Hawaiian Electric Industries Reports First Quarter 2015 Earnings and 2015 EPS Guidance

Diluted Earnings Per Share (EPS) of $0.31 and Core EPS[1] of $0.35 Board Declares Dividend of $0.31 Per Share

Company Release - 5/6/2015 5:15 PM ET

HONOLULU, May 6, 2015 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock for the first quarter of 2015 of $31.9 million, or $0.31 diluted earnings per share (EPS). Excluding $4.7 million after-tax of merger-related costs associated with the pending merger with NextEra Energy, Inc. and the spin-off of ASB Hawaii, core earnings1 for the first quarter of 2015 were $36.6 million or $0.35 EPS compared to $45.8 million or $0.45 EPS for the same quarter last year.

"First quarter earnings were in line with our expectations. Our utility continues to move ahead with its clean energy transformation and leads the nation with an estimated 12 percent of customers with rooftop solar systems and 21 percent of energy from renewable resources. Working collaboratively and innovatively with industry partners and other interested stakeholders, we can achieve a sustainable clean energy future for Hawaii," said Constance H. Lau, HEI president and chief executive officer.

"Our bank, American Savings Bank, continued to deliver solid results with excellent deposit growth and a high credit quality loan portfolio in a strong Hawaii economy. American's solid results enabled it to pay dividends of $7.5 million to HEI in the quarter while maintaining healthy capital levels," added Lau.

"With regard to our bank spin and utility merger transactions, we made good progress in the quarter.  During April, both NextEra Energy and the Hawaiian Electric companies hosted informational open houses across Hawaii to allow our communities the opportunity to ask questions and engage with NextEra Energy in what we hope is the beginning of a long and beneficial relationship. NextEra Energy has a proven track record of lowering customer bills, and we cannot imagine a better partner to help us accelerate Hawaii's clean energy transformation," said Lau.  Federal Energy Regulatory Commission approval was received in March, and shareholders will vote on the merger on May 12. In addition, the bank accomplished an important step towards its planned spin-off by filing its Form 10 with the Securities and Exchange Commission.

HAWAIIAN ELECTRIC COMPANY EARNINGS CONSISTENT WITH EXPECTATIONS

Hawaiian Electric Company's2 net income for the first quarter of 2015 was $26.9 million. Excluding $0.3 million after-tax of merger-related costs associated with the pending merger with NextEra Energy, Inc., core earnings3 for the first quarter of 2015 were $27.1 million compared to $35.4 million for the same quarter last year. The $8.3 million decline was mainly the result of higher other operations and maintenance (O&M) expense in the first quarter of 2015 compared to the prior year. Further details of the net income drivers are mainly as follows on an after-tax basis:

  • $9 million higher other operations and maintenance (O&M) expense4 primarily due to:
    • $3 million higher transmission, distribution and generation maintenance costs;
    • $1 million higher overhaul costs in the first quarter of 2015 compared to the prior year quarter that included no major overhauls;
    • $1 million higher bad debt reserves for one customer account;
    • $1 million higher consulting costs for our energy transformation plans;
    • $1 million accrued costs for damage to combined heat and power generating unit;
    • $1 million higher employee benefit costs; and
    • $1 million higher other expenses
  • $2 million higher depreciation expense in 2015 as a result of increasing investments for the integration of more renewable energy, improved customer reliability and greater system efficiency.

These decreases were partially offset (on an after-tax basis) by $3 million higher net revenues5 compared to the first quarter of 2014 primarily due to the $4 million greater estimated recovery of costs for reliability and clean energy investments less $1 million due to reduced fuel efficiency performance of the generation units on Oahu and Hawaii Island in the first quarter of 2015 stemming from the increased integration of intermittent renewable energy.

AMERICAN SAVINGS BANK CONTINUES TO DELIVER SOLID PERFORMANCE

American Savings Bank's (American) net income for the first quarter of 2015 was $13.5 million compared to $12.1 million in the fourth (or linked) quarter of 2014 and $14.4 million in the first quarter of 2014. First quarter 2015 net income was $1.4 million higher than the linked quarter primarily driven by the following on an after-tax basis:

  • $1 million lower provision for loan losses; and
  • $1 million higher noninterest income, especially higher mortgage banking income from gains on the sale of newly originated mortgages.

These were partially offset by $1 million (after-tax) lower net interest income primarily due to interest and fees related to commercial loan payoffs in the fourth quarter of 2014.   

Compared to the first quarter of 2014, net income declined by $0.9 million. The decline was primarily driven by the following on an after-tax basis:

  • $2 million gain in the first quarter of 2014 on the sale of the municipal bond securities portfolio; and
  • $2 million higher noninterest expense in the first quarter of 2015 due primarily to higher pension expense from the effect of a lower discount rate and changes in national mortality tables.

These were largely offset by (on an after-tax basis):

  • $1 million higher mortgage banking income and fee income on deposits in the first quarter of 2015; and
  • $1 million higher net interest income in the first quarter of 2015 driven by the growth in the lending portfolio.

Overall, American achieved solid profitability in the first quarter of 2015 with a return on average equity of 9.96% and a return on average assets of 0.96%.

For additional information, refer to the American news release issued on April 30, 2015.

HOLDING AND OTHER COMPANIES

The holding and other companies' net losses were $8.5 million in the first quarter of 2015. Excluding costs related to the pending merger with NextEra Energy, Inc. and the spin-off of ASB Hawaii, the first quarter of 2015 net loss was $4.0 million, consistent with the first quarter of 2014.

2015 EPS GUIDANCE

The company is maintaining its 2015 EPS guidance range of $1.64 to $1.74, excluding any expenses related to the pending merger and spin-off transactions, but is now guiding towards the lower end of the range. This is the result of the early equity forward settlement of 4.7 million shares in March 2015 and the Hawaii Public Utilities Commission (PUC) decision and order which provides clarity on the Schedule B decoupling mechanism issues. For additional information, refer to HEI's Form 8-K filed on April 16, 2015. 

We reaffirm our key assumptions for 2015 EPS guidance disclosed on February 12, 2015, in our yearend earnings call except for the following. The utilities have re-evaluated the timing of their 2015-2017 net capital expenditures, revising their prior 3-year forecast from a range of $1.1 billion to $2.0 billion downward to a range of $0.8 billion to $1.7 billion.  2015 is the transitional year under the revised rate adjustment mechanism (RAM) and our utility will propose a new approval process for projects exceeding the new GDPPI cap under the revised mechanism.  Given the change to the RAM, the number of other high priority issues currently before the PUC and our continuing refinement of our transformation plans, we have reduced our forecast for 2015 net capital expenditures from $420 million to $250 million.  As a result, the utility will not need the previously estimated $60 million HEI equity infusion and is re-evaluating the amount of debt needed in 2015.  The 2015 rate base growth is now expected to be between 1.5% to 3.0%.

BOARD DECLARES QUARTERLY DIVIDEND

On May 5, 2015, the board of directors maintained HEI's quarterly cash dividend of $0.31 cents per share, payable on June 10, 2015, to shareholders of record at the close of business on May 22, 2015 (ex-dividend date is May 20, 2015). The dividend is equivalent to an annual rate of $­­1.24 per share.

Dividends have been paid continuously since 1901. At the indicated annual dividend rate and the closing share price on May 5, 2015 of $31.19, HEI's yield is 4.0%.

NO WEBCAST AND CONFERENCE CALL
MAY 12, 2015 SPECIAL SHAREHOLDER MEETING

Due to the upcoming special meeting of shareholders to be held on May 12, 2015, there will not be a webcast and conference call to discuss first quarter results and 2015 earnings per share guidance this quarter.

HEI supplies power to approximately 450,000 customers or 95% of Hawaii's population through its electric utilities, Hawaiian Electric Company, Inc., 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 Savings Bank, one of Hawaii's largest financial institutions.

NON-GAAP MEASURES

See "Explanation of HEI's Use of Certain Unaudited Non-GAAP Measures" and related reconciliations on pages 15 and 16 of this release.

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, 2014 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, Hawaiian Electric Company, 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.

1 Non-GAAP measure which excludes merger-related costs after-tax for the first quarter of 2015. See the "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation.
2 Hawaiian Electric Company, unless otherwise defined, refers to the three utilities, Hawaiian Electric Company, Inc. on Oahu, Maui Electric Company, Limited, and Hawaii Electric Light Company, Inc.
3 Non-GAAP measure which excludes merger-related costs after-tax for the first quarter of 2015. See the "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation.
4 Excludes net income neutral expenses covered by surcharges or by third parties of $2 million in both the first quarter of 2015 and 2014 and costs related to the pending merger in 2015.  See "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation.
5 Net revenues represent the after-tax impact of "Revenues" less the following expenses which are largely pass through items in revenues: "fuel oil," "purchased power" and "taxes, other than income taxes" as shown on the Hawaiian Electric Company, Inc. and Subsidiaries' Consolidated Statements of Income.
Note: Amounts indicated as "after-tax" in this earnings release are based upon adjusting items for the composite statutory tax rates of 39% for the utilities and 40% for the bank.

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



Three months ended March 31

(in thousands, except per share amounts)


2015


2014

Revenues





Electric utility


$

573,442



$

720,062


Bank


64,348



63,619


Other


72



68


Total revenues


637,862



783,749


Expenses





Electric utility


515,806



649,396


Bank


43,717



41,088


Other


8,833



4,051


Total expenses


568,356



694,535


Operating income (loss)





Electric utility


57,636



70,666


Bank


20,631



22,531


Other


(8,761)



(3,983)


Total operating income


69,506



89,214


Interest expense, net—other than on deposit liabilities and other bank borrowings


(19,100)



(19,456)


Allowance for borrowed funds used during construction


499



614


Allowance for equity funds used during construction


1,413



1,609


Income before income taxes


52,318



71,981


Income taxes


19,979



25,721


Net income


32,339



46,260


Preferred stock dividends of subsidiaries


473



473


Net income for common stock


$

31,866



$

45,787


Basic earnings per common share


$

0.31



$

0.45


Diluted earnings per common share


$

0.31



$

0.45


Dividends per common share


$

0.31



$

0.31


Weighted-average number of common shares outstanding


103,281



101,382


Adjusted weighted-average shares


103,567



102,165


Net income (loss) for common stock by segment





Electric utility


$

26,874



$

35,420


Bank


13,475



14,399


Other


(8,483)



(4,032)


Net income for common stock


$

31,866



$

45,787


Comprehensive income attributable to Hawaiian Electric Industries, Inc.


$

35,924



$

46,954


Return on average common equity (twelve months ended)1


8.5%



10.4%



Prior period financial statements reflect the retrospective application of Accounting Standards Update (ASU) No. 2014-01, "Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects," which was adopted as of January 1, 2015 and did not have a material impact on the Company's financial condition or results of operations.


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, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Report on SEC Form 10-Q for the quarter ended March 31, 2015 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.


1  On a core basis, 2015 and 2014 returns on average common equity (twelve months ended March 31) were 9.0% and 10.4%, respectively.  See reconciliation of GAAP to non-GAAP measures.

 

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(dollars in thousands)


March 31, 2015



December 31, 2014

Assets





Cash and cash equivalents


$

292,168



$

175,542

Accounts receivable and unbilled revenues, net


255,365



313,696

Available-for-sale investment securities, at fair value


590,648



550,394

Stock in Federal Home Loan Bank of Seattle, at cost


63,711



69,302

Loans receivable held for investment, net


4,401,504



4,389,033

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


9,906



8,424

Property, plant and equipment, net of accumulated depreciation of $2,258,065 and






 $2,250,950 at the respective dates


4,190,835



4,148,774

Regulatory assets


905,589



905,264

Other


481,531



542,523

Goodwill


82,190



82,190

Total assets


$

11,273,447



$

11,185,142

Liabilities and shareholders' equity





Liabilities





Accounts payable


$

167,784



$

186,425

Interest and dividends payable


25,225



25,336

Deposit liabilities


4,751,328



4,623,415

Short-term borrowings—other than bank


30,500



118,972

Other bank borrowings


312,094



290,656

Long-term debt, net—other than bank


1,506,546



1,506,546

Deferred income taxes


640,778



633,570

Regulatory liabilities


351,712



344,849

Contributions in aid of construction


474,385



466,432

Defined benefit pension and other postretirement benefit plans liability


624,555



632,845

Other


456,338



531,230

Total liabilities


9,341,245



9,360,276

Preferred stock of subsidiaries - not subject to mandatory redemption


34,293



34,293

Shareholders' equity





Preferred stock, no par value, authorized 10,000,000 shares; issued: none




Common stock, no par value, authorized 200,000,000 shares; issued and






outstanding: 107,417,644 shares and 102,565,266 shares at the respective dates


1,624,549



1,521,297

Retained earnings


296,680



296,654

Accumulated other comprehensive loss, net of tax benefits


(23,320)



(27,378)

Total shareholders' equity


1,897,909



1,790,573

Total liabilities and shareholders' equity


$

11,273,447



$

11,185,142


Prior period financial statements reflect the retrospective application of ASU No. 2014-01, "Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects," which was adopted as of January 1, 2015 and did not have a material impact on the Company's financial condition or results of operations.


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, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Report on SEC Form 10-Q for the quarter ended March 31, 2015 (when filed), as updated by SEC Forms 8-K.

 

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Three months ended March 31

2015


2014

(in thousands)




Cash flows from operating activities




Net income

$

32,339



$

46,260

Adjustments to reconcile net income to net cash provided by operating activities




Depreciation of property, plant and equipment

45,865



43,181

Other amortization

1,362



1,609

Provision for loan losses

614



995

Loans receivable originated and purchased, held for sale

(79,070)



(46,998)

Proceeds from sale of loans receivable, held for sale

78,332



48,720

Increase in deferred income taxes

15,265



6,457

Excess tax benefits from share-based payment arrangements

(968)



(164)

Allowance for equity funds used during construction

(1,413)



(1,609)

Change in cash overdraft



(1,038)

Changes in assets and liabilities




Decrease in accounts receivable and unbilled revenues, net

58,331



22,352

Decrease (increase) in fuel oil stock

20,731



(34,260)

Increase in regulatory assets

(10,827)



(9,258)

Decrease in accounts, interest and dividends payable

(42,463)



(9,307)

Change in prepaid and accrued income taxes and utility revenue taxes

(61,397)



(19,474)

Increase (decrease) in defined benefit pension and other postretirement benefit plans liability

123



(818)

Change in other assets and liabilities

19,826



(27,227)

Net cash provided by operating activities

76,650



19,421

Cash flows from investing activities




Available-for-sale investment securities purchased

(63,370)



(79,912)

Principal repayments on available-for-sale investment securities

28,486



15,597

Proceeds from sale of available-for-sale investment securities



79,564

Redemption of stock from Federal Home Loan Bank of Seattle

5,590



5,848

Net increase in loans held for investment

(12,524)



(37,887)

Proceeds from sale of real estate acquired in settlement of loans

606



1,429

Capital expenditures

(59,011)



(65,829)

Contributions in aid of construction

9,145



6,958

Other

3,281



Net cash used in investing activities

(87,797)



(74,232)

Cash flows from financing activities




Net increase in deposit liabilities

127,913



105,510

Net increase (decrease) in short-term borrowings with original maturities of three months or less

(88,472)



30,887

Net increase in retail repurchase agreements

21,451



141

Excess tax benefits from share-based payment arrangements

968



164

Net proceeds from issuance of common stock

104,468



3,054

Common stock dividends

(31,829)



(31,435)

Preferred stock dividends of subsidiaries

(473)



(473)

Other

(6,253)



(3,953)

Net cash provided by financing activities

127,773



103,895

Net increase in cash and cash equivalents

116,626



49,084

Cash and cash equivalents, beginning of period

175,542



220,036

Cash and cash equivalents, end of period

$

292,168



$

269,120


Prior period financial statements reflect the retrospective application of ASU No. 2014-01, "Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects," which was adopted as of January 1, 2015 and did not have a material impact on the Company's financial condition or results of operations.


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, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015 (when filed), as updated by SEC Forms 8-K.

 

Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)




Three months ended March 31

(dollars in thousands, except per barrel amounts)


2015


2014

Revenues


$

573,442



$

720,062

Expenses





Fuel oil


176,806



286,300

Purchased power


136,007



164,916

Other operation and maintenance


104,002



88,606

Depreciation


44,243



41,603

Taxes, other than income taxes


54,748



67,971

Total expenses


515,806



649,396

Operating income


57,636



70,666

Allowance for equity funds used during construction


1,413



1,609

Interest expense and other charges, net


(16,325)



(15,723)

Allowance for borrowed funds used during construction


499



614

Income before income taxes


43,223



57,166

Income taxes


15,850



21,247

Net income


27,373



35,919

Preferred stock dividends of subsidiaries


229



229

Net income attributable to Hawaiian Electric


27,144



35,690

Preferred stock dividends of Hawaiian Electric


270



270

Net income for common stock


$

26,874



$

35,420

Comprehensive income attributable to Hawaiian Electric


$

26,896



$

35,429

OTHER ELECTRIC UTILITY INFORMATION





Kilowatthour sales (millions)





   Hawaiian Electric


1,527



1,595

   Hawaii Electric Light


253



260

   Maui Electric


264



271



2,044



2,126

Wet-bulb temperature (Oahu average; degrees Fahrenheit)


66.5



67.1

Cooling degree days (Oahu)


795



828

Average fuel oil cost per barrel


$

86.60



$

131.15






Twelve months ended March 31


2015


2014

Return on average common equity (%) (simple average)





   Hawaiian Electric


8.03



9.21

   Hawaii Electric Light


6.18



7.64

   Maui Electric


8.87



7.68

   Hawaiian Electric Consolidated


7.84



8.69


This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric's Annual Report on SEC Form 10-K for the year ended December 31, 2014 and the consolidated financial statements and the notes thereto in Hawaiian Electric's Quarterly Report on SEC Form 10-Q for the quarter ended March 31, 2015 (when filed), as updated by SEC Forms 8-K. 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 Company, Inc. (Hawaiian Electric) and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(dollars in thousands, except par value)


March 31,
2015



December 31,
2014

Assets





Property, plant and equipment





Utility property, plant and equipment





Land


$

52,022



$

52,299

Plant and equipment


6,066,523



6,009,482

Less accumulated depreciation


(2,189,090)



(2,175,510)

Construction in progress


164,851



158,616

Utility property, plant and equipment, net


4,094,306



4,044,887

Nonutility property, plant and equipment, less accumulated depreciation of $1,228 and $1,227 at respective dates


6,562



6,563

Total property, plant and equipment, net


4,100,868



4,051,450

Current assets





Cash and cash equivalents


8,120



13,762

Customer accounts receivable, net


124,995



158,484

Accrued unbilled revenues, net


109,494



137,374

Other accounts receivable, net


8,668



4,283

Fuel oil stock, at average cost


85,315



106,046

Materials and supplies, at average cost


58,607



57,250

Prepayments and other


43,355



66,383

Regulatory assets


102,745



71,421

Total current assets


541,299



615,003

Other long-term assets





Regulatory assets


802,844



833,843

Unamortized debt expense


8,216



8,323

Other


82,273



81,838

Total other long-term assets


893,333



924,004

Total assets


$

5,535,500



$

5,590,457

Capitalization and liabilities





Capitalization





Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 15,805,327)


$

105,388



$

105,388

Premium on capital stock


578,933



578,938

Retained earnings


1,002,046



997,773

Accumulated other comprehensive income, net of income taxes-retirement benefit plans


67



45

Common stock equity


1,686,434



1,682,144

Cumulative preferred stock — not subject to mandatory redemption


34,293



34,293

Long-term debt, net


1,206,546



1,206,546

Total capitalization


2,927,273



2,922,983

Current liabilities





Short-term borrowings from non-affiliates


30,000



Accounts payable


138,509



163,934

Interest and preferred dividends payable


24,257



22,316

Taxes accrued


182,872



250,402

Regulatory liabilities


1,174



632

Other


65,989



65,146

Total current liabilities


442,801



502,430

Deferred credits and other liabilities





Deferred income taxes


596,984



602,872

Regulatory liabilities


350,538



344,217

Unamortized tax credits


82,037



79,492

Defined benefit pension and other postretirement benefit plans liability


587,165



595,395

Other


74,317



76,636

Total deferred credits and other liabilities


1,691,041



1,698,612

Contributions in aid of construction


474,385



466,432

Total capitalization and liabilities


$

5,535,500



$

5,590,457


This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric's Annual Report on SEC Form 10-K for the year ended December 31, 2014 and the consolidated financial statements and the notes thereto in Hawaiian Electric's Quarterly Report on SEC Form 10-Q for the quarter ended March 31, 2015 (when filed), as updated by SEC Forms 8-K.

 

Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Three months ended March 31


2015



2014

(in thousands)





Cash flows from operating activities





Net income


$

27,373



$

35,919

Adjustments to reconcile net income to net cash provided by operating activities





Depreciation of property, plant and equipment


44,243



41,603

Other amortization


689



1,621

Increase in deferred income taxes


15,132



20,344

Change in tax credits, net


2,576



2,032

Allowance for equity funds used during construction


(1,413)



(1,609)

Change in cash overdraft




(1,038)

Changes in assets and liabilities





Decrease in accounts receivable


29,104



8,804

Decrease in accrued unbilled revenues


27,880



12,260

Decrease (increase) in fuel oil stock


20,731



(34,260)

Increase in materials and supplies


(1,357)



(1,045)

Increase in regulatory assets


(10,827)



(9,258)

Decrease in accounts payable


(49,136)



(16,024)

Change in prepaid and accrued income taxes and revenue taxes


(63,696)



(47,526)

Increase (decrease) in defined benefit pension and other postretirement benefit






plans liability


110



(205)

Change in other assets and liabilities


(8,522)



(10,981)

Net cash provided by operating activities


32,887



637

Cash flows from investing activities





Capital expenditures


(54,358)



(64,462)

Contributions in aid of construction


9,145



6,958

Net cash used in investing activities


(45,213)



(57,504)

Cash flows from financing activities





Common stock dividends


(22,601)



(22,707)

Preferred stock dividends of Hawaiian Electric and subsidiaries


(499)



(499)

Net increase in short-term borrowings from non-affiliates and affiliate with original






maturities of three months or less


30,000



34,996

Other


(216)



(389)

Net cash provided by financing activities


6,684



11,401

Net decrease in cash and cash equivalents


(5,642)



(45,466)

Cash and cash equivalents, beginning of period


13,762



62,825

Cash and cash equivalents, end of period


$

8,120



$

17,359


This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in Hawaiian Electric's Annual Report on SEC Form 10-K for the year ended December 31, 2014 and the consolidated financial statements and the notes thereto in Hawaiian Electric's Quarterly Report on SEC Form 10-Q for the quarter ended March 31, 2015 (when filed), as updated by SEC Forms 8-K.

 

American Savings Bank, F.S.B.

STATEMENTS OF INCOME DATA

(Unaudited)




Three months ended

(in thousands)


March 31, 2015


December 31, 2014


March 31, 2014

Interest and dividend income







Interest and fees on loans


$

45,198



$

46,276



$

43,682

Interest and dividends on investment securities


3,051



3,187



3,035

Total interest and dividend income


48,249



49,463



46,717

Interest expense







Interest on deposit liabilities


1,260



1,303



1,225

Interest on other borrowings


1,466



1,468



1,405

Total interest expense


2,726



2,771



2,630

Net interest income


45,523



46,692



44,087

Provision for loan losses


614



2,560



995

Net interest income after provision for loan losses


44,909



44,132



43,092

Noninterest income







Fees from other financial services


5,355



5,760



5,128

Fee income on deposit liabilities


5,315



5,074



4,421

Fee income on other financial products


1,889



1,806



2,290

Bank-owned life insurance


983



1,004



963

Mortgage banking income


1,822



1,164



628

Gains on sale of investment securities






2,847

Other income, net


735



455



625

Total noninterest income


16,099



15,263



16,902

Noninterest expense







Compensation and employee benefits


21,766



19,835



20,286

Occupancy


4,113



4,238



3,953

Data processing


3,116



2,975



3,060

Services


2,341



2,561



2,273

Equipment


1,701



1,638



1,645

Office supplies, printing and postage


1,483



1,602



1,616

Marketing


841



1,309



711

FDIC insurance


811



820



796

Other expense


4,205



6,116



3,122

Total noninterest expense


40,377



41,094



37,462

Income before income taxes


20,631



18,301



$

22,532

Income taxes


7,156



6,188



8,133

Net income


$

13,475



$

12,113



$

14,399

Comprehensive income


$

17,318



$

5,419



$

15,423

OTHER BANK INFORMATION (annualized %, except as of period end)





Return on average assets


0.96



0.88



1.09

Return on average equity


9.96



8.93



10.94

Return on average tangible common equity


11.74



10.52



12.96

Net interest margin


3.52



3.65



3.64

Net charge-offs to average loans outstanding


0.04



0.04



0.02

As of period end







Nonperforming assets to loans outstanding and real estate owned *


0.80



0.85



1.12

Allowance for loan losses to loans outstanding


1.03



1.03



0.98

Tier-1 leverage ratio *


8.9



8.9



9.0

Total capital ratio *


13.2



12.3



12.7

Tangible common equity to total assets


8.18



8.23



8.42

Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)


8



9



9


*   Regulatory basis. Capital ratios as of March 31, 2015 calculated under Basel III rules, which became effective January 1, 2015.


Prior period financial statements reflect the retrospective application of ASU No. 2014-01, "Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects," which was adopted as of January 1, 2015 and did not have a material impact on ASB's financial condition or results of operations.


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, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Report on SEC Form 10-Q for the quarter ended March 31, 2015 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

 


American Savings Bank, F.S.B.

BALANCE SHEETS DATA

(Unaudited)



March 31, 2015


December 31, 2014

(in thousands)





Assets





Cash and due from banks


$

98,484



$

107,233

Interest-bearing deposits


172,517



54,230

Available-for-sale investment securities, at fair value


590,648



550,394

Stock in Federal Home Loan Bank of Seattle, at cost


63,711



69,302

Loans receivable held for investment


4,447,299



4,434,651

Allowance for loan losses


(45,795)



(45,618)

Net loans


4,401,504



4,389,033

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


9,906



8,424

Other


305,917



305,416

Goodwill


82,190



82,190

Total assets


$

5,724,877



$

5,566,222

Liabilities and shareholder's equity





Deposit liabilities–noninterest-bearing


$

1,420,085



$

1,342,794

Deposit liabilities–interest-bearing


3,331,243



3,280,621

Other borrowings


312,094



290,656

Other


117,849



118,363

Total liabilities


5,181,271



5,032,434

Common stock


1



1

Additional paid in capital


338,411



338,411

Retained earnings


217,909



211,934

Accumulated other comprehensive loss, net of tax benefits





Net unrealized gains on securities

$

3,913



$

462



Retirement benefit plans

(16,628)


(12,715)


(17,020)


(16,558)

Total shareholder's equity


543,606



533,788

Total liabilities and shareholder's equity


$

5,724,877



$

5,566,222


Prior period financial statements reflect the retrospective application of ASU No. 2014-01, "Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects," which was adopted as of January 1, 2015 and did not have a material impact on ASB's financial condition or results of operations.


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, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Report on SEC Form 10-Q for the quarter ended March 31, 2015 (when filed), as updated by SEC Forms 8-K.

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

HEI and Hawaiian Electric Company management use certain non-GAAP measures to evaluate the performance of the utility and HEI.  Management believes these non-GAAP measures provide useful information and are a better indicator of the companies' core operating activities.  Core earnings and other financial measures as presented here may not be comparable to similarly titled measures used by other companies.  The accompanying tables provide a reconciliation of reported GAAP1 earnings to non-GAAP core earnings and the adjusted return on average common equity (ROACE) for the utility and HEI consolidated.

The reconciling adjustment from GAAP earnings to core earnings is limited to the costs related to the pending merger between HEI and NextEra Energy, Inc. and the spin-off of ASB Hawaii, Inc.  For more information on the pending merger, see HEI's definitive proxy statement on Form DEFM14A filed on March 26, 2015.  Management does not consider these items to be representative of the company's fundamental core earnings.

The accompanying table also provides the calculation of utility GAAP O&M adjusted for costs related to the pending merger discussed above. "O&M-related net income neutral items" which are O&M expenses covered by specific surcharges or by third parties have also been excluded.  These "O&M-related net income neutral items" are grossed-up in revenue and expense and do not impact net income.

RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES


Hawaiian Electric Industries, Inc. and Subsidiaries

Unaudited



($ in millions, except per share amounts)




Three months ended March 31


2015


2014

HEI CONSOLIDATED NET INCOME




GAAP (as reported)

$

31.9


$

45.8

Excluding special items (after-tax):




Costs related to pending merger with NextEra Energy, Inc. and spin-off of ASB Hawaii, Inc

4.7


Non-GAAP (core)

$

36.6


$

45.8

HEI CONSOLIDATED DILUTED EARNINGS PER SHARE






GAAP (as reported)

$

0.31


$

0.45

Excluding special items (after-tax):




Costs related to pending merger with NextEra Energy, Inc. and spin-off of ASB Hawaii, Inc

0.05


Non-GAAP (core)

$

0.35


$

0.45

HEI CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average)

Twelve months ended March 31


2015


2014

Based on GAAP

8.5%


10.4%

Based on non-GAAP (core)2

9.0%


10.4%





Note:  Columns may not foot due to rounding




1 Accounting principles generally accepted in the United States of America




2 Calculated as core net income divided by average GAAP common equity




 

RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES


Hawaiian Electric Company, Inc. and Subsidiaries

Unaudited



($ in millions)




Three months ended
March 31


2015


2014

HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME



GAAP (as reported)

$

26.9


$

35.4

Excluding special items (after-tax):




Costs related to pending merger with NextEra Energy, Inc.

0.3


Non-GAAP (core)

$

27.1


$

35.4





HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY

Twelve months ended
March 31

(ROACE) (simple average)

2015


2014

Based on GAAP

7.84%


8.69%

Based on non-GAAP (core)2

7.86%


8.69%





HAWAIIAN ELECTRIC CONSOLIDATED OTHER OPERATION AND MAINTENANCE (O&M)

Three months ended
March 31

EXPENSE

2015


2014

GAAP (as reported)

$

104.0


$

88.6

Excluding O&M-related net income neutral items3

1.9


2.0

Excluding costs related to pending merger with  NextEra Energy, Inc.

0.4


Non-GAAP (Adjusted other O&M expense)

$

101.7


$

86.6

Note:  Columns may not foot due to rounding




1  Accounting principles generally accepted in the United States of America




2  Calculated as core net income divided by average GAAP common equity




3  Expenses covered by surcharges or by third parties recorded in revenues




 

Contact:

Clifford H. Chen

Telephone: (808) 543-7300


 Manager, Investor Relations & Strategic Planning

E-mail: ir@hei.com

Logo - http://photos.prnewswire.com/prnh/20110411/LA80136LOGO

 

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SOURCE Hawaiian Electric Industries, Inc.