Hawaiian Electric Industries Capital Trust I 10-Q 2003 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

Commission File Number: 1-8503-01

HAWAIIAN ELECTRIC INDUSTRIES

CAPITAL TRUST I

(Exact Name of Registrant as Specified in Its Certificate of Trust)

Delaware	52-6829385
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

c/o The Bank of New York, 101 Barclay Street, 8th Floor West, New York, N.Y. 10286 (212) 815-5845

Attention: Corporate Trust Trustee Administration

(Address, including zip code, and telephone number, including area code, of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
8.36% Trust Originated Preferred Securities (TOPrS) (and the related guarantee of Hawaiian Electric Industries, Inc.)	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes  ¨  No  x

As of March 31, 2002, no common securities of the Registrant were held by nonaffiliates of the Registrant.

Hawaiian Electric Industries Capital Trust I

Form 10-Q—Quarter ended March 31, 2003

INDEX

		Page No.
	PART I – FINANCIAL INFORMATION
Item 1.	Financial statements Balance sheets (unaudited) – March 31, 2003 and December 31, 2002	1
	Statements of earnings (unaudited) – for the three months ended March 31, 2003 and 2002	1
	Statements of changes in stockholders’ equity (unaudited) – for the three months ended March 31, 2003 and 2002	2
	Statements of cash flows (unaudited) – for the three months ended March 31, 2003 and 2002	2
	Notes to financial statements (unaudited)	3
Item 2.	Management’s discussion and analysis of financial condition and results of operations	3
Item 3.	Quantitative and qualitative disclosures about market risk	4
Item 4.	Controls and procedures	4
	PART II – OTHER INFORMATION
Item 1.	Legal proceedings	5
Item 6.	Exhibits and reports on Form 8-K	5
Signatures		5
Certifications		6

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PART I – FINANCIAL INFORMATION

Item 1. Financial statements

Hawaiian Electric Industries Capital Trust I

Balance sheets (unaudited)

(in thousands)	March 31, 2003		December 31, 2002
Assets
Investment in partnership preferred securities	$	103,093	$	103,093
Stockholders’ equity
Preferred securities (8.36% Trust Originated Preferred Securities; 4,000,000 authorized, issued and outstanding; $25 liquidation amount per security)	$	100,000	$	100,000
Common securities (8.36% Trust Common Securities; 123,720 authorized, issued and outstanding; $25 liquidation amount per security)		3,093		3,093
	$	103,093	$	103,093

Hawaiian Electric Industries Capital Trust I

Statements of earnings (unaudited)

	Three months ended March 31,
(in thousands)	2003			2002
Earnings-equity in earnings of HEI Preferred Funding, LP	$	2,155		$	2,155
Distribution on preferred securities		(2,090	)		(2,090	)
Earnings available for common securities	$	65		$	65

Note: Hawaiian Electric Industries, Inc. owns all of Hawaiian Electric Industries Capital Trust I’s common securities. Therefore, per share data is not meaningful.

See accompanying notes to financial statements.

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Hawaiian Electric Industries Capital Trust I

Statements of changes in stockholders’ equity (unaudited)

	Three months ended March 31,
(in thousands)	2003			2002
Preferred securities, beginning and end of period	$	100,000		$	100,000
Common securities, beginning and end of period		3,093			3,093
Retained earnings, beginning of period		—			—
Earnings available for common securities		65			65
Distribution on common securities		(65	)		(65	)
Balance, end of period		—			—
Total stockholders’ equity	$	103,093		$	103,093

Hawaiian Electric Industries Capital Trust I

Statements of cash flows (unaudited)

	Three months ended March 31,
(in thousands)	2003			2002
Cash flows from operating activities
Earnings before distribution on preferred securities	$	2,155		$	2,155
Equity in earnings of HEI Preferred Funding, LP		(2,155	)		(2,155	)
Distribution from HEI Preferred Funding, LP		2,155			2,155
Net cash provided by operating activities		2,155			2,155
Cash flows from financing activities
Distribution on common securities		(65	)		(65	)
Distribution on preferred securities		(2,090	)		(2,090	)
Net cash used in financing activities		(2,155	)		(2,155	)
Net change in cash		—			—
Cash, beginning of period		—			—
Cash, end of period	$	—		$	—

See accompanying notes to financial statements.

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Hawaiian Electric Industries Capital Trust I

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

(1) Basis of presentation

The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Securities and Exchange Commission (SEC) Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited financial statements should be read in conjunction with the financial statements and notes thereto in the Annual Report of Hawaiian Electric Industries Capital Trust I (the Trust) on SEC Form 10-K for the year ended December 31, 2002.

In the opinion of the management of the Trust, the accompanying unaudited financial statements contain all material adjustments required by GAAP to present fairly the Trust’s financial position as of March 31, 2003 and December 31, 2002, and the results of its operations and its cash flows for the three months ended March 31, 2003 and 2002. All such adjustments are of a normal recurring nature unless otherwise disclosed in this Form 10-Q or other referenced material.

Item 2. Management’s discussion and analysis of financial condition and results of operations

The Trust is a statutory business trust formed under the Delaware Business Trust Act, as amended, pursuant to a trust agreement and a certificate of trust filed with the Secretary of State of Delaware on December 19, 1996. The Trust Agreement was subsequently amended by an amended and restated trust agreement dated as of February 1, 1997. The Trust exists for the exclusive purposes of (i) issuing trust securities (the Trust Securities), consisting of 8.36% Trust Originated Preferred Securities (the Trust Preferred Securities) and trust common securities (the Trust Common Securities), representing undivided beneficial ownership interests in the assets of the Trust, (ii) investing the gross proceeds of the Trust Securities in 8.36% Partnership Preferred Securities (the Partnership Preferred Securities) issued by HEI Preferred Funding, LP (the Partnership), and (iii) engaging in only those other activities necessary or incidental thereto. The Trust has no employees.

The Registrant’s activities are limited to issuing securities and investing the proceeds as described above. Since the Trust was organized on December 19, 1996, its activities, as specified in its declaration of trust, have been limited to the issuance of the Trust Preferred Securities and the Trust Common Securities, the investing of the proceeds in the Partnership Preferred Securities, the receipt of distributions on the Partnership Preferred Securities and the payment of distributions on the Trust Preferred Securities and the Trust Common Securities in accordance with their terms. All of the foregoing activities of the Trust occurred in or after February 1997.

All expenses of organizing the Trust, carrying out the issuance of its securities, and conducting its limited activities have been borne by Hawaiian Electric Industries, Inc. (the Company), either directly or through Hycap Management, Inc. (Hycap), its wholly owned subsidiary.

The Partnership is a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act, as amended, pursuant to an agreement of limited partnership and the filing of a certificate of limited partnership with the Secretary of State of Delaware on December 23, 1996, which was subsequently amended by an amended and restated agreement of limited partnership dated as of February 1, 1997. Hycap is the sole general partner of the Partnership. The Partnership is managed by the general partner and exists for the exclusive purposes of (a) purchasing certain eligible debt instruments of the Company and the wholly owned subsidiaries of the Company (collectively, the Affiliate Investment Instruments) and certain U.S. government obligations and commercial paper of unaffiliated entities (Eligible Debt Securities) with the proceeds from (i) the sale of its Partnership Preferred Securities, representing limited partner interests in the Partnership, to the Trust and (ii) a capital contribution in exchange for the general partner interest in the Partnership, (b) receiving interest and other payments on the

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Affiliate Investment Instruments and Eligible Debt Securities held by the Partnership from time to time, (c) making distributions on the Partnership Preferred Securities and distributions on the general partner interest in the Partnership if, as, and when declared by the general partner in its sole discretion, (d) subject to the restrictions and conditions contained in the agreement of limited partnership, making additional investments in Affiliate Investment Instruments and Eligible Debt Securities and disposing of any such investments, and (e) except as otherwise limited in the agreement of limited partnership, entering into, making and performing all contracts and other undertakings, and engaging in those activities and transactions as the general partner deems necessary or advisable for carrying out the purposes of the Partnership. Since the Partnership was organized on December 23, 1996, its activities, as specified in its agreement of limited partnership, have been limited to the issuance of the Partnership Preferred Securities, the receipt of a capital contribution from Hycap, as general partner, the investment of the proceeds from the sale of the Partnership Preferred Securities and the general partner interest in the Affiliate Investment Instruments and Eligible Debt Securities, receiving interest and other payments on the Affiliate Investment Instruments and Eligible Debt Securities and the payment of distributions on the Partnership Preferred Securities and general partner interest.

For information about the Company (Commission File Number 1-8503), refer to the Company’s periodic reports filed from time to time under the Securities and Exchange Act of 1934.

Item 3. Quantitative and qualitative disclosures about market risk

In February 1997, the Trust invested the gross proceeds from the sale of the Trust Preferred Securities and the Trust Common Securities in the Partnership Preferred Securities. This investment is accounted for under the equity method. The Partnership, in turn, invested the proceeds from the sale of the Partnership Preferred Securities and a capital contribution from Hycap in the Affiliate Investment Instruments and Eligible Debt Securities. To the extent the Partnership has funds available from the Affiliate Investment Instruments and Eligible Debt Securities, the general partner of the Partnership may declare and pay distributions on the Partnership Preferred Securities to the Trust, which is the sole holder of the Partnership Preferred Securities. The Trust’s ability to pay distributions to the holders of the Trust Preferred Securities is dependent on its receipt of distributions on the Partnership Preferred Securities from the Partnership. The Partnership distributions are in turn dependent on the receipt of payments from the Affiliate Investment Instruments and Eligible Debt Securities. The principal risk to the Trust is thus the credit risk associated with the Affiliate Investment Instruments.

Item 4. Controls and procedures

Regular Trustees Robert F. Clarke and Eric K. Yeaman function as the equivalent of Chief Executive Officer and Chief Financial Officer of the Trust, respectively. Based on their evaluations, as of May 8, 2003, they have concluded that the disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934) are effective. There have been no significant changes in the Trust’s internal controls or in other factors that could significantly affect these controls subsequent to May 8, 2003, including any corrective actions with regard to significant deficiencies and material weaknesses.

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PART II – OTHER INFORMATION

Item 1. Legal proceedings

The Registrant knows of no material legal proceedings involving the Trust or its assets.

Item 6. Exhibits and reports on Form 8-K

(a) Exhibits

Exhibit 12	Computation of ratio of earnings to combined fixed charges and preferred securities distributions for the three months ended March 31, 2003 and 2002
Exhibit 99.1	Written Statement Pursuant to 18 U.S.C. Section 1350, as Adopted by Section 906 of the Sarbanes-Oxley Act of 2002 of Robert F. Clarke (Regular Trustee)
Exhibit 99.2	Written Statement Pursuant to 18 U.S.C. Section 1350, as Adopted by Section 906 of the Sarbanes-Oxley Act of 2002 of Eric K. Yeaman (Regular Trustee)

(b) Reports on Form 8-K

None

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on the 9th day of May, 2003.

HAWAIIAN ELECTRIC INDUSTRIES CAPITAL TRUST I *
By:	/s/    ROBERT F. CLARKE
Name:	Robert F. Clarke
Title:	Regular Trustee
By:	/s/    ERIC K. YEAMAN
Name:	Eric K. Yeaman
Title:	Regular Trustee

* There is no principal executive officer, principal financial officer, controller, principal accounting officer or board of directors of the Registrant. The Trustees of the Registrant (which include the Regular Trustees, the Property Trustee and the Delaware Trustee) together exercise all powers and perform all functions with respect to the Registrant.

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Certification Pursuant to Section 13a-14 of the Securities Exchange Act of 1934 of Robert F. Clarke (Regular Trustee)

I, Robert F. Clarke, a Regular Trustee of Hawaiian Electric Industries Capital Trust I (registrant) certify that:

1. I have reviewed this quarterly report on Form 10-Q of the registrant;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 9, 2003

/s/    ROBERT F. CLARKE        

Robert F. Clarke*

Regular Trustee

* Robert F. Clarke functions as the equivalent of the Chief Executive Officer of the Trust for the purposes of Section 302 of the Sarbanes-Oxley Act of 2002.

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Certification Pursuant to Section 13a-14 of the Securities Exchange Act of 1934 of Eric K. Yeaman (Regular Trustee)

I, Eric K. Yeaman, a Regular Trustee of Hawaiian Electric Industries Capital Trust I (registrant), certify that:

1. I have reviewed this quarterly report on Form 10-Q of the registrant;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 9, 2003

/s/    ERIC K. YEAMAN        

Eric K. Yeaman*

Regular Trustee

* Eric K. Yeaman functions as the equivalent of the Chief Financial Officer of the Trust for purposes of Section 302 of the Sarbanes-Oxley Act of 2002.

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