Hawaiian Electric Company, Inc. PFD H 5.250% (HAWLM) 8-K 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: October 21, 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 93813

(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 October 21, 2002, HEI issued the following news release:

HAWAIIAN ELECTRIC INDUSTRIES, INC. REPORTS THIRD QUARTER 2002 EARNINGS

HONOLULU—Hawaiian Electric Industries, Inc. (NYSE-HE) today reported income from continuing operations for the three months ended September 30, 2002 of $32.8 million, or 90 cents per share, compared with $28.7 million, or 85 cents per share in the same quarter of 2001. For the nine months ended September 30, 2002, income from continuing operations was $90.7 million, or $2.51 per share, compared with $82.5 million, or $2.47 per share in the same period last year.

“Thirty-two percent net income growth from our bank this quarter versus the same quarter last year boosted HEI’s income from continuing operations by 14%,” said Robert F. Clarke, HEI chairman, president and chief executive officer. “Lower interest expense at the holding company also contributed to HEI’s income from continuing operations growth.” Utility results were stable this quarter as compared with the same quarter of 2001. “Although income from continuing operations was up 14% this quarter, earnings per share from continuing operations were up only 6% due to an 8% increase in the average number of shares outstanding, primarily resulting from HEI’s November 2001 common stock offering.”

Electric utility net income during the quarter was $25.6 million versus $25.7 million in the same quarter last year. Electric utility net income for the nine months was consistent with the same period last year at $69.8 million.

“Increases in usage and the number of residential customers caused kilowatthour sales to grow by 1.8% for the quarter despite slightly cooler weather,” said Clarke. Increased operation and maintenance expenses and depreciation as compared with the same quarter last year offset the earnings impact of the kilowatthour sales increase. Other operations expense was higher primarily due to a $1.6 million decrease in net pension credits. In addition, maintenance expenses were higher primarily due to the timing and larger scope of generating unit overhauls.

Bank net income in the third quarter was $14.7 million compared to $11.1 million in the same quarter last year. Bank net income for the nine months was $42.8 million versus $33.2 million in the same period of 2001.

“Our bank’s net income continues to benefit from favorable interest rates that kept its cost of funds low,” said Clarke. The interest rate spread was 3.28% in the recent quarter versus 3.08% for the same quarter of 2001. “Also, delinquencies have been at five-year lows, which translated into a lower provision for loan losses in the third quarter as compared with the same quarter last year,” added Clarke. Increased financial services and deposit fee income were partially offset by increases in general and administrative expenses and writedowns of mortgage servicing rights as loans have experienced high prepayments in the current low interest rate environment. The adoption of new accounting rules established by the Financial Accounting Standards Board calling for the discontinuation of goodwill amortization added $1 million of the $3.6 million increase in bank net income for the third quarter as compared to the same quarter last year. For the nine months, the discontinuation of goodwill amortization resulted in a $2.9 million increase in bank net income.

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Continued low interest rates and record mortgage refinancing volume are, however, beginning to pressure the bank’s interest rate spread as the bank’s loan portfolio reprices lower while deposit rates are already at low levels.

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 June 30, 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.

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HAWAIIAN ELECTRIC INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,						Twelve months ended September 30,
	2002			2001			2002			2001			2002			2001
	(in thousands, except per share amounts)
Revenues
Electric utility	$	333,636		$	341,386		$	919,643		$	973,460		$	1,235,487		$	1,316,056
Bank		99,722			108,034			300,633			336,038			409,197			453,654
Other		(1,798	)		(2,128	)		(2,278	)		(1,530	)		(7,377	)		851
		431,560			447,292			1,217,998			1,307,968			1,637,307			1,770,561
Expenses
Electric utility		280,047			287,064			769,497			821,100			1,043,756			1,127,143
Bank		75,156			88,546			229,527			278,829			313,201			378,888
Other		4,650			2,631			13,913			9,354			17,801			12,502
		359,853			378,241			1,012,937			1,109,283			1,374,758			1,518,533
Operating income (loss)
Electric utility		53,589			54,322			150,146			152,360			191,731			188,913
Bank		24,566			19,488			71,106			57,209			95,996			74,766
Other		(6,448	)		(4,759	)		(16,191	)		(10,884	)		(25,178	)		(11,651	)
		71,707			69,051			205,061			198,685			262,549			252,028
Interest expense—other than bank		(17,751	)		(19,937	)		(54,618	)		(59,461	)		(73,883	)		(79,172	)
Allowance for borrowed funds used during construction		549			524			1,392			1,711			1,939			2,413
Preferred stock dividends of subsidiaries		(501	)		(501	)		(1,504	)		(1,504	)		(2,006	)		(2,006	)
Preferred securities distributions of trust subsidiaries		(4,008	)		(4,008	)		(12,026	)		(12,026	)		(16,035	)		(16,035	)
Allowance for equity funds used during construction		1,162			998			2,977			3,218			3,998			4,496
Income from continuing operations before income taxes		51,158			46,127			141,282			130,623			176,562			161,724
Income taxes		18,381			17,461			50,602			48,081			60,678			57,768
Income from continuing operations		32,777			28,666			90,680			82,542			115,884			103,956
Discontinued operations, net of income taxes
Loss from operations		—			(711	)		—			(1,254	)		—			(47,045	)
Net loss on disposals		—			(20,821	)		—			(20,821	)		(1,966	)		(20,821	)
Loss from discontinued operations		—			(21,532	)		—			(22,075	)		(1,966	)		(67,866	)
Net income	$	32,777		$	7,134		$	90,680		$	60,467		$	113,918		$	36,090
Per common share
Basic earnings (loss)
Continuing operations	$	0.90		$	0.85		$	2.51		$	2.47		$	3.24		$	3.12
Discontinued operations		—			(0.64	)		—			(0.66	)		(0.06	)		(2.04	)
	$	0.90		$	0.21		$	2.51		$	1.81		$	3.18		$	1.08
Diluted earnings (loss)
Continuing operations	$	0.89		$	0.84		$	2.49		$	2.46		$	3.22		$	3.11
Discontinued operations		—			(0.63	)		—			(0.66	)		(0.05	)		(2.03	)
	$	0.89		$	0.21		$	2.49		$	1.80		$	3.17		$	1.08
Dividends	$	0.62		$	0.62		$	1.86		$	1.86		$	2.48		$	2.48
Weighted-average number of common shares outstanding		36,435			33,716			36,150			33,454			35,770			33,305
Adjusted weighted-average shares		36,627			33,925			36,350			33,634			35,957			33,471
Income (loss) from continuing operations by segment
Electric utility	$	25,610		$	25,695		$	69,819		$	69,836		$	88,283		$	84,363
Bank		14,652			11,072			42,815			33,154			58,192			43,352
Other		(7,485	)		(8,101	)		(21,954	)		(20,448	)		(30,591	)		(23,759	)
Income from continuing operations	$	32,777		$	28,666		$	90,680		$	82,542		$	115,884		$	103,956

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, June 30, 2002 and September 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.

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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 fourth quarter using data as of September 30, 2002. 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 September 30,				Nine months ended September 30,				Twelve months ended September 30,
	2002		2001		2002		2001		2002		2001
	(in thousands, except per share amounts)
Consolidated
Reported net income	$	32,777	$	7,134	$	90,680	$	60,467	$	113,918	$	36,090
Goodwill amortization, net of tax benefits		—		961		—		2,877		968		3,831
Adjusted net income	$	32,777	$	8,095	$	90,680	$	63,344	$	114,886	$	39,921
Per common share
Reported basic earnings	$	0.90	$	0.21	$	2.51	$	1.81	$	3.18	$	1.08
Goodwill amortization, net of tax benefits		—		0.03		—		0.08		0.03		0.12
Adjusted basic earnings	$	0.90	$	0.24	$	2.51	$	1.89	$	3.21	$	1.20
Per common share
Reported diluted earnings	$	0.89	$	0.21	$	2.49	$	1.80	$	3.17	$	1.08
Goodwill amortization, net of tax benefits		—		0.03		—		0.08		0.03		0.11
Adjusted diluted earnings	$	0.89	$	0.24	$	2.49	$	1.88	$	3.20	$	1.19
Bank
Reported net income	$	14,652	$	11,072	$	42,815	$	33,154	$	58,192	$	43,352
Goodwill amortization, net of tax benefits		—		961		—		2,877		968		3,831
Adjusted net income	$	14,652	$	12,033	$	42,815	$	36,031	$	59,160	$	47,183

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HAWAIIAN ELECTRIC COMPANY, INC. (HECO) AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2002			2001			2002			2001
	(in thousands)
Operating revenues	$	332,453		$	340,231		$	916,402		$	969,979
Operating expenses
Fuel oil		85,311			96,665			218,901			266,995
Purchased power		87,123			87,670			240,744			253,067
Other operation		33,888			30,729			95,573			90,599
Maintenance		15,705			14,540			45,727			42,752
Depreciation		26,340			25,363			79,063			75,335
Taxes, other than income taxes		31,287			31,494			88,769			91,411
Income taxes		16,287			16,244			44,110			44,210
		295,941			302,705			812,887			864,369
Operating income		36,512			37,526			103,515			105,610
Other income
Allowance for equity funds used during construction		1,162			998			2,977			3,218
Other, net		858			530			2,435			2,467
		2,020			1,528			5,412			5,685
Income before interest and other charges		38,532			39,054			108,927			111,295
Interest and other charges
Interest on long-term debt		10,127			10,126			30,430			30,127
Amortization of net bond premium and expense		498			509			1,505			1,546
Other interest charges		430			832			1,313			4,245
Allowance for borrowed funds used during construction		(549	)		(524	)		(1,392	)		(1,711	)
Preferred stock dividends of subsidiaries		228			228			686			686
Preferred securities distributions of trust subsidiaries		1,918			1,918			5,756			5,756
		12,652			13,089			38,298			40,649
Income before preferred stock dividends of HECO		25,880			25,965			70,629			70,646
Preferred stock dividends of HECO		270			270			810			810
Net income for common stock	$	25,610		$	25,695		$	69,819		$	69,836
OTHER ELECTRIC UTILITY INFORMATION
Kilowatthour sales (millions)		2,515			2,471			7,117			7,010
Cooling degree days (Oahu)		1,539			1,578			3,611			3,711

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AMERICAN SAVINGS BANK, F.S.B. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2002			2001			2002			2001
				(in thousands)
Interest and dividend income:
Interest and fees on loans	$	50,210		$	53,760		$	152,300		$	178,665
Interest on mortgage-related securities		35,503		��	39,136			103,634			115,331
Interest and dividends on investment securities		1,880			4,071			5,979			13,163
Total interest and dividend income		87,593			96,967			261,913			307,159
Interest expense:
Interest on deposit liabilities		17,833			29,015			57,331			92,241
Interest on Federal Home Loan Bank advances		14,905			16,540			43,327			54,267
Interest on securities sold under repurchase agreements		5,683			6,563			15,256			22,922
Total interest expense		38,421			52,118			115,914			169,430
Net interest income		49,172			44,849			145,999			137,729
Provision for loan losses		1,500			3,000			8,000			9,000
Net interest income after provision for loan losses		47,672			41,849			137,999			128,729
Other income:
Fees from other financial services		5,416			4,512			15,381			12,594
Fees from deposit liabilities		4,091			2,309			11,717			6,713
Fee income on other financial products		2,592			2,282			7,647			5,850
Fee income on loans serviced by others, net		(882	)		663			(369	)		1,794
Gain (loss) on sale of securities		(913	)		(268	)		(640	)		3,731
Loss on investments		—			—			—			(6,164	)
Other income		1,825			1,569			4,984			4,361
Total other income		12,129			11,067			38,720			28,879
General and administrative expenses:
Compensation and employee benefits		14,753			13,090			44,046			38,647
Occupancy and equipment		7,896			7,225			22,387			21,324
Data processing		2,579			2,416			8,228			7,515
Consulting		1,582			671			4,374			2,298
Amortization of goodwill and core deposit intangibles		433			1,676			1,298			5,021
Other		7,992			8,350			25,280			25,594
Total general and administrative expenses		35,235			33,428			105,613			100,399
Income before minority interest and income taxes		24,566			19,488			71,106			57,209
Minority interests		42			48			131			162
Income taxes		8,519			7,015			24,102			19,835
Income before preferred stock dividends		16,005			12,425			46,873			37,212
Preferred stock dividends		1,353			1,353			4,058			4,058
Net income for common stock	$	14,652		$	11,072		$	42,815		$	33,154
Interest rate spread (%)		3.28			3.08			3.28			3.10

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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/    CURTIS Y. HARADA	/s/    ERNEST T. SHIRAKI
Curtis Y. Harada	Ernest T. Shiraki
Controller	Controller
(Principal Accounting Officer of HEI)	(Principal Accounting Officer of HECO)
Date: October 21, 2002	Date: October 21, 2002

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