Hawaiian Electric Industries Reports Third Quarter 2015 Earnings

Diluted Earnings Per Share (EPS) of $0.47 and Core EPS[1] of $0.49;

Utility Continues Clean Energy Transformation;

Bank Delivers Solid Performance;

Hawaiian Electric Industries, Inc. Maintains Dividend;

Historical Cash Flow Statements Revised/Restated

05 Nov, 2015, 16:15 ET from Hawaiian Electric Industries, Inc.

HONOLULU, Nov. 5, 2015 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock for the third quarter of 2015 of $50.7 million and diluted earnings per share (EPS) of $0.47 compared to $47.8 million and $0.46 EPS for the third quarter of 2014. Excluding costs associated with the pending merger with NextEra Energy, Inc. and the spin-off of ASB Hawaii of $1.7 million and $0.4 million (after-tax), in the third quarter of 2015 and 2014 respectively, core earnings1 for the third quarter of 2015 were $52.4 million and $0.49 EPS compared to $48.3 million and $0.47 EPS for the third quarter of 2014.

"With the PUC's recent distributed energy resources order and Hawaii's new 100% renewable portfolio standard goal by 2045, our utility's continued work to modernize our electric grids and pursue new customer options is more important than ever," said Constance Lau, HEI president and chief executive officer.

"Our bank delivered solid revenue and loan growth this quarter. Credit quality remained sound, and capital levels were healthy," added Lau.

"During the quarter, we achieved another important milestone toward the completion of our proposed merger with NextEra Energy with the expiration of the Hart-Scott-Rodino waiting period. The PUC just completed public listening sessions on all islands, and during the past few weeks, we and NextEra Energy filed our surrebuttal testimonies and closed out a six-month discovery process. We look forward to evidentiary hearings beginning late November. And as we move forward, we continue to believe NextEra Energy is the right partner for Hawaiian Electric to help achieve Hawaii's 100 percent renewable portfolio standard by 2045."


1 Non-GAAP measure which excludes merger-related and spin-off costs after-tax. See the "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation.

HAWAIIAN ELECTRIC COMPANY EARNINGS CONSISTENT WITH EXPECTATIONS
Hawaiian Electric Company's2 net income for the third quarter of 2015 was $43.0 million compared to $38.9 million for the same quarter last year. The $4.1 million increase was mainly driven by the following on an after-tax basis:

  • $3 million higher net revenues3 compared to the third quarter of 2014 primarily due to $2 million in recovery of costs for clean energy and reliability investments and $1 million for better fuel efficiency performance; and
  • $2 million lower operations and maintenance (O&M) expenses4 in the third quarter of 2015 compared to the same quarter last year, due to the following on an after-tax basis:
    • Third quarter of 2014 O&M costs were elevated due primarily to consulting costs associated with regulatory filings, storm restoration expenses and the initial phase of our smart grid installations as part of our grid modernization program which in total had a $6 million impact to net income; and
    • Third quarter of 2015 O&M costs were impacted by the regulatory decision denying enterprise resource planning software costs and higher maintenance costs including environmental compliance costs and vegetation management costs partially offset by the positive impact of the regulatory approval of the deferral of the Interactive Voice Response system project costs that were previously expensed. In total, these items had a $4 million unfavorable impact to net income.
  • $2 million higher depreciation expense as a result of increasing investments for the integration of more renewable energy, improved customer reliability and greater system efficiency.

2 Hawaiian Electric Company, unless otherwise defined, refers to the three utilities, Hawaiian Electric Company, Inc. on Oahu, Maui Electric Company, Limited, and Hawaii Electric Light Company, Inc.

3 Net revenues represent the after-tax impact of "Revenues" less the following expenses which are largely pass through items in revenues: "fuel oil," "purchased power," and "taxes, other than income taxes" as shown on the Hawaiian Electric Company Consolidated Statements of Income.

4 Excludes net income neutral expenses covered by surcharges or by third parties of $2 million in the third quarter of 2015 and $3 million in the third quarter of 2014. See "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation.

Note: Amounts indicated as "after-tax" in this earnings release are based upon adjusting items for the composite statutory tax rates of 39% for the utilities and 40% for the bank.

AMERICAN SAVINGS BANK CONTINUES TO DELIVER SOLID PERFORMANCE
American Savings Bank's (American) net income for the third quarter of 2015 was $13.5 million compared to $12.9 million in the second, or linked quarter of 2015 and $13.3 million in the third quarter of 2014. Third quarter 2015 net income was $0.6 million higher than the linked quarter primarily driven by the following on an after-tax basis:

  • $1 million higher net interest income primarily driven by higher average interest-earning assets and a favorable shift to higher yielding assets; and
  • $1 million higher noninterest income primarily due to the gain on sale of an American service center building vacated as part of the bank's facilities consolidation plan; partially offset by
  • $1 million higher provision for loan losses primarily due to strong loan growth in the quarter; and
  • $1 million higher noninterest expense.

Compared to the third quarter of 2014, net income was higher by $0.2 million primarily driven by the following on an after-tax basis:

  • $1 million higher net interest income in the third quarter of 2015 primarily due to higher average interest earning assets; and
  • $2 million higher noninterest income primarily from the gain on sale of real estate and higher fee income on deposit products and mortgage banking in the third quarter of 2015; offset by
  • $1 million higher provision for loan losses attributable to higher loan growth; and
  • $2 million higher noninterest expense in the third quarter of 2015 due primarily to higher pension and benefits expense.

Overall, American achieved solid profitability in the third quarter of 2015 with a return on average equity of 9.73% and a return on average assets of 0.92%.

For additional information, refer to the American news release issued on October 30, 2015.

HOLDING AND OTHER COMPANIES
The holding and other companies' net losses were $5.8 million in the third quarter of 2015 compared to $4.3 million in the prior year quarter. Excluding costs related to the pending merger with NextEra Energy, Inc. and the spin-off of ASB Hawaii, the third quarter of 2015 net loss was $4.1 million compared to $3.9 million in the same quarter last year.

BOARD DECLARES QUARTERLY DIVIDEND
On November 4, 2015, the board of directors maintained HEI's quarterly cash dividend of $0.31 cents per share, payable on December 10, 2015, to shareholders of record at the close of business on November 23, 2015 (ex-dividend date is November 19, 2015). The dividend is equivalent to an annual rate of $1.24 per share.

Dividends have been paid continuously since 1901. At the indicated annual dividend rate and the closing share price on November 4, 2015 of $29.30, HEI's yield is 4.2%.

HEI AND HAWAIIAN ELECTRIC COMPANY
CASH FLOW RESTATEMENTS AND REVISIONS
In the course of preparing our third quarter financial statements, HEI's and Hawaiian Electric Company's management determined that Hawaiian Electric Company's capital expenditures on HEI's and Hawaiian Electric Company's Consolidated Statements of Cash Flows did not correctly account for the beginning of period unpaid invoices and accruals (that were paid in cash during the period). Accordingly, HEI and Hawaiian Electric Company are each restating or revising their previously filed Consolidated Statements of Cash Flows for the periods stated below to correct for such misstatements by adjusting cash used for "Capital expenditures" (investing activity) and the change in accounts payable (operating activity).

Based on our review, HEI and Hawaiian Electric Company have determined that, as a result of the described misstatements, HEI's and Hawaiian Electric Company's consolidated net cash provided by operating activities were understated for the years 2012 through 2014 approximately by $45 million, $40 million, and $25 million, respectively, and approximately by $65 million for both the first three-month and the first six-month periods of 2015. Accordingly, HEI's and Hawaiian Electric Company's restatements and revisions will show higher cash inflows from operations for the periods affected. Similarly, HEI's and Hawaiian Electric Company's consolidated net cash used in investing activities due to capital expenditures were also understated by the corresponding amounts in their respective time periods. Accordingly, HEI's and Hawaiian Electric Company's restatements and revisions will show greater outflows of cash invested in capital expenditures. Furthermore, the misstatements, as well as our revisions and restatements, did not and will not have any impact on HEI's and Hawaiian Electric Company's obligations nor upon utility customer rates. 

On November 4, 2015, the Audit Committees of the Boards of Directors of HEI and Hawaiian Electric Company (Audit Committees), after consultation with management and PricewaterhouseCoopers LLP, the independent registered public accounting firm for HEI and Hawaiian Electric Company, concluded that it is necessary to restate HEI's and Hawaiian Electric Company's Consolidated Statements of Cash Flows for:

  • the three months ended March 31, 2015 and 2014,
  • the six months ended June 30, 2015 and 2014, and
  • the years ended December 31, 2013 and 2012,

and therefore, such financial statements should no longer be relied upon. The Audit Committees also concluded it was necessary to revise HEI's and Hawaiian Electric Company's Consolidated Statements of Cash Flows for:

  • the nine months ended September 30, 2014 and
  • the year ended December 31, 2014.

The restatements and revisions are necessary to correct the misstatements related to capital expenditures, changes in accounts payable, changes in deferred income taxes, changes in accrued income taxes, and changes in other assets and liabilities as described below. The restatements and revisions do not impact HEI's and Hawaiian Electric Company's previously reported overall net change in cash and cash equivalents in their Consolidated Statements of Cash Flows for any period restated or revised. Additionally, the restatements and revisions do not impact HEI's and Hawaiian Electric Company's Consolidated Balance Sheets or Consolidated Statements of Income for any period restated or revised.

As soon as practicable, HEI and Hawaiian Electric Company expect to amend the reports discussed above, in order to correct the misstatements and related disclosures.

Preliminary Conclusions Regarding Internal Controls

In light of the above matter, management, in consultation with the Audit Committees, has determined that a material weakness in HEI's and Hawaiian Electric Company's internal control over financial reporting existed at December 31, 2014. HEI and Hawaiian Electric Company intend to restate management's report on internal control over financial reporting and its evaluation of disclosure controls and procedures and expect to receive an adverse opinion on the internal control over financial reporting as of December 31, 2014, from PricewaterhouseCoopers LLP.

HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE
Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its third quarter of 2015 earnings and 2015 EPS guidance on Thursday, November 5, 2015, at 12:00 noon Hawaii time (5:00 p.m. Eastern time). The event can be accessed through HEI's website at www.hei.com or by dialing (888) 311-8190 and entering passcode: 22822426. International parties may listen to the conference by calling the following toll free number, (330) 863-3378 and entering passcode:  22822426. The presentation for the webcast will be on HEI's website under the heading "Investor Relations."  HEI and Hawaiian Electric Company intend to continue to use HEI's website, www.hei.com, as a means of disclosing additional information. Such disclosures will be included on HEI's website in the Investor Relations section. Accordingly, investors should routinely monitor such portions of HEI's website, in addition to following HEI's, Hawaiian Electric Company's and American's press releases, HEI's and Hawaiian Electric Company's Securities and Exchange Commission (SEC) filings and HEI's public conference calls and webcasts. The information on HEI's website is not incorporated by reference in this document or in HEI's and Hawaiian Electric Company's SEC filings unless, and except to the extent, specifically incorporated by reference. Investors may also wish to refer to the Public Utilities Commission of the State of Hawaii (PUC) website at dms.puc.hawaii.gov/dms in order to review documents filed with and issued by the PUC. No information on the PUC website is incorporated by reference in this document or in HEI's and Hawaiian Electric Company's SEC filings.

An on-line replay of the webcast will be available on HEI's website beginning about two hours after the event. Audio replays of the teleconference will also be available approximately two hours after the event through November 19, 2015, by dialing (855) 859-2056 or (404) 537-3406 and entering passcode:  22822426.

HEI supplies power to approximately 450,000 customers or 95% of Hawaii's population through its electric utilities, Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited and provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, one of Hawaii's largest financial institutions.

NON-GAAP MEASURES
See "Explanation of HEI's Use of Certain Unaudited Non-GAAP Measures" and related reconciliations on pages 15 to 16 of this release.

FORWARD-LOOKING STATEMENTS
This release may contain "forward-looking statements," which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as "expects," "anticipates," "intends," "plans," "believes," "predicts," "estimates" or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries, the performance of the industries in which they do business and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance.

Forward-looking statements in this release should be read in conjunction with the "Forward-Looking Statements" and "Risk Factors" discussions (which are incorporated by reference herein) set forth in HEI's Annual Report on Form 10-K for the year ended December 31, 2014, HEI's Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 and HEI's future periodic reports that discuss important factors that could cause HEI's results to differ materially from those anticipated in such statements. These forward-looking statements speak only as of the date of the report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric Company, American and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



Three months ended

September 30


Nine months ended

 September 30

(in thousands, except per share amounts)


2015


2014


2015


2014

Revenues









Electric utility


$

648,127



$

803,565



$

1,779,732



$

2,262,056


Bank


69,091



63,536



199,222



187,771


Other


(42)



(5)



(4)



(325)


Total revenues


717,176



867,096



1,978,950



2,449,502


Expenses









Electric utility


565,470



727,409



1,573,278



2,045,166


Bank


48,289



43,030



138,063



126,778


Other


6,322



4,621



28,278



13,125


Total expenses


620,081



775,060



1,739,619



2,185,069


Operating income (loss)









Electric utility


82,657



76,156



206,454



216,890


Bank


20,802



20,506



61,159



60,993


Other


(6,364)



(4,626)



(28,282)



(13,450)


Total operating income


97,095



92,036



239,331



264,433


Interest expense, net—other than on deposit liabilities and other bank borrowings


(19,229)



(19,170)



(57,235)



(58,648)


Allowance for borrowed funds used during construction


737



740



1,918



1,877


Allowance for equity funds used during construction


2,057



1,937



5,366



4,933


Income before income taxes


80,660



75,543



189,380



212,595


Income taxes


29,516



27,264



70,406



76,302


Net income


51,144



48,279



118,974



136,293


Preferred stock dividends of subsidiaries


471



471



1,417



1,417


Net income for common stock


$

50,673



$

47,808



$

117,557



$

134,876


Basic earnings per common share


$

0.47



$

0.47



$

1.11



$

1.33


Diluted earnings per common share


$

0.47



$

0.46



$

1.11



$

1.32


Dividends per common share


$

0.31



$

0.31



$

0.93



$

0.93


Weighted-average number of common shares outstanding


107,457



102,416



106,067



101,768


Adjusted weighted-average shares


107,738



103,026



106,347



102,478


Net income (loss) for common stock by segment









Electric utility


$

43,006



$

38,879



$

102,721



$

108,529


Bank


13,451



13,253



39,777



39,188


Other


(5,784)



(4,324)



(24,941)



(12,841)


Net income for common stock


$

50,673



$

47,808



$

117,557



$

134,876


Comprehensive income attributable to Hawaiian Electric Industries, Inc.


$

55,103



$

46,497



$

122,918



$

137,632


Return on average common equity (twelve months ended)1






8.1

%


10.1

%


Prior period financial statements reflect the retrospective application of Accounting Standards Update (ASU) No. 2014-01, "Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects," which was adopted as of January 1, 2015 and did not have a material impact on the Company's financial condition or results of operations.


This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.


1  On a core basis, 2015 and 2014 returns on average common equity (twelve months ended September 30) were 9.1% and 10.1%, respectively.  See reconciliation of GAAP to non-GAAP measures.

 


Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(dollars in thousands)


September 30, 2015


December 31, 2014

Assets





Cash and cash equivalents


$

228,417



$

175,542


Accounts receivable and unbilled revenues, net


305,448



313,696


Available-for-sale investment securities, at fair value


785,837



550,394


Stock in Federal Home Loan Bank, at cost


10,678



69,302


Loans receivable held for investment, net


4,487,130



4,389,033


Loans held for sale, at lower of cost or fair value


5,598



8,424


Property, plant and equipment, net of accumulated depreciation of $2,318,227 and $2,250,950 at the respective dates


4,317,121



4,148,774


Regulatory assets


897,948



905,264


Other


453,099



542,523


Goodwill


82,190



82,190


Total assets


$

11,573,466



$

11,185,142


Liabilities and shareholders' equity





Liabilities





Accounts payable


$

152,896



$

186,425


Interest and dividends payable


25,914



25,336


Deposit liabilities


4,825,954



4,623,415


Short-term borrowings—other than bank


171,992



118,972


Other bank borrowings


368,593



290,656


Long-term debt, net—other than bank


1,506,546



1,506,546


Deferred income taxes


643,951



633,570


Regulatory liabilities


362,251



344,849


Contributions in aid of construction


495,667



466,432


Defined benefit pension and other postretirement benefit plans liability


607,682



632,845


Other


456,726



531,230


Total liabilities


9,618,172



9,360,276


Preferred stock of subsidiaries - not subject to mandatory redemption


34,293



34,293


Shareholders' equity





Preferred stock, no par value, authorized 10,000,000 shares; issued: none





Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 107,458,641 shares and 102,565,266 shares at the respective dates


1,627,259



1,521,297


Retained earnings


315,759



296,654


Accumulated other comprehensive loss, net of tax benefits


(22,017)



(27,378)


Total shareholders' equity


1,921,001



1,790,573


Total liabilities and shareholders' equity


$

11,573,466



$

11,185,142



Prior period financial statements reflect the retrospective application of ASU No. 2014-01, "Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects," which was adopted as of January 1, 2015 and did not have a material impact on the Company's financial condition or results of operations.


This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K.

 


Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)




Three months ended September 30


Nine months ended September 30

(dollars in thousands, except per barrel amounts)


2015


2014


2015


2014

Revenues


$

648,127



$

803,565



1,779,732



2,262,056


Expenses









Fuel oil


195,633



309,432



518,670



865,989


Purchased power


160,518



192,882



445,809



546,121


Other operation and maintenance


103,653



108,313



306,519



295,483


Depreciation


44,356



41,594



132,840



124,790


Taxes, other than income taxes


61,310



75,188



169,440



212,783


Total expenses


565,470



727,409



1,573,278



2,045,166


Operating income


82,657



76,156



206,454



216,890


Allowance for equity funds used during construction


2,057



1,937



5,366



4,933


Interest expense and other charges, net


(16,557)



(16,414)



(49,170)



(48,989)


Allowance for borrowed funds used during construction


737



740



1,918



1,877


Income before income taxes


68,894



62,419



164,568



174,711


Income taxes


25,390



23,042



60,351



64,686


Net income


43,504



39,377



104,217



110,025


Preferred stock dividends of subsidiaries


228



228



686



686


Net income attributable to Hawaiian Electric


43,276



39,149



103,531



109,339


Preferred stock dividends of Hawaiian Electric


270



270



810



810


Net income for common stock


$

43,006



$

38,879



102,721



108,529


Comprehensive income attributable to Hawaiian Electric


$

43,010



$

38,889



$

102,732



$

108,561


OTHER ELECTRIC UTILITY INFORMATION









Kilowatthour sales (millions)









   Hawaiian Electric


1,874



1,815



5,016



5,062


   Hawaii Electric Light


282



273



792



793


   Maui Electric


312



296



848



844




2,468



2,384



6,656



6,699


Wet-bulb temperature (Oahu average; degrees Fahrenheit)


74.9



72.2



70.2



69.5


Cooling degree days (Oahu)


1,711



1,631



3,687



3,703


Average fuel oil cost per barrel


$

81.35



$

133.26



$

79.13



$

132.19













Twelve months ended September 30






2015



2014


Return on average common equity (%) (simple average)











   Hawaiian Electric






7.95



9.63


   Hawaii Electric Light






6.30



6.77


   Maui Electric






9.21



8.55


   Hawaiian Electric Consolidated






7.86



8.96



This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric's Annual Report on SEC Form 10-K for the year ended December 31, 2014 and the consolidated financial statements and the notes thereto in Hawaiian Electric's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

 


Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(dollars in thousands, except par value)


September 30, 2015


December 31, 2014

Assets





Property, plant and equipment





Utility property, plant and equipment





Land


$

52,283



$

52,299


Plant and equipment


6,216,114



6,009,482


Less accumulated depreciation


(2,246,614)



(2,175,510)


Construction in progress


196,681



158,616


Utility property, plant and equipment, net


4,218,464



4,044,887


Nonutility property, plant and equipment, less accumulated depreciation of $1,228 and $1,227 at respective dates


6,562



6,563


Total property, plant and equipment, net


4,225,026



4,051,450


Current assets





Cash and cash equivalents


10,704



13,762


Customer accounts receivable, net


162,468



158,484


Accrued unbilled revenues, net


123,578



137,374


Other accounts receivable, net


4,763



4,283


Fuel oil stock, at average cost


70,104



106,046


Materials and supplies, at average cost


58,973



57,250


Prepayments and other


46,891



66,383


Regulatory assets


79,950



71,421


Total current assets


557,431



615,003


Other long-term assets





Regulatory assets


817,998



833,843


Unamortized debt expense


7,586



8,323


Other


75,951



81,838


Total other long-term assets


901,535



924,004


Total assets


$

5,683,992



$

5,590,457


Capitalization and liabilities





Capitalization





Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 15,805,327 shares)


$

105,388



$

105,388


Premium on capital stock


578,930



578,938


Retained earnings


1,032,690



997,773


Accumulated other comprehensive income, net of income taxes-retirement benefit plans


56



45


Common stock equity


1,717,064



1,682,144


Cumulative preferred stock — not subject to mandatory redemption


34,293



34,293


Long-term debt, net


1,206,546



1,206,546


Total capitalization


2,957,903



2,922,983


Current liabilities





Short-term borrowings from non-affiliates


94,995




Accounts payable


124,779



163,934


Interest and preferred dividends payable


25,078



22,316


Taxes accrued


193,575



250,402


Regulatory liabilities


347



632


Other


75,450



65,146


Total current liabilities


514,224



502,430


Deferred credits and other liabilities





Deferred income taxes


625,422



602,872


Regulatory liabilities


361,904



344,217


Unamortized tax credits


83,648



79,492


Defined benefit pension and other postretirement benefit plans liability


570,028



595,395


Other


75,196



76,636


Total deferred credits and other liabilities


1,716,198



1,698,612


Contributions in aid of construction


495,667



466,432


Total capitalization and liabilities


$

5,683,992



$

5,590,457



This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric's Annual Report on SEC Form 10-K for the year ended December 31, 2014 and the consolidated financial statements and the notes thereto in Hawaiian Electric's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K.

 


American Savings Bank, F.S.B.

STATEMENTS OF INCOME DATA

(Unaudited)




Three months ended


Nine months ended September 30

(in thousands)


September 30, 2015


June 30,
2015


September 30, 2014


2015


2014

Interest and dividend income











Interest and fees on loans


$

46,413



$

46,035



$

45,532



$

137,646



$

133,065


Interest and dividends on investment securities


4,213



3,306



2,773



10,570



8,758


Total interest and dividend income


50,626



49,341



48,305



148,216



141,823


Interest expense











Interest on deposit liabilities


1,355



1,266



1,312



3,881



3,774


Interest on other borrowings


1,515



1,487



1,438



4,468



4,263


Total interest expense


2,870



2,753



2,750



8,349



8,037


Net interest income


47,756



46,588



45,555



139,867



133,786


Provision for loan losses


2,997



1,825



1,550



5,436



3,566


Net interest income after provision for loan losses


44,759



44,763



44,005



134,431



130,220


Noninterest income











Fees from other financial services


5,639



5,550



5,642



16,544



15,987


Fee income on deposit liabilities


5,883



5,424



5,109



16,622



14,175


Fee income on other financial products


2,096



2,103



1,971



6,088



6,325


Bank-owned life insurance


1,021



1,058



1,000



3,062



2,945


Mortgage banking income


1,437



2,068



875



5,327



1,749


Gains on sale of investment securities










2,847


Other income, net


2,389



239



634



3,363



1,920


Total noninterest income


18,465



16,442



15,231



51,006



45,948


Noninterest expense











Compensation and employee benefits


22,728



22,319



19,892



66,813



60,050


Occupancy


4,128



4,009



4,517



12,250



12,959


Data processing


3,032



2,953



2,684



9,101



8,715


Services


2,556



2,833



2,580



7,730



7,708


Equipment


1,608



1,690



1,672



4,999



4,926


Office supplies, printing and postage


1,511



1,303



1,415



4,297



4,487


Marketing


934



844



948



2,619



2,690


FDIC insurance


809



773



840



2,393



2,441


Other expense


5,116



4,755



4,182



14,076



11,198


Total noninterest expense


42,422



41,479



38,730



124,278



115,174


Income before income taxes


20,802



19,726



20,506



61,159



60,994


Income taxes


7,351



6,875



7,253



21,382



21,806


Net income


$

13,451



$

12,851



$

13,253



$

39,777



$

39,188


Comprehensive income


$

17,678



$

9,544



$

11,804



$

44,540



$

41,521


OTHER BANK INFORMATION (annualized %, except as of period end)









Return on average assets


0.92



0.89



0.98



0.92



0.97


Return on average equity


9.73



9.38



9.88



9.69



9.83


Return on average tangible common equity


11.43



11.04



11.67



11.40



11.63


Net interest margin


3.53



3.52



3.62



3.52



3.60


Net charge-offs to average loans outstanding


0.10



0.11



0.04



0.08



0.01


As of period end











Nonperforming assets to loans outstanding and real estate owned *


1.00



0.70



0.88






Allowance for loan losses to loans outstanding


1.06



1.04



1.00






Tangible common equity to tangible assets


8.23



8.16



8.48






Tier-1 leverage ratio *


8.8



8.8



9.1






Total capital ratio *


13.4



13.5



12.6






Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)


$

7.5



$

7.5



$

8.8







* Regulatory basis. Capital ratios as of September 30, 2015 and June 30, 2015 calculated under Basel III rules, which became effective January 1, 2015.


Prior period financial statements reflect the retrospective application of ASU No. 2014-01, "Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects," which was adopted as of January 1, 2015 and did not have a material impact on ASB's financial condition or results of operations.


This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

 


American Savings Bank, F.S.B.

BALANCE SHEETS DATA

(Unaudited)


(in thousands)

September 30, 2015

December 31, 2014






Assets





Cash and due from banks


$

103,934



$

107,233


Interest-bearing deposits


73,041



54,230


Available-for-sale investment securities, at fair value


785,837



550,394


Stock in Federal Home Loan Bank, at cost


10,678



69,302


Loans receivable held for investment


4,535,404



4,434,651


Allowance for loan losses


(48,274)



(45,618)


Net loans


4,487,130



4,389,033


Loans held for sale, at lower of cost or fair value


5,598



8,424


Other


307,089



305,416


Goodwill


82,190



82,190


Total assets


$

5,855,497



$

5,566,222


Liabilities and shareholder's equity





Deposit liabilities–noninterest-bearing


$

1,422,843



$

1,342,794


Deposit liabilities–interest-bearing


3,403,111



3,280,621


Other borrowings


368,593



290,656


Other


103,553



118,363


Total liabilities


5,298,100



5,032,434


Common stock


1



1


Additional paid in capital


339,980



338,411


Retained earnings


229,211



211,934


Accumulated other comprehensive loss, net of tax benefits





     Net unrealized gains on securities

$

4,070


$

462


     Retirement benefit plans

(15,865)

(11,795)


(17,020)

(16,558)


Total shareholder's equity


557,397



533,788


Total liabilities and shareholder's equity


$

5,855,497



$

5,566,222



Prior period financial statements reflect the retrospective application of ASU No. 2014-01, "Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects," which was adopted as of January 1, 2015 and did not have a material impact on ASB's financial condition or results of operations.


This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K.

EXPLANATION OF HEI'S USE OF CERTAIN UNAUDITED NON-GAAP MEASURES

HEI and Hawaiian Electric Company management use certain non-GAAP measures to evaluate the performance of the utility and HEI.  Management believes these non-GAAP measures provide useful information and are a better indicator of the companies' core operating activities.  Core earnings and other financial measures as presented here may not be comparable to similarly titled measures used by other companies.  The accompanying tables provide a reconciliation of reported GAAP1 earnings to non-GAAP core earnings and the adjusted return on average common equity (ROACE) for the utility and HEI consolidated.

The reconciling adjustment from GAAP earnings to core earnings is limited to the costs related to the pending merger between HEI and NextEra Energy, Inc. and the spin-off of ASB Hawaii, Inc.  For more information on the pending merger, see HEI's definitive proxy statement on Form DEFM14A filed on March 26, 2015.  Management does not consider these items to be representative of the company's fundamental core earnings.

The accompanying table also provides the calculation of utility GAAP O&M adjusted for costs related to the pending merger discussed above. "O&M-related net income neutral items" which are O&M expenses covered by specific surcharges or by third parties have also been excluded.  These "O&M-related net income neutral items" are grossed-up in revenue and expense and do not impact net income.

RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES


Hawaiian Electric Industries, Inc. and Subsidiaries

Unaudited






($ in millions, except per share amounts)







Three months ended September 30


Nine months ended

September 30


2015

2014


2015

2014







HEI CONSOLIDATED NET INCOME






GAAP (as reported)

$

50.7


$

47.8



$

117.6


$

134.9


Excluding special items (after-tax):






Costs related to pending merger with NextEra Energy, Inc. and spin-off of ASB Hawaii, Inc

1.7


0.4



13.6


0.6


Non-GAAP (core)

$

52.4


$

48.3



$

131.1


$

135.4







HEI CONSOLIDATED DILUTED EARNINGS PER SHARE





GAAP (as reported)

$

0.47


$

0.46



$

1.11


$

1.32


Excluding special items (after-tax):






Costs related to pending merger with NextEra Energy, Inc. and spin-off of ASB Hawaii, Inc

0.02




0.13


0.01


Non-GAAP (core)

$

0.49


$

0.47



$

1.23


$

1.32


HEI CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average)




Twelve months ended September 30





2015

2014

Based on GAAP




8.1

%

10.1

%

Based on non-GAAP (core)2




9.1

%

10.1

%







Note:  Columns may not foot due to rounding


1 Accounting principles generally accepted in the United States of America


2 Calculated as core net income divided by average GAAP common equity

 

RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES


Hawaiian Electric Company, Inc. and Subsidiaries

Unaudited






($ in millions)







Three months ended September 30


Nine months ended

September 30


2015

2014


2015

2014







HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME






GAAP (as reported)

$

43.0


$

38.9



$

102.7


$

108.5


Excluding special items (after-tax):






Costs related to pending merger with NextEra Energy, Inc.




0.3



Non-GAAP (core)

$

43.0


$

38.9



$

103.0


$

108.5








HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY




Twelve months ended September 30

(ROACE) (simple average)




2015

2014

Based on GAAP




7.86

%

8.96

%

Based on non-GAAP (core)2




7.88

%

8.96

%







HAWAIIAN ELECTRIC CONSOLIDATED OTHER OPERATION

Three months ended September 30


Nine months ended

September 30

AND MAINTENANCE (O&M) EXPENSE

2015

2014


2015

2014

GAAP (as reported)

$

103.7


$

108.3



$

306.5


$

295.5


Excluding O&M-related net income neutral items3

1.9


2.5



5.4


7.5


Excluding costs related to pending merger with  NextEra Energy, Inc.




0.4



Non-GAAP (Adjusted other O&M expense)

$

101.8


$

105.8



$

300.7


$

288.0






Note:  Columns may not foot due to rounding





1  Accounting principles generally accepted in the United States of America







2  Calculated as core net income divided by average GAAP common equity







3  Expenses covered by surcharges or by third parties recorded in revenues

 

Contact:

Clifford H. Chen

Telephone: (808) 543-7300


Manager, Investor Relations & Strategic Planning

E-mail: ir@hei.com

Logo - http://photos.prnewswire.com/prnh/20110411/LA80136LOGO

 

SOURCE Hawaiian Electric Industries, Inc.



RELATED LINKS

http://www.hei.com