SCHEDULE I — Condensed Financial Information of Registrant

ITC HOLDINGS CORP.

CONDENSED STATEMENTS OF FINANCIAL POSITION (PARENT COMPANY ONLY)



	December 31,
(In thousands, except share data)	2015		2014
ASSETS
Current assets
Cash and cash equivalents	$	8,185	$	6,305
Accounts receivable from subsidiaries	38,010		42,665
Prepaid and other current assets	1,674		1,655
Total current assets	47,869		50,625
Other assets
Investment in subsidiaries	4,010,767		3,784,609
Deferred income taxes	21,241		25,887
Deferred financing fees (net of accumulated amortization of $6,670 and $4,700, respectively)	12,322		14,117
Other	64,098		67,376
Total other assets	4,108,428		3,891,989
TOTAL ASSETS	$	4,156,297	$	3,942,614
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	3,421	$	2,431
Accrued payroll	24,123		23,502
Accrued interest	34,836		34,815
Debt maturing within one year	395,334		—
Other	7,084		4,266
Total current liabilities	464,798		65,014
Accrued pension and postretirement liabilities	61,609		69,562
Other	1,186		3,237
Long-term debt (net of discounts of $3,407 and $3,940, respectively)	1,919,633		2,135,244
STOCKHOLDERS’ EQUITY
Common stock, without par value, 300,000,000 shares authorized, 152,699,077 and 155,140,967 shares issued and outstanding at December 31, 2015 and 2014, respectively	829,211		923,191
Retained earnings	875,595		741,550
Accumulated other comprehensive income	4,265		4,816
Total stockholders’ equity	1,709,071		1,669,557
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,156,297	$	3,942,614

See notes to condensed financial statements (parent company only).

SCHEDULE I — Condensed Financial Information of Registrant

ITC HOLDINGS CORP.

CONDENSED STATEMENTS OF OPERATIONS (PARENT COMPANY ONLY)



	Year Ended December 31,
(In thousands)	2015			2014			2013
Other income	$	996		$	786		$	1,487
General and administrative expense	(5,526		)	(7,336		)	(56,707		)
Interest expense	(106,442		)	(105,411		)	(98,660		)
Loss on extinguishment of debt	—			(29,205		)	—
Other expense	(163		)	(196		)	(3,609		)
LOSS BEFORE INCOME TAXES	(111,135		)	(141,362		)	(157,489		)
INCOME TAX BENEFIT	(45,652		)	(55,646		)	(72,798		)
LOSS AFTER TAXES	(65,483		)	(85,716		)	(84,691		)
EQUITY IN SUBSIDIARIES’ NET EARNINGS	307,889			329,799			318,197
NET INCOME	$	242,406		$	244,083		$	233,506

See notes to condensed financial statements (parent company only).

SCHEDULE I — Condensed Financial Information of Registrant

ITC HOLDINGS CORP.

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (PARENT COMPANY ONLY)



	Year Ended December 31,
(In thousands)	2015			2014			2013
NET INCOME	$	242,406		$	244,083		$	233,506
OTHER COMPREHENSIVE (LOSS) INCOME
Derivative instruments (net of tax of $967, $1,897 and $16,087 for the years ended December 31, 2015, 2014 and 2013, respectively)	(375		)	(1,479		)	24,304
Available-for-sale securities (net of tax of $126, $18 and $46 for the years ended December 31, 2015, 2014 and 2013, respectively)	(176		)	(32		)	71
TOTAL OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX	(551		)	(1,511		)	24,375
TOTAL COMPREHENSIVE INCOME	$	241,855		$	242,572		$	257,881

See notes to condensed financial statements (parent company only).

SCHEDULE I — Condensed Financial Information of Registrant

ITC HOLDINGS CORP.

CONDENSED STATEMENTS OF CASH FLOWS (PARENT COMPANY ONLY)



	Year Ended December 31,
(In thousands)	2015			2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	242,406		$	244,083		233,506
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in subsidiaries' earnings	(307,889		)	(329,799		)	(318,197		)
Dividends from subsidiaries	185,303			224,167			169,973
Deferred and other income taxes	(116,243		)	(122,413		)	(117,956		)
Loss on extinguishment of debt	—			29,205			—
Intercompany tax payments from subsidiaries	120,863			124,315			112,008
Share-based compensation expense	17,674			14,652			15,667
Other	3,108			2,852			(226		)
Changes in assets and liabilities, exclusive of changes shown separately:
Accounts receivable from subsidiaries	3,158			1,304			(979		)
Prepaid and other current assets	92			4,154			16,948
Accounts payable	990			(3,869		)	(2,294		)
Accrued payroll	621			1,572			1,190
Accrued interest	21			(2,671		)	6,501
Accrued taxes	8,996			11,147			(179		)
Tax benefit on the excess tax deduction of share-based compensation	(11,707		)	(7,767		)	(4,302		)
Other current liabilities	2,416			(2,425		)	2,278
Other non-current assets and liabilities, net	6,006			3,078			12,465
Net cash provided by operating activities	155,815			191,585			126,403
CASH FLOWS FROM INVESTING ACTIVITIES
Equity contributions to subsidiaries	(263,150		)	(348,661		)	(339,770		)
Return of capital from subsidiaries	161,075			126,900			96,120
Proceeds from sale of marketable securities	673			495			20,844
Purchases of marketable securities	(10,422		)	(6,091		)	(22,250		)
Other	(750		)	(984		)	—
Net cash used in investing activities	(112,574		)	(228,341		)	(245,056		)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt	—			398,664			548,484
Borrowings under revolving credit agreement	838,900			533,900			222,800
Borrowings under term loan credit agreements	—			60,000			390,000
Net issuance of commercial paper, net of discount	94,630			—			—
Retirement of long-term debt - including extinguishment of debt costs	—			(248,625		)	(267,000		)
Repayments of revolving credit agreement	(754,700		)	(480,400		)	(252,400		)
Repayments of term loan credit agreements	—			(39,000		)	(450,000		)
Issuance of common stock	13,635			20,713			10,042
Dividends on common and restricted stock	(108,275		)	(95,595		)	(84,129		)
Repurchase and retirement of common stock	(137,081		)	(134,284		)	(4,885		)
Tax benefit on the excess tax deduction of share-based compensation	11,707			7,767			4,302
Advance for forward contract of accelerated share repurchase program	—			(20,000		)	—
Return of unused advance for forward contract of accelerated share repurchase program	—			20,000			—
Other	(177		)	(6,932		)	5,746
Net cash (used in) provided by financing activities	(41,361		)	16,208			122,960
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	1,880			(20,548		)	4,307
CASH AND CASH EQUIVALENTS — Beginning of period	6,305			26,853			22,546
CASH AND CASH EQUIVALENTS — End of period	$	8,185		$	6,305		$	26,853

Supplementary cash flows information:
Interest paid (net of interest capitalized)	$	103,915		$	105,817		$	90,224
Income taxes paid — net	55,722			44,524			20,092
Supplementary non-cash investing and financing activities:
Equity transfers to subsidiaries	1,497			6,227			6,213

See notes to condensed financial statements (parent company only).

SCHEDULE I — Condensed Financial Information of Registrant

ITC HOLDINGS CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS (PARENT COMPANY ONLY)

1. GENERAL

For ITC Holdings Corp.’s (“ITC Holdings,” “we,” “our” and “us”) presentation (Parent Company only), the investment in subsidiaries is accounted for using the equity method. The condensed parent company financial statements and notes should be read in conjunction with the consolidated financial statements and notes of ITC Holdings appearing in this Annual Report on Form 10-K.

As a holding company with no business operations, ITC Holdings’ assets consist primarily of investments in our subsidiaries. ITC Holding s’ material cash inflows are only from dividends and other payments received from our subsidiaries, the proceeds raised from the sale of debt and equity securities, issuances under our commercial paper program and borrowings under our revolving credit agreement. ITC Holdings may not be able to access cash generated by our subsidiaries in order to fulfill cash commitments or pay dividends to shareholders. The ability of our subsidiaries to make dividend and other payments to us is subject to the availability of funds after taking into account their respective funding requirements, the terms of their respective indebtedness, the regulations of the FERC under the FPA and applicable state laws. In addition, there are practical limitations on using the net assets of each of our Regulated Operating Subsidiaries as of December 31, 2015 for dividends based on management's intent to maintain the FERC-approved capital structure targeting 60% equity and 40% debt for each of our Regulated Operating Subsidiaries. Management does not expect maintaining this targeted capital structure to have an impact on our ability to pay dividends at the current level in the foreseeable future. Each of our subsidiaries, however, is legally distinct from us and has no obligation, contingent or otherwise, to make funds available to us.

2. DEBT

As of December 31, 2015, the maturities of our debt outstanding were as follows:



(In thousands)
2016	$	395,344
2017	50,000
2018	385,000
2019	137,700
2020	200,000
2021 and thereafter	1,150,340
Total	$	2,318,384

Refer to Note 8 to the consolidated financial statements for a description of the ITC Holdings Senior Notes, the ITC Holdings Revolving and Term Loan Credit Agreements, the ITC Holdings Commercial Paper Program and related items.

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 the ITC Holdings Senior Notes was $2,059.4 million and $2,126.1 million at December 31, 2015 and 2014, respectively. The total book value of the ITC Holdings Senior Notes, net of discount, was $1,921.3 million and $1,920.7 million at December 31, 2015 and 2014, respectively. At December 31, 2015 and 2014, we had a total of $298.7 million and $214.5 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 in Note 12 to the consolidated financial statements. At December 31, 2015, ITC Holdings had $95.0 million of commercial paper issued and outstanding under the commercial paper program established in 2015. Due to the short-term nature of these financial instruments, the carrying value approximates fair value.

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 and paying dividends. In addition, the covenants require us to meet certain financial ratios, such as maintaining certain debt to capitalization ratios. At December 31, 2015, we were not in violation of any debt covenant.

3. RELATED-PARTY TRANSACTIONS

Our related-party transactions during 2015, 2014 and 2013 were as follows:



	Year Ended December 31,
(In millions)	2015		2014		2013
Equity contributions to subsidiaries	$	263.2	$	348.7	$	339.8
Dividends from subsidiaries (a)	185.3		224.2		170.0
Return of capital from subsidiaries (a)	161.1		126.9		96.1

Income taxes paid to ITC Holdings from: (b)
ITCTransmission	$	36.4	$	38.1	$	39.1
MTH	39.0		41.4		30.0
ITC Midwest	31.0		34.3		33.6
ITC Great Plains	14.5		10.6		9.4

____________________________


(a)	Includes ITCTransmission, MTH, ITC Midwest and other subsidiaries.

(b)

The income tax payments to ITC Holdings from subsidiaries were pursuant to intercompany tax sharing arrangements and the total of these tax payments is presented as a cash inflow from operating activities in the condensed parent company statements of cash flows. Other reconciling items between the parent company and the consolidated tax liabilities are presented as deferred and other income taxes in the adjustments to reconcile net income to net cash provided by operating activities.