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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
HAWAIIAN ELECTRIC INDUSTRIES CAPITAL TRUST I
(Exact Name of Registrant as Specified in Its Certificate of Trust)
Commission File Number: 1-8503-01
Delaware 52-6829385
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o The Bank of New York, 101 Barclay Street, 21st Floor, New York, N.Y. 10286
(212) 815-5084
Attention: Corporate Trust Trustee Administration
(Address, including zip code, and telephone number, including area code of
principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
8.36% Trust Originated New York Stock Exchange
Preferred Securities (TOPrS)
(and the related guarantee of
Hawaiian Electric Industries,
Inc.)
Securities registered pursuant to Section 12(g) of the Act: None
HEI PREFERRED FUNDING, LP
(Exact Name of Registrant as Specified in Its Certificate of Limited
Partnership)
Commission File Number: 1-8503-02
Delaware 52-2007237
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) No.)
300 Delaware Avenue, Suite 1704, Wilmington, Delaware 19801 (302) 427-5738
(Address, including zip code, and telephone number, including area code of
principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
8.36% Partnership Preferred None
Securities(and the related
guarantee of Hawaiian Electric
Industries, Inc.)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--- ---
As of March 31, 1998, no common securities of the Registrants were held by
nonaffiliates of the Registrants.
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Hawaiian Electric Industries Capital Trust I
HEI Preferred Funding, LP
Form 10-Q--Quarter ended March 31, 1998
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial statements
Hawaiian Electric Industries Capital Trust I
--------------------------------------------
Balance sheets (unaudited) - March 31, 1998 and
December 31, 1997.............................................1
Statements of earnings (unaudited) - for the three
months ended March 31, 1998 and the period February 4,
1997 (inception) to March 31, 1997............................1
Statements of changes in stockholders' equity (unaudited) -
for the three months ended March 31, 1998 and the
period February 4, 1997 (inception) to March 31, 1997.........2
Statements of cash flows (unaudited) - for the three
months ended March 31, 1998 and the period February 4,
1997 (inception) to March 31, 1997............................2
Notes to financial statements (unaudited)......................3
HEI Preferred Funding, LP
-------------------------
Balance sheets (unaudited) - March 31, 1998 and December 31,
1997..........................................................4
Statements of earnings (unaudited) - for the three months
ended March 31, 1998 and the period February 4, 1997
(inception) to March 31, 1997.................................4
Statements of changes in partners' capital (unaudited) -
for the three months ended March 31, 1998 and the
period February 4, 1997 (inception) to March 31, 1997.........5
Statements of cash flows (unaudited) - for the three months
ended March 31, 1998 and the period February 4, 1997
(inception) to March 31, 1997.................................5
Notes to financial statements (unaudited)......................6
Item 2. Management's discussion and analysis of financial condition
and results of operations.....................................6
PART II. OTHER INFORMATION
Item 1. Legal proceedings..............................................7
Item 6. Exhibits and reports on Form 8-K...............................7
Signatures..............................................................8
ii
PART I - FINANCIAL INFORMATION
- -----------------------------------------------------------------------------------------------------------
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
Hawaiian Electric Industries Capital Trust I
BALANCE SHEETS (UNAUDITED)
(in thousands) March 31, 1998 December 31, 1997
- -----------------------------------------------------------------------------------------------------------
Assets
- ------
Investment in partnership preferred securities.............. $103,093 $103,093
==================== ======================
Stockholders' equity
- --------------------
Preferred securities (8.36% Trust Originated Preferred
Securities; 4,000,000 authorized, issued and outstanding;
$25 liquidation amount per security)..................... $100,000 $100,000
Common securities (8.36% Trust Common Securities;
123,720 authorized, issued and outstanding;
$25 liquidation amount per security)..................... 3,093 3,093
-------------------- ----------------------
$103,093 $103,093
==================== ======================
Hawaiian Electric Industries Capital Trust I
STATEMENTS OF EARNINGS (UNAUDITED)
February 4, 1997
Three months ended (inception) to
(in thousands) March 31, 1998 March 31, 1997
- --------------------------------------------------------------------------------------------------------------
Earnings-equity in earnings of HEI Preferred Funding, LP.... $ 2,155 $ 1,317
Distribution on preferred securities........................ (2,090) (1,277)
-------------------- ------------------------
Earnings available for common securities.................... $ 65 $ 40
==================== ========================
Note: Hawaiian Electric Industries, Inc. owns all of Hawaiian Electric
Industries Capital Trust I's common securities. Therefore, per share data
is not meaningful.
See accompanying notes to financial statements.
1
Hawaiian Electric Industries Capital Trust I
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Three months February 4, 1997
ended (inception) to
(in thousands) March 31, 1998 March 31, 1997
- --------------------------------------------------------------------------------------------------------------
Preferred securities, beginning of period................. $100,000 $ --
Issuance of preferred securities on
February 4, 1997 (inception)........................ -- 100,000
------------------ ----------------------
Balance, end of period................................. 100,000 100,000
------------------ ----------------------
Common securities, beginning of period................... 3,093 --
Issuance of common securities on
February 4, 1997 (inception)........................ -- 3,093
------------------ ----------------------
Balance, end of period................................. 3,093 3,093
------------------ ----------------------
Retained earnings, beginning of period................... -- --
Earnings available for common securities............... 65 40
Distribution on common securities...................... (65) (40)
------------------ ----------------------
Balance, end of period................................. -- --
------------------ ----------------------
Total stockholders' equity............................... $103,093 $103,093
================== ======================
Hawaiian Electric Industries Capital Trust I
STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months February 4, 1997
ended (inception) to
(in thousands) March 31, 1998 March 31, 1997
- --------------------------------------------------------------------------------------------------------------
Cash flows from operating activities--
Earnings before distribution on preferred securities...... $ 2,155 $ 1,317
Equity in earnings of HEI Preferred Funding, LP........... (2,155) (1,317)
Distribution from HEI Preferred Funding, LP............... 2,155 1,317
-------------------- ----------------------
Net cash provided by operating activities................. 2,155 1,317
-------------------- ----------------------
Cash flows used in investing activity--purchase of
partnership preferred securities on February 4, 1997
(inception)............................................. -- (103,093)
-------------------- ----------------------
Cash flows from financing activities--
Proceeds from issuance of preferred securities on
February 4, 1997 (inception)............................ -- 100,000
Proceeds from issuance of common securities on
February 4, 1997 (inception)............................ -- 3,093
Distribution on common securities......................... (65) (40)
Distribution on preferred securities...................... (2,090) (1,277)
-------------------- ----------------------
Net cash provided by (used in) financing activities....... (2,155) 101,776
-------------------- ----------------------
Net change in cash........................................ -- --
Cash, beginning of period................................. -- --
-------------------- ----------------------
Cash, end of period....................................... $ -- $ --
==================== ======================
See accompanying notes to financial statements.
2
Hawaiian Electric Industries Capital Trust I
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
- --------------------------------------------------------------------------------
(1) Basis of presentation
- --------------------------
The accompanying unaudited financial statements have been prepared in conformity
with generally accepted accounting principles (GAAP) for interim financial
information and with the instructions to Securities and Exchange Commission
(SEC) Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. The accompanying unaudited financial statements should be
read in conjunction with the financial statements and notes thereto in Hawaiian
Electric Industries Capital Trust I's Annual Report on SEC Form 10-K for the
fiscal year ended December 31, 1997. In preparing the Trust's financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the balance sheet and the reported amounts
of earnings for the period. Actual results could differ significantly from those
estimates.
In the opinion of the management of Hawaiian Electric Industries Capital Trust I
(the Trust), the accompanying unaudited financial statements contain all
material adjustments required by GAAP to present fairly the Trust's financial
position as of March 31, 1998 and December 31, 1997, and the results of its
operations and its cash flows for the three months ended March 31, 1998 and the
period February 4, 1997 (inception) to March 31, 1997. All such adjustments are
of a normal recurring nature unless otherwise disclosed in this Form 10-Q or
other referenced material. The Trust was formed under Delaware law on December
19, 1996, but engaged in no activity until it was capitalized through the
issuance of the Trust Preferred Securities and Trust Common Securities on
February 4, 1997 (inception) with the proceeds from the sale of the Trust
Preferred Securities and the Common Securities.
3
HEI Preferred Funding, LP
BALANCE SHEETS (UNAUDITED)
(in thousands) March 31, 1998 December 31, 1997
- ------------------------------------------------------------------------------------------------------------
Assets
- ------
Cash........................................................... $ 38 $ 1
Interest receivable............................................ 27 10
Investments
Corporate commercial paper.................................. 1,165 1,263
Affiliate debentures........................................ 120,073 120,073
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$121,303 $121,347
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Liabilities and partners' capital
- ---------------------------------
Liabilities - accounts payable to affiliate.................... $ 17 $ 61
Partners' capital
Limited partner interest.................................... 103,093 103,093
General partner interest.................................... 18,193 18,193
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Total partners' capital..................................... 121,286 121,286
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$121,303 $121,347
================== =====================
HEI Preferred Funding, LP
STATEMENTS OF EARNINGS (UNAUDITED)
Three months February 4, 1997
ended (inception) to
(in thousands) March 31, 1998 March 31, 1997
- -----------------------------------------------------------------------------------------------------------
Earnings
--------
Interest income
Affiliate debentures........................................ $2,509 $1,534
Corporate commercial paper.................................. 17 --
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$2,526 $1,534
================== ===================
Note: Hycap Management, Inc., a wholly owned subsidiary of Hawaiian Electric
Industries, Inc., is the sole general partner of HEI Preferred Funding,
LP. Per share data is not meaningful for HEI Preferred Funding, LP.
See accompanying notes to financial statements.
4
HEI Preferred Funding, LP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (UNAUDITED)
Three months February 4, 1997
ended (inception) to
(in thousands) March 31, 1998 March 31, 1997
- ---------------------------------------------------------------------------------------------------------
Limited partner's capital, beginning of period............ $103,093 $ --
Issuance of preferred securities on February 4, 1997
(inception)......................................... -- 103,093
Earnings allocated to limited partner.................. 2,155 1,317
Distribution to limited partner........................ (2,155) (1,317)
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Balance, end of period................................. 103,093 103,093
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General partner's capital, beginning of period........... 18,193 --
Capital contribution................................... -- 18,193
Earnings allocated to general partner.................. 371 217
Distribution to general partner........................ (371) (217)
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Balance, end of period................................. 18,193 18,193
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Total partners' capital.................................. $121,286 $121,286
================== ================
HEI Preferred Funding, LP
STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months February 4, 1997
ended (inception) to
(in thousands) March 31, 1998 March 31, 1997
- ----------------------------------------------------------------------------------------------------------
Cash flows from operating activities--
Earnings.................................................. $ 2,526 $ 1,534
Increase in interest receivable........................... (17) --
Decrease in accounts payable to affiliate................. (44) --
----------------- ------------------
Net cash provided by operating activities................. 2,465 1,534
----------------- ------------------
Cash flows from investing activities--
Purchase of affiliate debentures.......................... -- (120,073)
Purchase of commercial paper.............................. -- (1,213)
Proceeds from commercial paper............................ 98 --
----------------- ------------------
Net cash provided by (used in) investing activities....... 98 (121,286)
----------------- ------------------
Cash flows from financing activities--
Proceeds from issuance of preferred securities............ -- 103,093
Capital contribution - general partner.................... -- 18,193
Distribution to limited partner........................... (2,155) (1,317)
Distribution to general partner........................... (371) (217)
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Net cash provided by (used in) financing activities....... (2,526) 119,752
----------------- -------------------
Net increase in cash...................................... 37 --
Cash, beginning of period................................. 1 --
------------------ -------------------
Cash, end of period....................................... $ 38 $ --
================== ===================
See accompanying notes to financial statements.
5
HEI Preferred Funding, LP
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
- --------------------------------------------------------------------------------
(1) Basis of presentation
- --------------------------
The accompanying unaudited financial statements have been prepared in conformity
with generally accepted accounting principles (GAAP) for interim financial
information and with the instructions to Securities and Exchange Commission
(SEC) Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. The accompanying unaudited financial statements should be
read in conjunction with the financial statements and notes thereto in HEI
Preferred Funding, LP's Annual Report on SEC Form 10-K for the year ended
December 31, 1997. In preparing the Partnership's financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the balance sheet and the reported amounts of
earnings for the period. Actual results could differ significantly from those
estimates.
In the opinion of the management of HEI Preferred Funding, LP (the Partnership),
the accompanying unaudited financial statements contain all material adjustments
required by GAAP to present fairly the Partnership's financial position as of
March 31, 1998 and December 31, 1997, and the results of its operations and its
cash flows for the for the three months ended March 31, 1998 and the period
February 4, 1997 (inception) to March 31, 1997. All such adjustments are of a
normal recurring nature unless otherwise disclosed in this Form 10-Q or other
referenced material. The Partnership was formed on December 23, 1996, but
engaged in no activity until it was capitalized through the issuance of its
Partnership Preferred Securities and general partner interest on February 4,
1997 (inception) with the proceeds from the sale of the Partnership Preferred
Securities and the general partner interest.
ITEM 2. Management's discussion and analysis of financial condition and results
- --------------------------------------------------------------------------------
of operations
- -------------
Hawaiian Electric Industries Capital Trust I (the Trust) is a statutory business
trust formed under the Delaware Business Trust Act, as amended, pursuant to a
trust agreement and a certificate of trust filed with the Secretary of State on
December 19, 1996. The Trust Agreement was subsequently amended by an amended
and restated trust agreement dated as of February 1, 1997. The Trust exists for
the exclusive purposes of (i) issuing trust securities, consisting of 8.36%
Trust Originated Preferred Securities (the Trust Preferred Securities) and trust
common securities (the Trust Common Securities), representing undivided
beneficial ownership interests in the assets of the Trust, (ii) investing the
gross proceeds of the trust securities in 8.36% Partnership Preferred Securities
(the Partnership Preferred Securities) issued by HEI Preferred Funding, LP (the
Partnership), and (iii) engaging in only those other activities necessary or
incidental thereto.
The Partnership is a limited partnership formed under the Delaware Revised
Uniform Limited Partnership Act, as amended, pursuant to an agreement of limited
partnership and the filing of a certificate of limited partnership with the
Secretary of State of Delaware on December 23, 1996, which was subsequently
amended by an amended and restated agreement of limited partnership dated as of
February 1, 1997. Hycap Management, Inc. (Hycap), a wholly owned subsidiary of
Hawaiian Electric Industries, Inc. (the Company), is the sole general partner of
the Partnership. The Partnership is managed by the general partner and exists
for the exclusive purposes of (a) purchasing certain eligible debt instruments
of the Company and the wholly owned subsidiaries of the Company (collectively,
the Affiliate Investment Instruments) and certain U.S. government obligations
and commercial paper of unaffiliated entities (Eligible Debt Securities) with
the proceeds from (i) the sale of its Partnership Preferred Securities,
representing limited partner interests in the Partnership, to the Trust and (ii)
a capital contribution in exchange for the general partner interest in the
Partnership, (b) receiving interest and other payments on the Affiliate
Investment Instruments and the Eligible Debt Securities held by the Partnership
from time to time, (c) making distributions on the Partnership Preferred
Securities and
6
distributions on the general partner interest in the Partnership if, as, and
when declared by the general partner in its sole discretion, (d) subject to the
restrictions and conditions contained in the agreement of limited partnership,
making additional investments in Affiliate Investment Instruments and Eligible
Debt Securities and disposing of any such investments, and (e) except as
otherwise limited in the agreement of limited partnership, entering into, making
and performing all contracts and other undertakings, and engaging in those
activities and transactions as the general partner deems necessary or advisable
for carrying out the purposes of the Partnership.
The Registrants' activities are limited to issuing securities and investing the
proceeds as described above. Since the Trust was organized on December 19, 1996,
its activities, as specified in its declaration of trust, have been limited to
the issuance of the Trust Preferred Securities and the Trust Common Securities,
the investing of the proceeds in the Partnership Preferred Securities, and the
payment of distributions on the Trust Preferred Securities and the Trust Common
Securities in accordance with their terms. Since the Partnership was organized
on December 23, 1996, its activities, as specified in its agreement of limited
partnership, have been limited to the issuance of the Partnership Preferred
Securities, the receipt of a capital contribution from Hycap, as general
partner, the investment of the proceeds from the sale of the Partnership
Preferred Securities and the general partner interest in the Affiliate
Investment Instruments and Eligible Debt Securities, and the payment of
distributions on the Partnership Preferred Securities. All of the foregoing
activities of the Trust and the Partnership occurred in or after February 1997.
All expenses of organizing the Trust and the Partnership, carrying out the
issuance of their respective securities, and conducting their limited activities
have been borne by the Company, either directly or through Hycap, its wholly
owned subsidiary.
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. Legal proceedings
- --------------------------
The Registrants know of no material legal proceedings involving the Trust, the
Partnership or the assets of either of them.
Item 6. Exhibits and reports on Form 8-K
- -----------------------------------------
(a) EXHIBITS
Exhibit 12 Computation of ratios of earnings to combined fixed charges and
preferred securities or limited partner distributions for the
three months ended March 31, 1998 and for the period February
4, 1997 (inception) to March 31, 1997
Exhibit 27.1 Hawaiian Electric Industries Capital Trust I -- Financial Data
Schedule March 31, 1998 and three months ended March 31, 1998
Exhibit 27.2 HEI Preferred Funding, LP -- Financial Data Schedule
March 31, 1998 and three months ended March 31, 1998
(b) REPORTS ON FORM 8-K
None
7
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the 1st day of May,
1998.
HAWAIIAN ELECTRIC INDUSTRIES
CAPITAL TRUST I
By: /s/Robert F. Mougeot
--------------------
Name: Robert F. Mougeot
Title: Regular Trustee
(Principal Financial Officer of the Trust)
By: /s/Constance H. Lau
-------------------
Name: Constance H. Lau
Title: Regular Trustee
HEI PREFERRED FUNDING, LP
By: HYCAP MANAGEMENT, INC., as General Partner
By: /s/Robert F. Mougeot
--------------------
Name: Robert F. Mougeot
Title: Vice President
(Principal Financial Officer of the
Partnership)
8