HEI Exhibit 99.1
November 1, 2007
Contact: | Suzy P. Hollinger | (808) 543-7385 Telephone | ||
Manager, Treasury and Investor Relations | (808) 532-5812 Facsimile | |||
E-mail:shollinger@hei.com |
HAWAIIAN ELECTRIC INDUSTRIES, INC. REPORTS THIRD QUARTER 2007 EARNINGS
HONOLULU — Hawaiian Electric Industries, Inc.(NYSE – HE) today reported net income for the quarter ended September 30, 2007 of $19.9 million, or $0.24 per share, compared with $32.3 million, or $0.40 per share for the same quarter of 2006. “Third quarter results were significantly impacted by the recognition of a reserve for a potential refund to Oahu electric customers of $15.0 million ($8.3 million net of taxes or $0.10 per share) resulting from an amended proposed decision and order on Hawaiian Electric Company’s 2005 test year rate case,” said Constance H. Lau, HEI’s president and chief executive officer. “Results were also down quarter-over-quarter as our utility continued to incur higher costs to provide reliable electric services and our bank continued to experience margin compression and increased its loss reserve primarily due to commercial loans to a single borrower,” said Lau.
UTILITY RESULTS
Electric utility net income for the third quarter of 2007 was $12.9 million compared with $23.7 million for the same quarter in 2006. “Reserves made for the potential rate case refund to Oahu customers and higher quarter-over-quarter other operation and maintenance (O&M) costs
Hawaiian Electric Industries, Inc. News Release
November 1, 2007
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more than offset the impacts of the interim rate relief received for our Hawaii Island utility,” said Lau.
As previously disclosed, the potential refund resulted from the exclusion of a prepaid pension asset from rate base in the Hawaii Public Utilities Commission’s (PUC) proposed decision and order on HECO’s 2005 rate case. In its interim decision on the case, the PUC had allowed HECO to include the prepaid pension asset in rate base.
Kilowatthour sales were essentially flat compared with the same quarter in 2006. Lower consumption by large commercial customers was partially offset by new load growth and warmer weather.
Other O&M expenses for the quarter were higher by $12.4 million due primarily to $5.4 million of production maintenance expenses resulting from higher generating station maintenance and the increased number and scope of generating unit overhauls and $1.7 million of increased employee benefits expenses. The remaining increase in O&M expenses of $5.3 million includes costs to execute energy efficient programs and ensure reliable operations.
Depreciation and amortization expenses were higher by $1.7 million quarter-over-quarter due to 2006 additions to plant in service, including Hawaiian Electric Company’s new dispatch center, the Ford Island substation, and Maui Electric Company’s 18-megawatt steam turbine.
Recovery of increased O&M expenses and capital expenditures were primary reasons all three utilities—Hawaiian Electric Company, Hawaii Electric Light Company and Maui Electric Company—have filed rate cases with the Hawaii Public Utilities Commission.
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November 1, 2007
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BANK RESULTS
Bank net income was $11.7 million in the third quarter of 2007 compared to $13.5 million for the same quarter last year. “The volatility in the capital markets from the housing market slowdown and liquidity issues in the third quarter made it a difficult environment for financial institutions. Fortunately, we were fairly well-insulated from the deteriorating credit conditions that have impacted many banks during the quarter,” said Lau. “The interest rate environment remained challenging and results for the quarter were impacted by increased funding costs due to the continued shift in mix from lower costing deposit accounts to higher costing CDs and other borrowings, as well as higher provision expenses primarily related to a single commercial borrower,” Lau added.
Net interest income in the third quarter of 2007 was $47.7 million compared to $49.2 million in the third quarter of 2006. Increased interest income, primarily due to higher balances on loans and other investments, was more than offset by increased interest expense due to higher rates on deposits and higher balances of other borrowings. Net interest margin was 3.01% in the third quarter of 2007, compared with 3.10% in the third quarter of 2006.
The bank provided $2.7 million for possible loan losses in the third quarter of 2007 compared to no provision in the third quarter of 2006. “The bank’s overall credit quality remained good during the third quarter. The provision recorded in the quarter was primarily attributable to the commercial borrower for which we provisioned last quarter, and is not reflective of a trend in the overall credit quality of the loan portfolio,” said Lau.
Noninterest income in the third quarter increased $1.6 million compared to the third quarter of 2006, due primarily to higher fee income on deposits. In addition, noninterest income
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November 1, 2007
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in the third quarter of 2006 included a $1.7 million gain on sale of securities. There were no similar gains in the third quarter of 2007.
Noninterest expense decreased slightly quarter-over-quarter.
HOLDING AND OTHER COMPANIES’ RESULTS
The holding and other companies’ net losses were $4.7 million in the third quarter of 2007 and $4.8 million in the third quarter of 2006.
WEBCAST AND TELECONFERENCE
Hawaiian Electric Industries, Inc. will conduct a webcast and teleconference call to review its third quarter on Friday, November 2, 2007, at 7:00 a.m. Hawaii Time (1:00 p.m. Eastern Time). The event can be accessed through HEI’s website athttp://www.hei.com or by dialing (800) 435-1261, passcode: 62906597 for the teleconference call.
An online replay of the webcast will be available at the same website beginning about two hours after the event. Replays of the teleconference call will also be available approximately two hours after the event through November 16, 2007, by dialing (888) 286-8010, passcode: 62187695.
Representing management will be Constance H. Lau, president and chief executive officer, Hawaiian Electric Industries, Inc., chairman, Hawaiian Electric Company, Inc. and chairman, president and chief executive officer, American Savings Bank, F.S.B.; T. Michael May, president and chief executive officer, Hawaiian Electric Company, Inc.; Timothy K. Schools, chief operating officer, American Savings Bank, F.S.B.;
Hawaiian Electric Industries, Inc. News Release
November 1, 2007
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and Eric K. Yeaman, financial vice president, treasurer and chief financial officer, Hawaiian Electric Industries, Inc. HEI supplies power to over 400,000 customers or 95% of Hawaii’s population through its electric utilities, Hawaiian Electric Company, Hawaii Electric Light Company and Maui Electric Company, and provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, the state’s third largest financial institution based on year-end asset size.
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November 1, 2007
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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 the “Forward-Looking Statements” discussion (which is incorporated by reference herein) set forth on page iv of HEI’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, 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. (HEI) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended September 30 | Nine months ended September 30 | Twelve months ended September 30 | ||||||||||||||||||||||
(in thousands, except per share amounts) | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | ||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Electric utility | $ | 567,615 | $ | 569,838 | $ | 1,508,005 | $ | 1,548,861 | $ | 2,014,034 | $ | 2,059,401 | ||||||||||||
Bank | 105,507 | 103,338 | 317,493 | 305,898 | 419,960 | 407,207 | ||||||||||||||||||
Other | 339 | 718 | 2,749 | (934 | ) | 1,332 | 11,976 | |||||||||||||||||
673,461 | 673,894 | 1,828,247 | 1,853,825 | 2,435,326 | 2,478,584 | |||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Electric utility | 536,249 | 521,187 | 1,434,858 | 1,414,784 | 1,908,246 | 1,885,407 | ||||||||||||||||||
Bank | 86,960 | 82,760 | 260,824 | 232,146 | 348,485 | 305,647 | ||||||||||||||||||
Other | 2,235 | 3,591 | 10,698 | 10,659 | 13,568 | 15,231 | ||||||||||||||||||
625,444 | 607,538 | 1,706,380 | 1,657,589 | 2,270,299 | 2,206,285 | |||||||||||||||||||
Operating income (loss) | ||||||||||||||||||||||||
Electric utility | 31,366 | 48,651 | 73,147 | 134,077 | 105,788 | 173,994 | ||||||||||||||||||
Bank | 18,547 | 20,578 | 56,669 | 73,752 | 71,475 | 101,560 | ||||||||||||||||||
Other | (1,896 | ) | (2,873 | ) | (7,949 | ) | (11,593 | ) | (12,236 | ) | (3,255 | ) | ||||||||||||
48,017 | 66,356 | 121,867 | 196,236 | 165,027 | 272,299 | |||||||||||||||||||
Interest expense–other than on deposit liabilities and other bank borrowings | (19,589 | ) | (18,275 | ) | (59,382 | ) | (56,526 | ) | (78,534 | ) | (74,880 | ) | ||||||||||||
Allowance for borrowed funds used during construction | 656 | 838 | 1,840 | 2,259 | 2,460 | 2,819 | ||||||||||||||||||
Preferred stock dividends of subsidiaries | (474 | ) | (471 | ) | (1,420 | ) | (1,417 | ) | (1,893 | ) | (1,890 | ) | ||||||||||||
Allowance for equity funds used during construction | 1,336 | 1,838 | 3,770 | 4,974 | 5,144 | 6,404 | ||||||||||||||||||
Income before income taxes | 29,946 | 50,286 | 66,675 | 145,526 | 92,204 | 204,752 | ||||||||||||||||||
Income taxes | 10,065 | 17,963 | 22,481 | 53,642 | 31,893 | 75,344 | ||||||||||||||||||
Net income | $ | 19,881 | $ | 32,323 | $ | 44,194 | $ | 91,884 | $ | 60,311 | $ | 129,408 | ||||||||||||
Per common share | ||||||||||||||||||||||||
Basic earnings | $ | 0.24 | $ | 0.40 | $ | 0.54 | $ | 1.13 | $ | 0.74 | $ | 1.60 | ||||||||||||
Diluted earnings | $ | 0.24 | $ | 0.40 | $ | 0.54 | $ | 1.13 | $ | 0.74 | $ | 1.59 | ||||||||||||
Dividends | $ | 0.31 | $ | 0.31 | $ | 0.93 | $ | 0.93 | $ | 1.24 | $ | 1.24 | ||||||||||||
Weighted-average number of common shares outstanding | 82,481 | 81,213 | 81,949 | 81,099 | 81,781 | 81,055 | ||||||||||||||||||
Adjusted weighted-average shares | 82,640 | 81,556 | 82,180 | 81,383 | 81,984 | 81,319 | ||||||||||||||||||
Net income (loss) by segment | ||||||||||||||||||||||||
Electric utility | $ | 12,875 | $ | 23,666 | $ | 23,978 | $ | 61,940 | $ | 36,985 | $ | 80,126 | ||||||||||||
Bank | 11,731 | 13,470 | 35,909 | 46,515 | 45,176 | 64,174 | ||||||||||||||||||
Other | (4,725 | ) | (4,813 | ) | (15,693 | ) | (16,571 | ) | (21,850 | ) | (14,892 | ) | ||||||||||||
Net income | $ | 19,881 | $ | 32,323 | $ | 44,194 | $ | 91,884 | $ | 60,311 | $ | 129,408 | ||||||||||||
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, 2006 and the consolidated financial statements and the notes thereto in HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007 (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 Company, Inc. (HECO) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
(in thousands) | 2007 | 2006 | 2007 | 2006 | ||||||||||||
Operating revenues | $ | 561,720 | $ | 568,236 | $ | 1,499,766 | $ | 1,545,557 | ||||||||
Operating expenses | ||||||||||||||||
Fuel oil | 222,721 | 227,288 | 549,771 | 594,940 | ||||||||||||
Purchased power | 144,918 | 138,758 | 390,161 | 378,916 | ||||||||||||
Other operation | 54,113 | 46,612 | 154,949 | 136,565 | ||||||||||||
Maintenance | 28,594 | 23,653 | 85,799 | 63,087 | ||||||||||||
Depreciation | 34,273 | 32,539 | 102,812 | 97,614 | ||||||||||||
Taxes, other than income taxes | 51,389 | 51,985 | 138,839 | 142,726 | ||||||||||||
Income taxes | 4,976 | 14,665 | 15,974 | 38,909 | ||||||||||||
540,984 | 535,500 | 1,438,305 | 1,452,757 | |||||||||||||
Operating income | 20,736 | 32,736 | 61,461 | 92,800 | ||||||||||||
Other income | ||||||||||||||||
Allowance for equity funds used during construction | 1,336 | 1,838 | 3,770 | 4,974 | ||||||||||||
Other, net | 3,819 | 1,379 | (1,330 | ) | 2,809 | |||||||||||
5,155 | 3,217 | 2,440 | 7,783 | |||||||||||||
Income before interest and other charges | 25,891 | 35,953 | 63,901 | 100,583 | ||||||||||||
Interest and other charges | ||||||||||||||||
Interest on long-term debt | 11,478 | 10,777 | 34,364 | 32,331 | ||||||||||||
Amortization of net bond premium and expense | 621 | 565 | 1,813 | 1,651 | ||||||||||||
Other interest charges | 1,075 | 1,285 | 4,090 | 5,424 | ||||||||||||
Allowance for borrowed funds used during construction | (656 | ) | (838 | ) | (1,840 | ) | (2,259 | ) | ||||||||
Preferred stock dividends of subsidiaries | 228 | 228 | 686 | 686 | ||||||||||||
12,746 | 12,017 | 39,113 | 37,833 | |||||||||||||
Income before preferred stock dividends of HECO | 13,145 | 23,936 | 24,788 | 62,750 | ||||||||||||
Preferred stock dividends of HECO | 270 | 270 | 810 | 810 | ||||||||||||
Net income for common stock | $ | 12,875 | $ | 23,666 | $ | 23,978 | $ | 61,940 | ||||||||
OTHER ELECTRIC UTILITY INFORMATION | — | |||||||||||||||
Kilowatthour sales (millions) | 2,663 | 2,678 | 7,568 | 7,528 | ||||||||||||
Cooling degree days (Oahu) | 1,566 | 1,469 | 3,666 | 3,321 | ||||||||||||
Average fuel cost per barrel | $ | 74.78 | $ | 74.35 | $ | 65.52 | $ | 69.09 |
This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in HECO’s Annual Report on SEC Form 10-K for the year ended December 31, 2006 and the consolidated financial statements and the notes thereto in HECO's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007 (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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American Savings Bank, F.S.B. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended September 30 | Nine months ended September 30 | |||||||||||
(in thousands) | 2007 | 2006 | 2007 | 2006 | ||||||||
Interest and dividend income | ||||||||||||
Interest and fees on loans | $ | 61,817 | $ | 59,417 | $ | 182,191 | $ | 171,893 | ||||
Interest and dividends on investment and mortgage-related securities | 26,497 | 28,368 | 85,090 | 89,315 | ||||||||
88,314 | 87,785 | 267,281 | 261,208 | |||||||||
Interest expense | ||||||||||||
Interest on deposit liabilities | 20,381 | 19,701 | 61,951 | 52,095 | ||||||||
Interest on other borrowings | 20,243 | 18,891 | 57,230 | 54,361 | ||||||||
40,624 | 38,592 | 119,181 | 106,456 | |||||||||
Net interest income | 47,690 | 49,193 | 148,100 | 154,752 | ||||||||
Provision for loan losses | 2,700 | — | 3,900 | — | ||||||||
Net interest income after provision for loan losses | 44,990 | 49,193 | 144,200 | 154,752 | ||||||||
Noninterest income | ||||||||||||
Fees from other financial services | 7,153 | 6,548 | 20,539 | 19,730 | ||||||||
Fee income on deposit liabilities | 6,583 | 4,653 | 19,095 | 13,218 | ||||||||
Fee income on other financial products | 1,977 | 1,739 | 5,845 | 6,308 | ||||||||
Gain on sale of securities | — | 1,735 | — | 1,735 | ||||||||
Other income | 1,480 | 878 | 4,733 | 3,699 | ||||||||
17,193 | 15,553 | 50,212 | 44,690 | |||||||||
Noninterest expense | ||||||||||||
Compensation and employee benefits | 16,173 | 17,398 | 52,733 | 52,711 | ||||||||
Occupancy | 5,418 | 4,942 | 15,707 | 13,895 | ||||||||
Equipment | 3,630 | 3,768 | 10,893 | 10,900 | ||||||||
Services | 6,385 | 5,600 | 22,638 | 13,441 | ||||||||
Data processing | 2,596 | 2,534 | 7,799 | 7,541 | ||||||||
Other expense | 9,456 | 9,926 | 27,972 | 27,202 | ||||||||
43,658 | 44,168 | 137,742 | 125,690 | |||||||||
Income before income taxes | 18,525 | 20,578 | 56,670 | 73,752 | ||||||||
Income taxes | 6,794 | 7,108 | 20,761 | 27,237 | ||||||||
Net income | $ | 11,731 | $ | 13,470 | $ | 35,909 | $ | 46,515 | ||||
Net interest margin (%) | 3.01 | 3.10 | 3.09 | 3.23 |
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, 2006 and the consolidated financial statements and the notes thereto in HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007 (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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