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

Diluted Earnings Per Share (EPS) of $0.33 and Core EPS1 of $0.39 Results In Line with EPS Guidance

Company Release - 8/10/2015 6:00 AM ET

HONOLULU, Aug. 10, 2015 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock for the second quarter of 2015 of $35.0 million, or diluted earnings per share (EPS) of $0.33.  Excluding $7.2 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 second quarter of 2015 were $42.2 million or $0.39 EPS, compared to $41.3 million or $0.41 EPS for the second quarter of 2014.

"Our utility continued to invest in modernizing and improving the electric grids on the five islands we serve to support the integration of more renewable energy, improve customer service and maintain system stability.  We remain focused on further reducing costs for our customers while providing safe, reliable and ever cleaner electricity," said Constance Lau, HEI president and chief executive officer.

"Our bank delivered consistent financial results with good core deposit growth and strong mortgage banking income this quarter.  Credit quality remained sound while maintaining healthy capital levels," added Lau.

"In the quarter, we achieved an important milestone for our pending bank spin and utility merger when our shareholders approved the merger with approximately 90% of the voted shares voting in favor of the merger.  The process to obtain Hawaii Public Utilities Commission approval is also underway.  We firmly believe that as we and our merger partner, NextEra Energy, are able to provide more information and engage in additional discussions, the commission and others will conclude that this partnership will result in significant benefits to our customers and will further underscore Hawaii's global leadership in clean energy.  Both Hawaiian Electric and NextEra Energy each have made clear that we are fully committed to achieving Hawaii's new goal of 100% renewable energy by 2045.  Together, we believe we can get there faster."   

HAWAIIAN ELECTRIC COMPANY EARNINGS CONSISTENT WITH EXPECTATIONS

Hawaiian Electric Company's2 net income for the second quarter of 2015 was $32.8 million compared to $34.2 million for the same quarter last year.  The $1.4 million decline was mainly driven by the following on an after-tax basis:

  • Depreciation expense was $2 million higher as a result of increasing investments for the integration of more renewable energy, improved customer reliability and greater system efficiency; and
  • O&M expenses3 were $1 million higher in the second quarter of 2015 compared to the prior year primarily driven by higher consulting costs for our energy transformation plans, higher transmission and distribution costs and benefits expense, partially offset by lower overhaul and smart grid costs in the second quarter of 2015.

These were partially offset by (on an after-tax basis) $1 million higher allowance for funds used during construction and lower interest expense.

AMERICAN SAVINGS BANK CONTINUES TO DELIVER SOLID PERFORMANCE

American Savings Bank's (American) net income for the second quarter of 2015 was $12.9 million compared to $13.5 million in the first, or linked quarter of 2015 and $11.5 million in the second quarter of 2014.  Second quarter 2015 net income was $0.6 million lower than the linked quarter primarily driven by the following on an after-tax basis:

  • $1 million higher net interest income primarily driven by higher interest-earning assets and fees related to the early payoff of commercial loans, offset by
  • $1 million higher provision for loan losses; and
  • $1 million higher noninterest expense.

Compared to the second quarter of 2014, net income was higher by $1.3 million primarily driven by the following on an after-tax basis:

  • $1 million higher net interest income in the second quarter of 2015 primarily due to higher average loan balances; and
  • $2 million higher noninterest income primarily from mortgage banking and fees on deposit products in the second quarter of 2015, partially offset by
  • $1 million higher noninterest expense in the second quarter of 2015 due primarily to higher pension and benefits expense.

Overall, American achieved solid profitability in the second quarter of 2015 with a return on average equity of 9.38% and a return on average assets of 0.89%.

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

HOLDING AND OTHER COMPANIES

The holding and other companies' net losses were $10.7 million in the second quarter of 2015.  Excluding costs related to the pending merger with NextEra Energy, Inc. and the spin-off of ASB Hawaii, the second quarter of 2015 net loss was $3.5 million compared to $4.5 million in the same quarter last year primarily due to lower interest and other costs.

BOARD DECLARES QUARTERLY DIVIDEND

On August 7, 2015, the board of directors maintained HEI's quarterly cash dividend of $0.31 cents per share, payable on September 10, 2015, to shareholders of record at the close of business on August 24, 2015 (ex-dividend date is August 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 August 7, 2015 of $30.99, HEI's yield is 4.0%.

HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE

Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its second quarter of 2015 earnings and 2015 EPS guidance on Monday, August 10, 2015, at 7:00 a.m. Hawaii time (1:00 p.m. Eastern time).  The event can be accessed through HEI's website at www.hei.com or by dialing (888) 311-8190 and entering passcode: 74311446.  International parties may listen to the conference by calling the following toll free number, (330) 863-3378 and entering passcode:  74311446.  The presentation for the webcast will be on HEI's website under the heading "Investor Relations."  HEI and Hawaiian Electric Company 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, Hawaiian Electric Company's and American's press releases, HEI's and Hawaiian Electric Company'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 Hawaiian Electric Company'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 Hawaiian Electric Company's SEC filings.

An on-line replay of the webcast will be available on HEI's website beginning about two hours after the event.  Audio replays of the teleconference will also be available approximately two hours after the event through August 24, 2015, by dialing (855) 859-2056 or (404) 537-3406 and entering passcode:  74311446.

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 14 to 15 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, HEI's Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 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 second 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 Excludes net income neutral expenses covered by surcharges or by third parties of $2 million and $3 million in the second quarter of 2015 and 2014, respectively.  See "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation.

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 June 30


Six months ended June 30

(in thousands, except per share amounts)


2015


2014


2015


2014


Revenues










Electric utility


$

558,163


$

738,429


$

1,131,605



$

1,458,491


Bank


65,783


60,616


130,131



124,235


Other


(34)


(388)


38



(320)


Total revenues


623,912


798,657


1,261,774



1,582,406


Expenses












Electric utility


492,002


668,361


1,007,808



1,317,757


Bank


46,057


42,660


89,774



83,748


Other


13,123


4,453


21,956



8,504


Total expenses


551,182


715,474


1,119,538



1,410,009


Operating income (loss)










Electric utility


66,161


70,068


123,797



140,734


Bank


19,726


17,956


40,357



40,487


Other


(13,157)


(4,841)


(21,918)



(8,824)


Total operating income


72,730


83,183


142,236



172,397


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


(18,906)


(20,022)


(38,006)



(39,478)


Allowance for borrowed funds used during construction


682


523


1,181



1,137


Allowance for equity funds used during construction


1,896


1,387


3,309



2,996


Income before income taxes


56,402


65,071


108,720



137,052


Income taxes


20,911


23,317


40,890



49,038


Net income


35,491


41,754


67,830



88,014


Preferred stock dividends of subsidiaries


473


473


946



946


Net income for common stock


$

35,018


$

41,281


$

66,884



$

87,068


Basic earnings per common share


$

0.33


$

0.41


0.63



$

0.86


Diluted earnings per common share


$

0.33


$

0.41


0.63



$

0.85


Dividends per common share


$

0.31


$

0.31


$

0.62



$

0.62


Weighted-average number of common shares outstanding


107,418


101,495


105,361



101,439


Adjusted weighted-average shares


107,694


101,825


105,659



102,045


Net income (loss) for common stock by segment










Electric utility


$

32,841


$

34,230


$

59,715



$

69,650


Bank


12,851


11,536


26,326



25,935


Other


(10,674)


(4,485)


(19,157)



(8,517)


Net income for common stock


$

35,018


$

41,281


$

66,884



$

87,068


Comprehensive income attributable to Hawaiian Electric Industries, Inc.


$

31,891


$

44,181


$

67,815



$

91,135


Return on average common equity (twelve months ended)1






8.1

%


10.3

%


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 Reports on SEC Form 10-Q for the quarters ended March 31, 2015 and June 30, 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 June 30) were 9.0% and 10.3%, respectively.  See reconciliation of GAAP to non-GAAP measures.

 

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Unaudited)






(dollars in thousands)


June 30, 2015


December 31, 2014

Assets





Cash and cash equivalents


$

300,687


$

175,542

Accounts receivable and unbilled revenues, net


269,207


313,696

Available-for-sale investment securities, at fair value


693,520


550,394

Stock in Federal Home Loan Bank, at cost


10,678


69,302

Loans receivable held for investment, net


4,410,817


4,389,033

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


5,581


8,424

Property, plant and equipment, net of accumulated depreciation of $2,288,804 and $2,250,950 at the respective dates


4,269,241


4,148,774

Regulatory assets


904,559


905,264

Other


493,151


542,523

Goodwill


82,190


82,190

Total assets


$

11,439,631


$

11,185,142

Liabilities and shareholders' equity





Liabilities





Accounts payable


$

183,094


$

186,425

Interest and dividends payable


25,360


25,336

Deposit liabilities


4,803,271


4,623,415

Short-term borrowings—other than bank


124,543


118,972

Other bank borrowings


314,157


290,656

Long-term debt, net—other than bank


1,506,546


1,506,546

Deferred income taxes


632,718


633,570

Regulatory liabilities


357,089


344,849

Contributions in aid of construction


482,760


466,432

Defined benefit pension and other postretirement benefit plans liability


615,945


632,845

Other


461,335


531,230

Total liabilities


9,506,818


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: 107,446,530 shares and 102,565,266 shares at the respective dates


1,626,569


1,521,297

Retained earnings


298,398


296,654

Accumulated other comprehensive loss, net of tax benefits


(26,447)


(27,378)

Total shareholders' equity


1,898,520


1,790,573

Total liabilities and shareholders' equity


$

11,439,631


$

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 Reports on SEC Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015 (when filed), as updated by SEC Forms 8-K.

 

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)





Six months ended June 30

2015


2014

(in thousands)




Cash flows from operating activities




Net income

$

67,830


$

88,014

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




Depreciation of property, plant and equipment

91,731


86,397

Other amortization

4,320


4,014

Provision for loan losses

2,439


2,016

Loans receivable originated and purchased, held for sale

(168,921)


(69,656)

Proceeds from sale of loans receivable, held for sale

173,267


75,040

Increase in deferred income taxes

22,980


28,570

Excess tax benefits from share-based payment arrangements

(984)


(267)

Allowance for equity funds used during construction

(3,309)


(2,996)

Change in cash overdraft

193


(1,038)

Changes in assets and liabilities




Decrease (increase) in accounts receivable and unbilled revenues, net

44,489


(2,986)

Increase in fuel oil stock

(2,362)


(27,206)

Increase in regulatory assets

(19,976)


(17,731)

Decrease in accounts, interest and dividends payable

(56,076)


(64,843)

Change in prepaid and accrued income taxes and utility revenue taxes

(4,390)


(32,510)

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

218


(1,714)

Change in other assets and liabilities

(47,146)


(16,909)

Net cash provided by operating activities

104,303


46,195

Cash flows from investing activities




Available-for-sale investment securities purchased

(208,110)


(125,531)

Principal repayments on available-for-sale investment securities

63,568


33,202

Proceeds from sale of available-for-sale investment securities


79,564

Redemption of stock from Federal Home Loan Bank

58,623


11,683

Net increase in loans held for investment

(23,206)


(137,122)

Proceeds from sale of real estate acquired in settlement of loans

1,258


2,162

Capital expenditures

(142,236)


(149,253)

Contributions in aid of construction

19,089


13,209

Other

3,308


(16)

Net cash used in investing activities

(227,706)


(272,102)

Cash flows from financing activities




Net increase in deposit liabilities

179,856


152,383

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

5,571


79,693

Net increase (decrease) in retail repurchase agreements

13,508


(2,053)

Proceeds from other bank borrowings

10,000


Proceeds from issuance of long-term debt


125,000

Repayment of long-term debt


(100,000)

Excess tax benefits from share-based payment arrangements

984


267

Net proceeds from issuance of common stock

104,469


3,048

Common stock dividends

(65,140)


(62,916)

Preferred stock dividends of subsidiaries

(946)


(946)

Other

246


(228)

Net cash provided by financing activities

248,548


194,248

Net increase (decrease) in cash and cash equivalents

125,145


(31,659)

Cash and cash equivalents, beginning of period

175,542


220,036

Cash and cash equivalents, end of period

$

300,687


$

188,377


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 and June 30, 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 June 30


Six months ended June 30

(dollars in thousands, except per barrel amounts)


2015


2014


2015


2014

Revenues


$

558,163


$

738,429


1,131,605


1,458,491

Expenses









Fuel oil


146,231


270,257


323,037


556,557

Purchased power


149,284


188,323


285,291


353,239

Other operation and maintenance


98,864


98,564


202,866


187,170

Depreciation


44,241


41,593


88,484


83,196

Taxes, other than income taxes


53,382


69,624


108,130


137,595

Total expenses


492,002


668,361


1,007,808


1,317,757

Operating income


66,161


70,068


123,797


140,734

Allowance for equity funds used during construction


1,896


1,387


3,309


2,996

Interest expense and other charges, net


(16,288)


(16,852)


(32,613)


(32,575)

Allowance for borrowed funds used during construction


682


523


1,181


1,137

Income before income taxes


52,451


55,126


95,674


112,292

Income taxes


19,111


20,397


34,961


41,644

Net income


33,340


34,729


60,713


70,648

Preferred stock dividends of subsidiaries


229


229


458


458

Net income attributable to Hawaiian Electric


33,111


34,500


60,255


70,190

Preferred stock dividends of Hawaiian Electric


270


270


540


540

Net income for common stock


$

32,841


$

34,230


59,715


69,650

Comprehensive income attributable to Hawaiian Electric


$

32,826


$

34,243


$

59,722


$

69,672

OTHER ELECTRIC UTILITY INFORMATION









Kilowatthour sales (millions)









   Hawaiian Electric


1,615


1,652


3,142


3,247

   Hawaii Electric Light


257


261


510


520

   Maui Electric


272


276


536


548



2,144


2,189


4,188


4,315

Wet-bulb temperature (Oahu average; degrees Fahrenheit)


69.2


69.1


67.8


68.1

Cooling degree days (Oahu)


1,181


1,244


1,976


2,072

Average fuel oil cost per barrel


$

69.37


$

132.07


$

77.85


$

131.60










Twelve months ended June 30






2015


2014

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









   Hawaiian Electric






7.87


9.56

   Hawaii Electric Light






6.01


7.58

   Maui Electric






8.87


8.16

   Hawaiian Electric Consolidated






7.70


8.99


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 Reports on SEC Form 10-Q for the quarters ended March 31, 2015 and June 30, 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)


June 30, 2015


December 31, 2014

Assets





Property, plant and equipment





Utility property, plant and equipment





Land


$

52,022


$

52,299

Plant and equipment


6,142,229


6,009,482

Less accumulated depreciation


(2,218,703)


(2,175,510)

Construction in progress


196,355


158,616

Utility property, plant and equipment, net


4,171,903


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


4,178,465


4,051,450

Current assets





Cash and cash equivalents


4,470


13,762

Customer accounts receivable, net


139,922


158,484

Accrued unbilled revenues, net


109,444


137,374

Other accounts receivable, net


5,890


4,283

Fuel oil stock, at average cost


108,408


106,046

Materials and supplies, at average cost


57,355


57,250

Prepayments and other


35,962


66,383

Regulatory assets


99,236


71,421

Total current assets


560,687


615,003

Other long-term assets





Regulatory assets


805,323


833,843

Unamortized debt expense


7,900


8,323

Other


81,932


81,838

Total other long-term assets


895,155


924,004

Total assets


$

5,634,307


$

5,590,457

Capitalization and liabilities





Capitalization





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


$

105,388


$

105,388

Premium on capital stock


578,933


578,938

Retained earnings


1,012,285


997,773

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


52


45

Common stock equity


1,696,658


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


2,937,497


2,922,983

Current liabilities





Short-term borrowings from non-affiliates


88,993


Accounts payable


147,750


163,934

Interest and preferred dividends payable


22,367


22,316

Taxes accrued


188,653


250,402

Regulatory liabilities


763


632

Other


66,385


65,146

Total current liabilities


514,911


502,430

Deferred credits and other liabilities





Deferred income taxes


605,702


602,872

Regulatory liabilities


356,326


344,217

Unamortized tax credits


83,893


79,492

Defined benefit pension and other postretirement benefit plans liability


578,637


595,395

Other


74,581


76,636

Total deferred credits and other liabilities


1,699,139


1,698,612

Contributions in aid of construction


482,760


466,432

Total capitalization and liabilities


$

5,634,307


$

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 Reports on SEC Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015 (when filed), as updated by SEC Forms 8-K.

 

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)






Six months ended June 30


2015


2014

(in thousands)





Cash flows from operating activities





Net income


$

60,713


$

70,648

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





Depreciation of property, plant and equipment


88,484


83,196

Other amortization


2,748


3,597

Increase in deferred income taxes


33,320


45,386

Change in tax credits, net


4,461


4,227

Allowance for equity funds used during construction


(3,309)


(2,996)

Change in cash overdraft


193


(1,038)

Changes in assets and liabilities





Decrease (increase) in accounts receivable


16,955


(5,039)

Decrease in accrued unbilled revenues


27,930


2,255

Increase in fuel oil stock


(2,362)


(27,206)

Increase in materials and supplies


(105)


(1,835)

Increase in regulatory assets


(19,976)


(17,731)

Decrease in accounts payable


(68,951)


(63,306)

Change in prepaid and accrued income taxes and revenue taxes


(63,613)


(38,270)

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


221


(498)

Change in other assets and liabilities


(13,102)


(26,258)

Net cash provided by operating activities


63,607


25,132

Cash flows from investing activities





Capital expenditures


(134,563)


(145,734)

Contributions in aid of construction


19,089


13,209

Net cash used in investing activities


(115,474)


(132,525)

Cash flows from financing activities





Common stock dividends


(45,203)


(44,246)

Preferred stock dividends of Hawaiian Electric and subsidiaries


(998)


(998)

Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less


88,993


102,989

Other


(217)


(457)

Net cash provided by financing activities


42,575


57,288

Net decrease in cash and cash equivalents


(9,292)


(50,105)

Cash and cash equivalents, beginning of period


13,762


62,825

Cash and cash equivalents, end of period


$

4,470


$

12,720


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 Reports on SEC Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015 (when filed), as updated by SEC Forms 8-K.

 

American Savings Bank, F.S.B.

STATEMENTS OF INCOME DATA

(Unaudited)








Three months ended


Six months ended June 30

(in thousands)


June 30, 2015


 

March 31, 2015

June 30, 2014



2015


2014

Interest and dividend income











Interest and fees on loans


$

46,035


$

45,198


$

43,851


$

91,233


$

87,533

Interest and dividends on investment securities


3,306


3,051


2,950


6,357


5,985

Total interest and dividend income


49,341


48,249


46,801


97,590


93,518

Interest expense











Interest on deposit liabilities


1,266


1,260


1,237


2,526


2,462

Interest on other borrowings


1,487


1,466


1,420


2,953


2,825

Total interest expense


2,753


2,726


2,657


5,479


5,287

Net interest income


46,588


45,523


44,144


92,111


88,231

Provision for loan losses


1,825


614


1,021


2,439


2,016

Net interest income after provision for loan losses


44,763


44,909


43,123


89,672


86,215

Noninterest income











Fees from other financial services


5,550


5,355


5,217


10,905


10,345

Fee income on deposit liabilities


5,424


5,315


4,645


10,739


9,066

Fee income on other financial products


2,103


1,889


2,064


3,992


4,354

Bank-owned life insurance


1,058


983


982


2,041


1,945

Mortgage banking income


2,068


1,822


246


3,890


874

Gains on sale of investment securities






2,847

Other income, net


239


735


661


974


1,286

Total noninterest income


16,442


16,099


13,815


32,541


30,717

Noninterest expense











Compensation and employee benefits


22,319


21,766


19,872


44,085


40,158

Occupancy


4,009


4,113


4,489


8,122


8,442

Data processing


2,953


3,116


2,971


6,069


6,031

Services


2,833


2,341


2,855


5,174


5,128

Equipment


1,690


1,701


1,609


3,391


3,254

Office supplies, printing and postage


1,303


1,483


1,456


2,786


3,072

Marketing


844


841


1,031


1,685


1,742

FDIC insurance


773


811


805


1,584


1,601

Other expense


4,755


4,205


3,894


8,960


7,016

Total noninterest expense


41,479


40,377


38,982


81,856


76,444

Income before income taxes


19,726


20,631


17,956


40,357


40,488

Income taxes


6,875


7,156


6,420


14,031


14,553

Net income


$

12,851


$

13,475


$

11,536


$

26,326


$

25,935

Comprehensive income


$

9,544


$

17,318


$

14,294


$

26,862


$

29,717

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









Return on average assets


0.89


0.96


0.86


0.93


0.97

Return on average equity


9.38


9.96


8.69


9.67


9.81

Return on average tangible common equity


11.04


11.74


10.28


11.39


11.61

Net interest margin


3.52


3.52


3.55


3.52


3.59

Net charge-offs to average loans outstanding


0.11


0.04


(0.04)


0.08


(0.01)

As of period end











Nonperforming assets to loans outstanding and real estate owned *


0.70


0.80


1.05





Allowance for loan losses to loans outstanding


1.04


1.03


0.99





Tangible common equity to tangible assets


8.16


8.18


8.45





Tier-1 leverage ratio *


8.8


8.9


9.0





Total capital ratio *


13.5


13.2


12.6





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


$

7.5


$

7.5


$

9.8






* Regulatory basis. Capital ratios as of June 30, 2015 and 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 Reports on SEC Form 10-Q for the quarters ended March 31, 2015 and June 30, 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)





June 30, 2015

December 31, 2014

(in thousands)





Assets





Cash and due from banks


$

106,914



$

107,233

Interest-bearing deposits


162,088



54,230

Available-for-sale investment securities, at fair value


693,520



550,394

Stock in Federal Home Loan Bank, at cost


10,678



69,302

Loans receivable held for investment


4,457,182



4,434,651

Allowance for loan losses


(46,365)



(45,618)

Net loans


4,410,817



4,389,033

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


5,581



8,424

Other


305,310



305,416

Goodwill


82,190



82,190

Total assets


$

5,777,098



$

5,566,222

Liabilities and shareholder's equity





Deposit liabilities–noninterest-bearing


$

1,455,721



$

1,342,794

Deposit liabilities–interest-bearing


3,347,550



3,280,621

Other borrowings


314,157



290,656

Other


113,015



118,363

Total liabilities


5,230,443



5,032,434

Common stock


1



1

Additional paid in capital


339,416



338,411

Retained earnings


223,260



211,934

Accumulated other comprehensive loss, net of tax benefits





     Net unrealized gains on securities

$

219



$

462



     Retirement benefit plans

(16,241)


(16,022)


(17,020)


(16,558)

Total shareholder's equity


546,655



533,788

Total liabilities and shareholder's equity


$

5,777,098



$

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 Reports on SEC Form 10-Q for the quarters ended March 31, 2015 and June 30, 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 June 30


Six months ended June 30


2015

2014


2015

2014

HEI CONSOLIDATED NET INCOME






GAAP (as reported)

$

35.0


$

41.3



$

66.9


$

87.1


Excluding special items (after-tax):






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

7.2




11.9



Non-GAAP (core)

$

42.2


$

41.3



$

78.8


$

87.1


HEI CONSOLIDATED DILUTED EARNINGS PER SHARE





GAAP (as reported)

$

0.33


$

0.41



$

0.63


$

0.85


Excluding special items (after-tax):






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

0.07




0.11



Non-GAAP (core)

$

0.39


$

0.41



$

0.75


$

0.85


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




Twelve months ended June 30





2015

2014

Based on GAAP




8.1

%

10.3

%

Based on non-GAAP (core)2




9.0

%

10.3

%


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 June 30


Six months ended June 30


2015

2014


2015

2014

HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME






GAAP (as reported)

$

32.8


$

34.2



$

59.7


$

69.7


Excluding special items (after-tax):






Costs related to pending merger with NextEra Energy, Inc.




0.3



Non-GAAP (core)

$

32.8


$

34.2



$

60.0


$

69.7








HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY




Twelve months ended June 30

(ROACE) (simple average)




2015

2014

Based on GAAP




7.70

%

8.99

%

Based on non-GAAP (core)2




7.72

%

8.99

%







HAWAIIAN ELECTRIC CONSOLIDATED OTHER OPERATION

Three months ended June 30


Six months ended June 30

AND MAINTENANCE (O&M) EXPENSE

2015

2014


2015

2014

GAAP (as reported)

$

98.9


$

98.6



$

202.9


$

187.2


Excluding O&M-related net income neutral items3

1.6


2.9



3.5


5.0


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




0.4



Non-GAAP (Adjusted other O&M expense)

$

97.2


$

95.6



$

198.9


$

182.2



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

 

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

Contact:

Clifford H. Chen 

Telephone: (808) 543-7300


Manager, Investor Relations & Strategic Planning

 E-mail: ir@hei.com

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hawaiian-electric-industries-reports-second-quarter-2015-earnings-and-2015-eps-guidance-300125810.html

SOURCE Hawaiian Electric Industries, Inc.