HEI Exhibit 99
May 6, 2015| Contact: | Clifford H. Chen | |
| Manager, Investor Relations & | Telephone: (808) 543-7300 | |
| Strategic Planning | E-mail: ir@hei.com | |
HAWAIIAN ELECTRIC INDUSTRIES REPORTS FIRST QUARTER 2015 EARNINGS AND 2015 EPS GUIDANCE
Diluted Earnings Per Share (EPS) of $0.31 and Core EPS1 of $0.35
Board Declares Dividend of $0.31 Per Share
HONOLULU - Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock for the first quarter of 2015 of $31.9 million, or $0.31 diluted earnings per share (EPS). Excluding $4.7 million after-tax of merger-related costs associated with the pending merger with NextEra Energy, Inc. and the spin-off of ASB Hawaii, core earnings1 for the first quarter of 2015 were $36.6 million or $0.35 EPS compared to $45.8 million or $0.45 EPS for the same quarter last year.
“First quarter earnings were in line with our expectations. Our utility continues to move ahead with its clean energy transformation and leads the nation with an estimated 12 percent of customers with rooftop solar systems and 21 percent of energy from renewable resources. Working collaboratively and innovatively with industry partners and other interested stakeholders, we can achieve a sustainable clean energy future for Hawaii,” said Constance H. Lau, HEI president and chief executive officer.
“Our bank, American Savings Bank, continued to deliver solid results with excellent deposit growth and a high credit quality loan portfolio in a strong Hawaii economy. American’s solid results enabled it to pay dividends of $7.5 million to HEI in the quarter while maintaining healthy capital levels,” added Lau.
“With regard to our bank spin and utility merger transactions, we made good progress in the quarter. During April, both NextEra Energy and the Hawaiian Electric companies hosted informational open houses across Hawaii to allow our communities the opportunity to ask questions and engage with
NextEra Energy in what we hope is the beginning of a long and beneficial relationship. NextEra Energy
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1 | Non-GAAP measure which excludes merger-related costs after-tax for the first quarter of 2015. See the “Explanation of HEI’s Use of Certain Unaudited Non-GAAP measures” and the related reconciliation. |
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has a proven track record of lowering customer bills, and we cannot imagine a better partner to help us accelerate Hawaii’s clean energy transformation,” said Lau. Federal Energy Regulatory Commission approval was received in March, and shareholders will vote on the merger on May 12. In addition, the bank accomplished an important step towards its planned spin-off by filing its Form 10 with the Securities and Exchange Commission.
HAWAIIAN ELECTRIC COMPANY EARNINGS CONSISTENT WITH EXPECTATIONS
Hawaiian Electric Company’s2 net income for the first quarter of 2015 was $26.9 million. Excluding $0.3 million after-tax of merger-related costs associated with the pending merger with NextEra Energy, Inc., core earnings3 for the first quarter of 2015 were $27.1 million compared to $35.4 million for the same quarter last year. The $8.3 million decline was mainly the result of higher other operations and maintenance (O&M) expense in the first quarter of 2015 compared to the prior year. Further details of the net income drivers are mainly as follows on an after-tax basis:
| • | $9 million higher other operations and maintenance (O&M) expense4 primarily due to: |
| ◦ | $3 million higher transmission, distribution and generation maintenance costs; |
| ◦ | $1 million higher overhaul costs in the first quarter of 2015 compared to the prior year quarter that included no major overhauls; |
| ◦ | $1 million higher bad debt reserves for one customer account; |
| ◦ | $1 million higher consulting costs for our energy transformation plans; |
| ◦ | $1 million accrued costs for damage to combined heat and power generating unit; |
| ◦ | $1 million higher employee benefit costs; and |
| ◦ | $1 million higher other expenses |
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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 | Non-GAAP measure which excludes merger-related costs after-tax for the first quarter of 2015. See the “Explanation of HEI’s Use of Certain Unaudited Non-GAAP measures” and the related reconciliation. |
4 | Excludes net income neutral expenses covered by surcharges or by third parties of $2 million in both the first quarter of 2015 and 2014 and costs related to the pending merger in 2015. 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.
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| • | $2 million higher depreciation expense in 2015 as a result of increasing investments for the integration of more renewable energy, improved customer reliability and greater system efficiency. |
These decreases were partially offset (on an after-tax basis) by $3 million higher net revenues5 compared to the first quarter of 2014 primarily due to the $4 million greater estimated recovery of costs for reliability and clean energy investments less $1 million due to reduced fuel efficiency performance of the generation units on Oahu and Hawaii Island in the first quarter of 2015 stemming from the increased integration of intermittent renewable energy.
AMERICAN SAVINGS BANK CONTINUES TO DELIVER SOLID PERFORMANCE
American Savings Bank’s (American) net income for the first quarter of 2015 was $13.5 million compared to $12.1 million in the fourth (or linked) quarter of 2014 and $14.4 million in the first quarter of 2014. First quarter 2015 net income was $1.4 million higher than the linked quarter primarily driven by the following on an after-tax basis:
| • | $1 million lower provision for loan losses; and |
| • | $1 million higher noninterest income, especially higher mortgage banking income from gains on the sale of newly originated mortgages. |
These were partially offset by $1 million (after-tax) lower net interest income primarily due to interest and fees related to commercial loan payoffs in the fourth quarter of 2014.
Compared to the first quarter of 2014, net income declined by $0.9 million. The decline was primarily driven by the following on an after-tax basis:
| • | $2 million gain in the first quarter of 2014 on the sale of the municipal bond securities portfolio; and |
| • | $2 million higher noninterest expense in the first quarter of 2015 due primarily to higher pension expense from the effect of a lower discount rate and changes in national mortality tables. |
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5 | 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, Inc. and Subsidiaries’ Consolidated Statements of Income. |
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These were largely offset by (on an after-tax basis):
| • | $1 million higher mortgage banking income and fee income on deposits in the first quarter of 2015; and |
| • | $1 million higher net interest income in the first quarter of 2015 driven by the growth in the lending portfolio. |
Overall, American achieved solid profitability in the first quarter of 2015 with a return on average equity of 9.96% and a return on average assets of 0.96%.
For additional information, refer to the American news release issued on April 30, 2015.
HOLDING AND OTHER COMPANIES
The holding and other companies’ net losses were $8.5 million in the first quarter of 2015. Excluding costs related to the pending merger with NextEra Energy, Inc. and the spin-off of ASB Hawaii, the first quarter of 2015 net loss was $4.0 million, consistent with the first quarter of 2014.
2015 EPS GUIDANCE
The company is maintaining its 2015 EPS guidance range of $1.64 to $1.74, excluding any expenses related to the pending merger and spin-off transactions, but is now guiding towards the lower end of the range. This is the result of the early equity forward settlement of 4.7 million shares in March 2015 and the Hawaii Public Utilities Commission (PUC) decision and order which provides clarity on the Schedule B decoupling mechanism issues. For additional information, refer to HEI’s Form 8-K filed on April 16, 2015.
We reaffirm our key assumptions for 2015 EPS guidance disclosed on February 12, 2015, in our yearend earnings call except for the following. The utilities have re-evaluated the timing of their 2015-2017 net capital expenditures, revising their prior 3-year forecast from a range of $1.1 billion to $2.0 billion downward to a range of $0.8 billion to $1.7 billion. 2015 is the transitional year under the revised rate adjustment mechanism (RAM) and our utility will propose a new approval process for projects exceeding the new GDPPI cap under the revised mechanism. Given the change to the RAM, the number of other high priority issues currently before the PUC and our continuing refinement of our transformation plans, we have reduced our forecast for 2015 net capital expenditures from $420 million to $250 million. As a result, the utility will not need the previously estimated $60 million HEI equity
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infusion and is re-evaluating the amount of debt needed in 2015. The 2015 rate base growth is now expected to be between 1.5% to 3.0%.
BOARD DECLARES QUARTERLY DIVIDEND
On May 5, 2015, the board of directors maintained HEI’s quarterly cash dividend of $0.31 cents per share, payable on June 10, 2015, to shareholders of record at the close of business on May 22, 2015 (ex-dividend date is May 20, 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 May 5, 2015 of $31.19, HEI’s yield is 4.0%.
NO WEBCAST AND CONFERENCE CALL
MAY 12, 2015 SPECIAL SHAREHOLDER MEETING
Due to the upcoming special meeting of shareholders to be held on May 12, 2015, there will not be a webcast and conference call to discuss first quarter results and 2015 earnings per share guidance this quarter.
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 and 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
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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 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.
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Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | ||||||||
| Three months ended March 31 | ||||||||
| (in thousands, except per share amounts) | 2015 | 2014 | ||||||
| Revenues | ||||||||
| Electric utility | $ | 573,442 | $ | 720,062 | ||||
| Bank | 64,348 | 63,619 | ||||||
| Other | 72 | 68 | ||||||
| Total revenues | 637,862 | 783,749 | ||||||
| Expenses | ||||||||
| Electric utility | 515,806 | 649,396 | ||||||
| Bank | 43,717 | 41,088 | ||||||
| Other | 8,833 | 4,051 | ||||||
| Total expenses | 568,356 | 694,535 | ||||||
| Operating income (loss) | ||||||||
| Electric utility | 57,636 | 70,666 | ||||||
| Bank | 20,631 | 22,531 | ||||||
| Other | (8,761 | ) | (3,983 | ) | ||||
| Total operating income | 69,506 | 89,214 | ||||||
| Interest expense, net—other than on deposit liabilities and other bank borrowings | (19,100 | ) | (19,456 | ) | ||||
| Allowance for borrowed funds used during construction | 499 | 614 | ||||||
| Allowance for equity funds used during construction | 1,413 | 1,609 | ||||||
| Income before income taxes | 52,318 | 71,981 | ||||||
| Income taxes | 19,979 | 25,721 | ||||||
| Net income | 32,339 | 46,260 | ||||||
| Preferred stock dividends of subsidiaries | 473 | 473 | ||||||
| Net income for common stock | $ | 31,866 | $ | 45,787 | ||||
| Basic earnings per common share | $ | 0.31 | $ | 0.45 | ||||
| Diluted earnings per common share | $ | 0.31 | $ | 0.45 | ||||
| Dividends per common share | $ | 0.31 | $ | 0.31 | ||||
| Weighted-average number of common shares outstanding | 103,281 | 101,382 | ||||||
| Adjusted weighted-average shares | 103,567 | 102,165 | ||||||
| Net income (loss) for common stock by segment | ||||||||
| Electric utility | $ | 26,874 | $ | 35,420 | ||||
| Bank | 13,475 | 14,399 | ||||||
| Other | (8,483 | ) | (4,032 | ) | ||||
| Net income for common stock | $ | 31,866 | $ | 45,787 | ||||
| Comprehensive income attributable to Hawaiian Electric Industries, Inc. | $ | 35,924 | $ | 46,954 | ||||
Return on average common equity (twelve months ended)1 | 8.5 | % | 10.4 | % | ||||
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 Report on SEC Form 10-Q for the quarter ended March 31, 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 March 31) were 9.0% and 10.4%, respectively. See reconciliation of GAAP to non-GAAP measures.
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Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (dollars in thousands) | March 31, 2015 | December 31, 2014 | ||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 292,168 | $ | 175,542 | ||||
| Accounts receivable and unbilled revenues, net | 255,365 | 313,696 | ||||||
| Available-for-sale investment securities, at fair value | 590,648 | 550,394 | ||||||
| Stock in Federal Home Loan Bank of Seattle, at cost | 63,711 | 69,302 | ||||||
| Loans receivable held for investment, net | 4,401,504 | 4,389,033 | ||||||
| Loans held for sale, at lower of cost or fair value | 9,906 | 8,424 | ||||||
| Property, plant and equipment, net of accumulated depreciation of $2,258,065 and $2,250,950 at the respective dates | 4,190,835 | 4,148,774 | ||||||
| Regulatory assets | 905,589 | 905,264 | ||||||
| Other | 481,531 | 542,523 | ||||||
| Goodwill | 82,190 | 82,190 | ||||||
| Total assets | $ | 11,273,447 | $ | 11,185,142 | ||||
| Liabilities and shareholders’ equity | ||||||||
| Liabilities | ||||||||
| Accounts payable | $ | 167,784 | $ | 186,425 | ||||
| Interest and dividends payable | 25,225 | 25,336 | ||||||
| Deposit liabilities | 4,751,328 | 4,623,415 | ||||||
| Short-term borrowings—other than bank | 30,500 | 118,972 | ||||||
| Other bank borrowings | 312,094 | 290,656 | ||||||
| Long-term debt, net—other than bank | 1,506,546 | 1,506,546 | ||||||
| Deferred income taxes | 640,778 | 633,570 | ||||||
| Regulatory liabilities | 351,712 | 344,849 | ||||||
| Contributions in aid of construction | 474,385 | 466,432 | ||||||
| Defined benefit pension and other postretirement benefit plans liability | 624,555 | 632,845 | ||||||
| Other | 456,338 | 531,230 | ||||||
| Total liabilities | 9,341,245 | 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: 107,417,644 shares and 102,565,266 shares at the respective dates | 1,624,549 | 1,521,297 | ||||||
| Retained earnings | 296,680 | 296,654 | ||||||
| Accumulated other comprehensive loss, net of tax benefits | (23,320 | ) | (27,378 | ) | ||||
| Total shareholders’ equity | 1,897,909 | 1,790,573 | ||||||
| Total liabilities and shareholders’ equity | $ | 11,273,447 | $ | 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 Report on SEC Form 10-Q for the quarter ended March 31, 2015 (when filed), as updated by SEC Forms 8-K.
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Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three months ended March 31 | 2015 | 2014 | |||||
| (in thousands) | |||||||
| Cash flows from operating activities | |||||||
| Net income | $ | 32,339 | $ | 46,260 | |||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||
| Depreciation of property, plant and equipment | 45,865 | 43,181 | |||||
| Other amortization | 1,362 | 1,609 | |||||
| Provision for loan losses | 614 | 995 | |||||
| Loans receivable originated and purchased, held for sale | (79,070 | ) | (46,998 | ) | |||
| Proceeds from sale of loans receivable, held for sale | 78,332 | 48,720 | |||||
| Increase in deferred income taxes | 15,265 | 6,457 | |||||
| Excess tax benefits from share-based payment arrangements | (968 | ) | (164 | ) | |||
| Allowance for equity funds used during construction | (1,413 | ) | (1,609 | ) | |||
| Change in cash overdraft | — | (1,038 | ) | ||||
| Changes in assets and liabilities | |||||||
| Decrease in accounts receivable and unbilled revenues, net | 58,331 | 22,352 | |||||
| Decrease (increase) in fuel oil stock | 20,731 | (34,260 | ) | ||||
| Increase in regulatory assets | (10,827 | ) | (9,258 | ) | |||
| Decrease in accounts, interest and dividends payable | (42,463 | ) | (9,307 | ) | |||
| Change in prepaid and accrued income taxes and utility revenue taxes | (61,397 | ) | (19,474 | ) | |||
| Increase (decrease) in defined benefit pension and other postretirement benefit plans liability | 123 | (818 | ) | ||||
| Change in other assets and liabilities | 19,826 | (27,227 | ) | ||||
| Net cash provided by operating activities | 76,650 | 19,421 | |||||
| Cash flows from investing activities | |||||||
| Available-for-sale investment securities purchased | (63,370 | ) | (79,912 | ) | |||
| Principal repayments on available-for-sale investment securities | 28,486 | 15,597 | |||||
| Proceeds from sale of available-for-sale investment securities | — | 79,564 | |||||
| Redemption of stock from Federal Home Loan Bank of Seattle | 5,590 | 5,848 | |||||
| Net increase in loans held for investment | (12,524 | ) | (37,887 | ) | |||
| Proceeds from sale of real estate acquired in settlement of loans | 606 | 1,429 | |||||
| Capital expenditures | (59,011 | ) | (65,829 | ) | |||
| Contributions in aid of construction | 9,145 | 6,958 | |||||
| Other | 3,281 | — | |||||
| Net cash used in investing activities | (87,797 | ) | (74,232 | ) | |||
| Cash flows from financing activities | |||||||
| Net increase in deposit liabilities | 127,913 | 105,510 | |||||
| Net increase (decrease) in short-term borrowings with original maturities of three months or less | (88,472 | ) | 30,887 | ||||
| Net increase in retail repurchase agreements | 21,451 | 141 | |||||
| Excess tax benefits from share-based payment arrangements | 968 | 164 | |||||
| Net proceeds from issuance of common stock | 104,468 | 3,054 | |||||
| Common stock dividends | (31,829 | ) | (31,435 | ) | |||
| Preferred stock dividends of subsidiaries | (473 | ) | (473 | ) | |||
| Other | (6,253 | ) | (3,953 | ) | |||
| Net cash provided by financing activities | 127,773 | 103,895 | |||||
| Net increase in cash and cash equivalents | 116,626 | 49,084 | |||||
| Cash and cash equivalents, beginning of period | 175,542 | 220,036 | |||||
| Cash and cash equivalents, end of period | $ | 292,168 | $ | 269,120 | |||
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 (when filed), as updated by SEC Forms 8-K.
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Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| Three months ended March 31 | ||||||||
| (dollars in thousands, except per barrel amounts) | 2015 | 2014 | ||||||
| Revenues | $ | 573,442 | $ | 720,062 | ||||
| Expenses | ||||||||
| Fuel oil | 176,806 | 286,300 | ||||||
| Purchased power | 136,007 | 164,916 | ||||||
| Other operation and maintenance | 104,002 | 88,606 | ||||||
| Depreciation | 44,243 | 41,603 | ||||||
| Taxes, other than income taxes | 54,748 | 67,971 | ||||||
| Total expenses | 515,806 | 649,396 | ||||||
| Operating income | 57,636 | 70,666 | ||||||
| Allowance for equity funds used during construction | 1,413 | 1,609 | ||||||
| Interest expense and other charges, net | (16,325 | ) | (15,723 | ) | ||||
| Allowance for borrowed funds used during construction | 499 | 614 | ||||||
| Income before income taxes | 43,223 | 57,166 | ||||||
| Income taxes | 15,850 | 21,247 | ||||||
| Net income | 27,373 | 35,919 | ||||||
| Preferred stock dividends of subsidiaries | 229 | 229 | ||||||
| Net income attributable to Hawaiian Electric | 27,144 | 35,690 | ||||||
| Preferred stock dividends of Hawaiian Electric | 270 | 270 | ||||||
| Net income for common stock | $ | 26,874 | $ | 35,420 | ||||
| Comprehensive income attributable to Hawaiian Electric | $ | 26,896 | $ | 35,429 | ||||
| OTHER ELECTRIC UTILITY INFORMATION | ||||||||
| Kilowatthour sales (millions) | ||||||||
| Hawaiian Electric | 1,527 | 1,595 | ||||||
| Hawaii Electric Light | 253 | 260 | ||||||
| Maui Electric | 264 | 271 | ||||||
| 2,044 | 2,126 | |||||||
| Wet-bulb temperature (Oahu average; degrees Fahrenheit) | 66.5 | 67.1 | ||||||
| Cooling degree days (Oahu) | 795 | 828 | ||||||
| Average fuel oil cost per barrel | $ | 86.60 | $ | 131.15 | ||||
| Twelve months ended March 31 | 2015 | 2014 | ||||||
| Return on average common equity (%) (simple average) | ||||||||
| Hawaiian Electric | 8.03 | 9.21 | ||||||
| Hawaii Electric Light | 6.18 | 7.64 | ||||||
| Maui Electric | 8.87 | 7.68 | ||||||
| Hawaiian Electric Consolidated | 7.84 | 8.69 | ||||||
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 Report on SEC Form 10-Q for the quarter ended March 31, 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.
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Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (dollars in thousands, except par value) | March 31, 2015 | December 31, 2014 | ||||||
| Assets | ||||||||
| Property, plant and equipment | ||||||||
| Utility property, plant and equipment | ||||||||
| Land | $ | 52,022 | $ | 52,299 | ||||
| Plant and equipment | 6,066,523 | 6,009,482 | ||||||
| Less accumulated depreciation | (2,189,090 | ) | (2,175,510 | ) | ||||
| Construction in progress | 164,851 | 158,616 | ||||||
| Utility property, plant and equipment, net | 4,094,306 | 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 | 4,100,868 | 4,051,450 | ||||||
| Current assets | ||||||||
| Cash and cash equivalents | 8,120 | 13,762 | ||||||
| Customer accounts receivable, net | 124,995 | 158,484 | ||||||
| Accrued unbilled revenues, net | 109,494 | 137,374 | ||||||
| Other accounts receivable, net | 8,668 | 4,283 | ||||||
| Fuel oil stock, at average cost | 85,315 | 106,046 | ||||||
| Materials and supplies, at average cost | 58,607 | 57,250 | ||||||
| Prepayments and other | 43,355 | 66,383 | ||||||
| Regulatory assets | 102,745 | 71,421 | ||||||
| Total current assets | 541,299 | 615,003 | ||||||
| Other long-term assets | ||||||||
| Regulatory assets | 802,844 | 833,843 | ||||||
| Unamortized debt expense | 8,216 | 8,323 | ||||||
| Other | 82,273 | 81,838 | ||||||
| Total other long-term assets | 893,333 | 924,004 | ||||||
| Total assets | $ | 5,535,500 | $ | 5,590,457 | ||||
| Capitalization and liabilities | ||||||||
| Capitalization | ||||||||
| Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 15,805,327) | $ | 105,388 | $ | 105,388 | ||||
| Premium on capital stock | 578,933 | 578,938 | ||||||
| Retained earnings | 1,002,046 | 997,773 | ||||||
| Accumulated other comprehensive income, net of income taxes-retirement benefit plans | 67 | 45 | ||||||
| Common stock equity | 1,686,434 | 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 | 2,927,273 | 2,922,983 | ||||||
| Current liabilities | ||||||||
| Short-term borrowings from non-affiliates | 30,000 | — | ||||||
| Accounts payable | 138,509 | 163,934 | ||||||
| Interest and preferred dividends payable | 24,257 | 22,316 | ||||||
| Taxes accrued | 182,872 | 250,402 | ||||||
| Regulatory liabilities | 1,174 | 632 | ||||||
| Other | 65,989 | 65,146 | ||||||
| Total current liabilities | 442,801 | 502,430 | ||||||
| Deferred credits and other liabilities | ||||||||
| Deferred income taxes | 596,984 | 602,872 | ||||||
| Regulatory liabilities | 350,538 | 344,217 | ||||||
| Unamortized tax credits | 82,037 | 79,492 | ||||||
| Defined benefit pension and other postretirement benefit plans liability | 587,165 | 595,395 | ||||||
| Other | 74,317 | 76,636 | ||||||
| Total deferred credits and other liabilities | 1,691,041 | 1,698,612 | ||||||
| Contributions in aid of construction | 474,385 | 466,432 | ||||||
| Total capitalization and liabilities | $ | 5,535,500 | $ | 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 Report on SEC Form 10-Q for the quarter ended March 31, 2015 (when filed), as updated by SEC Forms 8-K.
11
Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three months ended March 31 | 2015 | 2014 | ||||||
| (in thousands) | ||||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 27,373 | $ | 35,919 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
| Depreciation of property, plant and equipment | 44,243 | 41,603 | ||||||
| Other amortization | 689 | 1,621 | ||||||
| Increase in deferred income taxes | 15,132 | 20,344 | ||||||
| Change in tax credits, net | 2,576 | 2,032 | ||||||
| Allowance for equity funds used during construction | (1,413 | ) | (1,609 | ) | ||||
| Change in cash overdraft | — | (1,038 | ) | |||||
| Changes in assets and liabilities | ||||||||
| Decrease in accounts receivable | 29,104 | 8,804 | ||||||
| Decrease in accrued unbilled revenues | 27,880 | 12,260 | ||||||
| Decrease (increase) in fuel oil stock | 20,731 | (34,260 | ) | |||||
| Increase in materials and supplies | (1,357 | ) | (1,045 | ) | ||||
| Increase in regulatory assets | (10,827 | ) | (9,258 | ) | ||||
| Decrease in accounts payable | (49,136 | ) | (16,024 | ) | ||||
| Change in prepaid and accrued income taxes and revenue taxes | (63,696 | ) | (47,526 | ) | ||||
| Increase (decrease) in defined benefit pension and other postretirement benefit plans liability | 110 | (205 | ) | |||||
| Change in other assets and liabilities | (8,522 | ) | (10,981 | ) | ||||
| Net cash provided by operating activities | 32,887 | 637 | ||||||
| Cash flows from investing activities | ||||||||
| Capital expenditures | (54,358 | ) | (64,462 | ) | ||||
| Contributions in aid of construction | 9,145 | 6,958 | ||||||
| Net cash used in investing activities | (45,213 | ) | (57,504 | ) | ||||
| Cash flows from financing activities | ||||||||
| Common stock dividends | (22,601 | ) | (22,707 | ) | ||||
| Preferred stock dividends of Hawaiian Electric and subsidiaries | (499 | ) | (499 | ) | ||||
| Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less | 30,000 | 34,996 | ||||||
| Other | (216 | ) | (389 | ) | ||||
| Net cash provided by financing activities | 6,684 | 11,401 | ||||||
| Net decrease in cash and cash equivalents | (5,642 | ) | (45,466 | ) | ||||
| Cash and cash equivalents, beginning of period | 13,762 | 62,825 | ||||||
| Cash and cash equivalents, end of period | $ | 8,120 | $ | 17,359 | ||||
This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference 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 Report on SEC Form 10-Q for the quarter ended March 31, 2015 (when filed), as updated by SEC Forms 8-K.
12
American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited)
| Three months ended | ||||||||||||
| (in thousands) | March 31, 2015 | December 31, 2014 | March 31, 2014 | |||||||||
| Interest and dividend income | ||||||||||||
| Interest and fees on loans | $ | 45,198 | $ | 46,276 | $ | 43,682 | ||||||
| Interest and dividends on investment securities | 3,051 | 3,187 | 3,035 | |||||||||
| Total interest and dividend income | 48,249 | 49,463 | 46,717 | |||||||||
| Interest expense | ||||||||||||
| Interest on deposit liabilities | 1,260 | 1,303 | 1,225 | |||||||||
| Interest on other borrowings | 1,466 | 1,468 | 1,405 | |||||||||
| Total interest expense | 2,726 | 2,771 | 2,630 | |||||||||
| Net interest income | 45,523 | 46,692 | 44,087 | |||||||||
| Provision for loan losses | 614 | 2,560 | 995 | |||||||||
| Net interest income after provision for loan losses | 44,909 | 44,132 | 43,092 | |||||||||
| Noninterest income | ||||||||||||
| Fees from other financial services | 5,355 | 5,760 | 5,128 | |||||||||
| Fee income on deposit liabilities | 5,315 | 5,074 | 4,421 | |||||||||
| Fee income on other financial products | 1,889 | 1,806 | 2,290 | |||||||||
| Bank-owned life insurance | 983 | 1,004 | 963 | |||||||||
| Mortgage banking income | 1,822 | 1,164 | 628 | |||||||||
| Gains on sale of investment securities | — | — | 2,847 | |||||||||
| Other income, net | 735 | 455 | 625 | |||||||||
| Total noninterest income | 16,099 | 15,263 | 16,902 | |||||||||
| Noninterest expense | ||||||||||||
| Compensation and employee benefits | 21,766 | 19,835 | 20,286 | |||||||||
| Occupancy | 4,113 | 4,238 | 3,953 | |||||||||
| Data processing | 3,116 | 2,975 | 3,060 | |||||||||
| Services | 2,341 | 2,561 | 2,273 | |||||||||
| Equipment | 1,701 | 1,638 | 1,645 | |||||||||
| Office supplies, printing and postage | 1,483 | 1,602 | 1,616 | |||||||||
| Marketing | 841 | 1,309 | 711 | |||||||||
| FDIC insurance | 811 | 820 | 796 | |||||||||
| Other expense | 4,205 | 6,116 | 3,122 | |||||||||
| Total noninterest expense | 40,377 | 41,094 | 37,462 | |||||||||
| Income before income taxes | 20,631 | 18,301 | $ | 22,532 | ||||||||
| Income taxes | 7,156 | 6,188 | 8,133 | |||||||||
| Net income | $ | 13,475 | $ | 12,113 | $ | 14,399 | ||||||
| Comprehensive income | $ | 17,318 | $ | 5,419 | $ | 15,423 | ||||||
| OTHER BANK INFORMATION (annualized %, except as of period end) | ||||||||||||
| Return on average assets | 0.96 | 0.88 | 1.09 | |||||||||
| Return on average equity | 9.96 | 8.93 | 10.94 | |||||||||
| Return on average tangible common equity | 11.74 | 10.52 | 12.96 | |||||||||
| Net interest margin | 3.52 | 3.65 | 3.64 | |||||||||
| Net charge-offs to average loans outstanding | 0.04 | 0.04 | 0.02 | |||||||||
| As of period end | ||||||||||||
| Nonperforming assets to loans outstanding and real estate owned * | 0.80 | 0.85 | 1.12 | |||||||||
| Allowance for loan losses to loans outstanding | 1.03 | 1.03 | 0.98 | |||||||||
| Tier-1 leverage ratio * | 8.9 | 8.9 | 9.0 | |||||||||
| Total capital ratio * | 13.2 | 12.3 | 12.7 | |||||||||
| Tangible common equity to total assets | 8.18 | 8.23 | 8.42 | |||||||||
| Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions) | 8 | 9 | 9 | |||||||||
* Regulatory basis. Capital ratios as of March 31, 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 Report on SEC Form 10-Q for the quarter ended March 31, 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.
13
American Savings Bank, F.S.B.
BALANCE SHEETS DATA
(Unaudited)
| March 31, 2015 | December 31, 2014 | |||||||||||
| (in thousands) | ||||||||||||
| Assets | ||||||||||||
| Cash and due from banks | $ | 98,484 | $ | 107,233 | ||||||||
| Interest-bearing deposits | 172,517 | 54,230 | ||||||||||
| Available-for-sale investment securities, at fair value | 590,648 | 550,394 | ||||||||||
| Stock in Federal Home Loan Bank of Seattle, at cost | 63,711 | 69,302 | ||||||||||
| Loans receivable held for investment | 4,447,299 | 4,434,651 | ||||||||||
| Allowance for loan losses | (45,795 | ) | (45,618 | ) | ||||||||
| Net loans | 4,401,504 | 4,389,033 | ||||||||||
| Loans held for sale, at lower of cost or fair value | 9,906 | 8,424 | ||||||||||
| Other | 305,917 | 305,416 | ||||||||||
| Goodwill | 82,190 | 82,190 | ||||||||||
| Total assets | $ | 5,724,877 | $ | 5,566,222 | ||||||||
| Liabilities and shareholder’s equity | ||||||||||||
| Deposit liabilities–noninterest-bearing | $ | 1,420,085 | $ | 1,342,794 | ||||||||
| Deposit liabilities–interest-bearing | 3,331,243 | 3,280,621 | ||||||||||
| Other borrowings | 312,094 | 290,656 | ||||||||||
| Other | 117,849 | 118,363 | ||||||||||
| Total liabilities | 5,181,271 | 5,032,434 | ||||||||||
| Common stock | 1 | 1 | ||||||||||
| Additional paid in capital | 338,411 | 338,411 | ||||||||||
| Retained earnings | 217,909 | 211,934 | ||||||||||
| Accumulated other comprehensive loss, net of tax benefits | ||||||||||||
| Net unrealized gains on securities | $ | 3,913 | $ | 462 | ||||||||
| Retirement benefit plans | (16,628 | ) | (12,715 | ) | (17,020 | ) | (16,558 | ) | ||||
| Total shareholder’s equity | 543,606 | 533,788 | ||||||||||
| Total liabilities and shareholder’s equity | $ | 5,724,877 | $ | 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 Report on SEC Form 10-Q for the quarter ended March 31, 2015 (when filed), as updated by SEC Forms 8-K.
14
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 March 31 | ||||||
| 2015 | 2014 | |||||
| HEI CONSOLIDATED NET INCOME | ||||||
| GAAP (as reported) | $ | 31.9 | $ | 45.8 | ||
| Excluding special items (after-tax): | ||||||
| Costs related to pending merger with NextEra Energy, Inc. and spin-off of ASB Hawaii, Inc | 4.7 | — | ||||
| Non-GAAP (core) | $ | 36.6 | $ | 45.8 | ||
| HEI CONSOLIDATED DILUTED EARNINGS PER SHARE | ||||||
| GAAP (as reported) | $ | 0.31 | $ | 0.45 | ||
| Excluding special items (after-tax): | ||||||
| Costs related to pending merger with NextEra Energy, Inc. and spin-off of ASB Hawaii, Inc | 0.05 | — | ||||
| Non-GAAP (core) | $ | 0.35 | $ | 0.45 | ||
| HEI CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average) | Twelve months ended March 31 | |||||
| 2015 | 2014 | |||||
| Based on GAAP | 8.5 | % | 10.4 | % | ||
Based on non-GAAP (core)2 | 9.0 | % | 10.4 | % | ||
| 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 | ||||||
15
RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES | ||||||
| Hawaiian Electric Company, Inc. and Subsidiaries | ||||||
| Unaudited | ||||||
| ($ in millions) | ||||||
| Three months ended March 31 | ||||||
| 2015 | 2014 | |||||
| HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME | ||||||
| GAAP (as reported) | $ | 26.9 | $ | 35.4 | ||
| Excluding special items (after-tax): | ||||||
| Costs related to pending merger with NextEra Energy, Inc. | 0.3 | — | ||||
| Non-GAAP (core) | $ | 27.1 | $ | 35.4 | ||
| HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY | Twelve months ended March 31 | |||||
| (ROACE) (simple average) | 2015 | 2014 | ||||
| Based on GAAP | 7.84 | % | 8.69 | % | ||
Based on non-GAAP (core)2 | 7.86 | % | 8.69 | % | ||
| HAWAIIAN ELECTRIC CONSOLIDATED OTHER OPERATION AND MAINTENANCE (O&M) | Three months ended March 31 | |||||
| EXPENSE | 2015 | 2014 | ||||
| GAAP (as reported) | $ | 104.0 | $ | 88.6 | ||
Excluding O&M-related net income neutral items3 | 1.9 | 2.0 | ||||
| Excluding costs related to pending merger with NextEra Energy, Inc. | 0.4 | — | ||||
| Non-GAAP (Adjusted other O&M expense) | $ | 101.7 | $ | 86.6 | ||
| 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 | ||||||
16