Hawaiian Electric Industries Reports Third Quarter 2016 Earnings

GAAP Diluted Earnings Per Share (EPS) of $1.17;

Includes Merger-Related Net Income of $0.59

Merger Termination Payment Will Help Support Utility Investments

Core EPS[1] of $0.58

News provided by

Hawaiian Electric Industries, Inc.

Nov 04, 2016, 04:15 ET

HONOLULU, Nov. 4, 2016 /PRNewswire/ -- Hawaiian Electric Industries, Inc.(NYSE - HE) (HEI) today reported consolidated net income for common stock for the third quarter of 2016 of $127.1 million and diluted earnings per share (EPS) of $1.17 compared to $50.7 million and EPS of $0.47 for the third quarter of 2015.  Financial results for the third quarter of 2016 include the one-time increase to net income of $63.8 million related to the recently terminated merger with NextEra Energy, Inc. and related spin-off of ASB Hawaii, Inc., as compared to $1.7 million net expense in the third quarter of 2015.  Excluding these items, core earnings1 for the third quarter of 2016 were $63.3 million and core EPS1 of $0.58 compared to $52.4 million and $0.49 respectively for the third quarter of 2015.

"The NextEra Energy termination payment will support HEI's investments in our community and projects our utility is undertaking to reliably integrate more renewable energy for its customers.  Through the first nine months of this year, Hawaiian Electric invested $230 million in local infrastructure projects to modernize the electric grid and to reliably integrate more renewable energy, moving us closer to our renewable energy goals.  And in October, Hawaiian Electric marked its 125th year of serving the people of Hawaii.  At American Savings Bank, we continued to deliver solid earnings growth and strong year-to-date annualized deposit growth of 9.4%," said Constance H. Lau, HEI president and chief executive officer.

________________________

1

Non-GAAP measure which excludes fees, reimbursements and other related costs to the recently terminated merger between HEI and NextEra Energy, Inc. and the terminated spin-off of ASB Hawaii, Inc. and costs related to the recently terminated LNG contract which required PUC approval of the merger with NextEra Energy, Inc.  See the "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation.

HAWAIIAN ELECTRIC COMPANY EARNINGS

Hawaiian Electric Company's2 net income for the third quarter of 2016 was $47.0 million compared to $43.0 million in the third quarter of 2015.  The increase was largely due to the non-recurrence of one-time items recorded in 2015.

O&M expenses were $5 million (after-tax) lower compared to the prior year quarter as the third quarter of 2015 was impacted by one-time items including the $3 million after-tax adjustment for enterprise resource planning software costs.  In addition, third quarter 2016 O&M costs were $2 million (after-tax) lower due to fewer overhauls performed. 

Lower O&M expenses were partially offset by $1 million higher depreciation expense as a result of increased investments for improved customer reliability and greater system efficiency, and the integration of more renewable energy.

Net revenues were relatively flat as $2 million (after-tax) higher recovery of costs for clean energy and reliability investments were offset by $2 million (after-tax) lower fuel efficiency.

AMERICAN SAVINGS BANK EARNINGS

American Savings Bank's (American) net income for the third quarter of 2016 was $15.1 million compared to $13.3 million in the second (or linked) quarter of 2016 and $13.5 million in the third quarter of 2015.  Third quarter 2016 net income was $1.8 million higher than the linked quarter primarily driven by $2 million (after-tax) higher revenues due to higher noninterest income and net interest income, partially offset by higher provision for loan losses.

Compared to the third quarter of 2015, net income improved by $1.7 million primarily driven by $2 million (after-tax) higher net interest income due to growth in the commercial real estate and consumer loan portfolios.  Higher net interest income was partially offset by higher provision for loan losses.

_________________________

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.


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.

Total loans were $4.7 billion at September 30, 2016, essentially flat compared to the linked quarter and increased $118 million year-to-date 2016.  Year-to-date annualized loan growth was 3.4%, on track for American's target of mid-single digit loan growth for the full year. 

Total deposits were $5.4 billion at September 30, 2016, an increase of $149 million and $355 million in the third quarter and year-to-date 2016, respectively.  Year-to-date annualized deposit growth of 9.4% was primarily driven by the $190 million (5.6% year-to-date annualized) increase in low-cost core deposits.   Average cost of funds remained low at 0.24% for the third quarter of 2016, 1 basis point higher than the linked quarter and 2 basis points higher than the prior year quarter.

Overall, American achieved solid profitability in the third quarter of 2016 with a return on average equity of 10.4% and a return on average assets of 0.97%.

For additional information, refer to the American news release issued on October 28, 2016.

HOLDING AND OTHER COMPANIES

The holding and other companies' net income (loss) were $65.1 million net income in the third quarter of 2016 compared to ($5.8) million net loss in the third quarter of 2015.  Excluding one-time merger-related items of $63.8 million net income in the third quarter of 2016 and $1.7 million net expenses in the third quarter of 2015, the holding and other companies' net income (loss) in the third quarter of 2016 and 2015 were $1.2 million net income and ($4.1) million net loss, respectively.  The holding company's third quarter 2016 results included favorable tax adjustments as HEI moved out of a federal net operating loss position, enabling the recognition of tax benefits.

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 2016 earnings on Friday, November 4, 2016, at 11:00 a.m. Hawaii time (5:00 p.m. Eastern time). 

Interested parties within the United States may listen to the conference by calling (888) 317-6016.  International parties may listen to the conference by calling (412) 317-6016 or by accessing the webcast on HEI's website at www.hei.com 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 online replay of the webcast will be available at the same website beginning about two hours after the event.  Replays of the conference call will also be available approximately two hours after the event through November 18, 2016, by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10094997.

HEI supplies power to approximately 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 12 and 13 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 "will," "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, 2015, HEI's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 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)

2016

2015

2016

2015

Revenues







Electric utility

$

572,253

$

648,127

$

1,549,700

$

1,779,732

Bank

73,708

69,091

213,297

199,222

Other

94

(42)

262

(4)

Total revenues

646,055

717,176

1,763,259

1,978,950

Expenses







Electric utility

482,441

565,470

1,333,876

1,573,278

Bank

50,981

48,289

150,752

138,063

Other

7,191

6,322

18,883

28,278

Total expenses

540,613

620,081

1,503,511

1,739,619

Operating income (loss)







Electric utility

89,812

82,657

215,824

206,454

Bank

22,727

20,802

62,545

61,159

Other

(7,097)

(6,364)

(18,621)

(28,282)

Total operating income

105,442

97,095

259,748

239,331

Merger termination fee

90,000

—

90,000

—

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

(19,365)

(19,229)

(56,792)

(57,235)

Allowance for borrowed funds used during construction

854

737

2,276

1,918

Allowance for equity funds used during construction

2,274

2,057

6,010

5,366

Income before income taxes

179,205

80,660

301,242

189,380

Income taxes

51,592

29,516

96,203

70,406

Net income

127,613

51,144

205,039

118,974

Preferred stock dividends of subsidiaries

471

471

1,417

1,417

Net income for common stock

$

127,142

$

50,673

$

203,622

$

117,557

Basic earnings per common share

$

1.17

$

0.47

$

1.89

$

1.11

Diluted earnings per common share

$

1.17

$

0.47

$

1.88

$

1.11

Dividends per common share

$

0.31

$

0.31

$

0.93

$

0.93

Weighted-average number of common shares outstanding

108,268

107,457

107,951

106,067

Adjusted weighted-average shares

108,472

107,738

108,171

106,347

Net income (loss) for common stock by segment







Electric utility

$

46,974

$

43,006

$

108,198

$

102,721

Bank

15,104

13,451

41,062

39,777

Other

65,064

(5,784)

54,362

(24,941)

Net income for common stock

$

127,142

$

50,673

$

203,622

$

117,557

Comprehensive income attributable to Hawaiian Electric Industries, Inc.

$

125,473

$

55,103

$

212,861

$

122,918

Return on average common equity (twelve months ended)1




12.3

%

8.1

%


This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC. 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, 2016 and 2015 returns on average common equity (twelve months ended September 30) were 9.5% and 9.1%.  See reconciliation of GAAP to non-GAAP measures.

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)

(dollars in thousands)

September 30, 2016

December 31, 2015

Assets



Cash and cash equivalents

$

284,355

$

300,478

Accounts receivable and unbilled revenues, net

250,076

242,766

Available-for-sale investment securities, at fair value

996,984

820,648

Stock in Federal Home Loan Bank, at cost

11,218

10,678

Loans receivable held for investment, net

4,675,901

4,565,781

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

26,743

4,631

Property, plant and equipment, net of accumulated depreciation of $2,416,937 and $2,339,319 at the respective dates

4,532,556

4,377,658

Regulatory assets

879,775

896,731

Other

459,187

480,457

Goodwill

82,190

82,190

Total assets

$

12,198,985

$

11,782,018

Liabilities and shareholders' equity



Liabilities



Accounts payable

$

134,176

$

138,523

Interest and dividends payable

27,115

26,042

Deposit liabilities

5,380,721

5,025,254

Short-term borrowings—other than bank

—

103,063

Other bank borrowings

265,388

328,582

Long-term debt, net—other than bank

1,579,065

1,578,368

Deferred income taxes

721,470

680,877

Regulatory liabilities

400,479

371,543

Contributions in aid of construction

525,491

506,087

Defined benefit pension and other postretirement benefit plans liability

572,933

589,918

Other

489,466

471,828

Total liabilities

10,096,304

9,820,085

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: 108,503,210 shares and 107,460,406 shares at the respective dates

1,657,421

1,629,136

Retained earnings

427,990

324,766

Accumulated other comprehensive loss, net of tax benefits

(17,023)

(26,262)

Total shareholders' equity

2,068,388

1,927,640

Total liabilities and shareholders' equity

$

12,198,985

$

11,782,018

The Consolidated Balance Sheet as of December 31, 2015 reflects the retrospective application of ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs," which was adopted in first quarter 2016.

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

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)

2016

2015

2016

2015

Revenues

$

572,253

$

648,127

$

1,549,700

$

1,779,732

Expenses







Fuel oil

128,624

195,633

334,263

518,670

Purchased power

157,750

160,518

412,667

445,809

Other operation and maintenance

94,789

103,653

298,260

306,519

Depreciation

46,759

44,356

140,300

132,840

Taxes, other than income taxes

54,519

61,310

148,386

169,440

Total expenses

482,441

565,470

1,333,876

1,573,278

Operating income

89,812

82,657

215,824

206,454

Allowance for equity funds used during construction

2,274

2,057

6,010

5,366

Interest expense and other charges, net

(17,323)

(16,557)

(49,734)

(49,170)

Allowance for borrowed funds used during construction

854

737

2,276

1,918

Income before income taxes

75,617

68,894

174,376

164,568

Income taxes

28,145

25,390

64,682

60,351

Net income

47,472

43,504

109,694

104,217

Preferred stock dividends of subsidiaries

228

228

686

686

Net income attributable to Hawaiian Electric

47,244

43,276

109,008

103,531

Preferred stock dividends of Hawaiian Electric

270

270

810

810

Net income for common stock

$

46,974

$

43,006

$

108,198

$

102,721

Comprehensive income attributable to Hawaiian Electric

$

47,125

$

43,010

$

108,610

$

102,732

OTHER ELECTRIC UTILITY INFORMATION







Kilowatthour sales (millions)







   Hawaiian Electric

1,800

1,874

4,982

5,016

   Hawaii Electric Light

277

282

795

792

   Maui Electric

295

312

836

848


2,372

2,468

6,613

6,656

Wet-bulb temperature (Oahu average; degrees Fahrenheit)

72.3

74.9

69.8

70.2

Cooling degree days (Oahu)

1,496

1,711

3,637

3,687

Average fuel oil cost per barrel

$

57.72

$

81.35

$

52.06

$

79.13













Twelve months ended

 September 30






2016

2015

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







   Hawaiian Electric




7.94

7.95

   Hawaii Electric Light




8.46

6.30

   Maui Electric




8.45

9.21

   Hawaiian Electric Consolidated1




8.11

7.86



This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC. 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, 2016 and 2015 returns on average common equity (twelve months ended September 30) were 8.2% and 7.9%.  See reconciliation of GAAP to non-GAAP measures.

Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)

(dollars in thousands, except par value)

September 30,
2016

December 31,
2015

Assets



Property, plant and equipment



Utility property, plant and equipment



Land

$

53,175

$

52,792

Plant and equipment

6,483,562

6,315,698

Less accumulated depreciation

(2,343,601)

(2,266,004)

Construction in progress

236,608

175,309

Utility property, plant and equipment, net

4,429,744

4,277,795

Nonutility property, plant and equipment, less accumulated depreciation of $1,231 and $1,229 at respective dates

7,374

7,272

Total property, plant and equipment, net

4,437,118

4,285,067

Current assets



Cash and cash equivalents

22,977

24,449

Customer accounts receivable, net

134,418

132,778

Accrued unbilled revenues, net

95,167

84,509

Other accounts receivable, net

4,629

10,408

Fuel oil stock, at average cost

64,480

71,216

Materials and supplies, at average cost

57,356

54,429

Prepayments and other

35,645

36,640

Regulatory assets

74,681

72,231

Total current assets

489,353

486,660

Other long-term assets



Regulatory assets

805,094

824,500

Unamortized debt expense

267

497

Other

68,994

75,486

Total other long-term assets

874,355

900,483

Total assets

$

5,800,826

$

5,672,210

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

578,921

578,930

Retained earnings

1,081,081

1,043,082

Accumulated other comprehensive income, net of income taxes

1,337

925

Common stock equity

1,766,727

1,728,325

Cumulative preferred stock — not subject to mandatory redemption

34,293

34,293

Long-term debt, net

1,279,327

1,278,702

Total capitalization

3,080,347

3,041,320

Current liabilities



Short-term borrowings from affiliates

21,000

—

Accounts payable

107,497

114,846

Interest and preferred dividends payable

25,934

23,111

Taxes accrued

167,276

191,084

Regulatory liabilities

2,987

2,204

Other

56,753

54,079

Total current liabilities

381,447

385,324

Deferred credits and other liabilities



Deferred income taxes

714,559

654,806

Regulatory liabilities

397,492

369,339

Unamortized tax credits

87,794

84,214

Defined benefit pension and other postretirement benefit plans liability

535,912

552,974

Other

77,784

78,146

Total deferred credits and other liabilities

1,813,541

1,739,479

Contributions in aid of construction

525,491

506,087

Total capitalization and liabilities

$

5,800,826

$

5,672,210

The Consolidated Balance Sheet as of December 31, 2015 reflects the retrospective application of ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs," which was adopted in first quarter 2016.

This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC.

American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited)


Three months ended

Nine months ended
September 30

(in thousands)

September 30,
2016

June 30,
2016

September 30,
2015

2016

2015

Interest and dividend income









Interest and fees on loans

$

50,444

$

49,690

$

46,413

$

148,571

$

137,646

Interest and dividends on investment securities

4,759

4,443

4,213

14,219

10,570

Total interest and dividend income

55,203

54,133

50,626

162,790

148,216

Interest expense









Interest on deposit liabilities

1,871

1,691

1,355

5,154

3,881

Interest on other borrowings

1,464

1,467

1,515

4,416

4,468

Total interest expense

3,335

3,158

2,870

9,570

8,349

Net interest income

51,868

50,975

47,756

153,220

139,867

Provision for loan losses

5,747

4,753

2,997

15,266

5,436

Net interest income after provision for loan losses

46,121

46,222

44,759

137,954

134,431

Noninterest income









Fees from other financial services

5,599

5,701

5,639

16,799

16,544

Fee income on deposit liabilities

5,627

5,262

5,883

16,045

16,622

Fee income on other financial products

2,151

2,207

2,096

6,563

6,088

Bank-owned life insurance

1,616

1,006

1,021

3,620

3,062

Mortgage banking income

2,347

1,554

1,437

5,096

5,327

Gains on sale of investment securities, net

—

598

—

598

—

Other income, net

1,165

288

2,389

1,786

3,363

Total noninterest income

18,505

16,616

18,465

50,507

51,006

Noninterest expense









Compensation and employee benefits

22,844

21,919

22,728

67,197

66,813

Occupancy

3,991

4,115

4,128

12,244

12,250

Data processing

3,150

3,277

3,032

9,599

9,101

Services

2,427

2,755

2,556

8,093

7,730

Equipment

1,759

1,771

1,608

5,193

4,999

Office supplies, printing and postage

1,483

1,583

1,511

4,431

4,297

Marketing

747

899

934

2,507

2,619

FDIC insurance

907

913

809

2,704

2,393

Other expense

4,591

5,382

5,116

13,948

14,076

Total noninterest expense

41,899

42,614

42,422

125,916

124,278

Income before income taxes

22,727

20,224

20,802

62,545

61,159

Income taxes

7,623

6,939

7,351

21,483

21,382

Net income

$

15,104

$

13,285

$

13,451

$

41,062

$

39,777

Comprehensive income

$

13,176

$

16,051

$

17,678

$

49,537

$

44,540

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







Return on average assets

0.97

0.86

0.92

0.89

0.92

Return on average equity

10.36

9.22

9.73

9.50

9.69

Return on average tangible common equity

12.06

10.75

11.43

11.07

11.4

Net interest margin

3.57

3.58

3.53

3.59

3.52

Efficiency ratio

59.54

63.05

64.06

61.81

65.11

Net charge-offs to average loans outstanding

0.20

0.15

0.10

0.19

0.08

As of period end









Nonperforming assets to loans outstanding and real estate owned

1.12

1.02

1.00




Allowance for loan losses to loans outstanding

1.24

1.16

1.06




Tangible common equity to tangible assets

8.03

8.15

8.23




Tier-1 leverage ratio

8.6

8.7

8.8




Total capital ratio

13.3

13.2

13.4




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

$

9.0

$

9.0

$

7.5





This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC. 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, 2016

December 31, 2015





Assets



Cash and due from banks

$

109,591

$

127,201

Interest-bearing deposits

103,989

93,680

Available-for-sale investment securities, at fair value

996,984

820,648

Stock in Federal Home Loan Bank, at cost

11,218

10,678

Loans receivable held for investment

4,734,638

4,615,819

Allowance for loan losses

(58,737)

(50,038)

Net loans

4,675,901

4,565,781

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

26,743

4,631

Other

330,054

309,946

Goodwill

82,190

82,190

Total assets

$

6,336,670

$

6,014,755

Liabilities and shareholder's equity



Deposit liabilities–noninterest-bearing

$

1,570,613

$

1,520,374

Deposit liabilities–interest-bearing

3,810,108

3,504,880

Other borrowings

265,388

328,582

Other

106,396

101,029

Total liabilities

5,752,505

5,454,865

Common stock

1

1

Additional paid in capital

342,234

340,496

Retained earnings

250,726

236,664

Accumulated other comprehensive loss, net of tax benefits



     Net unrealized gains (losses) on securities

$

5,965

$

(1,872)

     Retirement benefit plans

(14,761)

(8,796)

(15,399)

(17,271)

Total shareholder's equity

584,165

559,890

Total liabilities and shareholder's equity

$

6,336,670

$

6,014,755

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

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 HEI and the utility.  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 HEI and the utility.

The reconciling adjustments from GAAP earnings to core earnings is limited to the fees, reimbursements costs and associated taxes related to the recently terminated merger between HEI and NextEra Energy, Inc., and the cancelled spin-off of ASB Hawaii, Inc., and the recently terminated liquefied natural gas (LNG) contract which required the Hawaii Public Utilities Commission approval of the merger with NextEra Energy, Inc.  For more information on the transactions, see HEI's Form 8-K filed on July 18, 2016 and HEI's Form 8-K filed on July 19, 2016, respectively.  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 terminated 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 (HEI)




Unaudited

Three months ended
September 30

Nine months ended
September 30

($ in millions, except per share amounts)

2016

2015

2016

2015

HEI CONSOLIDATED (INCOME) EXPENSES RELATED TO THE TERMINATED MERGER WITH NEXTERA ENERGY AND CANCELLED SPIN-OFF OF ASB HAWAII




Pre-tax (income) expenses

$

(88.5)

$

1.8

$

(84.9)

$

15.7

Current income taxes (benefits)

24.7

(0.1)

24.7

(2.1)

After-tax (income) expenses

$

(63.8)

$

1.7

$

(60.3)

$

13.6

HEI CONSOLIDATED LNG CONTRACT COSTS2




Pre-tax expenses

$

—

$

—

$

3.4

$

—

Current income taxes (benefits)

—

—

(1.3)

—

After-tax (income) expenses

$

—

$

—

$

2.1

$

—

HEI CONSOLIDATED NET INCOME




GAAP (as reported)

$

127.1

$

50.7

$

203.6

$

117.6

Excluding special items (after-tax):




(Income) expenses related to the terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii

(63.8)

1.7

(60.3)

13.6

Costs related to the terminated LNG contract2

—

—

2.1

—

Non-GAAP (core) net income

$

63.3

$

52.4

$

145.4

$

131.1

HEI CONSOLIDATED DILUTED EARNINGS PER COMMON SHARE



GAAP (as reported)

$

1.17

$

0.47

$

1.88

$

1.11

Excluding special items (after-tax):




(Income) expenses related to the terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii

(0.59)

0.02

(0.56)

0.13

Costs related to the terminated LNG contract2

—

—

0.02

—

Non-GAAP (core) diluted earnings per common share

$

0.58

$

0.49

$

1.34

$

1.23




Twelve months ended
September 30




2016

2015

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


Based on GAAP


12.3

%

8.1

%

Based on non-GAAP (core)3


9.5

%

9.1

%














Note:  Columns may not foot due to rounding

1

Accounting principles generally accepted in the United States of America

2

The LNG contract was terminated as it was conditioned on the merger with NextEra Energy closing

3 

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

Three months ended
September 30

Nine months ended
September 30

($ in millions)

2016

2015

2016

2015

HAWAIIAN ELECTRIC CONSOLIDATED COSTS RELATED TO THE TERMINATED MERGER WITH NEXTERA ENERGY




Pre-tax expenses

$

—

$

—

$

0.1

$

0.4

Current income taxes (benefits)

—

—

—

(0.2)

After-tax expenses

$

—

$

—

$

0.1

$

0.3

HAWAIIAN ELECTRIC CONSOLIDATED LNG CONTRACT COSTS2



Pre-tax expenses

$

—

$

—

$

3.4

$

—

Current income taxes (benefits)

—

—

(1.3)

—

After-tax expenses

$

—

$

—

$

2.1

$

—

HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME




GAAP (as reported)

$

47.0

$

43.0

$

108.2

$

102.7

Excluding special items (after-tax):




Costs related to the terminated merger with NextEra Energy

—

—

0.1

0.3

Costs related to the terminated LNG contract2

—

—

2.1

—

Non-GAAP (core) net income

$

47.0

$

43.0

$

110.3

$

103.0










Twelve months ended
September 30




2016

2015

HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average)




Based on GAAP


8.11

%

7.86

%

Based on non-GAAP (core)3


8.24

%

7.88

%







Three months ended
September 30

Nine months ended
September 30

($ in millions)

2016

2015

2016

2015

HAWAIIAN ELECTRIC CONSOLIDATED OTHER OPERATION AND MAINTENANCE (O&M) EXPENSE




GAAP (as reported)

$

94.8

$

103.7

$

298.3

$

306.5

Excluding O&M-related net income neutral items4

1.4

1.9

4.6

5.4

Excluding costs related to the terminated merger with NextEra Energy

—

—

0.1

0.4

Excluding costs related to the terminated LNG contract2

—

—

3.4

—

Non-GAAP (Adjusted other O&M expense)

$

93.4

$

101.8

$

290.2

$

300.7






Note:  Columns may not foot due to rounding

1

Accounting principles generally accepted in the United States of America

2

The LNG contract was terminated as it was conditioned on the merger with NextEra Energy closing

3

Calculated as core net income divided by average GAAP common equity

4 

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: [email protected]

SOURCE Hawaiian Electric Industries, Inc.