Hawaiian Electric Industries Reports 2012 Year-end & Fourth Quarter Earnings; Webcast to Include EPS Guidance

2012 Net Income of $139 Million Flat Compared to 2011

Hawaiian Electric Company Invests Over $300 Million in Local Infrastructure

American Savings Bank Extends Over $1.7 Billion in Loans and Refinancings

Company Release - 2/15/2013 4:15 PM ET

HONOLULU, Feb. 15, 2013 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE: HE) (HEI) today reported year-end GAAP earnings of $138.7 million, flat with $138.2 million in 2011.  Diluted earnings per share (EPS) were $1.42 for 2012, slightly down compared to $1.44 for 2011.  For the fourth quarter of 2012, reported earnings were $13.8 million or $0.14 EPS, compared to $34.2 million or $0.36 EPS for the same quarter last year.  2012 and fourth quarter earnings include a $24 million after-tax write-down related to the settlement agreement between Hawaiian Electric Company1 and the Hawaii Consumer Advocate, which is subject to approval by the Hawaii Public Utilities Commission. 

"HEI's 2012 earnings reflect Hawaiian Electric Company's agreement with the Consumer Advocate which included a significant write-off of invested capital.  If approved, the agreement will resolve many pending issues, allowing our utilities to continue their focus on reducing Hawaii's dependence on expensive oil," said Constance H. Lau, HEI president and chief executive officer.

"American Savings Bank (American) continued to deliver stable and predictable results, contributing roughly 40% to consolidated HEI earnings in 2012.  Steady loan growth was supported by more than $1.7 billion in new credit and refinancings provided to customers.  Strong capital ratios enabled American to pay 2012 dividends to HEI totaling $45 million, an important source of funding as HEI continues to invest in its Hawaii based businesses," added Lau.

"In 2012, Hawaiian Electric Company invested in local infrastructure totaling over $300 million, more than three times its earnings.  These investments are critical to modernize the electric grid to operate more reliably while integrating more clean energy for our customers and our state.  In 2012, we achieved 13% of sales from renewable energy and are on track to exceed the 15% renewable portfolio standard by 2015," said Lau.

Excluding the write-down of regulatory assets, core earnings2 for 2012 were $163.1 million or $1.68 EPS, compared to $143.9 million or $1.50 EPS in 2011.  For the fourth quarter, core earnings were $38.3 million or $0.39 EPS compared to $39.9 million or $0.42 EPS for the same quarter last year. 

1 "Hawaiian Electric Company" or "utility", unless otherwise defined, refers to the three utilities, Hawaiian Electric Company, Inc. on Oahu, Maui Electric Company, Limited, and Hawaii Electric Light Company, Inc.


2 Non-GAAP measure which excludes the fourth quarter after-tax partial write-off of certain utility regulatory assets of $24.4 million in 2012 and $5.7 million in 2011. See "Explanation of HEI's Use of Certain Unaudited Non-GAAP Measures" and attached tables for GAAP to Non-GAAP reconciliations.

UTILITY EARNINGS REFLECT CLEAN ENERGY AND RELIABILITY INVESTMENTS

Full Year Results:

Reported earnings from the utility of $99.3 million in 2012 were essentially flat with $100.0 million in 2011.  Core earnings were $123.7 million in 2012 compared to $105.7 million in 2011.  The main driver of the $18 million core earnings improvement from the prior year was a full year recovery of costs in 2012 for reliability and clean energy investments on Oahu compared to a partial year recovery of costs in 2011.

Operations and maintenance (O&M) expenses3 (pretax) were $15 million or approximately 4% higher compared to the prior year.  The increases were primarily due to higher customer service expenses, reserves for environmental costs and higher power plant overhaul costs.

Fourth Quarter Results:

Reported earnings from the utility for the fourth quarter of 2012 were $4.2 million compared to $25.8 million in 2011.  Core earnings were $28.7 million in the fourth quarter of 2012 compared to $31.5 million in the fourth quarter of 2011.  The $3 million core earnings decline from the prior year quarter was primarily due to higher O&M expenses, largely offset by the recovery of costs for clean energy and reliability investments, primarily related to our Oahu and Maui utilities.

O&M expenses3 (pretax) were $14 million or 15% higher as expected in the fourth quarter of 2012 compared to the fourth quarter of 2011 largely due to higher customer service expenses and the timing of 2011 expenses weighted more to the first three quarters of the year.

3 Excludes demand side management (DSM) program costs. DSM program costs were $6 million and $4 million for the full year in 2012 and 2011, respectively, and $2 million and $1 million in the fourth quarter of 2012 and 2011, respectively. DSM program costs are recovered through a surcharge.

AMERICAN SAVINGS BANK:   SOLID PERFORMANCE AND LOAN GROWTH

Full Year Results:

American's net income for 2012 was $58.6 million compared to $59.8 million in 2011 reflecting the challenging low interest rate environment. The primary drivers impacting net income for the year were (on an after-tax basis):  $4 million lower net interest income and $5 million higher noninterest expense largely offset by $6 million higher gains on sales of new residential mortgages and $1 million lower provision for loan losses.

Overall, American's return on average equity for the full year remained solid at 11.7% in 2012 compared to 12.0% in 2011 and the return on average assets was 1.18% in 2012 compared to 1.23% in 2011. 

Fourth Quarter Results:

Fourth quarter 2012 net income of $14.4 million was essentially flat with the linked quarter of $14.2 million as higher noninterest income, driven mainly by higher gains on sales of newly originated residential mortgages, was offset by higher noninterest expense and lower net interest income.

Compared to the same quarter of 2011, net income declined by $1.0 million primarily driven by (on an after-tax basis): $2 million lower net interest income and $3 million higher noninterest expense which were largely offset by $4 million higher noninterest income primarily due to higher gains on sale of new residential mortgages and higher fee income.

American's fourth quarter 2012 return on average equity was 11.3%, up slightly from 11.2% in the linked quarter but down from 12.2% in the same quarter last year.  Return on average assets was 1.15% for the fourth quarter of 2012, unchanged from the linked quarter and down from 1.26% in the same quarter last year. 

Also refer to the American news release issued on January 30, 2013.

HOLDING AND OTHER COMPANIES

The holding and other companies' net losses were $19.3 million in 2012 compared to $21.6 million in 2011.  The lower net loss in 2012 was primarily driven by lower interest expense.  Fourth quarter net losses were $4.8 million in 2012 compared to $6.9 million in the fourth quarter 2011 primarily due to HEI funding the HEI Charitable Foundation in the fourth quarter of 2011.

WEBCAST AND CONFERENCE CALL

HEI TO ANNOUNCE 2013 EPS GUIDANCE IN EARNINGS CONFERENCE CALL

Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its 2012 earnings on Friday, February 15, 2013, at 12:00 noon Hawaii time (5:00 p.m. Eastern time).  HEI will announce 2013 EPS guidance during the scheduled webcast and conference call.

The event can be accessed through HEI's website at www.hei.com or by dialing (866) 202-3048 and entering passcode:  97355196 for the teleconference call.  The presentation for the webcast will be on HEI's website under the headings "Investor Relations," "News & Events" and "Presentations & Webcasts."  HEI and Hawaiian Electric Company, Inc. (HECO) 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, HECO's and American's press releases, HEI's and HECO'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 HECO'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 HECO's SEC filings.

An online replay of the webcast will be available at the same website beginning about two hours after the event and will remain on HEI's website for 12 months.  Replays of the conference call will also be available approximately two hours after the event through March 1, 2013, by dialing (888) 286-8010, passcode: 47992097.

HEI supplies power to approximately 450,000 customers or 95% of Hawaii's population through its electric utilities, HECO, 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, one of Hawaii's largest financial institutions.

EXPLANATION OF HEI'S USE OF CERTAIN UNAUDITED NON-GAAP MEASURES

HEI and HECO management use certain non-GAAP measures such as core earnings and adjusted return on average common equity (ROE) to evaluate the performance of the utility.  Management believes these non-GAAP measures provide useful information and are a better indicator of the utility's core operating activities.  Core earnings as presented here may not be comparable to similarly titled measures used by other companies.  The tables at the end of this news release provide a reconciliation of reported GAAP earnings to non-GAAP core earnings for both the utility and HEI consolidated and the corresponding adjustments to common equity for purposes of calculating adjusted ROE.

The reconciling adjustments from GAAP earnings to core earnings are the recorded after-tax charges of $24.4 million and $5.7 million in the fourth quarter of 2012 and 2011, respectively, related to settlement charges for the partial write-off of utility regulatory assets in 2012 and 2011.  The 2012 charges are not yet approved by the PUC.  For more information on the settlement charge recorded in 2012, see the Form 8-K filed on January 29, 2013.  Management does not consider these items to be representative of the company's fundamental core earnings.

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.

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, 2011, Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 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, HECO, 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.

 

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries








CONSOLIDATED STATEMENTS OF INCOME








(Unaudited)

Three months ended


Years ended



December 31,


December 31,

(in thousands, except per share amounts) 


2012


2011


2012


2011

Revenues









Electric utility


$  769,182


$  784,363


$3,109,439


$2,978,690

Bank


68,970


66,676


265,539


264,407

Other


(5)


(11)


17


(762)

    Total revenues


838,147


851,028


3,374,995


3,242,335

Expenses









Electric utility


749,739


731,911


2,896,427


2,763,556

Bank


46,945


43,818


177,106


172,806

Other


4,191


7,129


17,266


16,277

    Total expenses


800,875


782,858


3,090,799


2,952,639

Operating income (loss)









Electric utility


19,443


52,452


213,012


215,134

Bank


22,025


22,858


88,433


91,601

Other


(4,196)


(7,140)


(17,249)


(17,039)

     Total operating income 


37,272


68,170


284,196


289,696

Interest expense–other than on deposit liabilities and other bank borrowings


(19,393)


(17,840)


(78,151)


(82,106)

Allowance for borrowed funds used during construction


1,904


767


4,355


2,498

Allowance for equity funds used during construction


1,459


1,833


7,007


5,964

Income before income taxes


21,242


52,930


217,407


216,052

Income taxes


6,933


18,232


76,859


75,932

Net income 


14,309


34,698


140,548


140,120

Preferred stock dividends of subsidiaries


473


473


1,890


1,890

Net income for common stock


$    13,836


$    34,225


$   138,658


$   138,230

Basic earnings per common share


$       0.14


$       0.36


$        1.43


$        1.45

Diluted earnings per common share


$       0.14


$       0.36


$        1.42


$        1.44

Dividends per common share


$       0.31


$       0.31


$        1.24


$        1.24

Weighted-average number of common shares outstanding


97,602


95,939


96,908


95,510

Adjusted weighted-average shares


97,970


96,199


97,338


95,820

Net income (loss) for common stock  by segment










Electric utility


$      4,225


$    25,814


$     99,276


$     99,986


Bank


14,363


15,340


58,637


59,843


Other


(4,752)


(6,929)


(19,255)


(21,599)

Net income for common stock


$    13,836


$    34,225


$   138,658


$   138,230

Comprehensive income attributable to common shareholders


$      3,103


$    21,750


$   131,372


$   131,565

Return on average common equity






8.9%


9.2%










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, 2012 (when filed) and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2012, June 30, 2012 and

September 30, 2012, as updated by SEC Forms 8-K.

 

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries



CONSOLIDATED BALANCE SHEETS



(Unaudited)



December 31

2012

2011

(dollars in thousands)



Assets



Cash and cash equivalents

$     219,662

$   270,265

Accounts receivable and unbilled revenues, net

362,823

344,322

Available-for-sale investment and mortgage-related securities

671,358

624,331

Investment in stock of Federal Home Loan Bank of Seattle 

96,022

97,764

Loans receivable held for investment, net

3,737,233

3,642,818

Loans held for sale, at lower of cost or fair value

26,005

9,601

Property, plant and equipment, net of accumulated depreciation of $2,125,286 in 2012 and $2,049,821 in 2011 

3,594,829

3,334,501

Regulatory assets

864,596

669,389

Other