activities | 101,788 | 92,681 |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (5,638) | (18,627) |
CASH AND CASH EQUIVALENTS — Beginning of period | 13,859 | 27,741 |
CASH AND CASH EQUIVALENTS — End of period | $ 8,221 | $ 9,114 |
GENERAL
GENERAL | 3 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [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, 2015 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 Three months ended March 31, (in thousands) 2016 2015 Supplementary cash flows information: Interest paid (net of interest capitalized) $ 60,966 $ 61,633 Income taxes paid — net 18,444 19,817 Supplementary non-cash investing and financing activities: Additions to property, plant and equipment and other long-lived assets (a) $ 99,395 $ 71,219 Allowance for equity funds used during construction 7,519 7,549 ____________________________ (a) Amounts consist of accrued liabilities for construction, labor, materials and other costs that have not been included in investing activities. These amounts have not been paid for as of March 31, 2016 or 2015 , 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 | 3 Months Ended |
Mar. 31, 2016 | |
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 disclosures. 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. Although 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. We adopted this guidance as of January 1, 2016 and it did not change our conclusions with regard to identification of variable interest entities or consolidation of any entities. 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. On January 1, 2016, we adopted this guidance retrospectively and have applied this change to all amounts presented in our condensed consolidated statements of financial position. The following shows the impact of this adoption on our previously reported consolidated statement of financial position as of December 31, 2015: (In thousands) Reported Adjustment Adjusted Deferred financing fees (net of accumulated amortization) $ 29,298 $ (26,800 ) $ 2,498 Debt maturing within one year 395,334 (229 ) 395,105 Long-term debt 4,060,923 (26,571 ) 4,034,352 We have accounted for this adoption as a change in accounting principle that is required due to a change in the authoritative accounting guidance. In connection with implementing this guidance, we adopted an accounting policy to present unamortized debt issuance costs associated with revolving credit agreements, commercial paper and other similar arrangements as an asset that is amortized over the life of the particular arrangement. In addition, we present debt issuance costs incurred prior to the associated debt funding as an asset for all other debt arrangements. This standard did not impact our consolidated statements of operations or cash flows. Classification and Measurement of Financial Instruments In January 2016, the FASB issued authoritative guidance amending the classification and measurement of financial instruments. The guidance requires entities to carry most investments in equity securities at fair value and recognize changes in fair value in net income, unless the investment results in consolidation or equity method accounting. For financial liabilities measured using the fair value option, the change in fair value caused by a change in instrument-specific credit will be presented separately in other comprehensive income as opposed to reflecting the entire amount of the change in fair value in earnings. Additionally, the new guidance amends certain disclosure requirements associated with the fair value of financial instruments. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The guidance is required to be adopted by recording a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year in which the guidance is effective (“modified retrospective adoption”), with limited exceptions. We are currently assessing the impacts this guidance will have on our consolidated financial statements, including our disclosures. Accounting for Leases In February 2016, the FASB issued authoritative guidance on accounting for leases, which impacts accounting by lessees as well as lessors. The new guidance creates a dual approach for lessee accounting, with lease classification determined in accordance with principles in existing lease guidance. Income statement presentation differs depending on the lease classification; however, both types of leases result in lessees recognizing a right-of-use asset and a lease liability, with limited exceptions. Under existing accounting guidance, operating leases are not recorded on the balance sheet of lessees. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and will be applied using a modified retrospective approach, with possible optional practical expedients. Early application is permitted. We are currently assessing the impacts this guidance will have on our consolidated financial statements, including our disclosures. Contingent Put and Call Options in Debt Instruments In March 2016, the FASB issued authoritative guidance intended to standardize the assessment of whether embedded features within a debt host contract, including contingent put and call options, should be bifurcated and accounted for separately. This guidance clarifies that an entity does not have to separately assess whether the event that triggers the ability to exercise the contingent option is itself indexed only to interest rates or credit risk as part of the analysis of whether an embedded contingent option is clearly and closely related to the debt host. The guidance is effective for fiscal years beginning after December 15, 2016 and required to be adopted using a modified retrospective approach. We do not expect this guidance to have a material impact on our consolidated financial statements, including our disclosures. Simplification of Employee Share-Based Payment Accounting In March 2016, the FASB issued authoritative guidance that simplifies several aspects of the accounting for employee share-based payment transactions. The new guidance (1) requires that an entity recognize all excess tax benefits and tax deficiencies as income tax benefit or expense in the income statement, (2) allows an entity to elect as an accounting policy either to estimate forfeitures (as currently required) or account for forfeitures when they occur, (3) modifies the current exception to liability classification of an award when an employer uses a net-settlement feature to withhold shares to meet the employer’s minimum statutory tax withholding requirement to apply if the withholding amount does not exceed the maximum statutory tax rate and (4) specifies the statement of cash flow presentation for excess tax benefits and cash payments to taxing authorities when shares are withheld to meet tax withholding requirements. The new guidance is effective for annual periods beginning after December 15, 2017. Early adoption is permitted. The various amendments require different transition methods including modified-retrospective adoption through a cumulative effect adjustment to retained earnings, prospective adoption and retrospective adoption. We are currently assessing the impacts this guidance will have on our consolidated financial statements, including our disclosures. |
REGULATORY MATTERS
REGULATORY MATTERS | 3 Months Ended |
Mar. 31, 2016 | |
Regulated Operations [Abstract] | |
REGULATORY MATTERS | REGULATORY MATTERS MISO Funding Policy for Generator Interconnections On June 18, 2015, FERC issued an order initiating a proceeding, pursuant to Section 206 of the Federal Power Act (“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. On July 20, 2015, MISO and its transmission owners (“TOs”) filed a request for a rehearing of the FERC order to examine MISO’s funding policy for generator interconnections, which was subsequently denied by FERC on December 29, 2015. On January 8, 2016, MISO made a compliance filing to revise its funding policy to adopt the FERC suggestion to require mutual agreement between the customer and TO, with an effective date of June 24, 2015. On January 28, 2016, our MISO Regulated Operating Subsidiaries, together with several other utilities, filed a request with FERC for rehearing of certain aspects of the December 29, 2015 order. Additionally, on February 26, 2016, our MISO Regulated Operating Subsidiaries, along with Ameren Services Company, filed an appeal of certain aspects of the December 29, 2015 order. 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 Modifications Filing On October 30, 2015, our MISO Regulated Operating Subsidiaries requested modifications, pursuant to Section 205 of the FPA, to certain aspects of their 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. Our MISO Regulated Operating Subsidiaries requested an effective date of January 1, 2016 for the proposed template changes. On December 30, 2015, the FERC conditionally accepted the formula rate template modifications and required a further compliance filing, which was made on February 8, 2016. On April 14, 2016, the FERC issued an order accepting the February 8, 2016 compliance filing, effective January 1, 2016. The formula rate templates, prior to any proposed modifications, include certain deferred income taxes on contributions in aid of construction in rate base that resulted in the joint applicants recovering excess amounts from customers. As of March 31, 2016 and December 31, 2015 , our MISO Regulated Operating Subsidiaries had recorded an aggregate refund liability of $8.4 million and $10.4 million , respectively. Challenges Regarding Bonus Depreciation On December 18, 2015, Interstate Power and Light Company (“IP&L”) filed a formal challenge (“IP&L challenge”) with the FERC against ITC Midwest on certain inputs to ITC Midwest’s formula rates. The IP&L challenge alleged that ITC Midwest has unreasonably and imprudently opted out of using bonus depreciation in the calculation of its federal income tax expense and thereby unduly increased the transmission charges for transmission service for customers. On March 11, 2016, the FERC granted the IP&L challenge in part by requiring ITC Midwest to recalculate its revenue requirements, effective January 1, 2015, to simulate the election of bonus depreciation for 2015. FERC denied IP&L’s request that ITC Midwest be required to elect bonus depreciation in any past or future years; however, stakeholders will be able to challenge any decision by ITC Midwest not to take bonus depreciation in future years. ITC Midwest has filed with the FERC for rehearing of the March 11, 2016 order. On April 15, 2016, Consumers Energy Company filed a formal challenge, or in the alternative, a complaint under Section 206 of the FPA, with the FERC against METC also relating to METC’s historical practice of opting out of using bonus depreciation. These condensed consolidated financial statements reflect the election of bonus depreciation for tax years 2015 and 2016 for our Regulated Operating Subsidiaries. Additionally, as required by the March 11, 2016 FERC order, we have simulated the election of bonus depreciation for ITC Midwest’s 2015 revenue requirement and included the impact of the corresponding refund obligation in these condensed consolidated financial statements. The total impact from reflecting the election of bonus depreciation as described above was lower revenues and net income of approximately $5.4 million and $3.2 million , respectively, for the three months ended March 31, 2016, as compared to the same period if bonus depreciation was not reflected. These matters also resulted in additional deferred income tax liabilities of approximately $138.7 million and a corresponding income tax receivable as of March 31, 2016 . We are unable to predict the outcome of this matter; however, the election of bonus depreciation will result in higher cash flows in the year of the election and reduce our rate base and therefore our revenues and net income over the tax lives of the eligible assets. Rate of Return on Equity Complaints See “Rate of Return on Equity Complaints” in Note 10 for a discussion of the complaints. Cost-Based Formula Rate Templates with True-Up Mechanism The transmission revenue requirements at our Regulated Operating Subsidiaries are set annually, using FERC-approved formula rate templates (“formula rate templates”), and 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 make adjustments 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 formula rate templates do not require further action or FERC filings each year although the template inputs remain subject to legal challenge at the FERC. Our Regulated Operating Subsidiaries will continue to use formula rate templates to calculate their respective annual revenue requirements unless the FERC determines any template to be unjust and unreasonable or another mechanism is determined by the FERC to be just and reasonable. See “Rate of Return on Equity Complaints” in Note 10 for detail on return on equity (“ROE”) matters including incentive adders approved by FERC in 2015. Our 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 future revenue requirements and thus flows through to 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 three months ended March 31, 2016 : (in thousands) Total Net regulatory liability as of December 31, 2015 $ (2,564 ) Net refund of 2014 revenue deferrals and accruals, including accrued interest 5,594 Net revenue accrual for the three months ended March 31, 2016 11,199 Net accrued interest payable for the three months ended March 31, 2016 (212 ) Net regulatory asset as of March 31, 2016 $ 14,017 Regulatory assets and liabilities associated with our Regulated Operating Subsidiaries’ formula rate revenue accruals and deferrals, including accrued interest, are recorded in the condensed consolidated statements of financial position at March 31, 2016 as follows: (in thousands) Total Current assets $ 16,937 Non-current assets 34,943 Current liabilities (29,218 ) Non-current liabilities (8,645 ) Net regulatory asset as of March 31, 2016 $ 14,017 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS Goodwill At March 31, 2016 and December 31, 2015 , 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 $30.4 million and $31.2 million (net of accumulated amortization of $28.0 million and $27.2 million ) as of March 31, 2016 and December 31, 2015 , respectively. We have also recorded intangible assets for payments made by and obligations of 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 $14.5 million and $14.4 million (net of accumulated amortization of $1.1 million and $1.0 million ) as of March 31, 2016 and December 31, 2015 , respectively. During each of the three month periods ended March 31, 2016 and 2015 , we recognized $0.8 million of amortization expense of our intangible assets. For each of the next five years, we expect the annual amortization of our intangible assets that have been recorded as of March 31, 2016 to be $3.3 million per year. |
DEBT
DEBT | 3 Months Ended |
Mar. 31, 2016 | |
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 (1) the expected refinancing of the ITC Holdings 5.875% Senior Notes, due September 30, 2016 (“5.875% Senior Notes”) and (2) the expected financing required to repay the amount borrowed under ITC Holdings’ term loan credit agreement, due September 30, 2016 (“Term Loan”). As of March 31, 2016 , ITC Holdings had $139.2 million and $160.9 million outstanding under the 5.875% Senior Notes and Term Loan, respectively. Interest Rate Swaps Notional Amount Weighted Average 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 February 2016 swaps 75.0 1.687 % 10 years September 2016 March 2016 swap 50.0 1.743 % 10 years September 2016 Total $ 200.0 The 10 -year term interest rate swaps call for ITC Holdings to receive interest quarterly at a variable rate equal to LIBOR and 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, resulting from changes in benchmark interest rates from the trade date of the interest rate swaps to the issuance date of the debt obligation. As of March 31, 2016 , 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 related forecasted debt issuance. As of March 31, 2016 , the fair value of the derivative instruments was an asset of $0.4 million recorded to other current assets and a liability of $8.2 million recorded to other current liabilities. None of the interest rate swaps contain credit-risk-related contingent features. Refer to Note 9 for additional fair value information. METC On April 26, 2016, METC issued $200.0 million of 3.90% Senior Secured Notes, due April 26, 2046. The proceeds will be used to repay the $200.0 million borrowed under METC’s term loan credit agreement. The METC Senior Secured Notes were issued under its first mortgage indenture and secured by a first mortgage lien on substantially all of its real property and tangible personal property. ITC Holdings ITC Holdings has 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 March 31, 2016 , ITC Holdings had approximately $307.0 million of commercial paper issued and outstanding under the program, with a weighted-average interest rate of 0.8% and weighted average remaining days to maturity of 19 days . The proceeds from the issuances under the program were used for general corporate purposes, including the repayment of borrowings under ITC Holdings’ revolving credit agreement. The amount outstanding as of March 31, 2016 was classified as debt maturing within one year in the condensed consolidated statements of financial position. Revolving Credit Agreements At March 31, 2016 , 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 $ 7.0 $ 393.0 (c) 1.6% (d) 0.175 % ITCTransmission 100.0 61.1 38.9 1.4% (e) 0.10 % METC 100.0 12.4 87.6 1.4% (e) 0.10 % ITC Midwest 250.0 90.8 159.2 1.4% (e) 0.10 % ITC Great Plains 150.0 61.5 88.5 1.4% (e) 0.10 % Total $ 1,000.0 $ 232.8 $ 767.2 ____________________________ (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 $86.0 million as of March 31, 2016 . (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. On April 7, 2016, each of ITC Holdings and its Regulated Operating Subsidiaries amended its respective unsecured revolving credit agreement to allow for the consummation of the Merger (defined below in Note 11 ). 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 March 31, 2016 , we were not in violation of any debt covenant. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY The changes in stockholders’ equity for the three months ended March 31, 2016 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, 2015 152,699,077 $ 829,211 $ 875,595 $ 4,265 $ 1,709,071 Net income — — 64,237 — 64,237 Repurchase and retirement of common stock (28,875 ) (1,176 ) — — (1,176 ) Dividends declared ($0.1875 per share) — — (28,634 ) — (28,634 ) Stock option exercises 84,006 1,847 — — 1,847 Shares issued under the Employee Stock Purchase Plan 23,276 647 — — 647 Issuance of restricted stock 3,896 — — — — Forfeiture of restricted stock (11,737 ) — — — — Forfeiture of performance shares (3,626 ) — — — — Share-based compensation, net of forfeitures — 4,933 — — 4,933 Other comprehensive loss, net of tax — — — (2,162 ) (2,162 ) Other — 51 — — 51 BALANCE, MARCH 31, 2016 152,766,017 $ 835,513 $ 911,198 $ 2,103 $ 1,748,814 The changes in stockholders’ equity for the three months ended March 31, 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 — — 67,132 — 67,132 Repurchase and retirement of common stock (11,917 ) (476 ) — — (476 ) Dividends declared on common stock ($0.1625 per share) — — (25,220 ) — (25,220 ) Stock option exercises 37,495 665 — — 665 Shares issued under the Employee Stock Purchase Plan 17,267 581 — — 581 Issuance of restricted stock 27,776 — — — — Forfeiture of restricted stock (13,772 ) — — — — Share-based compensation, net of forfeitures — 3,853 — — 3,853 Other comprehensive loss, net of tax — — — (621 ) (621 ) BALANCE, MARCH 31, 2015 155,197,816 $ 927,814 $ 783,462 $ 4,195 $ 1,715,471 Accumulated Other Comprehensive Income The following table provides the components of changes in AOCI for the three months ended March 31, 2016 and 2015 : Three months ended March 31, (in thousands) 2016 2015 Balance at the beginning of period $ 4,265 $ 4,816 Derivative instruments Reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense — net (net of tax of $92 and $75 for the three months ended March 31, 2016 and 2015, respectively) 119 136 Loss on interest rate swaps relating to interest rate cash flow hedges (net of tax of $1,823 and $614 for the three months ended March 31, 2016 and 2015, respectively) (2,542 ) (863 ) Derivative instruments, net of tax (2,423 ) (727 ) Available-for-sale securities Unrealized net gain on available-for-sale securities (net of tax of $187 and $76 for the three months ended March 31, 2016 and 2015, respectively) 261 106 Available-for-sale securities, net of tax 261 106 Total other comprehensive loss, net of tax (2,162 ) (621 ) Balance at the end of period $ 2,103 $ 4,195 The amount of net loss relating to interest rate cash flow hedges to be reclassified from AOCI to interest expense for the 12-month period ending March 31, 2017 is not expected to be material. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2016 | |
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 months ended March 31, 2016 and 2015 is presented in the following table: Three months ended March 31, (in thousands, except share, per share data and percentages) 2016 2015 Numerator: Net income $ 64,237 $ 67,132 Less: dividends declared and paid — common and restricted shares (28,585 ) (25,220 ) Undistributed earnings 35,652 41,912 Percentage allocated to common shares (a) 99.4 % 99.2 % Undistributed earnings — common shares 35,438 41,577 Add: dividends declared and paid — common shares 28,403 25,024 Numerator for basic and diluted earnings per common share $ 63,841 $ 66,601 Denominator: Basic earnings per common share — weighted average common shares outstanding 151,460,490 153,970,515 Incremental shares for stock options, employee stock purchase plan shares and performance shares — weighted average assumed conversion 1,012,299 1,444,202 Diluted earnings per common share — adjusted weighted average shares and assumed conversion 152,472,789 155,414,717 Per common share net income: Basic $ 0.42 $ 0.43 Diluted $ 0.42 $ 0.43 ____________________________ (a) Weighted average common shares outstanding 151,460,490 153,970,515 Weighted average restricted shares (participating securities) 982,640 1,209,468 Total 152,443,130 155,179,983 Percentage allocated to common shares 99.4 % 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. Additionally, performance shares are included in the diluted EPS calculation using the treasury stock method when the performance metric is substantively measurable as of the end of the reporting period and has been met under the assumption the end of the reporting period was the end of the performance period. The outstanding stock options, ESPP shares and performance shares and the anti-dilutive stock options and ESPP shares excluded from the diluted EPS calculations were as follows: 2016 2015 Outstanding stock options, ESPP shares and performance shares (as of March 31) 4,004,003 4,553,938 Anti-dilutive stock options and ESPP shares (for the three months ended March 31) 524,834 542,312 |
RETIREMENT BENEFITS AND ASSETS
RETIREMENT BENEFITS AND ASSETS HELD IN TRUST | 3 Months Ended |
Mar. 31, 2016 | |
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. We expect to contribute $2.8 million to the retirement plan in 2016. 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 expect to contribute $5.2 million to the supplemental benefit plans in 2016. Net periodic benefit cost for the pension plans, by component, was as follows for the three months ended March 31, 2016 and 2015 : Three months ended March 31, (in thousands) 2016 2015 Service cost $ 1,604 $ 1,624 Interest cost 872 924 Expected return on plan assets (932 ) (960 ) Amortization of prior service credit (4 ) (10 ) Amortization of unrecognized loss 876 1,061 Net pension cost $ 2,416 $ 2,639 Other Postretirement Benefits We provide certain postretirement health care, dental and life insurance benefits for eligible employees. We expect to contribute $7.4 million to the plan in 2016. Net postretirement benefit plan cost, by component, was as follows for the three months ended March 31, 2016 and 2015 : Three months ended March 31, (in thousands) 2016 2015 Service cost $ 1,855 $ 2,122 Interest cost 630 619 Expected return on plan assets (530 ) (463 ) Amortization of unrecognized loss — 125 Net postretirement cost $ 1,955 $ 2,403 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 $1.6 million and $1.5 million for the three months ended March 31, 2016 and 2015 , respectively. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 31, 2016 | |
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 three months ended March 31, 2016 and the year ended December 31, 2015 , there were no transfers between levels. Our assets and liabilities measured at fair value subject to the three-tier hierarchy at March 31, 2016 , 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 $ 15 $ — $ — Mutual funds — fixed income securities 36,357 — — Mutual funds — equity securities 1,069 — — Interest rate swap derivatives — 359 — Financial liabilities measured on a recurring basis: Interest rate swap derivatives — (8,160 ) — Total $ 37,441 $ (7,801 ) $ — Our assets and liabilities measured at fair value subject to the three-tier hierarchy at December 31, 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 35,813 — — Mutual funds — equity securities 976 — — Interest rate swap derivative — 112 — Financial liabilities measured on a recurring basis: Interest rate swap derivatives — (3,548 ) — Total $ 36,838 $ (3,436 ) $ — As of March 31, 2016 and December 31, 2015 , we held certain assets and liabilities that are required to be measured at fair value on a recurring basis. The assets included in the table 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 funds that are recorded at cost plus accrued interest to approximate fair value. Our mutual funds consist 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. Gain and losses are recorded in earnings for investments classified as trading securities and other comprehensive income for investments classified as available-for-sale. The asset and liability related to derivatives consist of interest rate swaps as discussed in Note 5 . The fair value of our interest rate swap derivatives 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 three months ended March 31, 2016 . 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, 2015 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 $3,951.5 million and $3,879.7 million at March 31, 2016 and December 31, 2015 , respectively. These fair values represent Level 2 measurements under the three-tier hierarchy described above. The total book value of our consolidated long-term debt and debt maturing within one year, net of discount and deferred financing fees and excluding revolving and term loan credit agreements and commercial paper, was $3,654.4 million and $3,653.6 million at March 31, 2016 and December 31, 2015 , respectively. Revolving and Term Loan Credit Agreements At March 31, 2016 and December 31, 2015 , we had a consolidated total of $593.8 million and $680.9 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 | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENT LIABILITIES | COMMITMENTS AND CONTINGENT LIABILITIES Environmental Matters We 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 solid and hazardous wastes and hazardous materials, and impose obligations to investigate and remediate contamination in certain circumstances. Liabilities relating to investigation and remediation of 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 properties currently owned or operated by us. 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 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 assets and operations also involve the use of materials classified as hazardous, toxic or otherwise dangerous. Many of the properties that we 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 PCBs. Our facilities and equipment are often situated on or near 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 we do not own and transmission assets that we own or operate are sometimes commingled at our transmission stations with distribution assets owned or operated by our transmission customers. Some properties in which we have an ownership interest or at which we operate are, or are suspected of being, affected by environmental contamination. We are not aware of any pending or threatened claims against us with respect to environmental contamination relating to these properties, or of any investigation or remediation of contamination at these properties, that entail costs likely to materially affect us. 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 we do not believe that a causal link between electromagnetic field exposure and injury has been generally established and accepted in the scientific community, the liabilities and costs imposed on our business could be significant if such a relationship is established or accepted. We are not aware of any pending or threatened claims against us 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, eminent domain and vegetation management activities, 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 timing of any potential tax assessments or refunds. The amount of use tax associated with the exemptions taken by ITCTransmission through March 31, 2016 is estimated to be approximately $18.6 million including interest. This amount includes approximately $10.4 million , including interest, assessed for the audit periods noted above. ITCTransmission believes it is probable that portions of the use tax assessments could be sustained upon resolution of this matter. ITCTransmission has recorded $8.8 million and $5.9 million for this contingent liability, including interest, as of March 31, 2016 and December 31, 2015, respectively, primarily as an increase to property, plant and equipment, which is a component of revenue requirement in our cost-based formula rate. METC has also taken the industrial processing exemption, estimated to be approximately $10.4 million for periods still subject to audit. METC has not been assessed any use tax liability and has not recorded any contingent liability as of March 31, 2016 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, as the majority of purchases for which the exemption was taken relate to equipment purchases associated with capital projects. Rate of Return on Equity 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 “Initial 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 Initial 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 Initial 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 TOs, 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 DCF analysis 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 Initial 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 is 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 of FERC issued an order which terminated settlement procedures and initiated the hearing process, with an initial decision due within 47 weeks of the order. On April 6, 2015, the MISO TOs filed expert witness testimony in the Initial 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 11, 2015 (the “Initial Refund Period”). On December 22, 2015, the presiding administrative law judge issued an initial decision on the Initial Complaint, which recommended a base ROE of 10.32% for the Initial Refund Period, with a maximum ROE of 11.35% . The initial decision is a non-binding recommendation to FERC on the Initial Complaint, and exceptions to the initial decision have been filed by the MISO TOs and the complainants. In resolving the Initial Complaint, we expect FERC to establish a new base ROE and zone of reasonable returns that will be used 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. We anticipate a FERC order on the Initial Complaint by the end of 2016. 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”). Updated data to be considered in establishing any new base ROE was filed by the parties to the Second Complaint in January 2016, including a recommendation in the updated MISO TO expert witness testimony to use a 10.96% base ROE. In resolving the Second Complaint, we expect FERC to establish a new base ROE and zone of reasonable returns that will be used, along with any adders, to calculate the refund liability for the Second Refund Period. The initial decision on the Second Complaint is expected by June 30, 2016, with the related FERC order anticipated in 2017. We believe it is probable that refunds will be required for these matters and as of March 31, 2016 , the estimated range of refunds on a pre-tax basis is expected to be from $186.9 million to $242.3 million for the period from November 12, 2013 through March 31, 2016 . As of March 31, 2016 and December 31, 2015 , our MISO Regulated Operating Subsidiaries had recorded an aggregate estimated regulatory liability of $186.9 million and $168.0 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 $17.5 million and $7.5 million and an increase in interest expense of $1.4 million and $0.4 million for the three months ended March 31, 2016 and 2015 , respectively. This resulted in an estimated after-tax reduction to net income of $11.5 million and $4.8 million for the three months ended March 31, 2016 and 2015 , respectively. 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 $55.4 million (or a $34.0 million estimated after-tax reduction of net income) in excess of the amount recorded as of March 31, 2016 . It is also possible the outcome of these matters could differ from the estimated range of losses and materially affect our consolidated 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 March 31, 2016 , our MISO Regulated Operating Subsidiaries had a total of approximately $3.0 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 $3.0 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 rehearing on the approved incentive adder for independence and this request was subsequently denied by FERC on January 6, 2016. An appeal of FERC’s decision has been filed. 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 ROE complaints. Challenges Regarding Bonus Depreciation See “Challenges Regarding Bonus Depreciation” in Note 3 for discussion of these challenges. Legal Matters Associated with Proposed Merger Following the announcement of the Merger (defined below in Note 11 ), four putative state class action lawsuits have been filed by purported shareholders of ITC Holdings on behalf of a purported class of ITC Holdings shareholders. Initially, the four actions ( Paolo Guerra v. Albert Ernst, et al. , Harvey Siegelman v. Joseph L. Welch, et al. , Alan Poland v. Fortis Inc., et al. , Sanjiv Mehrotra v. Joseph L. Welch, et al.) were filed in the Oakland County Circuit Court of the State of Michigan. The complaints name as defendants a combination of ITC Holdings and the individual members of the ITC Holdings board of directors, Fortis Inc. (“Fortis”), FortisUS Inc. (“FortisUS”) and Element Acquisition Sub Inc. (“Merger Sub”). The complaints generally allege, among other things, that (1) ITC Holdings’ directors breached their fiduciary duties in connection with the Merger Agreement (defined below in Note 11 ), (including, but not limited to, various alleged breaches of duties of good faith, loyalty, care and independence), (2) ITC Holdings’ directors failed to take appropriate steps to maximize shareholder value and claims that the Merger Agreement contains several deal protection provisions that are unnecessarily preclusive and (3) a combination of ITC Holdings, Fortis, FortisUS and Merger Sub aided and abetted the purported breaches of fiduciary duties. The complaints seek class action certification and a variety of relief including, among other things, enjoining defendants from completing the proposed Merger, unspecified rescissory and compensatory damages, and costs, including attorneys’ fees and expenses. The Siegelman case was voluntarily dismissed by the plaintiff on March 22, 2016. On March 23, 2016, the state court entered an order directing that the related cases be consolidated under the caption In re ITC Holdings Corporation Shareholder Litigation. On April 8, 2016, Poland filed an amended complaint to add derivative claims on behalf of ITC Holdings. On March 14, 2016, the Guerra state court action was dismissed by the plaintiff and refiled in the United States District Court, Eastern District of Michigan, as Paolo Guerra v. Albert Ernst, et al . The federal complaint names the same defendants (plus FortisUS), asserts the same general allegations and seeks the same types of relief as in the state court cases. On March 25, 2016, Guerra amended his federal complaint. The amended complaint dropped Fortis US, Fortis and Merger Sub as defendants and added claims alleging that the defendants violated Sections 14(a) and 20(a) of the Exchange Act because the preliminary proxy statement/prospectus, filed with the SEC in connection with the special meeting of shareholders to approve the Merger Agreement, is allegedly materially misleading and allegedly omits material facts that are necessary to render it non-misleading. Another lawsuit was filed on April 8, 2016 in the United States District Court, Eastern District of Michigan captioned Harold Severance v. Joseph L. Welch et al. against the individual members of the ITC Holdings board of directors, Fortis, FortisUS and Merger Sub, asserting the same general allegations and seeking the same type of relief as Guerra . On April 22, 2016, the Mehrotra state court action was dismissed by the plaintiff and refiled in the United States District Court, Eastern District of Michigan, as Sanjiv Mehrotra v. Joseph L. Welch, et al . With the exception of Fortis, the federal complaint names the same defendants and asserts the same general allegations as the other federal complaints. We believe the lawsuits are without merit and intend to vigorously defend against them. Additional lawsuits arising out of or relating to the Merger Agreement or the Merger may be filed in the future. See Note 11 for additional discussion on the proposed Merger. |
PROPOSED MERGER
PROPOSED MERGER | 3 Months Ended |
Mar. 31, 2016 | |
Business Combinations [Abstract] | |
PROPOSED MERGER | PROPOSED MERGER On February 9, 2016, Fortis, FortisUS, Merger Sub and ITC Holdings entered into an agreement and plan of merger (the “Merger Agreement”), pursuant to which Merger Sub will merge with and into ITC Holdings, as a result of which ITC Holdings will become a subsidiary of FortisUS (the “Merger”). In the Merger, our shareholders will receive $22.57 in cash and 0.7520 Fortis common shares for each share of common stock of ITC Holdings. Upon completion of the Merger, ITC Holdings shareholders will hold approximately 27% of the common shares of Fortis. Fortis will apply to list its common shares on the New York Stock Exchange and will continue to have its shares listed on the Toronto Stock Exchange. On April 20, 2016, FortisUS assigned its rights, interest, duties and obligations under the Merger Agreement to ITC Investment Holdings Inc. (“Investment Holdings”), a subsidiary of FortisUS formed to complete the Merger. On the same date, Fortis reached a definitive agreement with GIC Private Limited to acquire an indirect 19.9% equity interest in ITC Holdings and debt securities to be issued by Investment Holdings for aggregate consideration of $1.228 billion in cash upon completion of the Merger. The closing of the Merger, expected to occur in late 2016, is subject to approval by ITC Holdings’ shareholders and the shareholders of Fortis, the satisfaction of other customary closing conditions and certain regulatory, state and federal approvals including, among others, those of the FERC, the Committee on Foreign Investment in the U.S., the U.S. Federal Trade Commission, the U.S. Department of Justice and various state utilities regulators. Many of these conditions are outside our control, and we cannot provide any assurance as to whether or when the Merger will be consummated or whether our shareholders will realize the anticipated benefits of completing the Merger. Also, if the Merger does not receive timely regulatory approval or if an event occurs that delays or prevents the Merger, such delay or failure to complete the Merger may cause uncertainty and other negative consequences that may materially and adversely affect our business, financial position and results of operations. The Merger Agreement contains certain termination rights, including the right of ITC Holdings to terminate the Merger Agreement to accept a superior proposal (subject to compliance with certain notice and other requirements). In addition, subject to certain exceptions and limitations, ITC Holdings or Fortis may terminate the Merger Agreement if the Merger is not consummated by February 9, 2017 (as such date may be extended pursuant to the terms of the Merger Agreement). The Merger Agreement provides that, in connection with termination of the Merger Agreement by ITC Holdings or Fortis upon specified conditions, a termination fee of $245 million may be required to be paid by ITC Holdings or Fortis. If the Merger Agreement is terminated as a result of the failure to obtain certain regulatory approvals or due to a legal prohibition related to regulatory matters, a termination fee of $280 million will be payable by Fortis to ITC Holdings, subject to certain limitations. For the three months ended March 31, 2016, we expensed external legal, advisory and financial services fees related to the Merger of $9.9 million and certain internal labor and associated costs related to the Merger of approximately $3.1 million . The external and internal costs related to the Merger will not be included as components of revenue requirement at our Regulated Operating Subsidiaries as they were incurred at ITC Holdings. Per the Merger Agreement, prior to completion of the Merger, there are certain restrictions on our ability to pay dividends other than those paid in the ordinary course of business with record dates and payment dates consistent with our past practice. Management does not expect the restrictions to have an impact on our ability to pay dividends at the current level for the foreseeable future. See Note 10 for legal matters associated with the proposed Merger with Fortis. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended |
Mar. 31, 2016 | |
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 OPERATING REVENUES: March 31, (in thousands) 2016 2015 Regulated Operating Subsidiaries $ 280,016 $ 272,450 ITC Holdings and other 307 177 Intercompany eliminations (190 ) (140 ) Total Operating Revenues $ 280,133 $ 272,487 Three months ended INCOME BEFORE INCOME TAXES: March 31, (in thousands) 2016 2015 Regulated Operating Subsidiaries $ 152,787 $ 148,818 ITC Holdings and other (48,807 ) (41,226 ) Total Income Before Income Taxes $ 103,980 $ 107,592 Three months ended NET INCOME: March 31, (in thousands) 2016 2015 Regulated Operating Subsidiaries $ 94,185 $ 91,439 ITC Holdings and other 64,237 67,132 Intercompany eliminations (94,185 ) (91,439 ) Total Net Income $ 64,237 $ 67,132 TOTAL ASSETS: March 31, December 31, (in thousands) 2016 2015 Regulated Operating Subsidiaries $ 7,752,752 $ 7,463,557 ITC Holdings and other 4,253,768 4,147,915 Reconciliations / Intercompany eliminations (a) (4,143,278 ) (4,056,150 ) Total Assets $ 7,863,242 $ 7,555,322 ____________________________ (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) | 3 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Supplementary Cash Flows Information | Three months ended March 31, (in thousands) 2016 2015 Supplementary cash flows information: Interest paid (net of interest capitalized) $ 60,966 $ 61,633 Income taxes paid — net 18,444 19,817 Supplementary non-cash investing and financing activities: Additions to property, plant and equipment and other long-lived assets (a) $ 99,395 $ 71,219 Allowance for equity funds used during construction 7,519 7,549 ____________________________ (a) Amounts consist of accrued liabilities for construction, labor, materials and other costs that have not been included in investing activities. These amounts have not been paid for as of March 31, 2016 or 2015 , 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 PRONOUNCEME20
RECENT ACCOUNTING PRONOUNCEMENTS (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The following shows the impact of this adoption on our previously reported consolidated statement of financial position as of December 31, 2015: (In thousands) Reported Adjustment Adjusted Deferred financing fees (net of accumulated amortization) $ 29,298 $ (26,800 ) $ 2,498 Debt maturing within one year 395,334 (229 ) 395,105 Long-term debt 4,060,923 (26,571 ) 4,034,352 |
REGULATORY MATTERS (Tables)
REGULATORY MATTERS (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
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 three months ended March 31, 2016 : (in thousands) Total Net regulatory liability as of December 31, 2015 $ (2,564 ) Net refund of 2014 revenue deferrals and accruals, including accrued interest 5,594 Net revenue accrual for the three months ended March 31, 2016 11,199 Net accrued interest payable for the three months ended March 31, 2016 (212 ) Net regulatory asset as of March 31, 2016 $ 14,017 |
Schedule of Regulatory Assets and Liabilities | Regulatory assets and liabilities associated with our Regulated Operating Subsidiaries’ formula rate revenue accruals and deferrals, including accrued interest, are recorded in the condensed consolidated statements of financial position at March 31, 2016 as follows: (in thousands) Total Current assets $ 16,937 Non-current assets 34,943 Current liabilities (29,218 ) Non-current liabilities (8,645 ) Net regulatory asset as of March 31, 2016 $ 14,017 |
DEBT (Tables)
DEBT (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
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 (1) the expected refinancing of the ITC Holdings 5.875% Senior Notes, due September 30, 2016 (“5.875% Senior Notes”) and (2) the expected financing required to repay the amount borrowed under ITC Holdings’ term loan credit agreement, due September 30, 2016 (“Term Loan”). As of March 31, 2016 , ITC Holdings had $139.2 million and $160.9 million outstanding under the 5.875% Senior Notes and Term Loan, respectively. Interest Rate Swaps Notional Amount Weighted Average 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 February 2016 swaps 75.0 1.687 % 10 years September 2016 March 2016 swap 50.0 1.743 % 10 years September 2016 Total $ 200.0 |
Schedule of Revolving Credit Agreements | At March 31, 2016 , 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 $ 7.0 $ 393.0 (c) 1.6% (d) 0.175 % ITCTransmission 100.0 61.1 38.9 1.4% (e) 0.10 % METC 100.0 12.4 87.6 1.4% (e) 0.10 % ITC Midwest 250.0 90.8 159.2 1.4% (e) 0.10 % ITC Great Plains 150.0 61.5 88.5 1.4% (e) 0.10 % Total $ 1,000.0 $ 232.8 $ 767.2 ____________________________ (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 $86.0 million as of March 31, 2016 . (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) | 3 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
Changes in Stockholders' Equity | The changes in stockholders’ equity for the three months ended March 31, 2016 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, 2015 152,699,077 $ 829,211 $ 875,595 $ 4,265 $ 1,709,071 Net income — — 64,237 — 64,237 Repurchase and retirement of common stock (28,875 ) (1,176 ) — — (1,176 ) Dividends declared ($0.1875 per share) — — (28,634 ) — (28,634 ) Stock option exercises 84,006 1,847 — — 1,847 Shares issued under the Employee Stock Purchase Plan 23,276 647 — — 647 Issuance of restricted stock 3,896 — — — — Forfeiture of restricted stock (11,737 ) — — — — Forfeiture of performance shares (3,626 ) — — — — Share-based compensation, net of forfeitures — 4,933 — — 4,933 Other comprehensive loss, net of tax — — — (2,162 ) (2,162 ) Other — 51 — — 51 BALANCE, MARCH 31, 2016 152,766,017 $ 835,513 $ 911,198 $ 2,103 $ 1,748,814 The changes in stockholders’ equity for the three months ended March 31, 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 — — 67,132 — 67,132 Repurchase and retirement of common stock (11,917 ) (476 ) — — (476 ) Dividends declared on common stock ($0.1625 per share) — — (25,220 ) — (25,220 ) Stock option exercises 37,495 665 — — 665 Shares issued under the Employee Stock Purchase Plan 17,267 581 — — 581 Issuance of restricted stock 27,776 — — — — Forfeiture of restricted stock (13,772 ) — — — — Share-based compensation, net of forfeitures — 3,853 — — 3,853 Other comprehensive loss, net of tax — — — (621 ) (621 ) BALANCE, MARCH 31, 2015 155,197,816 $ 927,814 $ 783,462 $ 4,195 $ 1,715,471 |
Changes in Accumulated Other Comprehensive Income | The following table provides the components of changes in AOCI for the three months ended March 31, 2016 and 2015 : Three months ended March 31, (in thousands) 2016 2015 Balance at the beginning of period $ 4,265 $ 4,816 Derivative instruments Reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense — net (net of tax of $92 and $75 for the three months ended March 31, 2016 and 2015, respectively) 119 136 Loss on interest rate swaps relating to interest rate cash flow hedges (net of tax of $1,823 and $614 for the three months ended March 31, 2016 and 2015, respectively) (2,542 ) (863 ) Derivative instruments, net of tax (2,423 ) (727 ) Available-for-sale securities Unrealized net gain on available-for-sale securities (net of tax of $187 and $76 for the three months ended March 31, 2016 and 2015, respectively) 261 106 Available-for-sale securities, net of tax 261 106 Total other comprehensive loss, net of tax (2,162 ) (621 ) Balance at the end of period $ 2,103 $ 4,195 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Schedule of Basic and Diluted Earnings Per Common Share | A reconciliation of both calculations for the three months ended March 31, 2016 and 2015 is presented in the following table: Three months ended March 31, (in thousands, except share, per share data and percentages) 2016 2015 Numerator: Net income $ 64,237 $ 67,132 Less: dividends declared and paid — common and restricted shares (28,585 ) (25,220 ) Undistributed earnings 35,652 41,912 Percentage allocated to common shares (a) 99.4 % 99.2 % Undistributed earnings — common shares 35,438 41,577 Add: dividends declared and paid — common shares 28,403 25,024 Numerator for basic and diluted earnings per common share $ 63,841 $ 66,601 Denominator: Basic earnings per common share — weighted average common shares outstanding 151,460,490 153,970,515 Incremental shares for stock options, employee stock purchase plan shares and performance shares — weighted average assumed conversion 1,012,299 1,444,202 Diluted earnings per common share — adjusted weighted average shares and assumed conversion 152,472,789 155,414,717 Per common share net income: Basic $ 0.42 $ 0.43 Diluted $ 0.42 $ 0.43 ____________________________ (a) Weighted average common shares outstanding 151,460,490 153,970,515 Weighted average restricted shares (participating securities) 982,640 1,209,468 Total 152,443,130 155,179,983 Percentage allocated to common shares 99.4 % 99.2 % |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The outstanding stock options, ESPP shares and performance shares and the anti-dilutive stock options and ESPP shares excluded from the diluted EPS calculations were as follows: 2016 2015 Outstanding stock options, ESPP shares and performance shares (as of March 31) 4,004,003 4,553,938 Anti-dilutive stock options and ESPP shares (for the three months ended March 31) 524,834 542,312 |
RETIREMENT BENEFITS AND ASSET25
RETIREMENT BENEFITS AND ASSETS HELD IN TRUST (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
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 months ended March 31, 2016 and 2015 : Three months ended March 31, (in thousands) 2016 2015 Service cost $ 1,604 $ 1,624 Interest cost 872 924 Expected return on plan assets (932 ) (960 ) Amortization of prior service credit (4 ) (10 ) Amortization of unrecognized loss 876 1,061 Net pension cost $ 2,416 $ 2,639 |
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 months ended March 31, 2016 and 2015 : Three months ended March 31, (in thousands) 2016 2015 Service cost $ 1,855 $ 2,122 Interest cost 630 619 Expected return on plan assets (530 ) (463 ) Amortization of unrecognized loss — 125 Net postretirement cost $ 1,955 $ 2,403 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
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 March 31, 2016 , 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 $ 15 $ — $ — Mutual funds — fixed income securities 36,357 — — Mutual funds — equity securities 1,069 — — Interest rate swap derivatives — 359 — Financial liabilities measured on a recurring basis: Interest rate swap derivatives — (8,160 ) — Total $ 37,441 $ (7,801 ) $ — Our assets and liabilities measured at fair value subject to the three-tier hierarchy at December 31, 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 35,813 — — Mutual funds — equity securities 976 — — Interest rate swap derivative — 112 — Financial liabilities measured on a recurring basis: Interest rate swap derivatives — (3,548 ) — Total $ 36,838 $ (3,436 ) $ — |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Segment Reporting [Abstract] | |
Schedule of Financial Information by Reportable Segment | The following tables show our financial information by reportable segment: Three months ended OPERATING REVENUES: March 31, (in thousands) 2016 2015 Regulated Operating Subsidiaries $ 280,016 $ 272,450 ITC Holdings and other 307 177 Intercompany eliminations (190 ) (140 ) Total Operating Revenues $ 280,133 $ 272,487 Three months ended INCOME BEFORE INCOME TAXES: March 31, (in thousands) 2016 2015 Regulated Operating Subsidiaries $ 152,787 $ 148,818 ITC Holdings and other (48,807 ) (41,226 ) Total Income Before Income Taxes $ 103,980 $ 107,592 Three months ended NET INCOME: March 31, (in thousands) 2016 2015 Regulated Operating Subsidiaries $ 94,185 $ 91,439 ITC Holdings and other 64,237 67,132 Intercompany eliminations (94,185 ) (91,439 ) Total Net Income $ 64,237 $ 67,132 TOTAL ASSETS: March 31, December 31, (in thousands) 2016 2015 Regulated Operating Subsidiaries $ 7,752,752 $ 7,463,557 ITC Holdings and other 4,253,768 4,147,915 Reconciliations / Intercompany eliminations (a) (4,143,278 ) (4,056,150 ) Total Assets $ 7,863,242 $ 7,555,322 ____________________________ (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 | ||
Mar. 31, 2016 | Mar. 31, 2015 | ||
Supplementary cash flows information: | |||
Interest paid (net of interest capitalized) | $ 60,966 | $ 61,633 | |
Income taxes paid — net | 18,444 | 19,817 | |
Supplementary non-cash investing and financing activities: | |||
Additions to property, plant and equipment and other long-lived assets | [1] | 99,395 | 71,219 |
Allowance for equity funds used during construction | $ 7,519 | $ 7,549 | |
[1] | Amounts consist of accrued liabilities for construction, labor, materials and other costs that have not been included in investing activities. These amounts have not been paid for as of March 31, 2016 or 2015, 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 PRONOUNCEME29
RECENT ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Deferred financing fees (net of accumulated amortization) | $ 3,343 | $ 2,498 |
Debt maturing within one year | 607,058 | 395,105 |
Long-term debt | $ 3,947,954 | 4,034,352 |
Reported | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Deferred financing fees (net of accumulated amortization) | 29,298 | |
Debt maturing within one year | 395,334 | |
Long-term debt | 4,060,923 | |
Adjustment | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Deferred financing fees (net of accumulated amortization) | (26,800) | |
Debt maturing within one year | (229) | |
Long-term debt | $ (26,571) |
REGULATORY MATTERS Net Changes
REGULATORY MATTERS Net Changes in Regulatory Assets and Liabilities (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Revenue Accruals and Deferrals | |
Beginning balance | $ (2,564) |
Net refund of 2014 revenue deferrals and accruals, including accrued interest | 5,594 |
Net revenue accrual for the three months ended March 31, 2016 | 11,199 |
Net accrued interest payable for the three months ended March 31, 2016 | (212) |
Ending balance | $ 14,017 |
REGULATORY MATTERS Schedule of
REGULATORY MATTERS Schedule of Regulatory Assets and Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Schedule of Regulatory Assets and Liabilities [Line Items] | ||
Current regulatory assets | $ 16,937 | $ 14,736 |
Non-current regulatory assets | 249,264 | 233,376 |
Current regulatory liabilities | 36,102 | 44,964 |
Non-current regulatory liabilities | 273,564 | $ 254,788 |
Revenue Deferrals, Including Accrued Interest | ||
Schedule of Regulatory Assets and Liabilities [Line Items] | ||
Current regulatory liabilities | 29,218 | |
Non-current regulatory liabilities | 8,645 | |
Revenue Accruals, Including Accrued Interest | ||
Schedule of Regulatory Assets and Liabilities [Line Items] | ||
Current regulatory assets | 16,937 | |
Non-current regulatory assets | $ 34,943 |
REGULATORY MATTERS Additional I
REGULATORY MATTERS Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Schedule of Regulatory Matters [Line Items] | |||
Operating revenues | $ 280,133 | $ 272,487 | |
Net income | 64,237 | $ 67,132 | |
Deferred income tax liabilities | $ 898,858 | $ 735,426 | |
Transmission rate, applicable period | 1 year | ||
Revenue true-up amount reflected in customer bill, period of recognition | 2 years | ||
Challenges Regarding Bonus Depreciation Election | Impact from Bonus Depreciation Election | |||
Schedule of Regulatory Matters [Line Items] | |||
Operating revenues | $ (5,400) | ||
Net income | (3,200) | ||
Deferred income tax liabilities | 138,700 | ||
MISO Formula Rate Template Modifications Filing | |||
Schedule of Regulatory Matters [Line Items] | |||
Regulatory liability | $ 8,400 | $ 10,400 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Goodwill and Intangible Assets | |||
Goodwill | $ 950,163 | $ 950,163 | |
Intangible assets | 44,950 | 45,602 | |
Accumulated amortization | 29,073 | 28,242 | |
Amortization expense | 800 | $ 800 | |
Expected amortization expense, year one | 3,300 | ||
Expected amortization expense, year two | 3,300 | ||
Expected amortization expense, year three | 3,300 | ||
Expected amortization expense, year four | 3,300 | ||
Expected amortization expense, year five | 3,300 | ||
ITCTransmission | |||
Goodwill and Intangible Assets | |||
Goodwill | 173,400 | 173,400 | |
METC | |||
Goodwill and Intangible Assets | |||
Goodwill | 453,800 | 453,800 | |
Intangible assets | 30,400 | 31,200 | |
Accumulated amortization | 28,000 | 27,200 | |
ITC Midwest | |||
Goodwill and Intangible Assets | |||
Goodwill | 323,000 | 323,000 | |
ITC Great Plains | |||
Goodwill and Intangible Assets | |||
Intangible assets | 14,500 | 14,400 | |
Accumulated amortization | $ 1,100 | $ 1,000 |
DEBT Interest Rate Swap Agreeme
DEBT Interest Rate Swap Agreements (Details) - USD ($) | Mar. 31, 2016 | Mar. 31, 2016 | Feb. 29, 2016 | Jan. 31, 2015 | Oct. 31, 2014 | Aug. 31, 2014 | Mar. 01, 2016 | Dec. 31, 2015 |
Derivative [Line Items] | ||||||||
Debt maturing within one year | $ 607,058,000 | $ 607,058,000 | $ 395,105,000 | |||||
Notional amount | 200,000,000 | 200,000,000 | $ 75,000,000 | $ 25,000,000 | $ 25,000,000 | $ 25,000,000 | $ 50,000,000 | |
Fixed rate | 2.301% | 3.075% | 3.217% | 1.743% | ||||
Weighted average fixed rate | 1.687% | |||||||
Recurring Basis | Fair Value, Inputs, Level 2 | Interest Rate Swap | ||||||||
Derivative [Line Items] | ||||||||
Derivative assets | 359,000 | 359,000 | 112,000 | |||||
Derivative liabilities | 8,160,000 | $ 8,160,000 | $ 3,548,000 | |||||
Interest Rate Swap | ||||||||
Derivative [Line Items] | ||||||||
Term of contract | 10 years | 10 years | 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 | 139,200,000 | $ 139,200,000 | ||||||
ITC Holdings | Term Loan Credit Agreement, due September 30, 2016 | Unsecured Debt | ||||||||
Derivative [Line Items] | ||||||||
Debt maturing within one year | $ 160,900,000 | $ 160,900,000 |
DEBT Schedule of Revolving Cred
DEBT Schedule of Revolving Credit Agreements (Details) | 3 Months Ended | |
Mar. 31, 2016USD ($) | ||
Line of Credit Facility [Line Items] | ||
Total available capacity | $ 1,000,000,000 | |
Outstanding balance | 232,800,000 | [1] |
Unused capacity | 767,200,000 | |
ITC Holdings | ||
Line of Credit Facility [Line Items] | ||
Total available capacity | 400,000,000 | |
Outstanding balance | 7,000,000 | [1] |
Unused capacity | $ 393,000,000 | [2] |
Weighted average interest rate | 1.60% | [3] |
Commitment fee rate | 0.175% | [4] |
Unused capacity, adjusted for commercial paper outstanding | $ 86,000,000 | |
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 [Line Items] | ||
Total available capacity | $ 100,000,000 | |
Outstanding balance | 61,100,000 | [1] |
Unused capacity | $ 38,900,000 | |
Weighted average interest rate | 1.40% | [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 [Line Items] | ||
Total available capacity | $ 100,000,000 | |
Outstanding balance | 12,400,000 | [1] |
Unused capacity | $ 87,600,000 | |
Weighted average interest rate | 1.40% | [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. | |
ITC Midwest | ||
Line of Credit Facility [Line Items] | ||
Total available capacity | $ 250,000,000 | |
Outstanding balance | 90,800,000 | [1] |
Unused capacity | $ 159,200,000 | |
Weighted average interest rate | 1.40% | [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. | |
ITC Great Plains | ||
Line of Credit Facility [Line Items] | ||
Total available capacity | $ 150,000,000 | |
Outstanding balance | 61,500,000 | [1] |
Unused capacity | $ 88,500,000 | |
Weighted average interest rate | 1.40% | [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 $86.0 million as of March 31, 2016. | |
[3] | Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.25% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1.00% above the one month LIBOR, plus an applicable margin of 0.25%, subject to adjustments based on ITC Holdings’ credit rating. | |
[4] | Calculation based on the average daily unused commitments, subject to adjustment based on the borrower’s credit rating. | |
[5] | Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1.00% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating. |
DEBT Additional Information (De
DEBT Additional Information (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2016 | Apr. 26, 2016 |
Debt Instrument [Line Items] | |||
Commercial paper program, maximum authorized amount outstanding | $ 400,000,000 | ||
Commercial paper | $ 307,000,000 | ||
Commercial paper, weighted average interest rate | 0.80% | ||
Commercial paper, weighted average days to maturity | 19 days | ||
Subsequent Event | METC | Senior Secured Notes, due April 26, 2046 | Secured Debt | |||
Debt Instrument [Line Items] | |||
Principal amount | $ 200,000,000 | ||
Interest rate | 3.90% | ||
Subsequent Event | METC | Term Loan Credit Agreement, due December 7, 2018 | |||
Debt Instrument [Line Items] | |||
Other long-term debt | $ 200,000,000 |
STOCKHOLDERS' EQUITY Changes in
STOCKHOLDERS' EQUITY Changes in Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Beginning balance, shares | 152,699,077 | |
Beginning balance | $ 1,709,071 | |
NET INCOME | 64,237 | $ 67,132 |
Other comprehensive loss, net of tax | $ (2,162) | $ (621) |
Ending balance, shares | 152,766,017 | |
Ending balance | $ 1,748,814 | |
Parenthetical Disclosures | ||
Dividends declared per common share | $ 0.1875 | $ 0.1625 |
Common Stock | ||
Beginning balance, shares | 152,699,077 | 155,140,967 |
Beginning balance | $ 829,211 | $ 923,191 |
Repurchase and retirement of common stock, shares | (28,875) | (11,917) |
Repurchase and retirement of common stock | $ (1,176) | $ (476) |
Stock option exercises, shares | 84,006 | 37,495 |
Stock option exercises | $ 1,847 | $ 665 |
Shares issued under the employee stock purchase plan, shares | 23,276 | 17,267 |
Shares issued under the employee stock purchase plan | $ 647 | $ 581 |
Issuance of restricted stock, shares | 3,896 | 27,776 |
Forfeiture of restricted stock, shares | (11,737) | (13,772) |
Forfeiture of performance, shares | (3,626) | |
Share-based compensation, net of forfeitures | $ 4,933 | $ 3,853 |
Other | $ 51 | |
Ending balance, shares | 152,766,017 | 155,197,816 |
Ending balance | $ 835,513 | $ 927,814 |
Retained Earnings | ||
Beginning balance | 875,595 | 741,550 |
NET INCOME | 64,237 | 67,132 |
Dividends, common stock | (28,634) | (25,220) |
Ending balance | 911,198 | 783,462 |
Accumulated Other Comprehensive Income (Loss) | ||
Beginning balance | 4,265 | 4,816 |
Other comprehensive loss, net of tax | (2,162) | (621) |
Ending balance | 2,103 | 4,195 |
Total Stockholders' Equity | ||
Beginning balance | 1,709,071 | 1,669,557 |
NET INCOME | 64,237 | 67,132 |
Repurchase and retirement of common stock | (1,176) | (476) |
Dividends, common stock | (28,634) | (25,220) |
Stock option exercises | 1,847 | 665 |
Shares issued under the employee stock purchase plan | 647 | 581 |
Share-based compensation, net of forfeitures | 4,933 | 3,853 |
Other comprehensive loss, net of tax | (2,162) | (621) |
Other | 51 | |
Ending balance | $ 1,748,814 | $ 1,715,471 |
STOCKHOLDERS' EQUITY Changes 38
STOCKHOLDERS' EQUITY Changes in Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Equity [Abstract] | ||
Balance at the beginning of period | $ 4,265 | $ 4,816 |
Derivative instruments | ||
Reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense — net (net of tax of $92 and $75 for the three months ended March 31, 2016 and 2015, respectively) | 119 | 136 |
Loss on interest rate swaps relating to interest rate cash flow hedges (net of tax of $1,823 and $614 for the three months ended March 31, 2016 and 2015, respectively) | (2,542) | (863) |
Derivative instruments, net of tax | (2,423) | (727) |
Available-for-sale securities | ||
Unrealized net gain on available-for-sale securities (net of tax of $187 and $76 for the three months ended March 31, 2016 and 2015, respectively) | 261 | 106 |
Available-for-sale securities, net of tax | 261 | 106 |
Total other comprehensive loss, net of tax | (2,162) | (621) |
Balance at the end of period | 2,103 | 4,195 |
Parenthetical Disclosures | ||
Reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense — net, tax | 92 | 75 |
Loss on interest rate swaps relating to interest rate cash flow hedges, tax | (1,823) | (614) |
Unrealized net gain on available-for-sale securities, tax | $ 187 | $ 76 |
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 | ||
Mar. 31, 2016 | Mar. 31, 2015 | ||
Numerator: | |||
NET INCOME | $ 64,237 | $ 67,132 | |
Less: dividends declared and paid - common and restricted shares | 28,585 | 25,220 | |
Undistributed earnings | $ 35,652 | $ 41,912 | |
Percentage allocated to common shares | [1] | 99.40% | 99.20% |
Numerator for basic and diluted earnings per common share | $ 63,841 | $ 66,601 | |
Denominator: | |||
Basic earnings per common share — weighted average common shares outstanding | 151,460,490 | 153,970,515 | |
Incremental shares for stock options and employee stock purchase plan — weighted average assumed conversion | 1,012,299 | 1,444,202 | |
Diluted earnings per common share — adjusted weighted average shares and assumed conversion | 152,472,789 | 155,414,717 | |
Per common share net income: | |||
Basic | $ 0.42 | $ 0.43 | |
Diluted | $ 0.42 | $ 0.43 | |
Percentage allocated to common shares: | |||
Weighted average restricted shares (participating securities) | 982,640 | 1,209,468 | |
Denominator for percentage allocated to common shares - total weighted-average shares outstanding | 152,443,130 | 155,179,983 | |
Common Stock | |||
Numerator: | |||
Less: dividends declared and paid - common and restricted shares | $ 28,403 | $ 25,024 | |
Undistributed earnings | $ 35,438 | $ 41,577 | |
[1] | Weighted average common shares outstanding151,460,490 153,970,515Weighted average restricted shares (participating securities)982,640 1,209,468 Total152,443,130 155,179,983 Percentage allocated to common shares99.4% 99.2% |
EARNINGS PER SHARE Additional I
EARNINGS PER SHARE Additional Information (Details) - shares | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Earnings Per Share, Basic and Diluted [Abstract] | ||
Outstanding stock options, ESPP shares and performance shares | 4,004,003 | 4,553,938 |
Anti-dilutive stock options and ESPP shares | 524,834 | 542,312 |
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 | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Defined Benefit Plans | ||
Defined Benefit Plan Disclosure | ||
Service cost | $ 1,604 | $ 1,624 |
Interest cost | 872 | 924 |
Expected return on plan assets | (932) | (960) |
Amortization of prior service credit | (4) | (10) |
Amortization of unrecognized loss | 876 | 1,061 |
Net cost | 2,416 | 2,639 |
Other Postretirement Benefits Plan | ||
Defined Benefit Plan Disclosure | ||
Service cost | 1,855 | 2,122 |
Interest cost | 630 | 619 |
Expected return on plan assets | (530) | (463) |
Amortization of unrecognized loss | 0 | 125 |
Net cost | $ 1,955 | $ 2,403 |
RETIREMENT BENEFITS AND ASSET42
RETIREMENT BENEFITS AND ASSETS HELD IN TRUST Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2016 | |
Other Postretirement Benefits Plan | Expectation | |||
Retirement Benefits Disclosure | |||
Expected additional current year contribution | $ 7.4 | ||
Defined Contribution Plan | |||
Retirement Benefits Disclosure | |||
Plan cost | $ 1.6 | $ 1.5 | |
Other Pension Plan | Expectation | |||
Retirement Benefits Disclosure | |||
Expected additional current year contribution | 2.8 | ||
Supplemental Employee Retirement Plan | Expectation | |||
Retirement Benefits Disclosure | |||
Employer contributions | $ 5.2 |
FAIR VALUE MEASUREMENTS Assets
FAIR VALUE MEASUREMENTS Assets Measured at Fair Value Subject to Three-Tier Hierarchy (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Fair Value, Assets and Liabilities Measured on Recurring Basis | ||
Fair value, level transfers | $ 0 | $ 0 |
Recurring Basis | Fair Value, Inputs, Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis | ||
Total - asset | 37,441,000 | 36,838,000 |
Recurring Basis | Fair Value, Inputs, Level 1 | Cash Equivalents | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis | ||
Cash and cash equivalents | 15,000 | 49,000 |
Recurring Basis | Fair Value, Inputs, Level 1 | Fixed Income Securities | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis | ||
Mutual funds | 36,357,000 | 35,813,000 |
Recurring Basis | Fair Value, Inputs, Level 1 | Equity Securities | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis | ||
Mutual funds | 1,069,000 | 976,000 |
Recurring Basis | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis | ||
Total - net liability | (7,801,000) | (3,436,000) |
Recurring Basis | Fair Value, Inputs, Level 2 | Interest Rate Swap | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis | ||
Derivative assets | 359,000 | 112,000 |
Derivative liabilities | $ (8,160,000) | $ (3,548,000) |
FAIR VALUE MEASUREMENTS Additio
FAIR VALUE MEASUREMENTS Additional Information (Details) - USD ($) $ in Millions | Mar. 31, 2016 | Dec. 31, 2015 |
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 | $ 3,951.5 | $ 3,879.7 |
Book value of long-term debt and debt maturing within one year, net of discount and deferred financing fees and excluding revolving and term loan credit agreements and commercial paper | 3,654.4 | 3,653.6 |
Book value of revolving credit agreements and term loan credit agreements | $ 593.8 | $ 680.9 |
COMMITMENTS AND CONTINGENT LI45
COMMITMENTS AND CONTINGENT LIABILITIES (Details) - USD ($) | 3 Months Ended | |||||||||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 22, 2016 | Jan. 31, 2016 | Dec. 31, 2015 | Oct. 20, 2015 | Apr. 06, 2015 | Jan. 30, 2015 | Jan. 05, 2015 | Nov. 30, 2014 | |
Commitments and Contingent Liabilities | ||||||||||
Non-current regulatory liabilities | $ 273,564,000 | $ 254,788,000 | ||||||||
Operating revenues | 280,133,000 | $ 272,487,000 | ||||||||
Interest expense | 50,417,000 | 48,474,000 | ||||||||
Net income | 64,237,000 | 67,132,000 | ||||||||
Estimated Potential Refund Related to Return on Equity Complaint | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Non-current regulatory liabilities | 186,900,000 | 168,000,000 | ||||||||
Rate of Return on Equity and Capital Structure Complaints | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Additional potential estimated refund, pre-tax | 55,400,000 | |||||||||
Additional potential estimated reduction of net income | 34,000,000 | |||||||||
Rate of Return on Equity and Capital Structure Complaints | Impact from Recognition of Liability | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Operating revenues | (17,500,000) | (7,500,000) | ||||||||
Interest expense | 1,400,000 | 400,000 | ||||||||
Net income | (11,500,000) | $ (4,800,000) | ||||||||
Rate of Return on Equity and Capital Structure Complaints | Minimum | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Estimated potential refund | 186,900,000 | |||||||||
Rate of Return on Equity and Capital Structure Complaints | Maximum | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Estimated potential refund | $ 242,300,000 | |||||||||
Rate of Return on Equity and Capital Structure Complaints | Complaint One | Expert Witness Testimony | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Recommended ROE rate in the event FERC elects to change base ROE | 11.39% | |||||||||
Presiding administrative law judges recommended base ROE on initial decision on initial complain | 10.32% | |||||||||
Presiding administrative law judges recommended maximum ROE on initial decision on initial complain | 11.35% | |||||||||
Recommended rate of return on equity in the event FERC elects to change base return on equity | 12.38% | |||||||||
Rate of Return on Equity and Capital Structure Complaints | Complaint Two | Expert Witness Testimony | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Recommended ROE rate in the event FERC elects to change base ROE | 10.96% | 10.75% | ||||||||
Recommended rate of return on equity in the event FERC elects to change base return on equity | 12.38% | |||||||||
ITCTransmission | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Rate of return on equity | 12.38% | |||||||||
FERC approved capital structure, equity percentage | 60.00% | |||||||||
ITCTransmission | Rate of Return on Equity and Capital Structure Complaints | Complaint One | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Reduced rate of return on equity | 9.15% | |||||||||
Complaint capital structure, equity percentage | 50.00% | |||||||||
ITCTransmission | Rate of Return on Equity and Capital Structure Complaints | Complaint Two | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Reduced rate of return on equity | 8.67% | |||||||||
ITCTransmission | Sales and Use Tax Audit | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Potential liability | $ 18,600,000 | |||||||||
Recorded contingent liability | 8,800,000 | $ 5,900,000 | ||||||||
ITCTransmission | Sales and Use Tax Audit | Audit Period | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Potential liability | $ 10,400,000 | |||||||||
METC | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Rate of return on equity | 12.38% | |||||||||
FERC approved capital structure, equity percentage | 60.00% | |||||||||
Approved incentive adder for RTO participation | 0.50% | |||||||||
Requested incentive adder for RTO participation | 0.50% | |||||||||
METC | Rate of Return on Equity and Capital Structure Complaints | Complaint One | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Reduced rate of return on equity | 9.15% | |||||||||
Complaint capital structure, equity percentage | 50.00% | |||||||||
METC | Rate of Return on Equity and Capital Structure Complaints | Complaint Two | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Reduced rate of return on equity | 8.67% | |||||||||
METC | Sales and Use Tax Audit | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Potential liability | $ 10,400,000 | |||||||||
Recorded contingent liability | $ 0 | |||||||||
ITC Midwest | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Rate of return on equity | 12.38% | |||||||||
FERC approved capital structure, equity percentage | 60.00% | |||||||||
Approved incentive adder for RTO participation | 0.50% | |||||||||
Requested 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 rate of return on equity | 9.15% | |||||||||
Complaint capital structure, equity percentage | 50.00% | |||||||||
ITC Midwest | Rate of Return on Equity and Capital Structure Complaints | Complaint Two | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Reduced rate of return on equity | 8.67% | |||||||||
MISO Operating Subsidiaries | ||||||||||
Commitments and Contingent Liabilities | ||||||||||
Equity in capital structure for ratemaking purposes | $ 3,000,000,000 | |||||||||
Effect on net income from 10 basis point reduction in the authorized base return on equity | $ 3,000,000 |
PROPOSED MERGER (Details)
PROPOSED MERGER (Details) - USD ($) $ / shares in Units, $ in Millions | Apr. 20, 2016 | Feb. 09, 2016 | Mar. 31, 2016 |
External Legal, Advisory and Financial Services Fees | |||
Proposed Merger | |||
Merger related expenses | $ 9.9 | ||
Certain Internal Labor and Associated Costs | |||
Proposed Merger | |||
Merger related expenses | $ 3.1 | ||
ITC Holdings | |||
Proposed Merger | |||
Cash per common share | $ 22.57 | ||
Fortis stock per common share | $ 0.7520 | ||
Ownership percentage of Fortis after close of merger | 27.00% | ||
ITC Holdings | Termination Fee Upon Specified Conditions | |||
Proposed Merger | |||
Fee for termination of agreement | $ 245 | ||
GIC Private Limited | Subsequent Event | |||
Proposed Merger | |||
Ownership percentage of minority investor upon completion of merger | 19.90% | ||
Business acquisition, transaction costs | $ 1,228 | ||
Fortis | Termination Fee Related to Regulatory Approvals or Legal Matters | |||
Proposed Merger | |||
Fee for termination of agreement related to regulatory approvals or matters | $ 280 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | ||
OPERATING REVENUES: | ||||
Operating revenues | $ 280,133 | $ 272,487 | ||
INCOME BEFORE INCOME TAXES: | ||||
Income before income taxes | 103,980 | 107,592 | ||
NET INCOME: | ||||
NET INCOME | 64,237 | 67,132 | ||
TOTAL ASSETS: | ||||
Assets | 7,863,242 | $ 7,555,322 | ||
Regulated Operating Subsidiaries | ||||
OPERATING REVENUES: | ||||
Operating revenues | 280,016 | 272,450 | ||
INCOME BEFORE INCOME TAXES: | ||||
Income before income taxes | 152,787 | 148,818 | ||
NET INCOME: | ||||
NET INCOME | 94,185 | 91,439 | ||
TOTAL ASSETS: | ||||
Assets | 7,752,752 | 7,463,557 | ||
ITC Holdings and other | ||||
OPERATING REVENUES: | ||||
Operating revenues | 307 | 177 | ||
INCOME BEFORE INCOME TAXES: | ||||
Income before income taxes | 48,807 | 41,226 | ||
NET INCOME: | ||||
NET INCOME | 64,237 | 67,132 | ||
TOTAL ASSETS: | ||||
Assets | 4,253,768 | 4,147,915 | ||
Intercompany eliminations | ||||
OPERATING REVENUES: | ||||
Operating revenues | 190 | 140 | ||
NET INCOME: | ||||
NET INCOME | 94,185 | $ 91,439 | ||
Reconciliations / Intercompany Eliminations | ||||
TOTAL ASSETS: | ||||
Assets | [1] | $ 4,143,278 | $ 4,056,150 | |
[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. |