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Form 8-K HAWAIIAN ELECTRIC INDUST For: Aug 04 Filed by: HAWAIIAN ELECTRIC CO INC

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August 4, 2016 4:34 PM EDT


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report: August 4, 2016

Exact Name of Registrant
Commission
I.R.S. Employer
as Specified in Its Charter
File Number
Identification No.
Hawaiian Electric Industries, Inc.
1-8503
99-0208097
Hawaiian Electric Company, Inc.
1-4955
99-0040500


State of Hawaii
(State or other jurisdiction of incorporation)
 
1001 Bishop Street, Suite 2900, Honolulu, Hawaii  96813 - Hawaiian Electric Industries, Inc. (HEI)
900 Richards Street, Honolulu, Hawaii  96813 - Hawaiian Electric Company, Inc. (Hawaiian Electric)
(Address of principal executive offices and zip code)
 
Registrant’s telephone number, including area code:
 
(808) 543-5662 - HEI
(808) 543-7771 - Hawaiian Electric
 
None
(Former name or former address, if changed since last report.)
  
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




Item 2.02 Results of Operations and Financial Condition.
On August 4, 2016, HEI issued a news release, “Hawaiian Electric Industries Reports Second Quarter 2016 Earnings.” This news release is furnished as HEI Exhibit 99.



Item 9.01 Financial Statements and Exhibits.

(d) Exhibits    
HEI Exhibit 99
News release, dated August 4, 2016, “Hawaiian Electric Industries Reports Second Quarter 2016 Earnings”






















SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. The signature of the undersigned companies shall be deemed to relate only to matters having reference to such companies and any subsidiaries thereof.

HAWAIIAN ELECTRIC INDUSTRIES, INC.
HAWAIIAN ELECTRIC COMPANY, INC.
(Registrant)
(Registrant)
/s/ James A. Ajello
/s/ Tayne S. Y. Sekimura
James A. Ajello
Tayne S. Y. Sekimura
Executive Vice President and
Senior Vice President and
Chief Financial Officer
Chief Financial Officer
 
 
 
 
Date: August 4, 2016
Date: August 4, 2016
 
 

1


EXHIBIT INDEX

Exhibit No.        Description
HEI Exhibit 99
News release, dated August 4, 2016, “Hawaiian Electric Industries Reports Second Quarter 2016 Earnings”


2


HEI Exhibit 99
August 4, 2016
Contact:
Clifford H. Chen
Telephone: (808) 543-7300
 
Manager, Investor Relations &
 
Strategic Planning
 
 
 
 
                                    
HAWAIIAN ELECTRIC INDUSTRIES REPORTS SECOND QUARTER 2016 EARNINGS

Diluted Earnings Per Share (EPS) of $0.41 and Core EPS1 of $0.43

HONOLULU - Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock of $44.1 million and diluted earnings per share (EPS) of $0.41 for the second quarter of 2016 compared to consolidated net income of $35.0 million and EPS of $0.33 for the second quarter of 2015. Excluding costs related to the recently terminated merger with NextEra Energy, Inc., the cancelled spin-off of ASB Hawaii, Inc. and the recently terminated liquefied natural gas (LNG) contract, which after-tax totaled $2.7 million and $7.2 million in the second quarters of 2016 and 2015, respectively, core earnings1 and core EPS1 for the second quarter of 2016 were $46.9 million and $0.43, respectively, compared to $42.2 million and $0.39, respectively, for the second quarter of 2015.
“HEI had a solid quarter as we continued to invest in our Hawaii-based businesses. Through the first half of the year, Hawaiian Electric invested $157 million (more than twice its earnings for the first half of the year) in local infrastructure projects to modernize the electric grid and to integrate more renewable energy reliably. At American Savings Bank, we continued to deliver profitable performance with year-to-date annualized loan growth of 6.0% and deposit growth of 8.2% driving higher net interest income,” said Constance H. Lau, HEI president and chief executive officer and chairman of the boards of Hawaiian Electric and American Savings Bank.

_________________
1 Non-GAAP measure which excludes costs related to the recently terminated merger between HEI and NextEra Energy, Inc. and the cancelled spin-off of ASB Hawaii, Inc. and costs related to the recently terminated LNG contract, which required PUC approval of the merger with NextEra Energy, Inc. See the “Explanation of HEI’s Use of Certain Unaudited Non-GAAP measures” and the related reconciliation.



Hawaiian Electric Industries, Inc.
August 4, 2016
Page 2
“HEI remains a strong company and is well-positioned to help Hawaiian Electric achieve Hawaii’s 100% renewable energy goal by 2045. Our utilities will continue transforming to focus on providing customer value and options. We will accomplish this through innovation and a balanced generation portfolio, distributed generation, enhanced electrification of transportation and demand response initiatives. And American Savings Bank will continue to move forward as one of the leading financial institutions in Hawaii delivering a full range of financial products and services to its customers.”

HAWAIIAN ELECTRIC COMPANY EARNINGS
Hawaiian Electric Company’s2 net income for the second quarter of 2016 was $35.9 million compared to $32.8 million in the second quarter of 2015. The net income increase was mainly driven by $4 million (after-tax) higher net revenues primarily due to the recovery of costs for clean energy and reliability investments partially offset by $2 million (after-tax) higher depreciation expense as a result of increasing investments for improved customer reliability and greater system efficiency, and the integration of more renewable energy.
Other operations and maintenance expenses were relatively flat compared to the prior year quarter. The second quarter of 2016 included higher overhaul and LNG consulting and legal expenses compared to the second quarter of 2015 which included higher vegetation management and boiler and steam maintenance expenses.

AMERICAN SAVINGS BANK EARNINGS
    American Savings Bank’s (American) net income for the second quarter of 2016 was $13.3 million compared to $12.7 million in the first (or linked) quarter of 2016 and $12.9 million in the second quarter of 2015. Second quarter 2016 net income was $0.6 million higher than the linked quarter, primarily driven by $1 million (after-tax) higher revenues due to higher noninterest income,

_________________
Note: Amounts indicated as “after-tax” in this earnings release are based upon adjusting items for the composite statutory tax rates of 39% for the utilities and 40% for the bank.

2 
Hawaiian Electric Company, unless otherwise defined, refers to the three utilities, Hawaiian Electric Company, Inc. on Oahu, Maui Electric Company, Limited, and Hawaii Electric Light Company, Inc.



Hawaiian Electric Industries, Inc.
August 4, 2016
Page 3
which included gains on sale of securities and higher mortgage banking income, and higher net interest income primarily due to growth in the commercial real estate and consumer loan portfolios. Higher revenues were partially offset by $1 million (after-tax) higher noninterest expense due primarily to costs related to the replacement and upgrade of the electronic banking platform.
Compared to the second quarter of 2015, net income improved by $0.4 million, primarily driven by $3 million (after-tax) higher net interest income due to growth in the commercial real estate and consumer loan and investment portfolios and higher yields on interest-earning assets. This was offset by the following on an after-tax basis:
•
$2 million higher provision for loan losses mainly driven by commercial real estate and consumer loan growth and downgrades of specific commercial credits in the second quarter of 2016; and
•
$1 million higher noninterest expense primarily due to costs related to the replacement and upgrade of the electronic banking platform.    
Total loans were $4.8 billion at June 30, 2016, an increase of $112 million and $138 million in the second quarter and year-to-date 2016, respectively. Year-to-date annualized loan growth was 6.0%, in line with American’s target of mid-single digit loan growth for the full year.
Total deposits were $5.2 billion at June 30, 2016, an increase of $92 million and $207 million in the second quarter and year-to-date 2016, respectively. Year-to-date annualized deposit growth of 8.2% was primarily driven by the $126 million (5.6% year-to-date annualized) increase in low-cost core deposits. Average cost of funds remained low at 0.23% for the second quarter of 2016, unchanged from the linked quarter and 1 basis point higher than the prior year quarter.
Overall, American achieved solid profitability in the second quarter of 2016 with a return on average equity of 9.2% and a return on average assets of 0.86%.
For additional information, refer to the American news release issued on July 29, 2016.

HOLDING AND OTHER COMPANIES
The holding and other companies’ net losses were $5.0 million in the second quarter of 2016 compared to $10.7 million in the second quarter of 2015. Excluding after-tax costs of $2.0 million associated with the recently terminated merger with NextEra Energy, Inc. and the cancelled spin-off of




Hawaiian Electric Industries, Inc.
August 4, 2016
Page 4
ASB Hawaii, Inc. in the second quarter of 2016 and $7.2 million in the second quarter of 2015, the holding and other companies’ net losses in 2016 and 2015 were $3.0 million and $3.5 million, respectively.

WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE
Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its second quarter of 2016 earnings on Thursday, August 4, 2016, at 11:00 a.m. Hawaii time (5:00 p.m. Eastern time).
Interested parties within the United States may listen to the conference by calling (888) 311-8190 and entering passcode: 16065228.  International parties may listen to the conference by calling (330) 863-3378 and entering passcode: 16065228 or by accessing the webcast on HEI’s website at www.hei.com under the heading “Investor Relations.”  HEI and Hawaiian Electric Company intend to continue to use HEI’s website, www.hei.com, as a means of disclosing additional information. Such disclosures will be included on HEI’s website in the Investor Relations section. Accordingly, investors should routinely monitor such portions of HEI’s website, in addition to following HEI’s, Hawaiian Electric Company’s and American’s press releases, HEI’s and Hawaiian Electric Company’s Securities and Exchange Commission (SEC) filings and HEI’s public conference calls and webcasts. The information on HEI’s website is not incorporated by reference in this document or in HEI’s and Hawaiian Electric Company’s SEC filings unless, and except to the extent, specifically incorporated by reference. Investors may also wish to refer to the Public Utilities Commission of the State of Hawaii (PUC) website at dms.puc.hawaii.gov/dms in order to review documents filed with and issued by the PUC. No information on the PUC website is incorporated by reference in this document or in HEI’s and Hawaiian Electric Company’s SEC filings.
An online replay of the webcast will be available at the same website beginning about two hours after the event. Replays of the conference call will also be available approximately two hours after the event through August 18, 2016, by dialing (855) 859-2056 or (404) 537-3406 and entering passcode: 16065228.
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,




Hawaiian Electric Industries, Inc.
August 4, 2016
Page 5
Limited and provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, one of Hawaii’s largest financial institutions.

NON-GAAP MEASURES
See “Explanation of HEI’s Use of Certain Unaudited Non-GAAP Measures” and related reconciliations on pages 12 and 13 of this release.

FORWARD-LOOKING STATEMENTS
This release may contain “forward-looking statements,” which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as “will,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “predicts,” “estimates” or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries, the performance of the industries in which they do business and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance.
Forward-looking statements in this release should be read in conjunction with the “Forward-Looking Statements” and “Risk Factors” discussions (which are incorporated by reference herein) set forth in HEI’s Annual Report on Form 10-K for the year ended December 31, 2015, HEI’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 and HEI’s future periodic reports that discuss important factors that could cause HEI’s results to differ materially from those anticipated in such statements. These forward-looking statements speak only as of the date of the report, presentation
or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric Company, American and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
###




Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three months ended June 30
 
Six months ended June 30
(in thousands, except per share amounts)
 
2016
 
2015
 
2016
 
2015
Revenues
 
 
 
 
 
 
 
 
Electric utility
 
$
495,395

 
$
558,163

 
$
977,447

 
$
1,131,605

Bank
 
70,749

 
65,783

 
139,589

 
130,131

Other
 
100

 
(34
)
 
168

 
38

Total revenues
 
566,244

 
623,912

 
1,117,204

 
1,261,774

Expenses
 
 
 
 
 
 
 
 
Electric utility
 
424,709

 
492,002

 
851,435

 
1,007,808

Bank
 
50,525

 
46,057

 
99,771

 
89,774

Other
 
5,555

 
13,123

 
11,692

 
21,956

Total expenses
 
480,789

 
551,182

 
962,898

 
1,119,538

Operating income (loss)
 
 
 
 
 
 
 
 
Electric utility
 
70,686

 
66,161

 
126,012

 
123,797

Bank
 
20,224

 
19,726

 
39,818

 
40,357

Other
 
(5,455
)
 
(13,157
)
 
(11,524
)
 
(21,918
)
Total operating income
 
85,455

 
72,730

 
154,306

 
142,236

Interest expense, net—other than on deposit liabilities and other bank borrowings
 
(17,301
)
 
(18,906
)
 
(37,427
)
 
(38,006
)
Allowance for borrowed funds used during construction
 
760

 
682

 
1,422

 
1,181

Allowance for equity funds used during construction
 
1,997

 
1,896

 
3,736

 
3,309

Income before income taxes
 
70,911

 
56,402

 
122,037

 
108,720

Income taxes
 
26,310

 
20,911

 
44,611

 
40,890

Net income
 
44,601

 
35,491

 
77,426

 
67,830

Preferred stock dividends of subsidiaries
 
473

 
473

 
946

 
946

Net income for common stock
 
$
44,128

 
$
35,018

 
$
76,480

 
$
66,884

Basic earnings per common share
 
$
0.41

 
$
0.33

 
$
0.71

 
$
0.63

Diluted earnings per common share
 
$
0.41

 
$
0.33

 
$
0.71

 
$
0.63

Dividends per common share
 
$
0.31

 
$
0.31

 
$
0.62

 
$
0.62

Weighted-average number of common shares outstanding
 
107,962

 
107,418

 
107,791

 
105,361

Adjusted weighted-average shares
 
108,133

 
107,694

 
107,978

 
105,659

Net income (loss) for common stock by segment
 
 
 
 
 
 
 
 
Electric utility
 
$
35,857

 
$
32,841

 
$
61,224

 
$
59,715

Bank
 
13,285

 
12,851

 
25,958

 
26,326

Other
 
(5,014
)
 
(10,674
)
 
(10,702
)
 
(19,157
)
Net income for common stock
 
$
44,128

 
$
35,018

 
$
76,480

 
$
66,884

Comprehensive income attributable to Hawaiian Electric Industries, Inc.
 
$
46,236

 
$
31,891

 
$
87,388

 
$
67,815

Return on average common equity (twelve months ended)1
 
 
 
 
 
8.8
%
 
8.1
%
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.
1 On a core basis, 2016 and 2015 returns on average common equity (twelve months ended June 30) were 9.3% and 9.0%.  See reconciliation of GAAP to non-GAAP measures.

6


Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
 
June 30, 2016
 
December 31, 2015
Assets
 
 

 
 

Cash and cash equivalents
 
$
257,208

 
$
300,478

Accounts receivable and unbilled revenues, net
 
224,179

 
242,766

Available-for-sale investment securities, at fair value
 
894,021

 
820,648

Stock in Federal Home Loan Bank, at cost
 
11,218

 
10,678

Loans receivable held for investment, net
 
4,699,623

 
4,565,781

Loans held for sale, at lower of cost or fair value
 
6,217

 
4,631

Property, plant and equipment, net of accumulated depreciation of $2,387,013 and $2,339,319 at the respective dates
 
4,482,990

 
4,377,658

Regulatory assets
 
885,114

 
896,731

Other
 
436,479

 
480,457

Goodwill
 
82,190

 
82,190

Total assets
 
$
11,979,239

 
$
11,782,018

Liabilities and shareholders’ equity
 
 

 
 

Liabilities
 
 

 
 

Accounts payable
 
$
130,160

 
$
138,523

Interest and dividends payable
 
23,490

 
26,042

Deposit liabilities
 
5,232,203

 
5,025,254

Short-term borrowings—other than bank
 
115,985

 
103,063

Other bank borrowings
 
272,887

 
328,582

Long-term debt, net—other than bank
 
1,578,842

 
1,578,368

Deferred income taxes
 
712,199

 
680,877

Regulatory liabilities
 
391,003

 
371,543

Contributions in aid of construction
 
516,750

 
506,087

Defined benefit pension and other postretirement benefit plans liability
 
578,651

 
589,918

Other
 
426,594

 
471,828

Total liabilities
 
9,978,764

 
9,820,085

Preferred stock of subsidiaries - not subject to mandatory redemption
 
34,293

 
34,293

Shareholders’ equity
 
 

 
 

Preferred stock, no par value, authorized 10,000,000 shares; issued: none
 
—

 
—

Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 108,187,063 shares and 107,460,406 shares at the respective dates
 
1,647,138

 
1,629,136

Retained earnings
 
334,398

 
324,766

Accumulated other comprehensive loss, net of tax benefits
 
(15,354
)
 
(26,262
)
Total shareholders’ equity
 
1,966,182

 
1,927,640

Total liabilities and shareholders’ equity
 
$
11,979,239

 
$
11,782,018

The Consolidated Balance Sheet as of December 31, 2015 reflects the retrospective application of ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which was adopted in first quarter 2016.
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.


7


Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three months ended June 30
 
Six months ended June 30
(dollars in thousands, except per barrel amounts)
 
2016
 
2015
 
2016
 
2015
Revenues
 
$
495,395

 
$
558,163

 
$
977,447

 
$
1,131,605

Expenses
 
 

 
 

 
 
 
 
Fuel oil
 
91,899

 
146,231

 
205,639

 
323,037

Purchased power
 
139,058

 
149,284

 
254,917

 
285,291

Other operation and maintenance
 
99,563

 
98,864

 
203,471

 
202,866

Depreciation
 
46,760

 
44,241

 
93,541

 
88,484

Taxes, other than income taxes
 
47,429

 
53,382

 
93,867

 
108,130

Total expenses
 
424,709

 
492,002

 
851,435

 
1,007,808

Operating income
 
70,686

 
66,161

 
126,012

 
123,797

Allowance for equity funds used during construction
 
1,997

 
1,896

 
3,736

 
3,309

Interest expense and other charges, net
 
(15,103
)
 
(16,288
)
 
(32,411
)
 
(32,613
)
Allowance for borrowed funds used during construction
 
760

 
682

 
1,422

 
1,181

Income before income taxes
 
58,340

 
52,451

 
98,759

 
95,674

Income taxes
 
21,984

 
19,111

 
36,537

 
34,961

Net income
 
36,356

 
33,340

 
62,222

 
60,713

Preferred stock dividends of subsidiaries
 
229

 
229

 
458

 
458

Net income attributable to Hawaiian Electric
 
36,127

 
33,111

 
61,764

 
60,255

Preferred stock dividends of Hawaiian Electric
 
270

 
270

 
540

 
540

Net income for common stock
 
$
35,857

 
$
32,841

 
$
61,224

 
$
59,715

Comprehensive income attributable to Hawaiian Electric
 
$
35,102

 
$
32,826

 
$
61,485

 
$
59,722

OTHER ELECTRIC UTILITY INFORMATION
 
 
 
 
 
 
 
 
Kilowatthour sales (millions)
 
 
 
 
 
 
 
 
   Hawaiian Electric
 
1,625

 
1,615

 
3,182

 
3,142

   Hawaii Electric Light
 
260

 
257

 
518

 
510

   Maui Electric
 
271

 
272

 
541

 
536

 
 
2,156

 
2,144

 
4,241

 
4,188

Wet-bulb temperature (Oahu average; degrees Fahrenheit)
 
69.9

 
69.2

 
68.6

 
67.8

Cooling degree days (Oahu)
 
1,257

 
1,181

 
2,141

 
1,976

Average fuel oil cost per barrel
 
$
44.98

 
$
69.37

 
$
49.05

 
$
77.85

 
 
 
 
 
 
 
 
 
 
 
 
 
Twelve months ended June 30
 
 
 
 
 
 
2016
 
2015
Return on average common equity (%) (simple average)
 
 
 
 
 
 
 
 
   Hawaiian Electric
 
 
 
 
 
7.95

 
7.87

   Hawaii Electric Light
 
 
 
 
 
7.47

 
6.01

   Maui Electric
 
 
 
 
 
8.67

 
8.87

   Hawaiian Electric Consolidated1
 
 
 
 
 
7.98

 
7.70

This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.
1 On a core basis, 2016 and 2015 returns on average common equity (twelve months ended June 30) were 8.1% and 7.7%.  See reconciliation of GAAP to non-GAAP measures.



8


Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands, except par value)
 
June 30, 2016
 
December 31, 2015
Assets
 
 

 
 

Property, plant and equipment
 
 
 
 
Utility property, plant and equipment
 
 

 
 

Land
 
$
53,175

 
$
52,792

Plant and equipment
 
6,411,544

 
6,315,698

Less accumulated depreciation
 
(2,314,743
)
 
(2,266,004
)
Construction in progress
 
230,143

 
175,309

Utility property, plant and equipment, net
 
4,380,119

 
4,277,795

Nonutility property, plant and equipment, less accumulated depreciation of $1,230 and $1,229 at respective dates
 
7,375

 
7,272

Total property, plant and equipment, net
 
4,387,494

 
4,285,067

Current assets
 
 
 
 

Cash and cash equivalents
 
27,579

 
24,449

Customer accounts receivable, net
 
116,265

 
132,778

Accrued unbilled revenues, net
 
87,724

 
84,509

Other accounts receivable, net
 
4,546

 
10,408

Fuel oil stock, at average cost
 
61,572

 
71,216

Materials and supplies, at average cost
 
56,911

 
54,429

Prepayments and other
 
21,879

 
36,640

Regulatory assets
 
90,471

 
72,231

Total current assets
 
466,947

 
486,660

Other long-term assets
 
 

 
 

Regulatory assets
 
794,643

 
824,500

Unamortized debt expense
 
344

 
497

Other
 
72,425

 
75,486

Total other long-term assets
 
867,412

 
900,483

Total assets
 
$
5,721,853

 
$
5,672,210

Capitalization and liabilities
 
 

 
 

Capitalization
 
 

 
 

Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 15,805,327 shares)
 
$
105,388

 
$
105,388

Premium on capital stock
 
578,926

 
578,930

Retained earnings
 
1,057,506

 
1,043,082

Accumulated other comprehensive income, net of income taxes
 
1,186

 
925

Common stock equity
 
1,743,006

 
1,728,325

Cumulative preferred stock — not subject to mandatory redemption
 
34,293

 
34,293

Long-term debt, net
 
1,279,123

 
1,278,702

Total capitalization
 
3,056,422

 
3,041,320

Current liabilities
 
 

 
 

Short-term borrowings from non-affiliates
 
36,995

 
—

Accounts payable
 
106,521

 
114,846

Interest and preferred dividends payable
 
21,309

 
23,111

Taxes accrued
 
141,148

 
191,084

Regulatory liabilities
 
3,368

 
2,204

Other
 
53,347

 
54,079

Total current liabilities
 
362,688

 
385,324

Deferred credits and other liabilities
 
 

 
 

Deferred income taxes
 
689,482

 
654,806

Regulatory liabilities
 
387,635

 
369,339

Unamortized tax credits
 
89,176

 
84,214

Defined benefit pension and other postretirement benefit plans liability
 
541,656

 
552,974

Other
 
78,044

 
78,146

Total deferred credits and other liabilities
 
1,785,993

 
1,739,479

Contributions in aid of construction
 
516,750

 
506,087

Total capitalization and liabilities
 
$
5,721,853

 
$
5,672,210

The Consolidated Balance Sheet as of December 31, 2015 reflects the retrospective application of ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which was adopted in first quarter 2016.
This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC.

9


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

(Unaudited)
 
 
Three months ended 
 
Six months ended June 30
(in thousands)
 
June 30, 2016
 
March 31, 2016
 
June 30, 2015
 
2016
 
2015
Interest and dividend income
 
 

 
 

 
 

 
 
 
 
Interest and fees on loans
 
$
49,690

 
$
48,437

 
$
46,035

 
98,127

 
91,233

Interest and dividends on investment securities
 
4,443

 
5,017

 
3,306

 
9,460

 
6,357

Total interest and dividend income
 
54,133

 
53,454

 
49,341

 
107,587

 
97,590

Interest expense
 
 

 
 

 
 
 
 
 
 
Interest on deposit liabilities
 
1,691

 
1,592

 
1,266

 
3,283

 
2,526

Interest on other borrowings
 
1,467

 
1,485

 
1,487

 
2,952

 
2,953

Total interest expense
 
3,158

 
3,077

 
2,753

 
6,235

 
5,479

Net interest income
 
50,975

 
50,377

 
46,588

 
101,352

 
92,111

Provision for loan losses
 
4,753

 
4,766

 
1,825

 
9,519

 
2,439

Net interest income after provision for loan losses
 
46,222

 
45,611

 
44,763

 
91,833

 
89,672

Noninterest income
 
 

 
 

 
 
 
 
 
 
Fees from other financial services
 
5,701

 
5,499

 
5,550

 
11,200

 
10,905

Fee income on deposit liabilities
 
5,262

 
5,156

 
5,424

 
10,418

 
10,739

Fee income on other financial products
 
2,207

 
2,205

 
2,103

 
4,412

 
3,992

Bank-owned life insurance
 
1,006

 
998

 
1,058

 
2,004

 
2,041

Mortgage banking income
 
1,554

 
1,195

 
2,068

 
2,749

 
3,890

Gains on sale of investment securities, net
 
598

 
—

 
—

 
598

 
—

Other income, net
 
288

 
333

 
239

 
621

 
974

Total noninterest income
 
16,616

 
15,386

 
16,442

 
32,002

 
32,541

Noninterest expense
 
 

 
 

 
 
 
 
 
 
Compensation and employee benefits
 
21,919

 
22,434

 
22,319

 
44,353

 
44,085

Occupancy
 
4,115

 
4,138

 
4,009

 
8,253

 
8,122

Data processing
 
3,277

 
3,172

 
2,953

 
6,449

 
6,069

Services
 
2,755

 
2,911

 
2,833

 
5,666

 
5,174

Equipment
 
1,771

 
1,663

 
1,690

 
3,434

 
3,391

Office supplies, printing and postage
 
1,583

 
1,365

 
1,303

 
2,948

 
2,786

Marketing
 
899

 
861

 
844

 
1,760

 
1,685

FDIC insurance
 
913

 
884

 
773

 
1,797

 
1,584

Other expense
 
5,382

 
3,975

 
4,755

 
9,357

 
8,960

Total noninterest expense
 
42,614

 
41,403

 
41,479

 
84,017

 
81,856

Income before income taxes
 
20,224

 
19,594

 
19,726

 
39,818

 
40,357

Income taxes
 
6,939

 
6,921

 
6,875

 
13,860

 
14,031

Net income
 
$
13,285

 
$
12,673

 
$
12,851

 
$
25,958

 
$
26,326

Comprehensive income
 
$
16,051

 
$
20,310

 
$
9,544

 
$
36,361

 
$
26,862

OTHER BANK INFORMATION (annualized %, except as of period end)
 
 
 
 
 
 
 
 
Return on average assets
 
0.86

 
0.84

 
0.89

 
0.85

 
0.93

Return on average equity
 
9.22

 
8.89

 
9.38

 
9.06

 
9.67

Return on average tangible common equity
 
10.75

 
10.39

 
11.04

 
10.57

 
11.39

Net interest margin
 
3.58

 
3.62

 
3.52

 
3.60

 
3.52

Efficiency ratio
 
63.05

 
62.96

 
65.81

 
63.00

 
65.67

Net charge-offs to average loans outstanding
 
0.15

 
0.21

 
0.11

 
0.18

 
0.08

As of period end
 
 
 
 
 
 
 
 
 
 
Nonperforming assets to loans outstanding and real estate owned
 
1.02

 
1.03

 
0.70

 
 
 
 
Allowance for loan losses to loans outstanding
 
1.16

 
1.13

 
1.04

 
 
 
 
Tangible common equity to tangible assets
 
8.15

 
8.08

 
8.16

 
 
 
 
Tier-1 leverage ratio
 
8.7

 
8.7

 
8.8

 
 
 
 
Total capital ratio
 
13.2

 
13.2

 
13.5

 
 
 
 
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)
 
$
9.0

 
$
9.0

 
$
7.5

 
 
 
 
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.


10


American Savings Bank, F.S.B.
BALANCE SHEETS DATA
(Unaudited)
(in thousands)
June 30, 2016
 
December 31, 2015
 
 
 
 

 
 

Assets
 
 

 
 

Cash and due from banks
 
$
111,738

 
$
127,201

Interest-bearing deposits
 
62,850

 
93,680

Available-for-sale investment securities, at fair value
 
894,021

 
820,648

Stock in Federal Home Loan Bank, at cost
 
11,218

 
10,678

Loans receivable held for investment
 
4,754,954

 
4,615,819

Allowance for loan losses
 
(55,331
)
 
(50,038
)
Net loans
 
4,699,623

 
4,565,781

Loans held for sale, at lower of cost or fair value
 
6,217

 
4,631

Other
 
320,233

 
309,946

Goodwill
 
82,190

 
82,190

Total assets
 
$
6,188,090

 
$
6,014,755

Liabilities and shareholder’s equity
 
 
 
 
Deposit liabilities–noninterest-bearing
 
$
1,583,420

 
$
1,520,374

Deposit liabilities–interest-bearing
 
3,648,783

 
3,504,880

Other borrowings
 
272,887

 
328,582

Other
 
103,396

 
101,029

Total liabilities
 
5,608,486

 
5,454,865

Common stock
 
1

 
1

Additional paid in capital
 
341,849

 
340,496

Retained earnings
 
244,622

 
236,664

Accumulated other comprehensive loss, net of tax benefits
 
 
 
 
     Net unrealized gains (losses) on securities
$
8,111

 

$
(1,872
)
 
     Retirement benefit plans
(14,979
)
(6,868
)
(15,399
)
(17,271
)
Total shareholder’s equity
 
579,604

 
559,890

Total liabilities and shareholder’s equity
 
$
6,188,090

 
$
6,014,755


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



11


EXPLANATION OF HEI’S USE OF CERTAIN UNAUDITED NON-GAAP MEASURES
HEI and Hawaiian Electric Company management use certain non-GAAP measures to evaluate the performance of HEI and the utility. Management believes these non-GAAP measures provide useful information and are a better indicator of the companies’ core operating activities. Core earnings and other financial measures as presented here may not be comparable to similarly titled measures used by other companies. The accompanying tables provide a reconciliation of reported GAAP1 earnings to non-GAAP core earnings and the adjusted return on average common equity (ROACE) for HEI and the utility.
The reconciling adjustments from GAAP earnings to core earnings is limited to the costs related to the recently terminated merger between HEI and NextEra Energy, Inc. and the cancelled spin-off of ASB Hawaii, Inc. and costs related to the recently terminated liquefied natural gas (LNG) contract which required the Hawaii Public Utilities Commission approval of the merger with NextEra Energy, Inc. less the associated current income tax benefits adjustment. For more information on the transactions, see HEI’s Form 8-K filed on July 18, 2016 and HEI’s Form 8-K filed on July 19, 2016, respectively. Management does not consider these items to be representative of the company’s fundamental core earnings.
The accompanying table also provides the calculation of utility GAAP O&M adjusted for costs related to the terminated merger discussed above. “O&M-related net income neutral items” which are O&M expenses covered by specific surcharges or by third parties have also been excluded. These “O&M-related net income neutral items” are grossed-up in revenue and expense and do not impact net income.
RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES
 
Hawaiian Electric Industries, Inc. and Subsidiaries (HEI)
Unaudited
Three months ended June 30
 
Six months ended June 30
($ in millions, except per share amounts)
2016
2015
 
2016
2015
HEI CONSOLIDATED COSTS RELATED TO THE TERMINATED MERGER WITH NEXTERA ENERGY AND CANCELLED SPIN-OFF OF ASB HAWAII
 
 
 
 
 
Pre-tax expenses
$
2.0

$
9.0

 
$
3.6

$
13.9

Current income tax benefits
—

(1.8
)
 
—

(2.0
)
After-tax expenses
$
2.0

$
7.2

 
$
3.6

$
11.9

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)
$
44.1

$
35.0

 
$
76.5

$
66.9

Excluding special items (after-tax):
 
 
 
 
 
Costs related to the terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii
2.0

7.2

 
3.6

11.9

Costs related to the terminated LNG contract2
0.7

—

 
2.1

—

Non-GAAP (core) net income
$
46.9

$
42.2

 
$
82.1

$
78.8

HEI CONSOLIDATED DILUTED EARNINGS PER COMMON SHARE
 
 
 
 
GAAP (as reported)
$
0.41

$
0.33

 
$
0.71

$
0.63

Excluding special items (after-tax):
 
 
 
 
 
Costs related to the terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii
0.02

0.07

 
0.03

0.11

Costs related to the terminated LNG contract2
0.01

—

 
0.02

—

Non-GAAP (core) diluted earnings per common share
$
0.43

$
0.39

 
$
0.76

$
0.75

 
 
 
 
Twelve months ended June 30
 
 
 
 
2016
2015
HEI CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average)
 
 
 
Based on GAAP
 
 
 
8.8
%
8.1
%
Based on non-GAAP (core)3
 
 
 
9.3
%
9.0
%
 
 
 
 
 
 
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

12


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)
2016
2015
 
2016
2015
HAWAIIAN ELECTRIC CONSOLIDATED COSTS RELATED TO THE TERMINATED MERGER WITH NEXTERA ENERGY
 
 
 
 
 
Pre-tax expenses
$
—

$
—

 
$
0.1

$
0.4

Current income tax benefits
—

—

 
—

(0.2
)
After-tax expenses
$
—

$
—

 
$
0.1

$
0.3

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)
$
35.9

$
32.8

 
$
61.2

$
59.7

Excluding special items (after-tax):
 
 
 
 
 
Costs related to the terminated merger with NextEra Energy
—

—

 
0.1

0.3

Costs related to the terminated LNG contract2
0.7

—

 
2.1

—

Non-GAAP (core) Net Income
$
36.6

$
32.9

 
$
63.4

$
60.0

 
 
 
 
 
 
 
 
 
 
Twelve months ended June 30
 
 
 
 
2016
2015
HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average)
 
 
 
 
 
Based on GAAP
 
 
 
7.98
%
7.70
%
Based on non-GAAP (core)3
 
 
 
8.12
%
7.72
%
 
 
 
 
 
 
 
Three months ended June 30
 
Six months ended June 30
($ in millions)
2016
2015
 
2016
2015
HAWAIIAN ELECTRIC CONSOLIDATED OTHER OPERATION AND MAINTENANCE (O&M) EXPENSE
 
 
 
 
 
GAAP (as reported)
$
99.6

$
98.9

 
$
203.5

$
202.9

Excluding O&M-related net income neutral items4
1.5

1.6

 
3.1

3.5

Excluding costs related to the terminated merger with NextEra Energy
—

—

 
0.1

0.4

Excluding costs related to the terminated LNG contract2
1.2

—

 
3.4

—

Non-GAAP (Adjusted other O&M expense)
$
96.8

$
97.2

 
$
196.8

$
198.9

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
 
 
 
 
 


13

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