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Hawaiian Electric Industries Reports 2013 Year-End & Fourth Quarter Earnings

2013 Net Income of $161.5 Million; Diluted Earnings Per Share (EPS) of $1.62 Fourth Quarter Net Income of $39.0 Million; EPS of $0.39

HONOLULU, Feb. 18, 2014 /PRNewswire/ --

Selected 2013 Highlights:

  • Core net income1of $161.5 million in 2013 vs $163.1 million in 2012; Reported net income of $161.5 million in 2013 vs $138.7 million in 2012
  • Core EPS1 of $1.62 in 2013 vs $1.68 in 2012; Reported EPS of $1.62 in 2013 vs $1.42 in 2012
  • ROE of  9.7% -- 8.0% utility; 11.4% bank 
  • Successfully accessed the capital markets to fund ongoing utility investments in local infrastructure to modernize the electric grid
    • Executed $180 million equity forward sale agreement in March 2013
    • Refinanced $216 million of debt at lower interest rates
  • Continued investments by local shareholders: Of the shareholders who disclose residence, over a third are Hawaii based, representing at least 25% of total HEI ownership
  • Continued 113-year history of continuous dividends: Through HEI's dividend reinvestment program, shareholders invested $42 million in HEI by reinvesting their dividends and buying more stock    
  • Continued legacy of delivering value for customers and Hawaii:
    • Record 18% of electricity used by Hawaiian Electric customers was from renewable sources
      • Surpassed Hawaii's 2015 renewable portfolio standard of 15%
      • Avoided-oil equivalent of 2.9 million barrels which would have cost our state approximately $350 million2 in imported oil in 2013
      • Led the nation by far in the integration of customer-sited solar: 10% of Oahu customers using rooftop solar by the end of 2013
      • Bank continued clean energy financing for rooftop solar vendors
      • Integrated two new lower-cost utility-scale solar projects on Oahu
      • Reached milestone to deactivate Honolulu Power Plant (January 2014)
      • Leveraging collaborative partnerships and over $20 million in grant funding to seek clean energy solutions for Hawaii
    • Utility proposals to the Hawaii Public Utilities Commission for 259 MW renewables priced ~30% lower than current rates3
    • Utility operating expenses managed to inflationary increases while expanding strategic initiatives
    • Bank provided over $2 billion in new credit and refinancings to customers
    • Contributed over ten thousand volunteer hours and over $2 million of charitable contributions to community organizations

Hawaiian Electric Industries, Inc.(NYSE - HE) (HEI) today reported 2013 year-end consolidated net income for common stock of $161.5 million, or diluted earnings per share (EPS) of $1.62.  For the fourth quarter of 2013, consolidated net income for common stock was $39.0 million, or $0.39 EPS.  The comparison to prior year results is shown on a core earnings basis1 in the table below.  Core earnings exclude a $24 million after-tax write-down in the fourth quarter of 2012 related to a settlement agreement between Hawaiian Electric Company4 and the Hawaii Consumer Advocate which was subsequently approved by the Hawaii Public Utilities Commission.





RECONCILIATION OF GAAP TO NON-GAAP MEASURES



($ in millions, except per share amounts)




Three months


Years




ended December 31


ended December 31




2013


2012


2013


2012



HEI CONSOLIDATED NET INCOME









GAAP (as reported)

$ 39.0


$ 13.8


$ 161.5


$ 138.7



Excluding special items

-


24.4


-


24.4



Non-GAAP (core)

$ 39.0


$ 38.3


$ 161.5


$ 163.1













HEI CONSOLIDATED DILUTED EARNINGS PER SHARE





GAAP (as reported)

$ 0.39


$ 0.14


$ 1.62


$ 1.42



Excluding special items

-


0.25


-


0.25



Non-GAAP (core)

$ 0.39


$ 0.39


$ 1.62


$ 1.68



Note: Columns may not foot due to rounding



























"While earnings per share were down 4% due to earnings declines at both American Savings Bank and Hawaiian Electric Company, we continued to deliver a competitive 9.7% return on equity for the year.  HEI's unique combination of companies continues to provide us with the financial resources to efficiently invest in our Hawaii-based companies," said Constance Lau, HEI president and chief executive officer.  "Our utility continued to invest in the modernization of our electric grid to ensure reliability and safety for our customers as we integrate more renewable energy.  These investments helped us exceed Hawaii's 2015 Renewable Portfolio Standard of 15%, meeting 18% of customers' electricity needs with renewable sources in 2013.  Ten percent of Oahu customers now have customer-sited solar, far more than any other utility.  At the same time, we are focused on reducing costs for our customers with proposed utility-scale solar and wind projects priced 30% lower than the current cost of generation.  We also are working with other stakeholders on the viability and benefits of bringing liquefied natural gas to Hawaii as a cleaner, lower-cost alternative to oil while we continue to aggressively pursue more renewable generation sources to displace fossil fuels."

"Our bank exceeded its loan growth goals while maintaining its targeted portfolio mix, gained market share in home lending, improved credit quality, and provided dividends to HEI while maintaining healthy capital levels.  Overall, we are pleased that we were able to achieve many of our goals in a challenging and dynamic year," said Lau.

HAWAIIAN ELECTRIC COMPANY EARNINGS CONSISTENT WITH EXPECTATIONS

The utility's full-year and fourth quarter 2013 net income was $122.9 million and $32.0 million, respectively.  The comparison to the prior year is shown on a core earnings basis in the chart below.






















RECONCILIATION OF GAAP TO NON-GAAP MEASURES



($ in millions)




Three months


Years




ended December 31


ended December 31




2013


2012


2013


2012



HAWAIIAN ELECTRIC COMPANY NET INCOME







GAAP (as reported)

$ 32.0


$ 4.2


$ 122.9


$ 99.3



Excluding special items

-


24.4


-


24.4



Non-GAAP (core)

$ 32.0


$ 28.7


$ 122.9


$ 123.7



Note: Columns may not foot due to rounding
















Full Year Results:

Core earnings declined by $0.8 million as additional recovery of costs was slightly less than the total increases in costs, primarily driven by higher customer service investments, lower cost recovery at Maui Electric due to its 2012 final rate case decision, and lower fuel efficiency performance on Oahu due to efforts to run units at lower levels.  These impacts were partially offset by a net favorable income tax adjustment in 2013.

Operations and maintenance (O&M) expenses5 (pretax) were $3 million or approximately 0.9% higher compared to the prior year and below inflationary levels.  The increases were primarily due to higher customer service costs (discussed above) partially offset by lower expenses for substation and overhead line maintenance and lower overhaul expenses. 

Fourth Quarter Results:

The $3.3 million core earnings improvement from the prior year quarter was primarily driven by lower O&M expenses5.  Additional recovery of costs was offset by increases in depreciation resulting from infrastructure investments to modernize the grid and ensure reliability, and lower allowance for funds used during construction.

O&M expenses (pretax) were $6 million lower due to lower overhaul and substation maintenance costs in the fourth quarter of 2013.          

AMERICAN SAVINGS BANK:   SOLID PERFORMANCE AND LOAN GROWTH
Full Year Results:

American Savings Bank's (American) net income for 2013 was $57.5 million compared to $58.6 million in 2012.  Lower 2013 earnings compared to the prior year reflected the challenging regulatory and interest rate environment.  The primary drivers impacting net income for the year were (on an after-tax basis): $2 million lower net interest income as lower yields on loans continued to more than offset the favorable contributions of loan growth; $2 million lower noninterest income due to lower mortgage banking income and lower interchange fees as a result of the Durbin Amendment which became effective in July 2013 for American, offsetting all the increases in other fee income and the premium on the sale of the credit card portfolio; $4 million higher noninterest expense primarily driven by higher loan and investment product volumes to customers, sales and performance related incentives, and benefit cost increases; and $7 million lower provision for loan losses resulting from continued improvement in credit quality, coupled with higher recoveries from previously charged-off loans and release of reserves related to the sale of the credit card portfolio.  

Overall, American's return on average equity for the full year remained solid at 11.4% in 2013 compared to 11.7% in 2012 and the return on average assets was 1.13% in 2013 compared to 1.18% in 2012. 

Fourth Quarter Results:

Fourth quarter 2013 net income of $12.2 million was $3.1 million lower than the linked quarter and $2.2 million lower than the same quarter of 2012.

Compared to the linked quarter of 2013, the $3.1 million net income decline was primarily driven by (on an after-tax basis): $2 million lower noninterest income mainly due to the gain on the strategic sale of the credit card portfolio recorded in the third quarter of 2013; and $1 million higher noninterest expense, largely attributable to the timing of certain performance-related compensation expenses.

Compared to the same quarter of 2012, net income declined by $2.2 million primarily driven by (on an after-tax basis): $4 million lower noninterest income primarily due to lower gains on sales of loans of new residential mortgages as the refinancing market contracted dramatically since mid-2013 and lower interchange fees; and $2 million lower provision for loan losses.

American's fourth quarter 2013 return on average equity was 9.6%, down from 12.1% in the linked quarter and 11.3% in the same quarter last year.  Return on average assets was 0.94% for the fourth quarter of 2013, compared to 1.20% from the linked quarter and 1.15% in the same quarter last year. 

Also refer to the American news release issued on January 30, 2014.

HOLDING AND OTHER COMPANIES

The holding and other companies' net losses were $18.9 million in 2013 compared to $19.3 million in 2012.  Fourth quarter net losses were $5.2 million in 2013 compared to $4.8 million in the fourth quarter 2012.

WEBCAST AND CONFERENCE CALL

HEI TO ANNOUNCE 2014 EPS GUIDANCE IN EARNINGS CONFERENCE CALL

Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its 2013 earnings on Tuesday, February 18, 2014, at 12:00 noon Hawaii time (5:00 p.m. Eastern time).  HEI will announce 2014 EPS guidance during the scheduled webcast and conference call.

Interested parties may listen to the conference by calling (877) 415-3182 and entering passcode:  61297681, 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 and will remain on HEI's website for 12 months.  Replays of the conference call will also be available approximately two hours after the event through March 4, 2014, by dialing (888) 286-8010, passcode: 22850388.

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 16 to 17 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 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 the fourth quarter after-tax partial write-off of certain utility assets of $24.4 million in 2012.  See the included tables for GAAP to Non-GAAP reconciliations and "Explanation of HEI's Use of Certain Unaudited Non-GAAP Measures" and related reconciliation.
 Estimate based on 2013 average price per barrel of $125.
3 Based on October 2013 on-peak avoided cost of oil generation.
4 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.
5 Excludes net income neutral expenses covered by surcharges or by third parties of $8 million and $6 million for the full year in 2013 and 2012, respectively, and $3 million and $2 million in the fourth quarter of 2013 and 2012, 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)


(in thousands, except per share amounts)


Three months
ended December 31


Years
ended December 31

Revenues


2013


2012


2013


2012

Electric utility


$

764,096


$

769,182


$

2,980,172


$

3,109,439

Bank


62,306


68,970


258,147


265,539

Other


45


(5)


151


17

Total revenues


826,447


838,147


3,238,470


3,374,995

Expenses









Electric utility


704,588


749,739


2,734,659


2,896,427

Bank


44,540


46,945


171,090


177,106

Other


5,026


4,191


17,302


17,266

Total expenses


754,154


800,875


2,923,051


3,090,799

Operating income (loss)









Electric utility


59,508


19,443


245,513


213,012

Bank


17,766


22,025


87,057


88,433

Other


(4,981)


(4,196)


(17,151)


(17,249)

Total operating income


72,293


37,272


315,419


284,196

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


(15,774)


(19,393)


(75,479)


(78,151)

Allowance for borrowed funds used during construction


620


1,904


2,246


4,355

Allowance for equity funds used during construction


1,531


1,459


5,561


7,007

Income before income taxes


58,670


21,242


247,747


217,407

Income taxes


19,184


6,933


84,341


76,859

Net income


39,486


14,309


163,406


140,548

Preferred stock dividends of subsidiaries


473


473


1,890


1,890

Net income for common stock


$

39,013


$

13,836


$

161,516


$

138,658

Basic earnings per common share


$

0.39


$

0.14


$

1.63


$

1.43

Diluted earnings per common share


$

0.39


$

0.14


$

1.62


$

1.42

Dividends per common share


$

0.31


$

0.31


$

1.24


$

1.24

Weighted-average number of common shares outstanding


99,853


97,602


98,968


96,908

Adjusted weighted-average shares


100,525


97,970


99,623


97,338

Net income (loss) for common stock by segment









Electric utility


$

31,990


$

4,225


$

122,929


$

99,276

Bank


12,184


14,363


57,534


58,637

Other


(5,161)


(4,752)


(18,947)


(19,255)

Net income for common stock


$

39,013


$

13,836


$

161,516


$

138,658

Comprehensive income attributable to Hawaiian Electric Industries, Inc.


$

57,949


$

3,103


$

171,189


$

131,372

Return on average common equity







9.7%


8.9%


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, 2013 (when filed) and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2013, June 30, 2013 and September 30, 2013, as updated by SEC Forms 8-K.

 

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Unaudited)






December 31


2013


2012

(dollars in thousands)





Assets





Cash and cash equivalents


$

220,036


$

219,662

Accounts receivable and unbilled revenues, net


346,785


362,823

Available-for-sale investment and mortgage-related securities


529,007


671,358

Investment in stock of Federal Home Loan Bank of Seattle


92,546


96,022

Loans receivable held for investment, net


4,110,113


3,737,233

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


5,302


26,005

Property, plant and equipment, net of accumulated depreciation of $2,191,199 in 2013 and $2,125,286 in 2012


3,858,947


3,594,829

Regulatory assets


575,924


864,596

Other


519,194


494,414

Goodwill


82,190


82,190

Total assets


$

10,340,044


$

10,149,132

Liabilities and shareholders' equity





Liabilities





Accounts payable


$

212,331


$

212,379

Interest and dividends payable


26,716


26,258

Deposit liabilities


4,372,477


4,229,916

Short-term borrowings—other than bank


105,482


83,693

Other bank borrowings


244,514


195,926

Long-term debt, net—other than bank


1,492,945


1,422,872

Deferred income taxes


529,260


439,329

Regulatory liabilities


349,299


324,152

Contributions in aid of construction


432,894


405,520

Defined benefit pension and other postretirement benefit plans liability


288,539


656,394

Other


524,224


524,535

Total liabilities


8,578,681


8,520,974

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: 101,259,800 shares in 2013 and 97,928,403 shares in 2012


1,488,126


1,403,484

Retained earnings


255,694


216,804

Accumulated other comprehensive loss, net of tax benefits


(16,750)


(26,423)

Total shareholders' equity


1,727,070


1,593,865

Total liabilities and shareholders' equity


$

10,340,044


$

10,149,132







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, 2013 (when filed) and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2013, June 30, 2013 and September 30, 2013, as updated by SEC Forms 8-K.

 

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED CASH FLOWS

(Unaudited)


Years ended December 31

2013


2012

(in thousands)




Cash flows from operating activities




Net income

$

163,406


$

140,548

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




Depreciation of property, plant and equipment

160,061


150,389

Other amortization

4,667


7,958

Provision for loan losses

1,507


12,883

Impairment of utility assets


40,000

Loans receivable originated and purchased, held for sale

(249,022)


(519,622)

Proceeds from sale of loans receivable, held for sale

273,775


513,000

Gain on sale of credit card portfolio

(2,251)


Increase in deferred income taxes

80,399


90,848

Excess tax benefits from share-based payment arrangements

(430)


(61)

Allowance for equity funds used during construction

(5,561)


(7,007)

Change in cash overdraft

1,038


Changes in assets and liabilities




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

16,038


(18,501)

Decrease in fuel oil stock

27,332


10,129

Increase in regulatory assets

(65,461)


(72,401)

Decrease in accounts, interest and dividends payable

(23,153)


(39,738)

Change in prepaid and accrued income taxes and utility revenue taxes

(19,406)


21,079

Decrease in defined benefit pension and other postretirement benefit plans liability

(33,014)


(228)

Change in other assets and liabilities

(2,779)


(94,734)

Net cash provided by operating activities

327,146


234,542

Cash flows from investing activities




Available-for-sale investment and mortgage-related securities purchased

(112,654)


(243,633)

Principal repayments on available-for-sale investment and mortgage-related securities

158,558


191,253

Proceeds from sale of available-for-sale investment and mortgage-related securities

71,367


3,548

Net increase in loans held for investment

(398,426)


(112,730)

Proceeds from sale of real estate acquired in settlement of loans

9,212


11,336

Capital expenditures

(353,879)


(325,480)

Contributions in aid of construction

32,160


45,982

Proceeds from sale of credit card portfolio

26,386


Other

3,516


2,677

Net cash used in investing activities

(563,760)


(427,047)

Cash flows from financing activities




Net increase in deposit liabilities

142,561


159,884

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

21,789


14,872

Net decrease in retail repurchase agreements

(1,418)


(37,291)

Proceeds from other bank borrowings

130,000


5,000

Repayments of other bank borrowings

(80,000)


(5,000)

Proceeds from issuance of long-term debt

286,000


457,000

Repayment of long-term debt

(216,000)


(375,500)

Excess tax benefits from share-based payment arrangements

430


61

Net proceeds from issuance of common stock

55,086


23,613

Common stock dividends

(98,383)


(96,202)

Preferred stock dividends of subsidiaries

(1,890)


(1,890)

Other

(1,187)


(2,645)

Net cash provided by financing activities

236,988


141,902

Net increase (decrease) in cash and cash equivalents

374


(50,603)

Cash and cash equivalents, January 1

219,662


270,265

Cash and cash equivalents, December 31

$

220,036


$

219,662






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, 2013 (when filed) and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2013, June 30, 2013 and September 30, 2013, as updated by SEC Forms 8-K.




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

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)




Three months
ended December 31


Years ended
December 31

(dollars in thousands, except per barrel amounts)


2013


2012


2013


2012

Revenues


$

764,096


$

769,182


$

2,980,172


$

3,109,439

Expenses









Fuel oil


307,814


311,343


1,185,552


1,297,419

Purchased power


184,012


184,400


710,681


724,240

Other operation and maintenance


102,299


107,362


403,270


397,429

Depreciation


38,160


35,942


154,025


144,498

Taxes, other than income taxes


72,303


70,692


281,131


292,841

Impairment of utility assets



40,000



40,000

Total expenses


704,588


749,739


2,734,659


2,896,427

Operating income


59,508


19,443


245,513


213,012

Allowance for equity funds used during construction


1,531


1,459


5,561


7,007

Interest expense and other charges, net


(11,830)


(15,463)


(59,279)


(62,055)

Allowance for borrowed funds used during construction


620


1,904


2,246


4,355

Income before income taxes


49,829


7,343


194,041


162,319

Income taxes


17,340


2,619


69,117


61,048

Net income


32,489


4,724


124,924


101,271

Preferred stock dividends of subsidiaries


229


229


915


915

Net income attributable to Hawaiian Electric


32,260


4,495


124,009


100,356

Preferred stock dividends of Hawaiian Electric


270


270


1,080


1,080

Net income for common stock


$

31,990


$

4,225


$

122,929


$

99,276

Comprehensive income attributable to Hawaiian Electric


$

33,516


$

3,058


$

124,507


$

98,338

OTHER ELECTRIC UTILITY INFORMATION









Kilowatthour sales (millions)









      Hawaiian Electric


1,759


1,771


6,859


6,976

      Hawaii Electric Light


273


275


1,076


1,085

      Maui Electric


292


290


1,135


1,145



2,324


2,336


9,070


9,206

Wet-bulb temperature (Oahu average; degrees Fahrenheit)


69.3


69.4


68.8


68.9

Cooling degree days (Oahu)


1,135


1,102


4,506


4,532

Average fuel oil cost per barrel


$

133.88


$

133.37


$

131.10


$

138.09

Return on average common equity (%) (simple average)1









      Hawaiian Electric






7.98


7.57

      Hawaii Electric Light






7.41


5.90

      Maui Electric






8.91


5.44

      Hawaiian Electric Consolidated






8.02


6.91











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, 2013 (when filed) 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, 2013, June 30, 2013 and September 30, 2013, as updated by SEC Forms 8-K.

 

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

CONSOLIDATED BALANCE SHEETS

(Unaudited)


December 31

2013


2012

(in thousands)




Assets




Utility plant, at cost




Land

$

51,883


$

51,568

Plant and equipment

5,701,875


5,364,400

Less accumulated depreciation

(2,111,229)


(2,040,789)

Construction in progress

143,233


151,378

Net utility plant

3,785,762


3,526,557

Current assets




Cash and equivalents

62,825


17,159

Customer accounts receivable, net

175,448


210,779

Accrued unbilled revenues, net

144,124


134,298

Other accounts receivable, net

14,062


28,176

Fuel oil stock, at average cost

134,087


161,419

Materials and supplies, at average cost

59,044


51,085

Prepayments and other

52,857


32,865

Regulatory assets

69,738


51,267

Total current assets

712,185


687,048

Other long-term assets




Regulatory assets

506,186


813,329

Unamortized debt expense

9,003


10,554

Other

73,993


71,305

Total other long-term assets

589,182


895,188

Total assets

$

5,087,129


$

5,108,793

Capitalization and liabilities




Capitalization




Common stock, $6 2/3 par value, authorized 50, 000 shares; outstanding 15,429,105 shares in 2013 and 14,665,264 shares in 2012

$

102,880


$

97,788

Premium on capital stock

541,452


468,045

Retained earnings

948,624


907,273

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

608


(970)

Common stock equity

1,593,564


1,472,136

Cumulative preferred stock – not subject to mandatory redemption

34,293


34,293

Long-term debt, net

1,206,545


1,147,872

Total capitalization

2,834,402


2,654,301

Current liabilities




Current portion of long-term debt

11,400


Accounts payable

189,559


186,824

Interest and preferred dividends payable

21,652


21,092

Taxes accrued

249,445


251,066

Regulatory liabilities

1,916


1,212

Other

63,881


60,801

Total current liabilities

537,853


520,995

Deferred credits and other liabilities




Deferred income taxes

507,161


417,611

Regulatory liabilities

347,383


322,940

Unamortized tax credits

73,539


66,584

Defined benefit pension and other postretirement benefit plans liability

262,162


620,205

Other

91,735


100,637

Total deferred credits and other liabilities

1,281,980


1,527,977

Contributions in aid of construction

432,894


405,520

Total capitalization and liabilities

$

5,087,129


$

5,108,793






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, 2013 (when filed) 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, 2013, June 30, 2013 and September 30, 2013, as updated by SEC Forms 8-K.

 

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Years ended December 31

2013


2012

(in thousands)




Cash flows from operating activities




Net income

$

124,924


$

101,271

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




Depreciation of property, plant and equipment

154,025


144,498

Other amortization

5,077


6,998

Impairment of utility assets


40,000

Increase in deferred income taxes

64,507


86,878

Change in tax credits, net

7,017


6,075

Allowance for equity funds used during construction

(5,561)


(7,007)

Change in cash overdraft

1,038


Changes in assets and liabilities




    Decrease (increase) in accounts receivable

49,445


(47,004)

    Decrease (increase) in accrued unbilled revenues

(9,826)


3,528

    Decrease in fuel oil stock

27,332


10,129

    Increase in materials and supplies

(7,959)


(7,897)

    Increase in regulatory assets

(65,461)


(72,401)

    Decrease in accounts payable

(20,828)


(38,913)

    Change in prepaid and accrued income taxes and revenue taxes

(2,028)


25,239

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

2,240


(744)

Change in other assets and liabilities

(31,499)


(73,419)

Net cash provided by operating activities

292,443


177,231

Cash flows from investing activities




Capital expenditures

(342,485)


(310,091)

Contributions in aid of construction

32,160


45,982

Other

(230)


Net cash used in investing activities

(310,555)


(264,109)

Cash flows from financing activities




Common stock dividends

(81,578)


(73,044)

Preferred stock dividends of Hawaiian Electric and subsidiaries

(1,995)


(1,995)

Proceeds from issuance of common stock

78,500


44,000

Proceeds from issuance of long-term debt

236,000


457,000

Repayment of long-term debt

(166,000)


(368,500)

Other

(1,149)


(2,230)

Net cash provided by financing activities

63,778


55,231

Net increase (decrease) in cash and cash equivalents

45,666


(31,647)

Cash and cash equivalents, January 1

17,159


48,806

Cash and cash equivalents, December 31

$

62,825


$

17,159






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, 2013 (when filed) 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, 2013, June 30, 2013 and September 30, 2013, as updated by SEC Forms 8-K.

 


American Savings Bank, F.S.B.

STATEMENTS OF INCOME DATA

(Unaudited)


(in thousands)


Three months ended


Years ended
December 31

Interest and dividend income


December 31
2013


September 30
2013


December 31
2012


2013


2012

Interest and fees on loans


$

43,405


$

43,337


$

42,816


$

172,969


$

176,057

Interest and dividends on investment and mortgage-related securities


3,372


3,025


3,288


13,095


13,822

Total interest and dividend income


46,777


46,362


46,104


186,064


189,879

Interest expense











Interest on deposit liabilities


1,222


1,262


1,408


5,092


6,423

Interest on other borrowings


1,437


1,206


1,193


4,985


4,869

Total interest expense


2,659


2,468


2,601


10,077


11,292

Net interest income


44,118


43,894


43,503


175,987


178,587

Provision for loan losses


554


54


3,379


1,507


12,883

Net interest income after provision for loan losses


43,564


43,840


40,124


174,480


165,704

Noninterest income











Fees from other financial services


5,732


5,728


8,887


27,099


31,361

Fee income on deposit liabilities


4,797


4,819


4,648


18,363


17,775

Fee income on other financial products


2,117


2,714


1,836


8,405


6,577

Mortgage banking income


1,413


1,547


6,331


8,309


14,628

Gains on sale of securities





1,226


134

Other income, net


1,470


3,888


1,164


8,681


5,185

Total noninterest income


15,529


18,696


22,866


72,083


75,660

Noninterest expense











Compensation and employee benefits


22,195


20,564


19,953


82,910


75,979

Occupancy


4,197


4,208


4,313


16,747


17,179

Data processing


2,970


2,168


2,854


10,952


10,098

Services


2,160


2,424


2,800


9,015


9,866

Equipment


1,826


1,825


1,806


7,295


7,105

Other expense


7,951


8,539


9,207


32,585


32,116

Total noninterest expense


41,299


39,728


40,933


159,504


152,343

Income before income taxes


17,794


22,808


22,057


87,059


89,021

Income taxes


5,610


7,532


7,694


29,525


30,384

Net income


$

12,184


$

15,276


$

14,363


$

57,534


$

58,637

Comprehensive income


$

23,802


$

14,107


$

5,740


$

60,733


$

52,612

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









Return on average assets


0.94


1.20


1.15


1.13


1.18

Return on average equity


9.56


12.13


11.29


11.38


11.68

Return on average tangible common equity


11.39


14.50


13.47


13.59


13.97

Net interest margin


3.67


3.73


3.81


3.74


3.93

Net charge-offs to average loans outstanding


0.15



0.13


0.09


0.24

As of period end











Nonperforming assets to loans outstanding and real estate owned *


1.20


1.33


1.87





Allowance for loan losses to loans outstanding


0.97


1.01


1.11





Tier-1 leverage ratio *


9.1


9.3


9.1





Total risk-based capital ratio *


12.1


12.5


12.8





Tangible common equity to total assets


8.5


8.36


8.39





Dividend paid to HEI (via ASHI) ($ in millions)


10


10


15


40


45













*  Regulatory basis

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, 2013 (when filed) and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2013, June 30, 2013 and September 30, 2013, as updated by SEC Forms 8-K.

 

 

American Savings Bank, F.S.B.

BALANCE SHEETS DATA

(Unaudited)


December 31



2013




2012

(in thousands)








Assets








Cash and cash equivalents



$

156,603




$

184,430

Available-for-sale investment and mortgage-related securities



529,007




671,358

Investment in stock of Federal Home Loan Bank of Seattle



92,546




96,022

Loans receivable held for investment



4,150,229




3,779,218

Allowance for loan losses



(40,116)




(41,985)

Loans receivable held for investment, net



4,110,113




3,737,233

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



5,302




26,005

Other



268,063




244,435

Goodwill



82,190




82,190

Total assets



$

5,243,824




$

5,041,673

Liabilities and shareholder's equity








Deposit liabilities–noninterest-bearing



$

1,214,418




$

1,164,308

Deposit liabilities–interest-bearing



3,158,059




3,065,608

Other borrowings



244,514




195,926

Other



105,679




117,752

Total liabilities



4,722,670




4,543,594

Common stock



336,054




333,712

Retained earnings



197,297




179,763

Accumulated other comprehensive loss, net of tax benefits








      Net unrealized gains (losses) on securities

$

(3,663)




$

10,761



      Retirement benefit plans

(8,534)


(12,197)


(26,157)


(15,396)

    Total shareholder's equity



521,154




498,079

    Total liabilities and shareholder's equity



$

5,243,824




$

5,041,673










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, 2013 (when filed) and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2013, June 30, 2013 and September 30, 2013, 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 for both the utility and HEI consolidated and the corresponding adjusted return on average common equity (ROACE).

The reconciling adjustments from GAAP earnings to core earnings are limited to the settlement charge for the partial write-off of utility assets in 2012.  For more information on the settlement charge recorded in 2012, see the Form 8-K filed on March 20, 2013.  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 "O&M-related net income neutral items" which are O&M expenses covered by specific surcharges or by third parties.  This item is grossed-up in revenue and expense and does not impact net income.

RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES

Hawaiian Electric Industries, Inc. and Subsidiaries (HEI)

Unaudited

($ in millions, except per share amounts)




Three months ended


Years ended




December 31


December 31




2013


2012


2013


2012

HEI CONSOLIDATED NET INCOME









GAAP (as reported)


$ 39.0


$ 13.8


$ 161.5


$ 138.7

Excluding special items (after-tax):









Settlement agreement for the partial writedown of certain utility assets


-


24.4


-


24.4

Non-GAAP (core)


$ 39.0


$ 38.3


$ 161.5


$ 163.1











HEI CONSOLIDATED DILUTED EARNINGS PER SHARE









GAAP (as reported)


$ 0.39


$ 0.14


$ 1.62


$ 1.42

Excluding special items (after-tax):









Settlement agreement for the partial writedown of certain utility assets


-


0.25


-


0.25

Non-GAAP (core)


$ 0.39


$ 0.39


$ 1.62


$ 1.68

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

Based on GAAP


9.7%


8.9%

Based on non-GAAP (core)2


9.7%


10.4%

Note: Columns may not foot due to rounding

1

Accounting principles generally accepted in the United States of America

2

Calculated as core net income divided by average GAAP common equity

 


RECONCILIATION OF GAAP TO NON-GAAP MEASURES

Hawaiian Electric Company, Inc. and Subsidiaries 

Unaudited

($ in millions)




Three months ended


Years ended








December 31


December 31








2013


2012


2013


2012





HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME 













GAAP (as reported)


$   32.0


$     4.2


$  122.9


$   99.3





Excluding special items (after-tax):













   Settlement agreement for the partial writedown of certain utility assets


-


24.4


-


24.4





Non-GAAP (core)


$   32.0


$   28.7


$  122.9


$  123.7



















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

Based on GAAP






8.0%


6.9%





Based on non-GAAP (core)1 






8.0%


8.6%






















Hawaiian Electric


Hawaii Electric Light


Maui Electric

Years ended December 31


2013


2012


2013


2012


2013


2012

NET INCOME 













GAAP (as reported)


$   81.5


$   70.4


$   20.1


$   16.2


$   21.3


$   12.6

Excluding special items (after-tax):













   Settlement agreement for the partial writedown of certain utility assets


-


17.7


-


3.4


-


3.4

Non-GAAP (core)


$   81.5


$   88.2


$   20.1


$   19.6


$   21.3


$   16.0















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













Based on GAAP


8.0%


7.6%


7.4%


5.9%


8.9%


5.4%

Based on non-GAAP (core)1 


8.0%


9.5%


7.4%


7.1%


8.9%


6.9%


















 Three months ended 


 Years ended 




December 31 


December 31 




2013


2012


Change


2013


2012


Change

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

GAAP (as reported)


$  102.3


$  107.4


$    (5.1)


$  403.3


$  397.4


$     5.9

   Excluding O&M-related net income neutral items2


(2.9)


(1.5)


(1.4)


(8.0)


(5.6)


(2.4)

 Adjusted other operation and maintenance (Non-GAAP measure) 


$   99.4


$  105.9


$    (6.5)


$  395.3


$  391.8


$     3.5

Note:  Columns may not foot due to rounding

   1

Calculated as core net income divided by average GAAP common equity 

2

Expenses covered by surcharges or by third parties recorded in revenues




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SOURCE Hawaiian Electric Industries, Inc.

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