HEI Reports Second Quarter 2017 Earnings

Diluted Earnings Per Share of $0.36

Company Release - 8/3/2017 2:15 PM ET

HONOLULU, Aug. 3, 2017 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (HEI) (NYSE - HE) today reported consolidated net income for common stock for the second quarter of 2017 of $38.7 million and diluted earnings per share (EPS) of $0.36 compared to $44.1 million and EPS of $0.41 for the second quarter of 2016.  Second quarter 2016 core earnings1 and core EPS1 were $46.9 million and $0.43, respectively.

"Our utilities continue to bring more renewable resources online, strengthen our energy delivery networks to make them more reliable and resilient and promote sustainable communities.  We are encouraged by our regulators' acceptance of our Power Supply Improvement Plan, which describes the near-term steps to move Hawaii closer to its 100 percent renewable energy goal.  At American Savings Bank, we continued to deliver strong performance through the second quarter with higher returns from improving credit quality, higher yields and greater efficiency while maintaining healthy capital levels," said Constance H. Lau, HEI president and chief executive officer.

HAWAIIAN ELECTRIC COMPANY EARNINGS
Hawaiian Electric Company's2 net income for the second quarter of 2017 was $25.6 million compared to $35.9 million in the second quarter of 2016.  Core earnings1 were $25.6 million and $36.6 million in the second quarters of 2017 and 2016, respectively.  The $11.0 million core net income decrease from the prior year quarter was primarily driven by the following after-tax items:

____________________________

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.

1

Non-GAAP measure that excludes after-tax income and costs related to the terminated merger with NextEra Energy, Inc., the cancelled spin-off of ASB Hawaii, Inc., and the termination of the liquefied natural gas (LNG) contract which required PUC approval of the merger with NextEra Energy, Inc. (the "Transaction Adjustments").  See the "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation.

2

Hawaiian Electric Company refers to the three utilities, Hawaiian Electric Company, Inc. on Oahu, Maui Electric Company, Limited, and Hawaii Electric Light Company, Inc.

  • $5 million lower net revenues3 mainly due to the expiration of the Hawaii Public Utilities Commission-approved 2013 settlement agreement with the Consumer Advocate that had allowed Hawaiian Electric Company, Inc. to record calendar year rate adjustment mechanism revenues from January 1, 2014 – December 31, 20164;
  • $5 million higher operations and maintenance expenses5 compared to the prior year quarter primarily due to higher overhaul expenses due to timing, increased maintenance costs, enterprise resource planning costs, partial write-off of deferred geothermal RFP costs, higher property damage reserve for a customer claim and grid modernization consulting costs; and
  • $1 million higher depreciation expense as a result of increasing investments for the integration of more renewable energy and improved customer reliability.

AMERICAN SAVINGS BANK EARNINGS
American Savings Bank's (American) net income for the second quarter of 2017 was $16.7 million compared to $15.8 million in the first (or linked) quarter of 2017 and $13.3 million in the second quarter of 2016. 

Compared to the second quarter of 2016, the $3.4 million increase was primarily driven by $3 million (after-tax) higher net interest income mainly due to growth in the commercial real estate and consumer loan portfolios as well as the deployment of deposit growth into our investment portfolio. 

______________________________

3

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' Condensed Consolidated Statements of Income.

4

With the expiration of the 2013 settlement agreement with the Consumer Advocate that was approved by the PUC, in 2017 the Oahu rate adjustment mechanism (RAM) revenues revert to being recorded for accounting purposes from a calendar year recognition period to a period beginning on June 1 of each year through May 31 of the subsequent year.  The periods in which the cash reflecting RAM revenues is collected did not change as a result of the settlement agreement and have always been aligned to the June 1 to May 31 periods. Therefore, the expiration of the 2013 settlement agreement will have no impact on Hawaiian Electric Company cash collections.

5

Excludes net income neutral expenses covered by surcharges or by third parties and merger-related costs including the terminated LNG contract costs.  See the "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation.

The $1 million (after-tax) lower provision for loan losses was offset by $1 million (after-tax) higher non-interest expense.

Compared to the linked first quarter of 2017, the $0.9 million increase was primarily driven by the following on an after-tax basis:

  • $1 million higher net interest income driven mainly by higher loan portfolio yields and growth in our consumer loan and investment portfolios;
  • $1 million lower provision for loan losses; and
  • $1 million higher noninterest income mainly due to improved performance from bank-owned life insurance investments.

These increases were offset by $2 million (after-tax) higher noninterest expense primarily due to higher compensation and benefit costs.

Total loans were $4.7 billion at June 30, 2017 and included growth in the consumer, home equity line of credit and residential loan portfolios during the second quarter of 2017. 

Total deposits were $5.7 billion at June 30, 2017, an increase of $175 million or 6.3% annualized from December 31, 2016.  Low-cost core deposits increased $143 million or 5.8% annualized from December 31, 2016.  The average cost of funds was 0.21% for the second quarter of 2017 compared to 0.20% for the first quarter of 2017 and 0.23% for the second quarter of 2016.

Overall, American achieved solid profitability in the second quarter of 2017 with a return on average equity of 11.3% and a return on average assets of 1.02%.

For additional information, refer to the American news release issued on July 28, 2017.

HOLDING AND OTHER COMPANIES
The holding and other companies' net losses were $3.7 million in the second quarter of 2017 compared to the $5.0 million net loss in the second quarter of 2016.  Excluding the Transaction Adjustments which totaled $2.0 million in the second quarter of 2016, holding and other companies' net losses were $3.7 million and $3.0 million in the second quarters of 2017 and 2016, respectively. 

WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE
HEI will conduct a webcast and conference call to discuss its second quarter of 2017 earnings and 2017 EPS guidance on Thursday, August 3, 2017, at 9:00 a.m. Hawaii time (3:00 p.m. Eastern time).

Interested parties within the United States may listen to the conference by calling (844) 834-0652 and international parties may listen to the conference by calling (412) 317-5198 or by accessing the webcast on HEI's website, www.hei.com, under the heading "Investor Relations."  HEI and Hawaiian Electric Company intend to continue to use HEI's website 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 August 17, 2017, by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10108918.

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, F.S.B., 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 to 13 of this release.

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)




Three months ended June 30


Six months ended June 30

(in thousands, except per share amounts)


2017


2016


2017


2016

Revenues









Electric utility


$

556,875



$

495,395



$

1,075,486



$

977,447


Bank


75,329



70,749



148,185



139,589


Other


77



100



172



168


Total revenues


632,281



566,244



1,223,843



1,117,204


Expenses









Electric utility


501,828



424,709



971,501



851,435


Bank


50,533



50,525



99,229



99,771


Other


4,024



5,555



9,355



11,692


Total expenses


556,385



480,789



1,080,085



962,898


Operating income (loss)









Electric utility


55,047



70,686



103,985



126,012


Bank


24,796



20,224



48,956



39,818


Other


(3,947)



(5,455)



(9,183)



(11,524)


Total operating income


75,896



85,455



143,758



154,306


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


(20,440)



(17,301)



(40,008)



(37,427)


Allowance for borrowed funds used during construction


1,143



760



2,032



1,422


Allowance for equity funds used during construction


3,027



1,997



5,426



3,736


Income before income taxes


59,626



70,911



111,208



122,037


Income taxes


20,492



26,310



37,408



44,611


Net income


39,134



44,601



73,800



77,426


Preferred stock dividends of subsidiaries


473



473



946



946


Net income for common stock


$

38,661



$

44,128



$

72,854



$

76,480


Basic earnings per common share


$

0.36



$

0.41



$

0.67



$

0.71


Diluted earnings per common share


$

0.36



$

0.41



$

0.67



$

0.71


Dividends declared per common share


$

0.31



$

0.31



$

0.62



$

0.62


Weighted-average number of common shares outstanding


108,750



107,962



108,712



107,791


Weighted-average shares assuming dilution


108,797



108,133



108,869



107,978


Net income (loss) for common stock by segment









Electric utility


$

25,644



$

35,857



$

47,109



$

61,224


Bank


16,733



13,285



32,546



25,958


Other


(3,716)



(5,014)



(6,801)



(10,702)


Net income for common stock


$

38,661



$

44,128



$

72,854



$

76,480


Comprehensive income attributable to Hawaiian Electric Industries, Inc.


$

41,031



$

46,236



$

76,209



$

87,388


Return on average common equity (twelve months ended)1






12.1

%


8.8

%


This information should be read in conjunction with the condensed 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, 2017 and 2016 returns on average common equity (twelve months ended June 30) were 8.9% and 9.3%, respectively.  See reconciliation of GAAP to non-GAAP measures.

 

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(dollars in thousands)


June 30, 2017


December 31, 2016

Assets





Cash and cash equivalents


$

210,381



$

278,452


Accounts receivable and unbilled revenues, net


249,539



237,950


Available-for-sale investment securities, at fair value


1,302,886



1,105,182


Stock in Federal Home Loan Bank, at cost


11,706



11,218


Loans receivable held for investment, net


4,688,278



4,683,160


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


5,261



18,817


Property, plant and equipment, net of accumulated depreciation of $2,508,291 and $2,444,348 at June 30, 2017 and December 31, 2016, respectively


4,726,524



4,603,465


Regulatory assets


938,277



957,451


Other


478,763



447,621


Goodwill


82,190



82,190


Total assets


$

12,693,805



$

12,425,506


Liabilities and shareholders' equity





Liabilities





Accounts payable


$

194,755



$

143,279


Interest and dividends payable


22,124



25,225


Deposit liabilities


5,724,386



5,548,929


Short-term borrowings—other than bank


49,789




Other bank borrowings


188,130



192,618


Long-term debt, net—other than bank


1,618,647



1,619,019


Deferred income taxes


750,413



728,806


Regulatory liabilities


431,630



410,693


Contributions in aid of construction


543,204



543,525


Defined benefit pension and other postretirement benefit plans liability


626,795



638,854


Other


434,610



473,512


Total liabilities


10,584,483



10,324,460


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: 108,785,486 shares and 108,583,413 shares at June 30, 2017 and December 31, 2016, respectively


1,660,403



1,660,910


Retained earnings


444,400



438,972


Accumulated other comprehensive loss, net of tax benefits


(29,774)



(33,129)


Total shareholders' equity


2,075,029



2,066,753


Total liabilities and shareholders' equity


$

12,693,805



$

12,425,506



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

 

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

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)




Three months ended June 30


Six months ended June 30

(dollars in thousands, except per barrel amounts)


2017


2016


2017


2016

Revenues


$

556,875



$

495,395



$

1,075,486



$

977,447


Expenses









Fuel oil


141,259



91,899



285,529



205,639


Purchased power


153,067



139,058



280,191



254,917


Other operation and maintenance


106,374



99,563



206,614



203,471


Depreciation


48,156



46,760



96,372



93,541


Taxes, other than income taxes


52,972



47,429



102,795



93,867


Total expenses


501,828



424,709



971,501



851,435


Operating income


55,047



70,686



103,985



126,012


Allowance for equity funds used during construction


3,027



1,997



5,426



3,736


Interest expense and other charges, net


(18,214)



(15,103)



(35,718)



(32,411)


Allowance for borrowed funds used during construction


1,143



760



2,032



1,422


Income before income taxes


41,003



58,340



75,725



98,759


Income taxes


14,860



21,984



27,618



36,537


Net income


26,143



36,356



48,107



62,222


Preferred stock dividends of subsidiaries


229



229



458



458


Net income attributable to Hawaiian Electric


25,914



36,127



47,649



61,764


Preferred stock dividends of Hawaiian Electric


270



270



540



540


Net income for common stock


$

25,644



$

35,857



$

47,109



$

61,224


Comprehensive income attributable to Hawaiian Electric


$

25,684



$

35,102



$

47,608



$

61,485


OTHER ELECTRIC UTILITY INFORMATION









Kilowatthour sales (millions)









   Hawaiian Electric


1,624



1,625



3,149



3,182


   Hawaii Electric Light


257



260



510



518


   Maui Electric


269



271



529



541




2,150



2,156



4,188



4,241


Cooling degree days (Oahu)


1,278



1,257



2,162



2,141


Average fuel oil cost per barrel


$

69.86



$

44.98



$

67.78



$

49.05











Twelve months ended June 30






2017


2016

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









   Hawaiian Electric






7.25



7.95


   Hawaii Electric Light






6.91



7.47


   Maui Electric






7.50



8.67


   Hawaiian Electric Consolidated






7.23



7.98



This information should be read in conjunction with the condensed 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.

 

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(dollars in thousands, except par value)


June 30, 2017


December 31, 2016

Assets





Property, plant and equipment





Utility property, plant and equipment





  Land


$

53,178



$

53,153


  Plant and equipment


6,711,418



6,605,732


  Less accumulated depreciation


(2,430,097)



(2,369,282)


  Construction in progress


272,438



211,742


  Utility property, plant and equipment, net


4,606,937



4,501,345


Nonutility property, plant and equipment, less accumulated depreciation of $1,233 and  $1,232  at June 30, 2017 and December 31, 2016, respectively


7,410



7,407


  Total property, plant and equipment, net


4,614,347



4,508,752


Current assets





Cash and cash equivalents


42,582



74,286


Customer accounts receivable, net


126,161



123,688


Accrued unbilled revenues, net


103,596



91,693


Other accounts receivable, net


3,684



5,233


Fuel oil stock, at average cost


72,392



66,430


Materials and supplies, at average cost


57,099



53,679


Prepayments and other


36,340



23,100


Regulatory assets


74,167



66,032


Total current assets


516,021



504,141


Other long-term assets





Regulatory assets


864,110



891,419


Unamortized debt expense


690



208


Other


75,987



70,908


Total other long-term assets


940,787



962,535


Total assets


$

6,071,155



$

5,975,428


Capitalization and liabilities





Capitalization





Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 16,019,785 shares  at June 30, 2017 and December 31, 2016)


$

106,818



$

106,818


Premium on capital stock


601,486



601,491


Retained earnings


1,095,025



1,091,800


Accumulated other comprehensive income (loss), net of income taxes


177



(322)


Common stock equity


1,803,506



1,799,787


Cumulative preferred stock — not subject to mandatory redemption


34,293



34,293


Long-term debt, net


1,318,845



1,319,260


Total capitalization


3,156,644



3,153,340


Current liabilities





Short-term borrowings from non-affiliates


43,990




Accounts payable


162,375



117,814


Interest and preferred dividends payable


19,497



22,838


Taxes accrued


142,263



172,730


Regulatory liabilities


2,883



3,762


Other


53,140



55,221


Total current liabilities


424,148



372,365


Deferred credits and other liabilities





Deferred income taxes


759,972



733,659


Regulatory liabilities


428,747



406,931


Unamortized tax credits


91,386



88,961


Defined benefit pension and other postretirement benefit plans liability


587,718



599,726


Other


79,336



76,921


Total deferred credits and other liabilities


1,947,159



1,906,198


Contributions in aid of construction


543,204



543,525


Total capitalization and liabilities


$

6,071,155



$

5,975,428



This information should be read in conjunction with the condensed 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


Six months ended June 30

(in thousands)


June 30, 2017


March 31, 2017


June 30, 2016


2017


2016

Interest and dividend income











Interest and fees on loans


$

52,317



$

50,742



$

49,690



$

103,059



$

98,127


Interest and dividends on investment securities


6,763



6,980



4,443



13,743



9,460


Total interest and dividend income


59,080



57,722



54,133



116,802



107,587


Interest expense











Interest on deposit liabilities


2,311



2,103



1,691



4,414



3,283


Interest on other borrowings


824



816



1,467



1,640



2,952


Total interest expense


3,135



2,919



3,158



6,054



6,235


Net interest income


55,945



54,803



50,975



110,748



101,352


Provision for loan losses


2,834



3,907



4,753



6,741



9,519


Net interest income after provision for loan losses


53,111



50,896



46,222



104,007



91,833


Noninterest income











Fees from other financial services


5,810



5,610



5,701



11,420



11,200


Fee income on deposit liabilities


5,565



5,428



5,262



10,993



10,418


Fee income on other financial products


1,971



1,866



2,207



3,837



4,412


Bank-owned life insurance


1,925



983



1,006



2,908



2,004


Mortgage banking income


587



789



1,554



1,376



2,749


Gains on sale of investment securities, net






598





598


Other income, net


391



458



288



849



621


Total noninterest income


16,249



15,134



16,616



31,383



32,002


Noninterest expense











Compensation and employee benefits


24,742



23,237



21,919



47,979



44,353


Occupancy


4,185



4,154



4,115



8,339



8,253


Data processing


3,207



3,280



3,277



6,487



6,449


Services


2,766



2,360



2,755



5,126



5,666


Equipment


1,771



1,748



1,771



3,519



3,434


Office supplies, printing and postage


1,527



1,535



1,583



3,062



2,948


Marketing


839



517



899



1,356



1,760


FDIC insurance


822



728



913



1,550



1,797


Other expense


4,705



4,311



5,382



9,016



9,357


Total noninterest expense


44,564



41,870



42,614



86,434



84,017


Income before income taxes


24,796



24,160



20,224



48,956



39,818


Income taxes


8,063



8,347



6,939



16,410



13,860


Net income


$

16,733



$

15,813



$

13,285



$

32,546



$

25,958


Comprehensive income


$

18,956



$

16,648



$

16,051



$

35,604



$

36,361


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













Return on average assets


1.02



0.98



0.86



1.00



0.85


Return on average equity


11.25



10.82



9.22



11.04



9.06


Return on average tangible common equity


13.06



12.58



10.75



12.82



10.57


Net interest margin


3.68



3.68



3.58



3.68



3.60


Efficiency ratio


61.73



59.87



63.05



60.81



63.00


Net charge-offs to average loans outstanding


0.21



0.29



0.15



0.25



0.18


As of period end











Nonaccrual loans to loans receivable held for investment


0.44



0.41



1.02






Allowance for loan losses to loans outstanding


1.19



1.19



1.16






Tangible common equity to tangible assets


7.88



7.78



8.15






Tier-1 leverage ratio


8.5



8.5



8.7






Total capital ratio


13.7



13.6



13.2






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


$

9.4



$

9.4



$

9.0



$

18.8



$

18.0



This information should be read in conjunction with the condensed 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)

June 30, 2017

December 31, 2016






Assets





Cash and due from banks


$

128,609


$

137,083

Interest-bearing deposits


37,049


52,128

Restricted cash



1,764

Available-for-sale investment securities, at fair value


1,302,886


1,105,182

Stock in Federal Home Loan Bank, at cost


11,706


11,218

Loans receivable held for investment


4,744,634


4,738,693

Allowance for loan losses


(56,356)


(55,533)

Net loans


4,688,278


4,683,160

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


5,261


18,817

Other


354,898


329,815

Goodwill


82,190


82,190

Total assets


$

6,610,877


$

6,421,357

Liabilities and shareholder's equity





Deposit liabilities–noninterest-bearing


$

1,694,150


$

1,639,051

Deposit liabilities–interest-bearing


4,030,236


3,909,878

Other borrowings


188,130


192,618

Other


101,974


101,635

Total liabilities


6,014,490


5,843,182

Common stock


1


1

Additional paid in capital


344,062


342,704

Retained earnings


271,739


257,943

Accumulated other comprehensive loss, net of tax benefits





     Net unrealized losses on securities

$

(5,687)


$

(7,931)


     Retirement benefit plans

(13,728)

(19,415)

(14,542)

(22,473)

  Total shareholder's equity


596,387


578,175

  Total liabilities and shareholder's equity


$

6,610,877


$

6,421,357


This information should be read in conjunction with the condensed 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 given the non-recurring nature of these items.  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 are limited to income, costs and associated taxes related to the terminated merger between HEI and NextEra Energy, Inc., the cancelled spin-off of ASB Hawaii, Inc., and the termination of the 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.  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 June 30


Six months ended June 30

($ in millions, except per share amounts)

2017

2016


2017

2016

HEI CONSOLIDATED COSTS RELATED TO THE TERMINATED MERGER WITH NEXTERA ENERGY AND CANCELLED SPIN-OFF OF ASB HAWAII






Pre-tax expenses

$


$

2.0



$


$

3.6


Current income tax benefits






After-tax expenses

$


$

2.0



$


$

3.6


HEI CONSOLIDATED LNG CONTRACT COSTS2






Pre-tax expenses

$


$

1.2



$


$

3.4


Current income tax benefits


(0.5)




(1.3)


After-tax expenses

$


$

0.7



$


$

2.1


HEI CONSOLIDATED NET INCOME






GAAP (as reported)

$

38.7


$

44.1



$

72.9


$

76.5


Excluding special items (after-tax):






Costs related to the terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii


2.0




3.6


Costs related to the terminated LNG contract2


0.7




2.1


Non-GAAP (core) net income

$

38.7


$

46.9



$

72.9


$

82.1


HEI CONSOLIDATED DILUTED EARNINGS PER COMMON SHARE





GAAP (as reported)

$

0.36


$

0.41



$

0.67


$

0.71


Excluding special items (after-tax):






Costs related to the terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii


0.02




0.03


Costs related to the terminated LNG contract2


0.01




0.02


Non-GAAP (core) diluted earnings per common share

$

0.36


$

0.43



$

0.67


$

0.76











Twelve months ended June 30





2017

2016

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



Based on GAAP




12.1

%

8.8

%

Based on non-GAAP (core)3




8.9

%

9.3

%







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 June 30


Six months ended June 30

($ in millions)

2017

2016


2017

2016

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






Pre-tax expenses

$


$



$


$

0.1


Current income tax benefits






After-tax expenses

$


$



$


$

0.1


HAWAIIAN ELECTRIC CONSOLIDATED LNG CONTRACT COSTS2








Pre-tax expenses

$


$

1.2



$


$

3.4


Current income tax benefits


(0.5)




(1.3)


After-tax expenses

$


$

0.7



$


$

2.1


HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME






GAAP (as reported)

$

25.6


$

35.9



$

47.1


$

61.2


Excluding special items (after-tax):






Costs related to the terminated merger with NextEra Energy





0.1


Costs related to the terminated LNG contract2


0.7




2.1


Non-GAAP (core) net income

$

25.6


$

36.6



$

47.1


$

63.4












Twelve months ended June 30





2017

2016

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






Based on GAAP




7.23

%

7.98

%

Based on non-GAAP (core)3




7.23

%

8.12

%








Three months ended June 30


Six months ended June 30

($ in millions)

2017

2016


2017

2016

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






GAAP (as reported)

$

106.4


$

99.6



$

206.6


$

203.5


Excluding O&M-related net income neutral items4

0.9


1.5



2.0


3.1


Excluding costs related to the terminated merger with NextEra Energy





0.1


Excluding costs related to the terminated LNG contract2


1.2




3.4


Non-GAAP (Adjusted other O&M expense)

$

105.4


$

96.8



$

204.6


$

196.8



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


Treasurer & Manager, Investor Relations & Strategic Planning

E-mail:  ir@hei.com

 

Hawaiian Electric Industries, Inc. (PRNewsFoto/Hawaiian Electric Industries, Inc.)

 

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SOURCE Hawaiian Electric Industries, Inc.