Hawaiian Electric Company, Inc. PFD H 5.250% 8K Other events

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report: July 22, 2002


Exact Name of Registrant as Specified in Its Charter	Commission File Number	I.R.S. Employer Identification No.
Hawaiian Electric Industries, Inc.	1-8503	99-0208097
Hawaiian Electric Company, Inc.	1-4955	99-0040500

State of Hawaii

(State or other jurisdiction of incorporation)

900 Richards Street, Honolulu, Hawaii 96813

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code:

(808) 543-5662—Hawaiian Electric Industries, Inc. (HEI)

(808) 543-7771—Hawaiian Electric Company, Inc. (HECO)

None

(Former name or former address, if changed since last report.)

Item 5. Other Events

On July 22, 2002, HEI issued the following news release:

HAWAIIAN ELECTRIC INDUSTRIES, INC. REPORTS SECOND QUARTER 2002 EARNINGS

HONOLULU — Hawaiian Electric Industries, Inc. (NYSE—HE) today reported income from continuing operations for the three months ended June 30, 2002 of $31.0 million, or 86 cents per share, compared with $26.1 million, or 78 cents per share in the same quarter of 2001. For the six months ended June 30, 2002, income from continuing operations was $57.9 million, or $1.61 per share, compared with $53.9 million, or $1.62 per share in the same period last year.

“We had a strong second quarter,” said Robert F. Clarke, HEI chairman, president and chief executive officer. “Income from continuing operations was up 19% compared with the same quarter last year due to 45% net income growth from our bank and 5% net income growth from our utilities, partially offset by holding company investment writedowns and expenses. Earnings per share from continuing operations were up 10% for the quarter as compared with the same quarter last year notwithstanding an increase in the number of shares outstanding, primarily resulting from HEI’s November 2001 common stock offering.”

Electric utility net income during the quarter was $23.9 million versus $22.7 million in the same quarter last year. Electric utility net income for the six months was $44.2 million versus $44.1 million in the same period of 2001.

“Increases in usage and number of residential customers, warmer weather and sales growth in nontourism related commercial sectors boosted kilowatthour sales by 3.5% for the quarter despite lower visitor arrivals post-September 11,” said Clarke. Increased operation and maintenance expenses, taxes and depreciation as compared with the same quarter last year partially offset the earnings impact of the increase in kilowatthour sales. Maintenance expenses were higher primarily due to the timing and larger scope of generating unit overhauls.

Bank net income in the second quarter was $14.8 million compared to $10.2 million in the same quarter last year. Bank net income for the six months was $28.2 million versus $22.1 million in the same period of 2001.

“Our bank’s net income benefited from very favorable interest rates that lowered its cost of funds,” said Clarke. The interest rate spread was 3.31% in the recent quarter versus 3.07% for the same quarter of 2001. “Noninterest income for the quarter was also higher due to the absence of investment losses recorded in the second quarter of 2001, increased collection of service charges and increased financial services income,” added Clarke. In addition, the adoption of new accounting rules established by the Financial Accounting Standards Board calling for the discontinuation of goodwill amortization resulted in $1.0 million of the $4.6 million increase in bank net income for the second quarter as compared to the same quarter last year. For the first half of 2002, the discontinuation of goodwill amortization resulted in a $1.9 million increase in bank net income. These increases were partially offset by a decrease in gains on sales of securities and increases in operating, administrative and general expenses.

HEI is the largest Hawaii-based company, providing electric utility services to 95% of Hawaii’s residents and a wide array of banking services to consumers and businesses through the state’s third largest bank.

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 (including future revenues, expenses, earnings or losses or growth rates), ongoing business strategies or prospects and possible future actions, which may be provided by management, 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 assumptions about 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 “Forward-looking statements” (which is incorporated by reference herein) set forth on page v of HEI’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 and in HEI’s future periodic reports that discuss important factors that could cause HEI’s results to differ materially from those anticipated in such statements. Forward-looking statements speak only as of the date of this release.

###

Hawaiian Electric Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three months ended June 30,						Six months ended June 30,						Twelve months ended June 30,
	2002			2001			2002			2001			2002			2001
	(in thousands, except per share amounts)
Revenues
Electric utility	$	307,676		$	313,651		$	586,007		$	632,074		$	1,243,237		$	1,311,994
Bank		102,069			112,250			200,911			228,004			417,509			459,920
Other		(743	)		1,438			(480	)		598			(7,707	)		3,362

		409,002			427,339			786,438			860,676			1,653,039			1,775,276

Expenses
Electric utility		256,723			263,623			489,450			534,036			1,050,773			1,124,110
Bank		77,700			94,678			154,371			190,283			326,591			387,663
Other		5,094			4,338			9,263			6,723			15,782			10,882

		339,517			362,639			653,084			731,042			1,393,146			1,522,655

Operating income (loss)
Electric utility		50,953			50,028			96,557			98,038			192,464			187,884
Bank		24,369			17,572			46,540			37,721			90,918			72,257
Other		(5,837	)		(2,900	)		(9,743	)		(6,125	)		(23,489	)		(7,520	)

		69,485			64,700			133,354			129,634			259,893			252,621

Interest expense—other than bank		(18,340	)		(19,939	)		(36,867	)		(39,524	)		(76,069	)		(78,077	)
Allowance for borrowed funds used during construction		488			511			843			1,187			1,914			2,696
Preferred stock dividends of subsidiaries		(502	)		(501	)		(1,003	)		(1,003	)		(2,006	)		(2,006	)
Preferred securities distributions of trust subsidiaries		(4,009	)		(4,009	)		(8,018	)		(8,018	)		(16,035	)		(16,035	)
Allowance for equity funds used during construction		1,042			955			1,815			2,220			3,834			5,003

Income from continuing operations before income taxes		48,164			41,717			90,124			84,496			171,531			164,202
Income taxes		17,180			15,605			32,221			30,620			59,758			57,711

Income from continuing operations		30,984			26,112			57,903			53,876			111,773			106,491
Discontinued operations, net of income taxes
Loss from operations		—			(524	)		—			(543	)		(711	)		(55,486	)
Net loss on disposals		—			—			—			—			(22,787	)		—

Loss from discontinued operations		—			(524	)		—			(543	)		(23,498	)		(55,486	)

Net income	$	30,984		$	25,588		$	57,903		$	53,333		$	88,275		$	51,005

Per common share
Basic earnings
Continuing operations	$	0.86		$	0.78		$	1.61		$	1.62		$	3.19		$	3.22
Discontinued operations		—			(0.02	)		—			(0.02	)		(0.67	)		(1.68	)

	$	0.86		$	0.76		$	1.61		$	1.60		$	2.52		$	1.54

Diluted earnings
Continuing operations	$	0.85		$	0.78		$	1.60		$	1.61		$	3.17		$	3.21
Discontinued operations		—			(0.02	)		—			(0.02	)		(0.67	)		(1.67	)

	$	0.85		$	0.76		$	1.60		$	1.59		$	2.50		$	1.54

Dividends	$	0.62		$	0.62		$	1.24		$	1.24		$	2.48		$	2.48


Weighted-average number of common shares outstanding		36,189			33,481			36,005			33,321			35,085			33,035

Adjusted weighted-average shares		36,406			33,646			36,203			33,477			35,248			33,172

Income (loss) from continuing operations by segment
Electric utility	$	23,850		$	22,716		$	44,209		$	44,141		$	88,368		$	83,688
Bank		14,812			10,207			28,163			22,082			54,612			42,095
Other		(7,678	)		(6,811	)		(14,469	)		(12,347	)		(31,207	)		(19,292	)

Income from continuing operations	$	30,984		$	26,112		$	57,903		$	53,876		$	111,773		$	106,491

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in HEI’s Annual Report on SEC Form 10-K for the year ended December 31, 2001 and the consolidated financial statements and the notes thereto in HEI’s Quarterly Report on SEC Form 10-Q for the quarters ended March 31, 2002 and June 30, 2002 (when filed).

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 Industries, Inc. and Subsidiaries

GOODWILL

(Unaudited)

The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets” on January 1, 2002. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually.

The Company’s $83.2 million of goodwill is in the bank segment and was tested for impairment as of January 1, 2002 and will be tested for impairment annually in the third quarter. As of January 1, 2002, there was no impairment of goodwill. The fair value of the bank was estimated using a valuation method based on a market approach, which takes into consideration market values of comparable publicly traded companies and recent transactions of companies in the industry.

Application of the provisions of SFAS No. 142 has affected the comparability of current period results of operations with prior periods because the goodwill in the bank segment is no longer being amortized over a 25 year period. Thus, the following “transitional” disclosures present net income and earnings per common share “adjusted” as shown below:

	Three months ended June 30,				Six months ended June 30,				Twelve months ended June 30,
	2002		2001		2002		2001		2002		2001
	(in thousands, except per share amounts)
Consolidated
Reported net income	$	30,984	$	25,588	$	57,903	$	53,333	$	88,275	$	51,005
Goodwill amortization, net of tax benefits		—		962		—		1,916		1,929		3,824

Adjusted net income	$	30,984	$	26,550	$	57,903	$	55,249	$	90,204	$	54,829

Per common share
Reported basic earnings	$	0.86	$	0.76	$	1.61	$	1.60	$	2.52	$	1.54
Goodwill amortization, net of tax benefits		—		0.03		—		0.06		0.05		0.12

Adjusted basic earnings	$	0.86	$	0.79	$	1.61	$	1.66	$	2.57	$	1.66

Per common share
Reported diluted earnings	$	0.85	$	0.76	$	1.60	$	1.59	$	2.50	$	1.54
Goodwill amortization, net of tax benefits		—		0.03		—		0.06		0.06		0.11

Adjusted diluted earnings	$	0.85	$	0.79	$	1.60	$	1.65	$	2.56	$	1.65

Bank
Reported net income	$	14,812	$	10,207	$	28,163	$	22,082	$	54,612	$	42,095
Goodwill amortization, net of tax benefits		—		962		—		1,916		1,929		3,824

Adjusted net income	$	14,812	$	11,169	$	28,163	$	23,998	$	56,541	$	45,919

Hawaiian Electric Company, Inc. (HECO) and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2002			2001			2002			2001
	(in thousands)

Operating revenues	$	306,616		$	312,455		$	583,949		$	629,748


Operating expenses
Fuel oil		74,355			82,085			133,590			170,330
Purchased power		76,520			83,481			153,621			165,397
Other operation		32,462			30,096			61,685			59,870
Maintenance		16,010			13,015			30,022			28,212
Depreciation		26,363			25,363			52,723			49,972
Taxes, other than income taxes		30,792			29,426			57,482			59,917
Income taxes		15,032			14,362			27,823			27,966

		271,534			277,828			516,946			561,664


Operating income		35,082			34,627			67,003			68,084


Other income
Allowance for equity funds used during construction		1,042			955			1,815			2,220
Other, net		762			960			1,577			1,937

		1,804			1,915			3,392			4,157

Income before interest and other charges		36,886			36,542			70,395			72,241


Interest and other charges
Interest on long-term debt		10,167			10,072			20,303			20,001
Amortization of net bond premium and expense		507			507			1,007			1,037
Other interest charges		432			1,340			883			3,413
Allowance for borrowed funds used during construction		(488	)		(511	)		(843	)		(1,187	)
Preferred stock dividends of subsidiaries		229			229			458			458
Preferred securities distributions of trust subsidiaries		1,919			1,919			3,838			3,838

		12,766			13,556			25,646			27,560

Income before preferred stock dividends of HECO		24,120			22,986			44,749			44,681
Preferred stock dividends of HECO		270			270			540			540


Net income for common stock	$	23,850		$	22,716		$	44,209		$	44,141


Other Electric Utility Information
Kilowatthour sales (millions)		2,379			2,298			4,602			4,539
Cooling degree days (Oahu)		1,253			1,223			2,072			2,133

American Savings Bank, F.S.B. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three months ended June 30,					Six months ended June 30,
	2002		2001			2002		2001
	(in thousands)
Interest and dividend income:
Interest and fees on loans	$	50,468	$	60,766		$	102,090	$	124,905
Interest on mortgage-related securities		36,325		38,393			68,131		76,195
Interest and dividends on investment securities		1,873		3,432			4,099		9,092

Total interest and dividend income		88,666		102,591			174,320		210,192

Interest expense:
Interest on deposit liabilities		19,325		31,233			39,498		63,226
Interest on Federal Home Loan Bank advances		14,440		18,070			28,422		37,727
Interest on securities sold under repurchase agreements		5,612		7,509			9,573		16,359

Total interest expense		39,377		56,812			77,493		117,312


Net interest income		49,289		45,779			96,827		92,880
Provision for loan losses		3,000		3,000			6,500		6,000


Net interest income after provision for loan losses		46,289		42,779			90,327		86,880

Other income:
Fees from other financial services		5,345		4,318			9,965		8,082
Fees from deposit liabilities		4,151		2,211			7,626		4,404
Fee income on other financial products		2,368		2,428			5,055		3,568
Gain on sale of securities		117		4,035			273		3,999
Loss on investments		—		(5,417	)		—		(6,164	)
Other income		1,422		2,084			3,672		3,923

Total other income		13,403		9,659			26,591		17,812

General and administrative expenses:
Compensation and employee benefits		15,276		13,111			29,293		25,557
Office occupancy		7,376		7,109			14,491		14,099
Service bureau		2,664		2,419			5,340		4,844
Consulting		1,146		1,097			2,792		1,627
Amortization of goodwill and core deposit intangibles		432		1,677			865		3,345
Other		8,429		9,453			17,597		17,499

Total general and administrative expenses		35,323		34,866			70,378		66,971


Income before minority interest and income taxes		24,369		17,572			46,540		37,721

Minority interests		44		55			89		114
Income taxes		8,161		5,958			15,583		12,820


Income before preferred stock dividends		16,164		11,559			30,868		24,787
Preferred stock dividends		1,352		1,352			2,705		2,705


Net income for common stock	$	14,812	$	10,207		$	28,163	$	22,082


Interest rate spread (%)		3.31		3.07			3.29		3.08

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. The signature of the undersigned companies shall be deemed to relate only to matters having reference to such companies and any subsidiaries thereof.

HAWAIIAN ELECTRIC INDUSTRIES, INC. (Registrant)		HAWAIIAN ELECTRIC COMPANY, INC. (Registrant)

	/s/		/s/
	Robert F. Mougeot Financial Vice President, Treasurer and Chief Financial Officer (Principal Financial Officer of HEI)		Richard A. von Gnechten Financial Vice President (Principal Financial Officer of HECO)

Date: July 22, 2002

Hawaiian Electric Company, Inc. PFD H 5.250% (HAWLM) 8-KOther events