Hawaiian Electric Industries Reports Third Quarter 2016 Earnings

GAAP Diluted Earnings Per Share (EPS) of $1.17;

Includes Merger-Related Net Income of $0.59

Merger Termination Payment Will Help Support Utility Investments

Core EPS[1] of $0.58

Company Release - 11/4/2016 4:15 PM ET

HONOLULU, Nov. 4, 2016 /PRNewswire/ -- Hawaiian Electric Industries, Inc.(NYSE - HE) (HEI) today reported consolidated net income for common stock for the third quarter of 2016 of $127.1 million and diluted earnings per share (EPS) of $1.17 compared to $50.7 million and EPS of $0.47 for the third quarter of 2015.  Financial results for the third quarter of 2016 include the one-time increase to net income of $63.8 million related to the recently terminated merger with NextEra Energy, Inc. and related spin-off of ASB Hawaii, Inc., as compared to $1.7 million net expense in the third quarter of 2015.  Excluding these items, core earnings1 for the third quarter of 2016 were $63.3 million and core EPS1 of $0.58 compared to $52.4 million and $0.49 respectively for the third quarter of 2015.

"The NextEra Energy termination payment will support HEI's investments in our community and projects our utility is undertaking to reliably integrate more renewable energy for its customers.  Through the first nine months of this year, Hawaiian Electric invested $230 million in local infrastructure projects to modernize the electric grid and to reliably integrate more renewable energy, moving us closer to our renewable energy goals.  And in October, Hawaiian Electric marked its 125th year of serving the people of Hawaii.  At American Savings Bank, we continued to deliver solid earnings growth and strong year-to-date annualized deposit growth of 9.4%," said Constance H. Lau, HEI president and chief executive officer.

________________________

1

Non-GAAP measure which excludes fees, reimbursements and other related costs to the recently terminated merger between HEI and NextEra Energy, Inc. and the terminated spin-off of ASB Hawaii, Inc. and costs related to the recently terminated LNG contract which required PUC approval of the merger with NextEra Energy, Inc.  See the "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation.

HAWAIIAN ELECTRIC COMPANY EARNINGS

Hawaiian Electric Company's2 net income for the third quarter of 2016 was $47.0 million compared to $43.0 million in the third quarter of 2015.  The increase was largely due to the non-recurrence of one-time items recorded in 2015.

O&M expenses were $5 million (after-tax) lower compared to the prior year quarter as the third quarter of 2015 was impacted by one-time items including the $3 million after-tax adjustment for enterprise resource planning software costs.  In addition, third quarter 2016 O&M costs were $2 million (after-tax) lower due to fewer overhauls performed. 

Lower O&M expenses were partially offset by $1 million higher depreciation expense as a result of increased investments for improved customer reliability and greater system efficiency, and the integration of more renewable energy.

Net revenues were relatively flat as $2 million (after-tax) higher recovery of costs for clean energy and reliability investments were offset by $2 million (after-tax) lower fuel efficiency.

AMERICAN SAVINGS BANK EARNINGS

American Savings Bank's (American) net income for the third quarter of 2016 was $15.1 million compared to $13.3 million in the second (or linked) quarter of 2016 and $13.5 million in the third quarter of 2015.  Third quarter 2016 net income was $1.8 million higher than the linked quarter primarily driven by $2 million (after-tax) higher revenues due to higher noninterest income and net interest income, partially offset by higher provision for loan losses.

Compared to the third quarter of 2015, net income improved by $1.7 million primarily driven by $2 million (after-tax) higher net interest income due to growth in the commercial real estate and consumer loan portfolios.  Higher net interest income was partially offset by higher provision for loan losses.

_________________________


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.



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.

Total loans were $4.7 billion at September 30, 2016, essentially flat compared to the linked quarter and increased $118 million year-to-date 2016.  Year-to-date annualized loan growth was 3.4%, on track for American's target of mid-single digit loan growth for the full year. 

Total deposits were $5.4 billion at September 30, 2016, an increase of $149 million and $355 million in the third quarter and year-to-date 2016, respectively.  Year-to-date annualized deposit growth of 9.4% was primarily driven by the $190 million (5.6% year-to-date annualized) increase in low-cost core deposits.   Average cost of funds remained low at 0.24% for the third quarter of 2016, 1 basis point higher than the linked quarter and 2 basis points higher than the prior year quarter.

Overall, American achieved solid profitability in the third quarter of 2016 with a return on average equity of 10.4% and a return on average assets of 0.97%.

For additional information, refer to the American news release issued on October 28, 2016.

HOLDING AND OTHER COMPANIES

The holding and other companies' net income (loss) were $65.1 million net income in the third quarter of 2016 compared to ($5.8) million net loss in the third quarter of 2015.  Excluding one-time merger-related items of $63.8 million net income in the third quarter of 2016 and $1.7 million net expenses in the third quarter of 2015, the holding and other companies' net income (loss) in the third quarter of 2016 and 2015 were $1.2 million net income and ($4.1) million net loss, respectively.  The holding company's third quarter 2016 results included favorable tax adjustments as HEI moved out of a federal net operating loss position, enabling the recognition of tax benefits.

WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE

Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its third quarter of 2016 earnings on Friday, November 4, 2016, at 11:00 a.m. Hawaii time (5:00 p.m. Eastern time). 

Interested parties within the United States may listen to the conference by calling (888) 317-6016.  International parties may listen to the conference by calling (412) 317-6016 or by accessing the webcast on HEI's website at www.hei.com 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 online replay of the webcast will be available at the same website beginning about two hours after the event.  Replays of the conference call will also be available approximately two hours after the event through November 18, 2016, by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10094997.

HEI supplies power to approximately 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 12 and 13 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 "will," "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, 2015, HEI's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 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.


Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



Three months ended
September 30


Nine months ended
September 30

(in thousands, except per share amounts)


2016


2015


2016


2015

Revenues









Electric utility


$

572,253



$

648,127



$

1,549,700



$

1,779,732


Bank


73,708



69,091



213,297



199,222


Other


94



(42)



262



(4)


Total revenues


646,055



717,176



1,763,259



1,978,950


Expenses









Electric utility


482,441



565,470



1,333,876



1,573,278


Bank


50,981



48,289



150,752



138,063


Other


7,191



6,322



18,883



28,278


Total expenses


540,613



620,081



1,503,511



1,739,619


Operating income (loss)









Electric utility


89,812



82,657



215,824



206,454


Bank


22,727



20,802



62,545



61,159


Other


(7,097)



(6,364)



(18,621)



(28,282)


Total operating income


105,442



97,095



259,748



239,331


Merger termination fee


90,000





90,000




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


(19,365)



(19,229)



(56,792)



(57,235)


Allowance for borrowed funds used during construction


854



737



2,276



1,918


Allowance for equity funds used during construction


2,274



2,057



6,010



5,366


Income before income taxes


179,205



80,660



301,242



189,380


Income taxes


51,592



29,516



96,203



70,406


Net income


127,613



51,144



205,039



118,974


Preferred stock dividends of subsidiaries


471



471



1,417



1,417


Net income for common stock


$

127,142



$

50,673



$

203,622



$

117,557


Basic earnings per common share


$

1.17



$

0.47



$

1.89



$

1.11


Diluted earnings per common share


$

1.17



$

0.47



$

1.88



$

1.11


Dividends per common share


$

0.31



$

0.31



$

0.93



$

0.93


Weighted-average number of common shares outstanding


108,268



107,457



107,951



106,067


Adjusted weighted-average shares


108,472



107,738



108,171



106,347


Net income (loss) for common stock by segment









Electric utility


$

46,974



$

43,006



$

108,198



$

102,721


Bank


15,104



13,451



41,062



39,777


Other


65,064



(5,784)



54,362



(24,941)


Net income for common stock


$

127,142



$

50,673



$

203,622



$

117,557


Comprehensive income attributable to Hawaiian Electric Industries, Inc.


$

125,473



$

55,103



$

212,861



$

122,918


Return on average common equity (twelve months ended)1






12.3

%


8.1

%



This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC. 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, 2016 and 2015 returns on average common equity (twelve months ended September 30) were 9.5% and 9.1%.  See reconciliation of GAAP to non-GAAP measures.

 

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)


(dollars in thousands)


September 30, 2016


December 31, 2015

Assets





Cash and cash equivalents


$

284,355



$

300,478


Accounts receivable and unbilled revenues, net


250,076



242,766


Available-for-sale investment securities, at fair value


996,984



820,648


Stock in Federal Home Loan Bank, at cost


11,218



10,678


Loans receivable held for investment, net


4,675,901



4,565,781


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


26,743



4,631


Property, plant and equipment, net of accumulated depreciation of $2,416,937 and $2,339,319 at the respective dates


4,532,556



4,377,658


Regulatory assets


879,775



896,731


Other


459,187



480,457


Goodwill


82,190



82,190


Total assets


$

12,198,985



$

11,782,018


Liabilities and shareholders' equity





Liabilities





Accounts payable


$

134,176



$

138,523


Interest and dividends payable


27,115



26,042


Deposit liabilities


5,380,721



5,025,254


Short-term borrowings—other than bank




103,063


Other bank borrowings


265,388



328,582


Long-term debt, net—other than bank


1,579,065



1,578,368


Deferred income taxes


721,470



680,877


Regulatory liabilities


400,479



371,543


Contributions in aid of construction


525,491



506,087


Defined benefit pension and other postretirement benefit plans liability


572,933



589,918


Other


489,466



471,828


Total liabilities


10,096,304



9,820,085


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: 108,503,210 shares and 107,460,406 shares at the respective dates


1,657,421



1,629,136


Retained earnings


427,990



324,766


Accumulated other comprehensive loss, net of tax benefits


(17,023)



(26,262)


Total shareholders' equity


2,068,388



1,927,640


Total liabilities and shareholders' equity


$

12,198,985



$

11,782,018



The Consolidated Balance Sheet as of December 31, 2015 reflects the retrospective application of ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs," which was adopted in first quarter 2016.


This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

 

Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)




Three months ended
September 30


Nine months ended
September 30

(dollars in thousands, except per barrel amounts)


2016


2015


2016


2015

Revenues


$

572,253



$

648,127



$

1,549,700



$

1,779,732


Expenses









Fuel oil


128,624



195,633



334,263



518,670


Purchased power


157,750



160,518



412,667



445,809


Other operation and maintenance


94,789



103,653



298,260



306,519


Depreciation


46,759



44,356



140,300



132,840


Taxes, other than income taxes


54,519



61,310



148,386



169,440


Total expenses


482,441



565,470



1,333,876



1,573,278


Operating income


89,812



82,657



215,824



206,454


Allowance for equity funds used during construction


2,274



2,057



6,010



5,366


Interest expense and other charges, net


(17,323)



(16,557)



(49,734)



(49,170)


Allowance for borrowed funds used during construction


854



737



2,276



1,918


Income before income taxes


75,617



68,894



174,376



164,568


Income taxes


28,145



25,390



64,682



60,351


Net income


47,472



43,504



109,694



104,217


Preferred stock dividends of subsidiaries


228



228



686



686


Net income attributable to Hawaiian Electric


47,244



43,276



109,008



103,531


Preferred stock dividends of Hawaiian Electric


270



270



810



810


Net income for common stock


$

46,974



$

43,006



$

108,198



$

102,721


Comprehensive income attributable to Hawaiian Electric


$

47,125



$

43,010



$

108,610



$

102,732


OTHER ELECTRIC UTILITY INFORMATION









Kilowatthour sales (millions)









   Hawaiian Electric


1,800



1,874



4,982



5,016


   Hawaii Electric Light


277



282



795



792


   Maui Electric


295



312



836



848




2,372



2,468



6,613



6,656


Wet-bulb temperature (Oahu average; degrees Fahrenheit)


72.3



74.9



69.8



70.2


Cooling degree days (Oahu)


1,496



1,711



3,637



3,687


Average fuel oil cost per barrel


$

57.72



$

81.35



$

52.06



$

79.13















Twelve months ended

 September 30







2016


2015

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









   Hawaiian Electric






7.94



7.95


   Hawaii Electric Light






8.46



6.30


   Maui Electric






8.45



9.21


   Hawaiian Electric Consolidated1






8.11



7.86





 

This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC. 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, 2016 and 2015 returns on average common equity (twelve months ended September 30) were 8.2% and 7.9%.  See reconciliation of GAAP to non-GAAP measures.

 

Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)


(dollars in thousands, except par value)


September 30,
2016


December 31,
2015

Assets





Property, plant and equipment





Utility property, plant and equipment





Land


$

53,175



$

52,792


Plant and equipment


6,483,562



6,315,698


Less accumulated depreciation


(2,343,601)



(2,266,004)


Construction in progress


236,608



175,309


Utility property, plant and equipment, net


4,429,744



4,277,795


Nonutility property, plant and equipment, less accumulated depreciation of $1,231 and $1,229 at respective dates


7,374



7,272


Total property, plant and equipment, net


4,437,118



4,285,067


Current assets





Cash and cash equivalents


22,977



24,449


Customer accounts receivable, net


134,418



132,778


Accrued unbilled revenues, net


95,167



84,509


Other accounts receivable, net


4,629



10,408


Fuel oil stock, at average cost


64,480



71,216


Materials and supplies, at average cost


57,356



54,429


Prepayments and other


35,645



36,640


Regulatory assets


74,681



72,231


Total current assets


489,353



486,660


Other long-term assets





Regulatory assets


805,094



824,500


Unamortized debt expense


267



497


Other


68,994



75,486


Total other long-term assets


874,355



900,483


Total assets


$

5,800,826



$

5,672,210


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


578,921



578,930


Retained earnings


1,081,081



1,043,082


Accumulated other comprehensive income, net of income taxes


1,337



925


Common stock equity


1,766,727



1,728,325


Cumulative preferred stock — not subject to mandatory redemption


34,293



34,293


Long-term debt, net


1,279,327



1,278,702


Total capitalization


3,080,347



3,041,320


Current liabilities





Short-term borrowings from affiliates


21,000




Accounts payable


107,497



114,846


Interest and preferred dividends payable


25,934



23,111


Taxes accrued


167,276



191,084


Regulatory liabilities


2,987



2,204


Other


56,753



54,079


Total current liabilities


381,447



385,324


Deferred credits and other liabilities





Deferred income taxes


714,559



654,806


Regulatory liabilities


397,492



369,339


Unamortized tax credits


87,794



84,214


Defined benefit pension and other postretirement benefit plans liability


535,912



552,974


Other


77,784



78,146


Total deferred credits and other liabilities


1,813,541



1,739,479


Contributions in aid of construction


525,491



506,087


Total capitalization and liabilities


$

5,800,826



$

5,672,210



The Consolidated Balance Sheet as of December 31, 2015 reflects the retrospective application of ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs," which was adopted in first quarter 2016.


This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC.

 

American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited)



Three months ended


Nine months ended
September 30

(in thousands)


September 30,
2016


June 30,
2016


September 30,
2015


2016


2015

Interest and dividend income











Interest and fees on loans


$

50,444



$

49,690



$

46,413



$

148,571



$

137,646


Interest and dividends on investment securities


4,759



4,443



4,213



14,219



10,570


Total interest and dividend income


55,203



54,133



50,626



162,790



148,216


Interest expense











Interest on deposit liabilities


1,871



1,691



1,355



5,154



3,881


Interest on other borrowings


1,464



1,467



1,515



4,416



4,468


Total interest expense


3,335



3,158



2,870



9,570



8,349


Net interest income


51,868



50,975



47,756



153,220



139,867


Provision for loan losses


5,747



4,753



2,997



15,266



5,436


Net interest income after provision for loan losses


46,121



46,222



44,759



137,954



134,431


Noninterest income











Fees from other financial services


5,599



5,701



5,639



16,799



16,544


Fee income on deposit liabilities


5,627



5,262



5,883



16,045



16,622


Fee income on other financial products


2,151



2,207



2,096



6,563



6,088


Bank-owned life insurance


1,616



1,006



1,021



3,620



3,062


Mortgage banking income


2,347



1,554



1,437



5,096



5,327


Gains on sale of investment securities, net




598





598




Other income, net


1,165



288



2,389



1,786



3,363


Total noninterest income


18,505



16,616



18,465



50,507



51,006


Noninterest expense











Compensation and employee benefits


22,844



21,919



22,728



67,197



66,813


Occupancy


3,991



4,115



4,128



12,244



12,250


Data processing


3,150



3,277



3,032



9,599



9,101


Services


2,427



2,755



2,556



8,093



7,730


Equipment


1,759



1,771



1,608



5,193



4,999


Office supplies, printing and postage


1,483



1,583



1,511



4,431



4,297


Marketing


747



899



934



2,507



2,619


FDIC insurance


907



913



809



2,704



2,393


Other expense


4,591



5,382



5,116



13,948



14,076


Total noninterest expense


41,899



42,614



42,422



125,916



124,278


Income before income taxes


22,727



20,224



20,802



62,545



61,159


Income taxes


7,623



6,939



7,351



21,483



21,382


Net income


$

15,104



$

13,285



$

13,451



$

41,062



$

39,777


Comprehensive income


$

13,176



$

16,051



$

17,678



$

49,537



$

44,540


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









Return on average assets


0.97



0.86



0.92



0.89



0.92


Return on average equity


10.36



9.22



9.73



9.50



9.69


Return on average tangible common equity


12.06



10.75



11.43



11.07



11.4


Net interest margin


3.57



3.58



3.53



3.59



3.52


Efficiency ratio


59.54



63.05



64.06



61.81



65.11


Net charge-offs to average loans outstanding


0.20



0.15



0.10



0.19



0.08


As of period end











Nonperforming assets to loans outstanding and real estate owned


1.12



1.02



1.00






Allowance for loan losses to loans outstanding


1.24



1.16



1.06






Tangible common equity to tangible assets


8.03



8.15



8.23






Tier-1 leverage ratio


8.6



8.7



8.8






Total capital ratio


13.3



13.2



13.4






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


$

9.0



$

9.0



$

7.5







This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC. 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)


(in thousands)

September 30, 2016

December 31, 2015






Assets





Cash and due from banks


$

109,591



$

127,201


Interest-bearing deposits


103,989



93,680


Available-for-sale investment securities, at fair value


996,984



820,648


Stock in Federal Home Loan Bank, at cost


11,218



10,678


Loans receivable held for investment


4,734,638



4,615,819


Allowance for loan losses


(58,737)



(50,038)


Net loans


4,675,901



4,565,781


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


26,743



4,631


Other


330,054



309,946


Goodwill


82,190



82,190


Total assets


$

6,336,670



$

6,014,755


Liabilities and shareholder's equity





Deposit liabilities–noninterest-bearing


$

1,570,613



$

1,520,374


Deposit liabilities–interest-bearing


3,810,108



3,504,880


Other borrowings


265,388



328,582


Other


106,396



101,029


Total liabilities


5,752,505



5,454,865


Common stock


1



1


Additional paid in capital


342,234



340,496


Retained earnings


250,726



236,664


Accumulated other comprehensive loss, net of tax benefits





     Net unrealized gains (losses) on securities

$

5,965



$

(1,872)



     Retirement benefit plans

(14,761)


(8,796)


(15,399)


(17,271)


Total shareholder's equity


584,165



559,890


Total liabilities and shareholder's equity


$

6,336,670



$

6,014,755



This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

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 HEI and the utility.  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 HEI and the utility.

The reconciling adjustments from GAAP earnings to core earnings is limited to the fees, reimbursements costs and associated taxes related to the recently terminated merger between HEI and NextEra Energy, Inc., and the cancelled spin-off of ASB Hawaii, Inc., and the recently terminated liquefied natural gas (LNG) contract which required the Hawaii Public Utilities Commission approval of the merger with NextEra Energy, Inc.  For more information on the transactions, see HEI's Form 8-K filed on July 18, 2016 and HEI's Form 8-K filed on July 19, 2016, respectively.  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 terminated 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 (HEI)





Unaudited

Three months ended
September 30


Nine months ended
September 30

($ in millions, except per share amounts)

2016

2015


2016

2015

HEI CONSOLIDATED (INCOME) EXPENSES RELATED TO THE TERMINATED MERGER WITH NEXTERA ENERGY AND CANCELLED SPIN-OFF OF ASB HAWAII






Pre-tax (income) expenses

$

(88.5)


$

1.8



$

(84.9)


$

15.7


Current income taxes (benefits)

24.7


(0.1)



24.7


(2.1)


After-tax (income) expenses

$

(63.8)


$

1.7



$

(60.3)


$

13.6


HEI CONSOLIDATED LNG CONTRACT COSTS2






Pre-tax expenses

$


$



$

3.4


$


Current income taxes (benefits)




(1.3)



After-tax (income) expenses

$


$



$

2.1


$


HEI CONSOLIDATED NET INCOME






GAAP (as reported)

$

127.1


$

50.7



$

203.6


$

117.6


Excluding special items (after-tax):






(Income) expenses related to the terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii

(63.8)


1.7



(60.3)


13.6


Costs related to the terminated LNG contract2




2.1



Non-GAAP (core) net income

$

63.3


$

52.4



$

145.4


$

131.1


HEI CONSOLIDATED DILUTED EARNINGS PER COMMON SHARE





GAAP (as reported)

$

1.17


$

0.47



$

1.88


$

1.11


Excluding special items (after-tax):






(Income) expenses related to the terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii

(0.59)


0.02



(0.56)


0.13


Costs related to the terminated LNG contract2




0.02



Non-GAAP (core) diluted earnings per common share

$

0.58


$

0.49



$

1.34


$

1.23






Twelve months ended
September 30





2016

2015

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




Based on GAAP




12.3

%

8.1

%

Based on non-GAAP (core)3




9.5

%

9.1

%















Note:  Columns may not foot due to rounding

1

Accounting principles generally accepted in the United States of America

2

The LNG contract was terminated as it was conditioned on the merger with NextEra Energy closing

3 

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

Three months ended
September 30


Nine months ended
September 30

($ in millions)

2016

2015


2016

2015

HAWAIIAN ELECTRIC CONSOLIDATED COSTS RELATED TO THE TERMINATED MERGER WITH NEXTERA ENERGY






Pre-tax expenses

$


$



$

0.1


$

0.4


Current income taxes (benefits)





(0.2)


After-tax expenses

$


$



$

0.1


$

0.3


HAWAIIAN ELECTRIC CONSOLIDATED LNG CONTRACT COSTS2





Pre-tax expenses

$


$



$

3.4


$


Current income taxes (benefits)




(1.3)



After-tax expenses

$


$



$

2.1


$


HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME






GAAP (as reported)

$

47.0


$

43.0



$

108.2


$

102.7


Excluding special items (after-tax):






Costs related to the terminated merger with NextEra Energy




0.1


0.3


Costs related to the terminated LNG contract2




2.1



Non-GAAP (core) net income

$

47.0


$

43.0



$

110.3


$

103.0












Twelve months ended
September 30





2016

2015

HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average)






Based on GAAP




8.11

%

7.86

%

Based on non-GAAP (core)3




8.24

%

7.88

%








Three months ended
September 30


Nine months ended
September 30

($ in millions)

2016

2015


2016

2015

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






GAAP (as reported)

$

94.8


$

103.7



$

298.3


$

306.5


Excluding O&M-related net income neutral items4

1.4


1.9



4.6


5.4


Excluding costs related to the terminated merger with NextEra Energy




0.1


0.4


Excluding costs related to the terminated LNG contract2




3.4



Non-GAAP (Adjusted other O&M expense)

$

93.4


$

101.8



$

290.2


$

300.7








Note:  Columns may not foot due to rounding

1

Accounting principles generally accepted in the United States of America

2

The LNG contract was terminated as it was conditioned on the merger with NextEra Energy closing

3

Calculated as core net income divided by average GAAP common equity

4 

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

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hawaiian-electric-industries-reports-third-quarter-2016-earnings-300357869.html

SOURCE Hawaiian Electric Industries, Inc.