HEI Exhibit 99
November 5, 2015 |
| | |
| Contact: | Clifford H. Chen
| |
| | Manager, Investor Relations & Strategic Planning | Telephone: (808) 543-7300 |
| | | E-mail: ir@hei.com |
| | | |
HAWAIIAN ELECTRIC INDUSTRIES REPORTS THIRD QUARTER 2015 EARNINGS
Diluted Earnings Per Share (EPS) of $0.47 and Core EPS1 of $0.49;
Utility Continues Clean Energy Transformation; Bank Delivers Solid Performance;
Hawaiian Electric Industries, Inc. Maintains Dividend;
Historical Cash Flow Statements Revised/Restated
HONOLULU - Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock for the third quarter of 2015 of $50.7 million and diluted earnings per share (EPS) of $0.47 compared to $47.8 million and $0.46 EPS for the third quarter of 2014. Excluding costs associated with the pending merger with NextEra Energy, Inc. and the spin-off of ASB Hawaii of $1.7 million and $0.4 million (after-tax), in the third quarter of 2015 and 2014 respectively, core earnings1 for the third quarter of 2015 were $52.4 million and $0.49 EPS compared to $48.3 million and $0.47 EPS for the third quarter of 2014.
“With the PUC’s recent distributed energy resources order and Hawaii’s new 100% renewable portfolio standard goal by 2045, our utility’s continued work to modernize our electric grids and pursue new customer options is more important than ever,” said Constance Lau, HEI president and chief executive officer.
“Our bank delivered solid revenue and loan growth this quarter. Credit quality remained sound, and capital levels were healthy,” added Lau.
“During the quarter, we achieved another important milestone toward the completion of our proposed merger with NextEra Energy with the expiration of the Hart-Scott-Rodino waiting period. The PUC just completed public listening sessions on all islands, and during the past few weeks, we and NextEra Energy filed our surrebuttal testimonies and closed out a six-month discovery process. We look forward to evidentiary hearings beginning late November. And as we move forward, we continue to
_________________
| |
1 | Non-GAAP measure which excludes merger-related and spin-off costs after-tax. See the “Explanation of HEI’s Use of Certain Unaudited Non-GAAP measures” and the related reconciliation. |
Hawaiian Electric Industries, Inc.
November 5, 2015
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believe NextEra Energy is the right partner for Hawaiian Electric to help achieve Hawaii’s 100 percent renewable portfolio standard by 2045."
HAWAIIAN ELECTRIC COMPANY EARNINGS CONSISTENT WITH EXPECTATIONS
Hawaiian Electric Company’s2 net income for the third quarter of 2015 was $43.0 million compared to $38.9 million for the same quarter last year. The $4.1 million increase was mainly driven by the following on an after-tax basis:
| |
| • | $3 million higher net revenues3 compared to the third quarter of 2014 primarily due to $2 million in recovery of costs for clean energy and reliability investments and $1 million for better fuel efficiency performance; and |
| |
| • | $2 million lower operations and maintenance (O&M) expenses4 in the third quarter of 2015 compared to the same quarter last year, due to the following on an after-tax basis: |
| |
| ◦ | Third quarter of 2014 O&M costs were elevated due primarily to consulting costs associated with regulatory filings, storm restoration expenses and the initial phase of our smart grid installations as part of our grid modernization program which in total had a $6 million impact to net income; and |
| |
| ◦ | Third quarter of 2015 O&M costs were impacted by the regulatory decision denying enterprise resource planning software costs and higher maintenance costs including environmental compliance costs and vegetation management costs partially offset by the positive impact of the regulatory approval of the deferral of the Interactive Voice Response system project costs that were previously expensed. In total, these items had a $4 million unfavorable impact to net income. |
_____________
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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 | Net revenues represent the after-tax impact of “Revenues” less the following expenses which are largely pass through items in revenues: “fuel oil,” “purchased power,” and “taxes, other than income taxes” as shown on the Hawaiian Electric Company Consolidated Statements of Income. |
| |
4 | Excludes net income neutral expenses covered by surcharges or by third parties of $2 million in the third quarter of 2015 and $3 million in the third quarter of 2014. See “Explanation of HEI’s Use of Certain Unaudited Non-GAAP measures” and the related reconciliation. |
Note: Amounts indicated as “after-tax” in this earnings release are based upon adjusting items for the composite statutory tax rates of 39% for the utilities and 40% for the bank.
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November 5, 2015
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| • | $2 million higher depreciation expense as a result of increasing investments for the integration of more renewable energy, improved customer reliability and greater system efficiency. |
AMERICAN SAVINGS BANK CONTINUES TO DELIVER SOLID PERFORMANCE
American Savings Bank’s (American) net income for the third quarter of 2015 was $13.5 million compared to $12.9 million in the second, or linked quarter of 2015 and $13.3 million in the third quarter of 2014. Third quarter 2015 net income was $0.6 million higher than the linked quarter primarily driven by the following on an after-tax basis:
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| • | $1 million higher net interest income primarily driven by higher average interest-earning assets and a favorable shift to higher yielding assets; and |
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| • | $1 million higher noninterest income primarily due to the gain on sale of an American service center building vacated as part of the bank’s facilities consolidation plan; partially offset by |
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| • | $1 million higher provision for loan losses primarily due to strong loan growth in the quarter; and |
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| • | $1 million higher noninterest expense. |
Compared to the third quarter of 2014, net income was higher by $0.2 million primarily driven by the following on an after-tax basis:
| |
| • | $1 million higher net interest income in the third quarter of 2015 primarily due to higher average interest earning assets; and |
| |
| • | $2 million higher noninterest income primarily from the gain on sale of real estate and higher fee income on deposit products and mortgage banking in the third quarter of 2015; offset by |
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| • | $1 million higher provision for loan losses attributable to higher loan growth; and |
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| • | $2 million higher noninterest expense in the third quarter of 2015 due primarily to higher pension and benefits expense. |
Overall, American achieved solid profitability in the third quarter of 2015 with a return on average equity of 9.73% and a return on average assets of 0.92%.
For additional information, refer to the American news release issued on October 30, 2015.
HOLDING AND OTHER COMPANIES
The holding and other companies’ net losses were $5.8 million in the third quarter of 2015 compared to $4.3 million in the prior year quarter. Excluding costs related to the pending merger with
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NextEra Energy, Inc. and the spin-off of ASB Hawaii, the third quarter of 2015 net loss was $4.1 million compared to $3.9 million in the same quarter last year.
BOARD DECLARES QUARTERLY DIVIDEND
On November 4, 2015, the board of directors maintained HEI’s quarterly cash dividend of $0.31 cents per share, payable on December 10, 2015, to shareholders of record at the close of business on November 23, 2015 (ex-dividend date is November 19, 2015). The dividend is equivalent to an annual rate of $1.24 per share.
Dividends have been paid continuously since 1901. At the indicated annual dividend rate and the closing share price on November 4, 2015 of $29.30, HEI’s yield is 4.2%.
HEI AND HAWAIIAN ELECTRIC COMPANY
CASH FLOW RESTATEMENTS AND REVISIONS
In the course of preparing our third quarter financial statements, HEI’s and Hawaiian Electric Company’s management determined that Hawaiian Electric Company’s capital expenditures on HEI’s and Hawaiian Electric Company’s Consolidated Statements of Cash Flows did not correctly account for the beginning of period unpaid invoices and accruals (that were paid in cash during the period). Accordingly, HEI and Hawaiian Electric Company are each restating or revising its previously filed Consolidated Statements of Cash Flows for the periods stated below to correct for such misstatements by adjusting cash used for “Capital expenditures” (investing activity) and the change in accounts payable (operating activity).
Based on our review, HEI and Hawaiian Electric Company have determined that, as a result of the described misstatements, HEI’s and Hawaiian Electric Company’s consolidated net cash provided by operating activities were understated for the years 2012 through 2014 approximately by $45 million, $40 million, and $25 million, respectively, and approximately by $65 million for both the first three-month and the first six-month periods of 2015. Accordingly, HEI’s and Hawaiian Electric Company’s restatements and revisions will show higher cash inflows from operations for the periods
Hawaiian Electric Industries, Inc.
November 5, 2015
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affected. Similarly, HEI’s and Hawaiian Electric Company’s consolidated net cash used in investing activities due to capital expenditures were also understated by the corresponding amounts in their respective time periods. Accordingly, HEI’s and Hawaiian Electric Company’s restatements and revisions will show greater outflows of cash invested in capital expenditures. Furthermore, the misstatements, as well as our revisions and restatements, did not and will not have any impact on HEI’s and Hawaiian Electric Company’s obligations nor upon utility customer rates.
On November 4, 2015, the Audit Committees of the Boards of Directors of HEI and Hawaiian Electric Company (Audit Committees), after consultation with management and PricewaterhouseCoopers LLP, the independent registered public accounting firm for HEI and Hawaiian Electric Company, concluded that it is necessary to restate HEI’s and Hawaiian Electric Company’s Consolidated Statements of Cash Flows for:
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| • | the three months ended March 31, 2015 and 2014, |
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| • | the six months ended June 30, 2015 and 2014, and |
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| • | the years ended December 31, 2013 and 2012, |
and therefore, such financial statements should no longer be relied upon. The Audit Committees also concluded it was necessary to revise HEI’s and Hawaiian Electric Company’s Consolidated Statements of Cash Flows for:
| |
| • | the nine months ended September 30, 2014 and |
| |
| • | the year ended December 31, 2014. |
The restatements and revisions are necessary to correct the misstatements related to capital expenditures, changes in accounts payable, changes in deferred income taxes, changes in accrued income taxes, and changes in other assets and liabilities as described below. The restatements and revisions do not impact HEI’s and Hawaiian Electric Company’s previously reported overall net change in cash and cash equivalents in their Consolidated Statements of Cash Flows for any period restated or revised. Additionally, the restatements and revisions do not impact HEI’s and Hawaiian
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November 5, 2015
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Electric Company’s Consolidated Balance Sheets or Consolidated Statements of Income for any period restated or revised.
As soon as practicable, HEI and Hawaiian Electric Company expect to amend the reports discussed above, in order to correct the misstatements and related disclosures.
Preliminary Conclusions Regarding Internal Controls
In light of the above matter, management, in consultation with the Audit Committees, has determined that a material weakness in HEI’s and Hawaiian Electric Company’s internal control over financial reporting existed at December 31, 2014. HEI and Hawaiian Electric Company intend to restate management’s report on internal control over financial reporting and its evaluation of disclosure controls and procedures and expect to receive an adverse opinion on the internal control over financial reporting as of December 31, 2014, from PricewaterhouseCoopers LLP.
HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE
Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its third quarter of 2015 earnings and 2015 EPS guidance on Thursday, November 5, 2015, at 12:00 noon Hawaii time (5:00 p.m. Eastern time). The event can be accessed through HEI’s website at www.hei.com or by dialing (888) 311-8190 and entering passcode: 22822426. International parties may listen to the conference by calling the following toll free number, (330) 863-3378 and entering passcode: 22822426. The presentation for the webcast will be on HEI’s website under the heading “Investor Relations.” HEI and Hawaiian Electric Company intend to continue to use HEI’s website, www.hei.com, as a means of disclosing additional information. Such disclosures will be included on HEI’s website in the Investor Relations section. Accordingly, investors should routinely monitor such portions of HEI’s website, in addition to following HEI’s, Hawaiian Electric Company’s and American’s press releases, HEI’s and Hawaiian Electric Company’s Securities and Exchange Commission (SEC) filings and HEI’s public conference calls and webcasts. The information on HEI’s website is not incorporated by reference in this document or in HEI’s and Hawaiian Electric
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Company’s SEC filings unless, and except to the extent, specifically incorporated by reference. Investors may also wish to refer to the Public Utilities Commission of the State of Hawaii (PUC) website at dms.puc.hawaii.gov/dms in order to review documents filed with and issued by the PUC. No information on the PUC website is incorporated by reference in this document or in HEI’s and Hawaiian Electric Company’s SEC filings.
An on-line replay of the webcast will be available on HEI’s website beginning about two hours after the event. Audio replays of the teleconference will also be available approximately two hours
after the event through November 19, 2015, by dialing (855) 859-2056 or (404) 537-3406 and entering passcode: 22822426.
HEI supplies power to approximately 450,000 customers or 95% of Hawaii’s population through its electric utilities, Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited and provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, one of Hawaii’s largest financial institutions.
NON-GAAP MEASURES
See “Explanation of HEI’s Use of Certain Unaudited Non-GAAP Measures” and related reconciliations on pages 15 to 16 of this release.
FORWARD-LOOKING STATEMENTS
This release may contain “forward-looking statements,” which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “predicts,” “estimates” or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries, the performance of the industries in which they do business and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance.
Hawaiian Electric Industries, Inc.
November 5, 2015
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Forward-looking statements in this release should be read in conjunction with the “Forward-Looking Statements” and “Risk Factors” discussions (which are incorporated by reference herein) set forth in HEI’s Annual Report on Form 10-K for the year ended December 31, 2014, HEI’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 and HEI’s future periodic reports that discuss important factors that could cause HEI’s results to differ materially from those anticipated in such statements. These forward-looking statements speak only as of the date of the report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric Company, American and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (Unaudited) |
| | | | | | | | | | | | | | | | |
| | | Three months ended September 30 | | Nine months ended September 30 |
| (in thousands, except per share amounts) | | 2015 | | 2014 | | 2015 | | 2014 |
| Revenues | | | | | | | | |
| Electric utility | | $ | 648,127 |
| | $ | 803,565 |
| | $ | 1,779,732 |
| | $ | 2,262,056 |
|
| Bank | | 69,091 |
| | 63,536 |
| | 199,222 |
| | 187,771 |
|
| Other | | (42 | ) | | (5 | ) | | (4 | ) | | (325 | ) |
| Total revenues | | 717,176 |
| | 867,096 |
| | 1,978,950 |
| | 2,449,502 |
|
| Expenses | | | | | | | | |
| Electric utility | | 565,470 |
| | 727,409 |
| | 1,573,278 |
| | 2,045,166 |
|
| Bank | | 48,289 |
| | 43,030 |
| | 138,063 |
| | 126,778 |
|
| Other | | 6,322 |
| | 4,621 |
| | 28,278 |
| | 13,125 |
|
| Total expenses | | 620,081 |
| | 775,060 |
| | 1,739,619 |
| | 2,185,069 |
|
| Operating income (loss) | | | | | | | | |
| Electric utility | | 82,657 |
| | 76,156 |
| | 206,454 |
| | 216,890 |
|
| Bank | | 20,802 |
| | 20,506 |
| | 61,159 |
| | 60,993 |
|
| Other | | (6,364 | ) | | (4,626 | ) | | (28,282 | ) | | (13,450 | ) |
| Total operating income | | 97,095 |
| | 92,036 |
| | 239,331 |
| | 264,433 |
|
| Interest expense, net—other than on deposit liabilities and other bank borrowings | | (19,229 | ) | | (19,170 | ) | | (57,235 | ) | | (58,648 | ) |
| Allowance for borrowed funds used during construction | | 737 |
| | 740 |
| | 1,918 |
| | 1,877 |
|
| Allowance for equity funds used during construction | | 2,057 |
| | 1,937 |
| | 5,366 |
| | 4,933 |
|
| Income before income taxes | | 80,660 |
| | 75,543 |
| | 189,380 |
| | 212,595 |
|
| Income taxes | | 29,516 |
| | 27,264 |
| | 70,406 |
| | 76,302 |
|
| Net income | | 51,144 |
| | 48,279 |
| | 118,974 |
| | 136,293 |
|
| Preferred stock dividends of subsidiaries | | 471 |
| | 471 |
| | 1,417 |
| | 1,417 |
|
| Net income for common stock | | $ | 50,673 |
| | $ | 47,808 |
| | $ | 117,557 |
| | $ | 134,876 |
|
| Basic earnings per common share | | $ | 0.47 |
| | $ | 0.47 |
| | $ | 1.11 |
| | $ | 1.33 |
|
| Diluted earnings per common share | | $ | 0.47 |
| | $ | 0.46 |
| | $ | 1.11 |
| | $ | 1.32 |
|
| Dividends per common share | | $ | 0.31 |
| | $ | 0.31 |
| | $ | 0.93 |
| | $ | 0.93 |
|
| Weighted-average number of common shares outstanding | | 107,457 |
| | 102,416 |
| | 106,067 |
| | 101,768 |
|
| Adjusted weighted-average shares | | 107,738 |
| | 103,026 |
| | 106,347 |
| | 102,478 |
|
| Net income (loss) for common stock by segment | | | | | | | | |
| Electric utility | | $ | 43,006 |
| | $ | 38,879 |
| | $ | 102,721 |
| | $ | 108,529 |
|
| Bank | | 13,451 |
| | 13,253 |
| | 39,777 |
| | 39,188 |
|
| Other | | (5,784 | ) | | (4,324 | ) | | (24,941 | ) | | (12,841 | ) |
| Net income for common stock | | $ | 50,673 |
| | $ | 47,808 |
| | $ | 117,557 |
| | $ | 134,876 |
|
| Comprehensive income attributable to Hawaiian Electric Industries, Inc. | | $ | 55,103 |
| | $ | 46,497 |
| | $ | 122,918 |
| | $ | 137,632 |
|
Return on average common equity (twelve months ended)1 | | | | | | 8.1 | % | | 10.1 | % |
Prior period financial statements reflect the retrospective application of Accounting Standards Update (ASU) No. 2014-01, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects,” which was adopted as of January 1, 2015 and did not have a material impact on the Company’s financial condition or results of operations.
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI’s Annual Report on SEC Form 10-K for the year ended December 31, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.
1 On a core basis, 2015 and 2014 returns on average common equity (twelve months ended September 30) were 9.1% and 10.1%, respectively. See reconciliation of GAAP to non-GAAP measures.
Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
| | | | | | | | |
| (dollars in thousands) | | September 30, 2015 | | December 31, 2014 |
| Assets | | |
| | |
|
| Cash and cash equivalents | | $ | 228,417 |
| | $ | 175,542 |
|
| Accounts receivable and unbilled revenues, net | | 305,448 |
| | 313,696 |
|
| Available-for-sale investment securities, at fair value | | 785,837 |
| | 550,394 |
|
| Stock in Federal Home Loan Bank, at cost | | 10,678 |
| | 69,302 |
|
| Loans receivable held for investment, net | | 4,487,130 |
| | 4,389,033 |
|
| Loans held for sale, at lower of cost or fair value | | 5,598 |
| | 8,424 |
|
| Property, plant and equipment, net of accumulated depreciation of $2,318,227 and $2,250,950 at the respective dates | | 4,317,121 |
| | 4,148,774 |
|
| Regulatory assets | | 897,948 |
| | 905,264 |
|
| Other | | 453,099 |
| | 542,523 |
|
| Goodwill | | 82,190 |
| | 82,190 |
|
| Total assets | | $ | 11,573,466 |
| | $ | 11,185,142 |
|
| Liabilities and shareholders’ equity | | |
| | |
|
| Liabilities | | |
| | |
|
| Accounts payable | | $ | 152,896 |
| | $ | 186,425 |
|
| Interest and dividends payable | | 25,914 |
| | 25,336 |
|
| Deposit liabilities | | 4,825,954 |
| | 4,623,415 |
|
| Short-term borrowings—other than bank | | 171,992 |
| | 118,972 |
|
| Other bank borrowings | | 368,593 |
| | 290,656 |
|
| Long-term debt, net—other than bank | | 1,506,546 |
| | 1,506,546 |
|
| Deferred income taxes | | 643,951 |
| | 633,570 |
|
| Regulatory liabilities | | 362,251 |
| | 344,849 |
|
| Contributions in aid of construction | | 495,667 |
| | 466,432 |
|
| Defined benefit pension and other postretirement benefit plans liability | | 607,682 |
| | 632,845 |
|
| Other | | 456,726 |
| | 531,230 |
|
| Total liabilities | | 9,618,172 |
| | 9,360,276 |
|
| Preferred stock of subsidiaries - not subject to mandatory redemption | | 34,293 |
| | 34,293 |
|
| Shareholders’ equity | | |
| | |
|
| Preferred stock, no par value, authorized 10,000,000 shares; issued: none | | — |
| | — |
|
| Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 107,458,641 shares and 102,565,266 shares at the respective dates | | 1,627,259 |
| | 1,521,297 |
|
| Retained earnings | | 315,759 |
| | 296,654 |
|
| Accumulated other comprehensive loss, net of tax benefits | | (22,017 | ) | | (27,378 | ) |
| Total shareholders’ equity | | 1,921,001 |
| | 1,790,573 |
|
| Total liabilities and shareholders’ equity | | $ | 11,573,466 |
| | $ | 11,185,142 |
|
Prior period financial statements reflect the retrospective application of ASU No. 2014-01, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects,” which was adopted as of January 1, 2015 and did not have a material impact on the Company’s financial condition or results of operations.
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI’s Annual Report on SEC Form 10-K for the year ended December 31, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K.
Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
| | | | | | | | | | | | | | | | |
| | | Three months ended September 30 | | Nine months ended September 30 |
| (dollars in thousands, except per barrel amounts) | | 2015 | | 2014 | | 2015 | | 2014 |
| Revenues | | $ | 648,127 |
| | $ | 803,565 |
| | 1,779,732 |
| | 2,262,056 |
|
| Expenses | | |
| | |
| | | | |
| Fuel oil | | 195,633 |
| | 309,432 |
| | 518,670 |
| | 865,989 |
|
| Purchased power | | 160,518 |
| | 192,882 |
| | 445,809 |
| | 546,121 |
|
| Other operation and maintenance | | 103,653 |
| | 108,313 |
| | 306,519 |
| | 295,483 |
|
| Depreciation | | 44,356 |
| | 41,594 |
| | 132,840 |
| | 124,790 |
|
| Taxes, other than income taxes | | 61,310 |
| | 75,188 |
| | 169,440 |
| | 212,783 |
|
| Total expenses | | 565,470 |
| | 727,409 |
| | 1,573,278 |
| | 2,045,166 |
|
| Operating income | | 82,657 |
| | 76,156 |
| | 206,454 |
| | 216,890 |
|
| Allowance for equity funds used during construction | | 2,057 |
| | 1,937 |
| | 5,366 |
| | 4,933 |
|
| Interest expense and other charges, net | | (16,557 | ) | | (16,414 | ) | | (49,170 | ) | | (48,989 | ) |
| Allowance for borrowed funds used during construction | | 737 |
| | 740 |
| | 1,918 |
| | 1,877 |
|
| Income before income taxes | | 68,894 |
| | 62,419 |
| | 164,568 |
| | 174,711 |
|
| Income taxes | | 25,390 |
| | 23,042 |
| | 60,351 |
| | 64,686 |
|
| Net income | | 43,504 |
| | 39,377 |
| | 104,217 |
| | 110,025 |
|
| Preferred stock dividends of subsidiaries | | 228 |
| | 228 |
| | 686 |
| | 686 |
|
| Net income attributable to Hawaiian Electric | | 43,276 |
| | 39,149 |
| | 103,531 |
| | 109,339 |
|
| Preferred stock dividends of Hawaiian Electric | | 270 |
| | 270 |
| | 810 |
| | 810 |
|
| Net income for common stock | | $ | 43,006 |
| | $ | 38,879 |
| | 102,721 |
| | 108,529 |
|
| Comprehensive income attributable to Hawaiian Electric | | $ | 43,010 |
| | $ | 38,889 |
| | $ | 102,732 |
| | $ | 108,561 |
|
| OTHER ELECTRIC UTILITY INFORMATION | | | | | | | | |
| Kilowatthour sales (millions) | | | | | | | | |
| Hawaiian Electric | | 1,874 |
| | 1,815 |
| | 5,016 |
| | 5,062 |
|
| Hawaii Electric Light | | 282 |
| | 273 |
| | 792 |
| | 793 |
|
| Maui Electric | | 312 |
| | 296 |
| | 848 |
| | 844 |
|
| | | 2,468 |
| | 2,384 |
| | 6,656 |
| | 6,699 |
|
| Wet-bulb temperature (Oahu average; degrees Fahrenheit) | | 74.9 |
| | 72.2 |
| | 70.2 |
| | 69.5 |
|
| Cooling degree days (Oahu) | | 1,711 |
| | 1,631 |
| | 3,687 |
| | 3,703 |
|
| Average fuel oil cost per barrel | | $ | 81.35 |
| | $ | 133.26 |
| | $ | 79.13 |
| | $ | 132.19 |
|
| | | | | | | | | |
| Twelve months ended September 30 | | | | | | 2015 | | 2014 |
| Return on average common equity (%) (simple average) | | | | | | | | |
| Hawaiian Electric | | | | | | 7.95 | | 9.63 |
| Hawaii Electric Light | | | | | | 6.30 | | 6.77 |
| Maui Electric | | | | | | 9.21 | | 8.55 |
| Hawaiian Electric Consolidated | | | | | | 7.86 | | 8.96 |
This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric’s Annual Report on SEC Form 10-K for the year ended December 31, 2014 and the consolidated financial statements and the notes thereto in Hawaiian Electric's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.
Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
| | | | | | | | |
| (dollars in thousands, except par value) | | September 30, 2015 | | December 31, 2014 |
| Assets | | |
| | |
|
| Property, plant and equipment | | | | |
| Utility property, plant and equipment | | |
| | |
|
| Land | | $ | 52,283 |
| | $ | 52,299 |
|
| Plant and equipment | | 6,216,114 |
| | 6,009,482 |
|
| Less accumulated depreciation | | (2,246,614 | ) | | (2,175,510 | ) |
| Construction in progress | | 196,681 |
| | 158,616 |
|
| Utility property, plant and equipment, net | | 4,218,464 |
| | 4,044,887 |
|
| Nonutility property, plant and equipment, less accumulated depreciation of $1,228 and $1,227 at respective dates | | 6,562 |
| | 6,563 |
|
| Total property, plant and equipment, net | | 4,225,026 |
| | 4,051,450 |
|
| Current assets | | |
| | |
|
| Cash and cash equivalents | | 10,704 |
| | 13,762 |
|
| Customer accounts receivable, net | | 162,468 |
| | 158,484 |
|
| Accrued unbilled revenues, net | | 123,578 |
| | 137,374 |
|
| Other accounts receivable, net | | 4,763 |
| | 4,283 |
|
| Fuel oil stock, at average cost | | 70,104 |
| | 106,046 |
|
| Materials and supplies, at average cost | | 58,973 |
| | 57,250 |
|
| Prepayments and other | | 46,891 |
| | 66,383 |
|
| Regulatory assets | | 79,950 |
| | 71,421 |
|
| Total current assets | | 557,431 |
| | 615,003 |
|
| Other long-term assets | | |
| | |
|
| Regulatory assets | | 817,998 |
| | 833,843 |
|
| Unamortized debt expense | | 7,586 |
| | 8,323 |
|
| Other | | 75,951 |
| | 81,838 |
|
| Total other long-term assets | | 901,535 |
| | 924,004 |
|
| Total assets | | $ | 5,683,992 |
| | $ | 5,590,457 |
|
| Capitalization and liabilities | | | | |
|
| Capitalization | | | | |
|
| Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 15,805,327 shares) | | $ | 105,388 |
| | $ | 105,388 |
|
| Premium on capital stock | | 578,930 |
| | 578,938 |
|
| Retained earnings | | 1,032,690 |
| | 997,773 |
|
| Accumulated other comprehensive income, net of income taxes-retirement benefit plans | | 56 |
| | 45 |
|
| Common stock equity | | 1,717,064 |
| | 1,682,144 |
|
| Cumulative preferred stock — not subject to mandatory redemption | | 34,293 |
| | 34,293 |
|
| Long-term debt, net | | 1,206,546 |
| | 1,206,546 |
|
| Total capitalization | | 2,957,903 |
| | 2,922,983 |
|
| Current liabilities | | | | |
|
| Short-term borrowings from non-affiliates | | 94,995 |
| | — |
|
| Accounts payable | | 124,779 |
| | 163,934 |
|
| Interest and preferred dividends payable | | 25,078 |
| | 22,316 |
|
| Taxes accrued | | 193,575 |
| | 250,402 |
|
| Regulatory liabilities | | 347 |
| | 632 |
|
| Other | | 75,450 |
| | 65,146 |
|
| Total current liabilities | | 514,224 |
| | 502,430 |
|
| Deferred credits and other liabilities | | | | |
|
| Deferred income taxes | | 625,422 |
| | 602,872 |
|
| Regulatory liabilities | | 361,904 |
| | 344,217 |
|
| Unamortized tax credits | | 83,648 |
| | 79,492 |
|
| Defined benefit pension and other postretirement benefit plans liability | | 570,028 |
| | 595,395 |
|
| Other | | 75,196 |
| | 76,636 |
|
| Total deferred credits and other liabilities | | 1,716,198 |
| | 1,698,612 |
|
| Contributions in aid of construction | | 495,667 |
| | 466,432 |
|
| Total capitalization and liabilities | | $ | 5,683,992 |
| | $ | 5,590,457 |
|
This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric’s Annual Report on SEC Form 10-K for the year ended December 31, 2014 and the consolidated financial statements and the notes thereto in Hawaiian Electric's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K.
American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited) |
| | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | Nine months ended September 30 |
| (in thousands) | | September 30, 2015 | | June 30, 2015 | | September 30, 2014 | | 2015 | | 2014 |
| Interest and dividend income | | |
| | |
| | |
| | | | |
| Interest and fees on loans | | $ | 46,413 |
| | $ | 46,035 |
| | $ | 45,532 |
| | $ | 137,646 |
| | $ | 133,065 |
|
| Interest and dividends on investment securities | | 4,213 |
| | 3,306 |
| | 2,773 |
| | 10,570 |
| | 8,758 |
|
| Total interest and dividend income | | 50,626 |
| | 49,341 |
| | 48,305 |
| | 148,216 |
| | 141,823 |
|
| Interest expense | | |
| | |
| | | | | | |
| Interest on deposit liabilities | | 1,355 |
| | 1,266 |
| | 1,312 |
| | 3,881 |
| | 3,774 |
|
| Interest on other borrowings | | 1,515 |
| | 1,487 |
| | 1,438 |
| | 4,468 |
| | 4,263 |
|
| Total interest expense | | 2,870 |
| | 2,753 |
| | 2,750 |
| | 8,349 |
| | 8,037 |
|
| Net interest income | | 47,756 |
| | 46,588 |
| | 45,555 |
| | 139,867 |
| | 133,786 |
|
| Provision for loan losses | | 2,997 |
| | 1,825 |
| | 1,550 |
| | 5,436 |
| | 3,566 |
|
| Net interest income after provision for loan losses | | 44,759 |
| | 44,763 |
| | 44,005 |
| | 134,431 |
| | 130,220 |
|
| Noninterest income | | |
| | |
| | | | | | |
| Fees from other financial services | | 5,639 |
| | 5,550 |
| | 5,642 |
| | 16,544 |
| | 15,987 |
|
| Fee income on deposit liabilities | | 5,883 |
| | 5,424 |
| | 5,109 |
| | 16,622 |
| | 14,175 |
|
| Fee income on other financial products | | 2,096 |
| | 2,103 |
| | 1,971 |
| | 6,088 |
| | 6,325 |
|
| Bank-owned life insurance | | 1,021 |
| | 1,058 |
| | 1,000 |
| | 3,062 |
| | 2,945 |
|
| Mortgage banking income | | 1,437 |
| | 2,068 |
| | 875 |
| | 5,327 |
| | 1,749 |
|
| Gains on sale of investment securities | | — |
| | — |
| | — |
| | — |
| | 2,847 |
|
| Other income, net | | 2,389 |
| | 239 |
| | 634 |
| | 3,363 |
| | 1,920 |
|
| Total noninterest income | | 18,465 |
| | 16,442 |
| | 15,231 |
| | 51,006 |
| | 45,948 |
|
| Noninterest expense | | |
| | |
| | | | | | |
| Compensation and employee benefits | | 22,728 |
| | 22,319 |
| | 19,892 |
| | 66,813 |
| | 60,050 |
|
| Occupancy | | 4,128 |
| | 4,009 |
| | 4,517 |
| | 12,250 |
| | 12,959 |
|
| Data processing | | 3,032 |
| | 2,953 |
| | 2,684 |
| | 9,101 |
| | 8,715 |
|
| Services | | 2,556 |
| | 2,833 |
| | 2,580 |
| | 7,730 |
| | 7,708 |
|
| Equipment | | 1,608 |
| | 1,690 |
| | 1,672 |
| | 4,999 |
| | 4,926 |
|
| Office supplies, printing and postage | | 1,511 |
| | 1,303 |
| | 1,415 |
| | 4,297 |
| | 4,487 |
|
| Marketing | | 934 |
| | 844 |
| | 948 |
| | 2,619 |
| | 2,690 |
|
| FDIC insurance | | 809 |
| | 773 |
| | 840 |
| | 2,393 |
| | 2,441 |
|
| Other expense | | 5,116 |
| | 4,755 |
| | 4,182 |
| | 14,076 |
| | 11,198 |
|
| Total noninterest expense | | 42,422 |
| | 41,479 |
| | 38,730 |
| | 124,278 |
| | 115,174 |
|
| Income before income taxes | | 20,802 |
| | 19,726 |
| | 20,506 |
| | 61,159 |
| | 60,994 |
|
| Income taxes | | 7,351 |
| | 6,875 |
| | 7,253 |
| | 21,382 |
| | 21,806 |
|
| Net income | | $ | 13,451 |
| | $ | 12,851 |
| | $ | 13,253 |
| | $ | 39,777 |
| | $ | 39,188 |
|
| Comprehensive income | | $ | 17,678 |
| | $ | 9,544 |
| | $ | 11,804 |
| | $ | 44,540 |
| | $ | 41,521 |
|
| OTHER BANK INFORMATION (annualized %, except as of period end) | | | | | | | | |
| Return on average assets | | 0.92 |
| | 0.89 |
| | 0.98 |
| | 0.92 |
| | 0.97 |
|
| Return on average equity | | 9.73 |
| | 9.38 |
| | 9.88 |
| | 9.69 |
| | 9.83 |
|
| Return on average tangible common equity | | 11.43 |
| | 11.04 |
| | 11.67 |
| | 11.40 |
| | 11.63 |
|
| Net interest margin | | 3.53 |
| | 3.52 |
| | 3.62 |
| | 3.52 |
| | 3.60 |
|
| Net charge-offs to average loans outstanding | | 0.10 |
| | 0.11 |
| | 0.04 |
| | 0.08 |
| | 0.01 |
|
| As of period end | | | | | | | | | | |
| Nonperforming assets to loans outstanding and real estate owned * | | 1.00 |
| | 0.70 |
| | 0.88 |
| | | | |
| Allowance for loan losses to loans outstanding | | 1.06 |
| | 1.04 |
| | 1.00 |
| | | | |
| Tangible common equity to tangible assets | | 8.23 |
| | 8.16 |
| | 8.48 |
| | | | |
| Tier-1 leverage ratio * | | 8.8 |
| | 8.8 |
| | 9.1 |
| | | | |
| Total capital ratio * | | 13.4 |
| | 13.5 |
| | 12.6 |
| | | | |
| Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions) | | $ | 7.5 |
| | $ | 7.5 |
| | $ | 8.8 |
| | | | |
* Regulatory basis. Capital ratios as of September 30, 2015 and June 30, 2015 calculated under Basel III rules, which became effective January 1, 2015.
Prior period financial statements reflect the retrospective application of ASU No. 2014-01, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects,” which was adopted as of January 1, 2015 and did not have a material impact on ASB’s financial condition or results of operations.
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI’s Annual Report on SEC Form 10-K for the year ended December 31, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.
American Savings Bank, F.S.B.
BALANCE SHEETS DATA
(Unaudited)
|
| | | | | | | | | | | | |
| (in thousands) | September 30, 2015 | | December 31, 2014 | |
| | | |
| | |
|
| Assets | | |
| | |
|
| Cash and due from banks | | $ | 103,934 |
| | $ | 107,233 |
|
| Interest-bearing deposits | | 73,041 |
| | 54,230 |
|
| Available-for-sale investment securities, at fair value | | 785,837 |
| | 550,394 |
|
| Stock in Federal Home Loan Bank, at cost | | 10,678 |
| | 69,302 |
|
| Loans receivable held for investment | | 4,535,404 |
| | 4,434,651 |
|
| Allowance for loan losses | | (48,274 | ) | | (45,618 | ) |
| Net loans | | 4,487,130 |
| | 4,389,033 |
|
| Loans held for sale, at lower of cost or fair value | | 5,598 |
| | 8,424 |
|
| Other | | 307,089 |
| | 305,416 |
|
| Goodwill | | 82,190 |
| | 82,190 |
|
| Total assets | | $ | 5,855,497 |
| | $ | 5,566,222 |
|
| Liabilities and shareholder’s equity | | | | |
| Deposit liabilities–noninterest-bearing | | $ | 1,422,843 |
| | $ | 1,342,794 |
|
| Deposit liabilities–interest-bearing | | 3,403,111 |
| | 3,280,621 |
|
| Other borrowings | | 368,593 |
| | 290,656 |
|
| Other | | 103,553 |
| | 118,363 |
|
| Total liabilities | | 5,298,100 |
| | 5,032,434 |
|
| Common stock | | 1 |
| | 1 |
|
| Additional paid in capital | | 339,980 |
| | 338,411 |
|
| Retained earnings | | 229,211 |
| | 211,934 |
|
| Accumulated other comprehensive loss, net of tax benefits | | | | |
| Net unrealized gains on securities | $ | 4,070 |
| |
| $ | 462 |
| |
| Retirement benefit plans | (15,865 | ) | (11,795 | ) | (17,020 | ) | (16,558 | ) |
| Total shareholder’s equity | | 557,397 |
| | 533,788 |
|
| Total liabilities and shareholder’s equity | | $ | 5,855,497 |
| | $ | 5,566,222 |
|
Prior period financial statements reflect the retrospective application of ASU No. 2014-01, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects,” which was adopted as of January 1, 2015 and did not have a material impact on ASB’s financial condition or results of operations.
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI’s Annual Report on SEC Form 10-K for the year ended December 31, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K.
EXPLANATION OF HEI’S USE OF CERTAIN UNAUDITED NON-GAAP MEASURES
HEI and Hawaiian Electric Company management use certain non-GAAP measures to evaluate the performance of the utility and HEI. Management believes these non-GAAP measures provide useful information and are a better indicator of the companies’ core operating activities. Core earnings and other financial measures as presented here may not be comparable to similarly titled measures used by other companies. The accompanying tables provide a reconciliation of reported GAAP1 earnings to non-GAAP core earnings and the adjusted return on average common equity (ROACE) for the utility and HEI consolidated.
The reconciling adjustment from GAAP earnings to core earnings is limited to the costs related to the pending merger between HEI and NextEra Energy, Inc. and the spin-off of ASB Hawaii, Inc. For more information on the pending merger, see HEI’s definitive proxy statement on Form DEFM14A filed on March 26, 2015. Management does not consider these items to be representative of the company’s fundamental core earnings.
The accompanying table also provides the calculation of utility GAAP O&M adjusted for costs related to the pending merger discussed above. “O&M-related net income neutral items” which are O&M expenses covered by specific surcharges or by third parties have also been excluded. These “O&M-related net income neutral items” are grossed-up in revenue and expense and do not impact net income.
|
| | | | | | | | | | | | | |
RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES | |
| Hawaiian Electric Industries, Inc. and Subsidiaries |
| Unaudited | | | | | |
| ($ in millions, except per share amounts) | | | | | |
| | Three months ended September 30 | | Nine months ended September 30 |
| | 2015 | 2014 | | 2015 | 2014 |
| HEI CONSOLIDATED NET INCOME | | | | | |
| GAAP (as reported) | $ | 50.7 |
| $ | 47.8 |
| | $ | 117.6 |
| $ | 134.9 |
|
| Excluding special items (after-tax): | | | | | |
| Costs related to pending merger with NextEra Energy, Inc. and spin-off of ASB Hawaii, Inc | 1.7 |
| 0.4 |
| | 13.6 |
| 0.6 |
|
| Non-GAAP (core) | $ | 52.4 |
| $ | 48.3 |
| | $ | 131.1 |
| $ | 135.4 |
|
| HEI CONSOLIDATED DILUTED EARNINGS PER SHARE | | | | |
| GAAP (as reported) | $ | 0.47 |
| $ | 0.46 |
| | $ | 1.11 |
| $ | 1.32 |
|
| Excluding special items (after-tax): | | | | | |
| Costs related to pending merger with NextEra Energy, Inc. and spin-off of ASB Hawaii, Inc | 0.02 |
| — |
| | 0.13 |
| 0.01 |
|
| Non-GAAP (core) | $ | 0.49 |
| $ | 0.47 |
| | $ | 1.23 |
| $ | 1.32 |
|
| HEI CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average) | | | | Twelve months ended September 30 |
| | | | | 2015 | 2014 |
| Based on GAAP | | | | 8.1 | % | 10.1 | % |
Based on non-GAAP (core)2 | | | | 9.1 | % | 10.1 | % |
| | | | | | |
| Note: Columns may not foot due to rounding | | | | | |
1 Accounting principles generally accepted in the United States of America | | | | | |
2 Calculated as core net income divided by average GAAP common equity | | | | | |
|
| | | | | | | | | | | | | |
RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES | |
| Hawaiian Electric Company, Inc. and Subsidiaries |
| Unaudited | | | | | |
| ($ in millions) | | | | | |
| | Three months ended September 30 | | Nine months ended September 30 |
| | 2015 | 2014 | | 2015 | 2014 |
| HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME | | | | | |
| GAAP (as reported) | $ | 43.0 |
| $ | 38.9 |
| | $ | 102.7 |
| $ | 108.5 |
|
| Excluding special items (after-tax): | | | | | |
| Costs related to pending merger with NextEra Energy, Inc. | — |
| — |
| | 0.3 |
| — |
|
| Non-GAAP (core) | $ | 43.0 |
| $ | 38.9 |
| | $ | 103.0 |
| $ | 108.5 |
|
| | | | | | |
| HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY | | | | Twelve months ended September 30 |
| (ROACE) (simple average) | | | | 2015 | 2014 |
| Based on GAAP | | | | 7.86 | % | 8.96 | % |
Based on non-GAAP (core)2 | | | | 7.88 | % | 8.96 | % |
| | | | | | |
| HAWAIIAN ELECTRIC CONSOLIDATED OTHER OPERATION | Three months ended September 30 | | Nine months ended September 30 |
| AND MAINTENANCE (O&M) EXPENSE | 2015 | 2014 | | 2015 | 2014 |
| GAAP (as reported) | $ | 103.7 |
| $ | 108.3 |
| | $ | 306.5 |
| $ | 295.5 |
|
Excluding O&M-related net income neutral items3 | 1.9 |
| 2.5 |
| | 5.4 |
| 7.5 |
|
| Excluding costs related to pending merger with NextEra Energy, Inc. | — |
| — |
| | 0.4 |
| — |
|
| Non-GAAP (Adjusted other O&M expense) | $ | 101.8 |
| $ | 105.8 |
| | $ | 300.7 |
| $ | 288.0 |
|
| Note: Columns may not foot due to rounding | | | |
1 Accounting principles generally accepted in the United States of America | | | | | |
2 Calculated as core net income divided by average GAAP common equity | | | | | |
3 Expenses covered by surcharges or by third parties recorded in revenues | | | | | |
