HONOLULU--(BUSINESS WIRE)--
Hawaiian Electric Industries, Inc. (NYSE:HE) today reported net
income for the fourth quarter of 2008 of $13.9 million or 16 cents per
share, compared with $40.6 million or 49 cents per share for the fourth
quarter of 2007, primarily reflecting the slowing economy's and volatile
financial market's impacts on both utility and bank operations.
Net income for all of 2008 was $90.3 million, or $1.07 per share,
compared with $84.8 million, or $1.03 per share for 2007. Consolidated
2008 net income includes the impact of the bank's previously-disclosed
balance sheet restructuring charge of $35.6 million, or 42 cents per
share. Excluding the $35.6 million after-tax charge, adjusted 2008
earnings were $125.9 million or $1.49 per share.
"Overall, earnings improved in 2008 compared with 2007 as we continued
to position the company for improved operating and financial
performance. However, in the fourth quarter and especially in December,
the company felt the impact of a sharp decline in the Hawaii economy,
the depressed national economy and volatility in the financial markets,"
said Constance H. Lau, HEI president and chief executive officer.
"Demand for electricity dropped significantly, residential loan
delinquencies started to rise and bank securities were required to be
written down to their fair value. While these difficult economic
conditions will continue to impact 2009 results as well, strategic
initiatives at both our operating companies are laying the groundwork
for future improved performance," Lau said.
FOURTH QUARTER RESULTS
ELECTRIC UTILITY
Electric utility fourth quarter net income was $14.0 million in 2008
versus $28.2 million for the same period in 2007. "Fourth quarter
earnings were down $14.2 million, driven primarily by the effects of
lower sales and higher planned operation and maintenance expenses," said
Lau.
Kilowatthour sales were down 3.6% compared with the same quarter of
2007--the largest quarterly decline in the company's recent history. Both
residential and commercial customer usage declined due to customer
conservation, the impact of energy efficiency programs, and Hawaii's
slowing economy.
Operation and maintenance expenses were $16.5 million higher
quarter-over-quarter due primarily to: 1) $7.6 million higher production
maintenance resulting from the timing of generation maintenance work; 2)
$3.1 million higher demand-side management (DSM) costs that are
recovered in electric rates; 3) $2.7 million higher bad debt expense;
and 4) $1.1 million higher vegetation management expenses.
The utility also recorded $1.2 million higher quarter-over-quarter
depreciation expenses due to 2007 plant additions.
BANK
Bank net income for the fourth quarter of 2008 was $5.9 million compared
with $17.2 million for the fourth quarter of 2007. The decrease was due
to lower noninterest income, higher noninterest expenses and higher
provisions for loan losses, partially offset by higher net interest
income.
Bank net interest income for the fourth quarter of 2008 was $51.5
million compared with $49.1 million in the same quarter of 2007. The
increase in net interest income was driven by lower interest expense due
to lower balances of deposits and borrowings and lower rates on those
deposits and borrowings, partially offset by lower interest income due
to lower balances of investments and lower yields on loans and
investments. The bank's net interest margin was 4.07% in the fourth
quarter of 2008, compared with 3.04% in the fourth quarter of 2007. The
overall cost of the bank's liabilities decreased more than the yield on
earning assets, a result of the balance sheet restructuring in June and
the overall lower level of interest rates.
In the fourth quarter of 2008, the bank recorded a $6.3 million
provision for loan losses, compared to a $1.8 million provision recorded
in the same period of 2007. "We are seeing the impact of the slowing
economy on credit trends. The increase in provision in the fourth
quarter was primarily due to increases in the classification of
commercial loans and increased nonperforming residential lot loans,"
added Lau.
Noninterest income in the fourth quarter of 2008 was $8.2 million lower
than in the fourth quarter of 2007, primarily due to a $7.8 million
non-cash write-down of two securities in the bank's investment portfolio
to fair value.
Noninterest expense in the fourth quarter of 2008 was $7.3 million
higher than in the fourth quarter of 2007. Compensation expenses in
fourth quarter 2008 were $12.2 million higher than in the fourth quarter
2007 due in part to an $8.8 million gain recorded in the fourth quarter
of 2007 resulting from changes to the bank's defined benefit retirement
plan. Services expenses were $3.4 million lower in the fourth quarter of
2008.
HOLDING AND OTHER COMPANIES' RESULTS
The holding and other companies' net losses were $6.1 million in the
fourth quarter of 2008 versus $4.8 million in the fourth quarter of 2007.
FULL YEAR RESULTS
Full-year 2008 earnings improved by $5.5 million or 4 cents per share to
$90.3 million or $1.07 per share compared with 2007. The overall
increase in year-over-year earnings was due to a recovery in utility net
income related to rate relief that was received primarily in the last
quarter of 2007, partially offset by lower kilowatthour sales, the $35.6
million balance sheet restructuring charge, an increase in the bank's
provision for loan losses and the write-down of two bank investment
securities to fair value.
ELECTRIC UTILITY
Electric utility earnings were $92.0 million in 2008 versus $52.2
million in 2007. "Earnings for 2008 reflected the effect of a full year
of interim rate relief received primarily late last year, partially
offset by lower kilowatthour sales and higher operation and depreciation
expenses. Also, 2007 results were unusually low due to a $9 million
net-of-tax refund of interim rates in HECO Oahu's 2005 rate case and a
$7 million net-of-tax write off of costs related to Hawaii Electric
Light Company's Keahole power plant expansion project," said Lau.
Kilowatthour sales were down 1.8% year-over-year, with the decrease
coming primarily in the last two quarters, due largely to the effects of
Hawaii's slowing economy, on-going energy efficiency and conservation
efforts and the impact on demand of high fuel prices.
Operation expense increased by $29.2 million primarily due to: 1) $11.4
million higher DSM costs that are recovered in electric rates; 2) $5.5
million higher production operation expenses resulting primarily from
higher staffing levels at generating plants and work to support the
acquisition of renewable resources; 3) $4.0 million higher bad debt
expense; and 4) $2.6 million higher transmission and distribution
operation expense includes higher expenses for support and maintenance
of grid control and operation infrastructure and work to support the
development of the advanced metering infrastructure program.
Maintenance expense decreased by $4.1 million primarily due to $4.5
million lower production maintenance expenses resulting from the timing
of generating unit overhauls.
Depreciation expense in 2008 increased $4.6 million over 2007 due to
2007 plant additions.
BANK
Bank net income for 2008 was $17.8 million compared with $53.1 million
for 2007. Results for 2008 include a $35.6 million after-tax charge
related to the balance sheet restructuring executed in June. The
restructuring reduced the size of the bank's balance sheet by
approximately $1 billion, while enabling the bank to maintain its
earnings power on a lower capital base. Excluding the balance sheet
restructuring charge, adjusted 2008 bank net income was $53.4 million.
"We are pleased that we were able to maintain the core earnings of the
bank in the face of a very challenging economic environment. The balance
sheet restructuring has positioned us to deal with the challenges ahead
by improving our profitability measures, capital position and liquidity,
while enabling the bank to dividend excess capital to HEI," said Lau.
"In addition, our efforts on improving efficiency will further buffer
financial performance from deteriorating market conditions."
Bank net interest income increased by $9.8 million in 2008 compared with
2007, as lower rates on loans and investments were more than offset by
lower rates on deposits and borrowings. The bank's net interest margin
increased to 3.62% compared to 3.05% in 2007, due in part to the balance
sheet restructuring.
The bank provided $10.3 million for loan losses in 2008, compared to
$5.7 million in 2007. The increased level of provisions in 2008 was due
to growth in loan balances, an increase in the number of commercial loan
classifications due to weakening credit quality, and an increase in
nonperforming residential lot loans.
Noninterest income was $22.3 million lower in 2008 than in 2007 due to
losses on the sale of securities from the balance sheet restructuring
and the write-down of two securities to fair value.
Noninterest expense increased by $40.1 million year-over-year, primarily
due to charges from the early extinguishment of debt related to the
balance sheet restructuring. Compensation expense was higher by $15.9
million in 2008, as compensation expense in 2007 was relatively low as a
result of an $8.8 million gain from changes in the bank's defined
benefit retirement plan and lower incentive compensation expenses.
Services expense was $12.5 million lower in 2008 due to lower
consulting, contract services and legal fees.
HOLDING AND OTHER COMPANIES' RESULTS
The holding and other companies' net loss was $19.5 million in 2008,
compared with $20.5 million in 2007.
WEBCAST AND TELECONFERENCE
Hawaiian Electric Industries, Inc. will conduct a webcast and
teleconference call to review its fourth quarter 2008 earnings on
Friday, February 20, 2009, at 8:00 a.m. Hawaii Time (1:00 p.m. Eastern
Time). The event can be accessed through HEI's website at http://www.hei.com
or by dialing (866) 578-5747, passcode: 76761127 for the teleconference
call.
An online replay of the webcast will be available at the same website
beginning about two hours after the event. Replays of the teleconference
call will also be available approximately two hours after the event
through March 6, 2009, by dialing (888) 286-8010, passcode: 83325249.
HEI supplies power to over 400,000 customers or 95% of Hawaii's
population through its electric utilities, Hawaiian Electric Company,
Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company,
Ltd. 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.
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 (including future revenues, expenses, earnings or losses or
growth rates), ongoing business strategies or prospects and possible
future actions, which may be provided by management, 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 assumptions about 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" discussion (which is incorporated
by reference herein) set forth on pages iv and v of HEI's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2008, and in
HEI's future periodic reports that discuss important factors that could
cause HEI's results to differ materially from those anticipated in such
statements. Forward-looking statements speak only as of the date of this
release.
Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED STATEMENTS
OF INCOME
(Unaudited) Three months ended Years ended
December 31, December 31,
(in thousands, except 2008 2007 2008 2007
per share amounts)
Revenues
Electric utility $ 720,552 $ 598,309 $ 2,860,350 $ 2,106,314
Bank 79,084 108,002 358,553 425,495
Other 181 1,860 17 4,609
799,817 708,171 3,218,920 2,536,418
Expenses
Electric utility 687,419 540,871 2,668,991 1,975,729
Bank 69,195 80,661 331,601 341,485
Other 5,523 4,774 14,171 15,472
762,137 626,306 3,014,763 2,332,686
Operating income (loss)
Electric utility 33,133 57,438 191,359 130,585
Bank 9,889 27,341 26,952 84,010
Other (5,342 ) (2,914 ) (14,154 ) (10,863 )
37,680 81,865 204,157 203,732
Interest expense-other
than on deposit (19,362 ) (19,174 ) (76,142 ) (78,556 )
liabilities and other
bank borrowings
Allowance for borrowed
funds used during 1,177 712 3,741 2,552
construction
Preferred stock
dividends of (473 ) (470 ) (1,890 ) (1,890 )
subsidiaries
Allowance for equity
funds used during 2,958 1,449 9,390 5,219
construction
Income before income 21,980 64,382 139,256 131,057
taxes
Income taxes 8,086 23,797 48,978 46,278
Net income $ 13,894 $ 40,585 $ 90,278 $ 84,779
Per common share
Basic earnings $ 0.16 $ 0.49 $ 1.07 $ 1.03
Diluted earnings $ 0.16 $ 0.49 $ 1.07 $ 1.03
Dividends $ 0.31 $ 0.31 $ 1.24 $ 1.24
Weighted-average number
of common shares 86,355 83,003 84,631 82,215
outstanding
Adjusted 86,538 83,163 84,720 82,419
weighted-average shares
Net income (loss) by
segment
Electric utility $ 14,026 $ 28,178 $ 91,975 $ 52,156
Bank 5,939 17,198 17,827 53,107
Other (6,071 ) (4,791 ) (19,524 ) (20,484 )
Net income $ 13,894 $ 40,585 $ 90,278 $ 84,779
This information should be read in conjunction with the consolidated financial
statements and the notes thereto incorporated by reference in HEI's Annual
Reports on SEC Form 10-K for the years ended December 31, 2007 and 2008 (when
filed) and the consolidated financial statements and the notes thereto in HEI's
Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2008, June
30, 2008 and September 30, 2008.
Hawaiian Electric Company, Inc. (HECO) and Subsidiaries
CONSOLIDATED STATEMENTS
OF INCOME
(Unaudited) Three months ended Years ended
December 31, December 31,
(in thousands) 2008 2007 2008 2007
Operating revenues $ 718,374 $ 597,192 $ 2,853,639 $ 2,096,958
Operating expenses
Fuel oil 328,738 224,348 1,229,193 774,119
Purchased power 159,682 146,799 689,828 536,960
Other operation 66,649 59,098 243,249 214,047
Maintenance 28,847 19,944 101,624 105,743
Depreciation 35,424 34,269 141,678 137,081
Taxes, other than income 67,765 55,768 261,823 194,607
taxes
Income taxes 8,800 18,152 56,307 34,126
695,905 558,378 2,723,702 1,996,683
Operating income 22,469 38,814 129,937 100,275
Other income
Allowance for equity
funds used during 2,958 1,449 9,390 5,219
construction
Other, net 1,966 703 5,659 (627 )
4,924 2,152 15,049 4,592
Income before interest 27,393 40,966 144,986 104,867
and other charges
Interest and other
charges
Interest on long-term 11,889 11,600 47,302 45,964
debt
Amortization of net bond 628 627 2,530 2,440
premium and expense
Other interest charges 1,528 774 4,925 4,864
Allowance for borrowed
funds used during (1,177 ) (712 ) (3,741 ) (2,552 )
construction
Preferred stock
dividends of 229 229 915 915
subsidiaries
13,097 12,518 51,931 51,631
Income before preferred 14,296 28,448 93,055 53,236
stock dividends of HECO
Preferred stock 270 270 1,080 1,080
dividends of HECO
Net income for common $ 14,026 $ 28,178 $ 91,975 $ 52,156
stock
OTHER ELECTRIC UTILITY
INFORMATION
Kilowatthour sales 2,458 2,550 9,936 10,118
(millions)
Cooling degree days 1,167 1,169 4,946 4,835
(Oahu)
Average fuel oil cost $ 124.08 $ 79.67 $ 114.50 $ 69.08
per barrel
This information should be read in conjunction with the consolidated financial
statements and the notes thereto incorporated by reference in HECO's Annual
Reports on SEC Form 10-K for the years ended December 31, 2007 and 2008 (when
filed) and the consolidated financial statements and the notes thereto in HECO's
Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2008, June
30, 2008 and September 30, 2008.
American Savings Bank, F.S.B. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) Three months ended Years ended
December 31, December 31,
(in thousands) 2008 2007 2008 2007
Interest and dividend income
Interest and fees on loans $ 60,898 $ 63,402 $ 247,210 $ 245,593
Interest and dividends on
investment and mortgage-related 8,130 26,380 65,208 111,470
securities
69,028 89,782 312,418 357,063
Interest expense
Interest on deposit liabilities 13,574 19,928 61,483 81,879
Interest on other borrowings 3,911 20,789 43,941 78,019
17,485 40,717 105,424 159,898
Net interest income 51,543 49,065 206,994 197,165
Provision for loan losses 6,300 1,800 10,334 5,700
Net interest income after 45,243 47,265 196,660 191,465
provision for loan losses
Noninterest income
Fees from other financial services 6,292 7,377 24,846 27,916
Fee income on deposit liabilities 7,443 7,247 28,332 26,342
Fee income on other financial 1,469 1,573 6,683 7,418
products
Gain (loss) on sale of securities 12 1,109 (17,376 ) 1,109
*
Loss on investments (7,764 ) - (7,764 ) -
Other income 2,604 914 11,414 5,647
10,056 18,220 46,135 68,432
Noninterest expense
Compensation and employee benefits 21,407 9,204 77,858 61,937
Occupancy 5,614 5,344 21,890 21,051
Equipment 3,034 3,524 12,544 14,417
Services 3,175 6,535 16,706 29,173
Data processing 2,659 2,659 10,678 10,458
Loss on early extinguishment of - - 39,843 -
debt *
Other expense 9,553 10,900 36,485 38,872
45,442 38,166 216,004 175,908
Income before income taxes 9,857 27,319 26,791 83,989
Income taxes * 3,918 10,121 8,964 30,882
Net income $ 5,939 $ 17,198 $ 17,827 $ 53,107
Net interest margin (%) 4.07 3.04 3.62 3.05
This information should be read in conjunction with the consolidated financial
statements and the notes thereto incorporated by reference in HEI's Annual
Reports on SEC Form 10-K for the years ended December 31, 2007 and 2008 (when
filed) and the consolidated financial statements and the notes thereto in HEI's
Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2008, June
30, 2008 and September 30, 2008.
* Net income included a $35.6 million after-tax charge related to ASB's balance
sheet restructuring in June 2008. The $35.6 million is comprised of: (1)
realized losses on the sale of mortgage-related securities and agency notes of
$19.3 million included in "Noninterest income-Gain (loss) on sale of
securities," (2) fees associated with the early retirement of other bank
borrowings of $39.8 million included in "Noninterest expense-Loss on early
extinguishment of debt" and (3) income tax benefits of $23.5 million included in
"Income taxes."
Source: Hawaiian Electric Industries, Inc.
Contact: Hawaiian Electric Industries, Inc.
Suzy P. Hollinger, 808-543-7385
Facsimile: 808-203-1155
Manager, Treasury and Investor Relations
shollinger@hei.com