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

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November 5, 2015 4:25 PM EST


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: November 4, 2015


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 November 5, 2015, HEI issued a news release, “Hawaiian Electric Industries Reports Third Quarter 2015 Earnings.” This news release is furnished as HEI Exhibit 99.



Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
The Audit Committees of the Boards of Directors of HEI and Hawaiian Electric (Audit Committees), after consultation with management and PricewaterhouseCoopers LLP, the independent registered public accounting firm for HEI and Hawaiian Electric, concluded on November 4, 2015 that it is necessary to restate HEI’s and Hawaiian Electric’s Consolidated Statements of Cash Flows for:
•
the three months ended March 31, 2015 and 2014,
•
the six months ended June 30, 2015 and 2014, and
•
the years ended December 31, 2013 and 2012,
and therefore, such financial statements should no longer be relied upon. The Audit Committees also concluded it was necessary to revise HEI’s and Hawaiian Electric’s Consolidated Statements of Cash Flows for:
•
the nine months ended September 30, 2014 and
•
the year ended December 31, 2014.
The restatements and revisions are necessary to correct misstatements related to capital expenditures, changes in accounts payable, changes in deferred income taxes, changes in accrued income taxes, and changes in other assets and liabilities as described below. The restatements and revisions do not impact HEI’s and Hawaiian Electric’s previously reported overall net change in cash and cash equivalents in their Consolidated Statements of Cash Flows for any period restated or revised. Additionally, the restatements and revisions do not impact HEI’s and Hawaiian Electric’s Consolidated Balance Sheets or Consolidated Statements of Income for any period restated or revised.
In the course of preparing their third quarter financial statements, HEI’s and Hawaiian Electric’s management determined that Hawaiian Electric’s capital expenditures on HEI’s and Hawaiian Electric’s Consolidated Statements of Cash Flows did not correctly account for the beginning of period unpaid invoices and accruals (that were paid in cash during the period). Accordingly, HEI and Hawaiian Electric are each restating or revising its previously filed Consolidated Statements of Cash Flows for the periods stated above to correct for such misstatements by adjusting cash used for “Capital expenditures” (investing activity) and the change in accounts payable (operating activity).

1


Based on their review, HEI and Hawaiian Electric have determined that, as a result of the described misstatements, HEI’s and Hawaiian Electric’s consolidated net cash provided by operating activities were understated for the years 2012 through 2014 by approximately $45 million, $40 million, and $25 million, respectively, and by approximately $65 million for each of the first three and six months of 2015. Accordingly, HEI’s and Hawaiian Electric’s restatements and revisions will show higher cash inflows from operations for the periods affected. Similarly, HEI’s and Hawaiian Electric’s consolidated net cash used in investing activities due to capital expenditures were also understated by the corresponding amounts in their respective time periods. Accordingly, HEI’s and Hawaiian Electric’s restatements and revisions will show greater outflows of cash invested in capital expenditures.
As soon as practicable, HEI and Hawaiian Electric expect to amend the reports discussed above, in order to correct the misstatements and related disclosures.
Preliminary Conclusions Regarding Internal Controls
In light of the above matter, management, in consultation with the Audit Committees, has determined that a material weakness in HEI’s and Hawaiian Electric’s internal control over financial reporting existed at December 31, 2014. HEI and Hawaiian Electric intend to restate management’s report on internal control over financial reporting and its evaluation of disclosure controls and procedures and expect to receive an adverse opinion on the internal control over financial reporting as of December 31, 2014 from PricewaterhouseCoopers LLP.


Item 9.01 Financial Statements and Exhibits.

(d) Exhibits    
HEI Exhibit 99
News release, dated November 5, 2015, “Hawaiian Electric Industries Reports Third Quarter 2015 Earnings”











2


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: November 5, 2015
Date: November 5, 2015
 
 

3


EXHIBIT INDEX

Exhibit No.
Description
HEI Exhibit 99
News release, dated November 5, 2015, “Hawaiian Electric Industries Reports Third Quarter 2015 Earnings”



4


HEI Exhibit 99
November 5, 2015
Contact:
Clifford H. Chen

 
 
Manager, Investor Relations & Strategic Planning
Telephone: (808) 543-7300
 
 
 
 
 
                                    
HAWAIIAN ELECTRIC INDUSTRIES REPORTS THIRD QUARTER 2015 EARNINGS
Diluted Earnings Per Share (EPS) of $0.47 and Core EPS1 of $0.49;
Utility Continues Clean Energy Transformation; Bank Delivers Solid Performance;
Hawaiian Electric Industries, Inc. Maintains Dividend;
Historical Cash Flow Statements Revised/Restated

HONOLULU - Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock for the third quarter of 2015 of $50.7 million and diluted earnings per share (EPS) of $0.47 compared to $47.8 million and $0.46 EPS for the third quarter of 2014. Excluding costs associated with the pending merger with NextEra Energy, Inc. and the spin-off of ASB Hawaii of $1.7 million and $0.4 million (after-tax), in the third quarter of 2015 and 2014 respectively, core earnings1 for the third quarter of 2015 were $52.4 million and $0.49 EPS compared to $48.3 million and $0.47 EPS for the third quarter of 2014.
“With the PUC’s recent distributed energy resources order and Hawaii’s new 100% renewable portfolio standard goal by 2045, our utility’s continued work to modernize our electric grids and pursue new customer options is more important than ever,” said Constance Lau, HEI president and chief executive officer.
“Our bank delivered solid revenue and loan growth this quarter. Credit quality remained sound, and capital levels were healthy,” added Lau.
“During the quarter, we achieved another important milestone toward the completion of our proposed merger with NextEra Energy with the expiration of the Hart-Scott-Rodino waiting period. The PUC just completed public listening sessions on all islands, and during the past few weeks, we and NextEra Energy filed our surrebuttal testimonies and closed out a six-month discovery process. We look forward to evidentiary hearings beginning late November. And as we move forward, we continue to
_________________


1 
Non-GAAP measure which excludes merger-related and spin-off costs after-tax. See the “Explanation of HEI’s Use of Certain Unaudited Non-GAAP measures” and the related reconciliation.



Hawaiian Electric Industries, Inc.
November 5, 2015
Page 2

believe NextEra Energy is the right partner for Hawaiian Electric to help achieve Hawaii’s 100 percent renewable portfolio standard by 2045."

HAWAIIAN ELECTRIC COMPANY EARNINGS CONSISTENT WITH EXPECTATIONS
Hawaiian Electric Company’s2 net income for the third quarter of 2015 was $43.0 million compared to $38.9 million for the same quarter last year. The $4.1 million increase was mainly driven by the following on an after-tax basis:

•
$3 million higher net revenues3 compared to the third quarter of 2014 primarily due to $2 million in recovery of costs for clean energy and reliability investments and $1 million for better fuel efficiency performance; and
•
$2 million lower operations and maintenance (O&M) expenses4 in the third quarter of 2015 compared to the same quarter last year, due to the following on an after-tax basis:

◦
Third quarter of 2014 O&M costs were elevated due primarily to consulting costs associated with regulatory filings, storm restoration expenses and the initial phase of our smart grid installations as part of our grid modernization program which in total had a $6 million impact to net income; and
◦
Third quarter of 2015 O&M costs were impacted by the regulatory decision denying enterprise resource planning software costs and higher maintenance costs including environmental compliance costs and vegetation management costs partially offset by the positive impact of the regulatory approval of the deferral of the Interactive Voice Response system project costs that were previously expensed. In total, these items had a $4 million unfavorable impact to net income.
_____________

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.
3 
Net revenues represent the after-tax impact of “Revenues” less the following expenses which are largely pass through items in revenues: “fuel oil,” “purchased power,” and “taxes, other than income taxes” as shown on the Hawaiian Electric Company Consolidated Statements of Income.
4 
Excludes net income neutral expenses covered by surcharges or by third parties of $2 million in the third quarter of 2015 and $3 million in the third quarter of 2014. 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.
November 5, 2015
Page 3

•
$2 million higher depreciation expense as a result of increasing investments for the integration of more renewable energy, improved customer reliability and greater system efficiency.

AMERICAN SAVINGS BANK CONTINUES TO DELIVER SOLID PERFORMANCE
American Savings Bank’s (American) net income for the third quarter of 2015 was $13.5 million compared to $12.9 million in the second, or linked quarter of 2015 and $13.3 million in the third quarter of 2014. Third quarter 2015 net income was $0.6 million higher than the linked quarter primarily driven by the following on an after-tax basis:
•
$1 million higher net interest income primarily driven by higher average interest-earning assets and a favorable shift to higher yielding assets; and
•
$1 million higher noninterest income primarily due to the gain on sale of an American service center building vacated as part of the bank’s facilities consolidation plan; partially offset by
•
$1 million higher provision for loan losses primarily due to strong loan growth in the quarter; and
•
$1 million higher noninterest expense.
Compared to the third quarter of 2014, net income was higher by $0.2 million primarily driven by the following on an after-tax basis:
•
$1 million higher net interest income in the third quarter of 2015 primarily due to higher average interest earning assets; and
•
$2 million higher noninterest income primarily from the gain on sale of real estate and higher fee income on deposit products and mortgage banking in the third quarter of 2015; offset by
•
$1 million higher provision for loan losses attributable to higher loan growth; and
•
$2 million higher noninterest expense in the third quarter of 2015 due primarily to higher pension and benefits expense.
Overall, American achieved solid profitability in the third quarter of 2015 with a return on average equity of 9.73% and a return on average assets of 0.92%.
For additional information, refer to the American news release issued on October 30, 2015.

HOLDING AND OTHER COMPANIES
The holding and other companies’ net losses were $5.8 million in the third quarter of 2015 compared to $4.3 million in the prior year quarter. Excluding costs related to the pending merger with




Hawaiian Electric Industries, Inc.
November 5, 2015
Page 4

NextEra Energy, Inc. and the spin-off of ASB Hawaii, the third quarter of 2015 net loss was $4.1 million compared to $3.9 million in the same quarter last year.

BOARD DECLARES QUARTERLY DIVIDEND
On November 4, 2015, the board of directors maintained HEI’s quarterly cash dividend of $0.31 cents per share, payable on December 10, 2015, to shareholders of record at the close of business on November 23, 2015 (ex-dividend date is November 19, 2015). The dividend is equivalent to an annual rate of $1.24 per share.
Dividends have been paid continuously since 1901. At the indicated annual dividend rate and the closing share price on November 4, 2015 of $29.30, HEI’s yield is 4.2%.

HEI AND HAWAIIAN ELECTRIC COMPANY
CASH FLOW RESTATEMENTS AND REVISIONS
In the course of preparing our third quarter financial statements, HEI’s and Hawaiian Electric Company’s management determined that Hawaiian Electric Company’s capital expenditures on HEI’s and Hawaiian Electric Company’s Consolidated Statements of Cash Flows did not correctly account for the beginning of period unpaid invoices and accruals (that were paid in cash during the period). Accordingly, HEI and Hawaiian Electric Company are each restating or revising its previously filed Consolidated Statements of Cash Flows for the periods stated below to correct for such misstatements by adjusting cash used for “Capital expenditures” (investing activity) and the change in accounts payable (operating activity).
Based on our review, HEI and Hawaiian Electric Company have determined that, as a result of the described misstatements, HEI’s and Hawaiian Electric Company’s consolidated net cash provided by operating activities were understated for the years 2012 through 2014 approximately by $45 million, $40 million, and $25 million, respectively, and approximately by $65 million for both the first three-month and the first six-month periods of 2015. Accordingly, HEI’s and Hawaiian Electric Company’s restatements and revisions will show higher cash inflows from operations for the periods



Hawaiian Electric Industries, Inc.
November 5, 2015
Page 5

affected. Similarly, HEI’s and Hawaiian Electric Company’s consolidated net cash used in investing activities due to capital expenditures were also understated by the corresponding amounts in their respective time periods. Accordingly, HEI’s and Hawaiian Electric Company’s restatements and revisions will show greater outflows of cash invested in capital expenditures. Furthermore, the misstatements, as well as our revisions and restatements, did not and will not have any impact on HEI’s and Hawaiian Electric Company’s obligations nor upon utility customer rates.
On November 4, 2015, the Audit Committees of the Boards of Directors of HEI and Hawaiian Electric Company (Audit Committees), after consultation with management and PricewaterhouseCoopers LLP, the independent registered public accounting firm for HEI and Hawaiian Electric Company, concluded that it is necessary to restate HEI’s and Hawaiian Electric Company’s Consolidated Statements of Cash Flows for:
•
the three months ended March 31, 2015 and 2014,
•
the six months ended June 30, 2015 and 2014, and
•
the years ended December 31, 2013 and 2012,
and therefore, such financial statements should no longer be relied upon. The Audit Committees also concluded it was necessary to revise HEI’s and Hawaiian Electric Company’s Consolidated Statements of Cash Flows for:
•
the nine months ended September 30, 2014 and
•
the year ended December 31, 2014.
The restatements and revisions are necessary to correct the misstatements related to capital expenditures, changes in accounts payable, changes in deferred income taxes, changes in accrued income taxes, and changes in other assets and liabilities as described below. The restatements and revisions do not impact HEI’s and Hawaiian Electric Company’s previously reported overall net change in cash and cash equivalents in their Consolidated Statements of Cash Flows for any period restated or revised. Additionally, the restatements and revisions do not impact HEI’s and Hawaiian



Hawaiian Electric Industries, Inc.
November 5, 2015
Page 6

Electric Company’s Consolidated Balance Sheets or Consolidated Statements of Income for any period restated or revised.
As soon as practicable, HEI and Hawaiian Electric Company expect to amend the reports discussed above, in order to correct the misstatements and related disclosures.
Preliminary Conclusions Regarding Internal Controls
In light of the above matter, management, in consultation with the Audit Committees, has determined that a material weakness in HEI’s and Hawaiian Electric Company’s internal control over financial reporting existed at December 31, 2014. HEI and Hawaiian Electric Company intend to restate management’s report on internal control over financial reporting and its evaluation of disclosure controls and procedures and expect to receive an adverse opinion on the internal control over financial reporting as of December 31, 2014, from PricewaterhouseCoopers LLP.

HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE
Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its third quarter of 2015 earnings and 2015 EPS guidance on Thursday, November 5, 2015, at 12:00 noon Hawaii time (5:00 p.m. Eastern time). The event can be accessed through HEI’s website at www.hei.com or by dialing (888) 311-8190 and entering passcode: 22822426. International parties may listen to the conference by calling the following toll free number, (330) 863-3378 and entering passcode: 22822426. The presentation for the webcast will be on HEI’s website 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



Hawaiian Electric Industries, Inc.
November 5, 2015
Page 7

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 on-line replay of the webcast will be available on HEI’s website beginning about two hours after the event. Audio replays of the teleconference will also be available approximately two hours
after the event through November 19, 2015, by dialing (855) 859-2056 or (404) 537-3406 and entering passcode: 22822426.
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 15 to 16 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.



Hawaiian Electric Industries, Inc.
November 5, 2015
Page 8

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, 2014, HEI’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 and HEI’s future periodic reports that discuss important factors that could cause HEI’s results to differ materially from those anticipated in such statements. These forward-looking statements speak only as of the date of the report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric Company, American and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


###




Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three months ended September 30
 
Nine months ended
 September 30
(in thousands, except per share amounts)
 
2015
 
2014
 
2015
 
2014
Revenues
 
 
 
 
 
 
 
 
Electric utility
 
$
648,127

 
$
803,565

 
$
1,779,732

 
$
2,262,056

Bank
 
69,091

 
63,536

 
199,222

 
187,771

Other
 
(42
)
 
(5
)
 
(4
)
 
(325
)
Total revenues
 
717,176

 
867,096

 
1,978,950

 
2,449,502

Expenses
 
 
 
 
 
 
 
 
Electric utility
 
565,470

 
727,409

 
1,573,278

 
2,045,166

Bank
 
48,289

 
43,030

 
138,063

 
126,778

Other
 
6,322

 
4,621

 
28,278

 
13,125

Total expenses
 
620,081

 
775,060

 
1,739,619

 
2,185,069

Operating income (loss)
 
 
 
 
 
 
 
 
Electric utility
 
82,657

 
76,156

 
206,454

 
216,890

Bank
 
20,802

 
20,506

 
61,159

 
60,993

Other
 
(6,364
)
 
(4,626
)
 
(28,282
)
 
(13,450
)
Total operating income
 
97,095

 
92,036

 
239,331

 
264,433

Interest expense, net—other than on deposit liabilities and other bank borrowings
 
(19,229
)
 
(19,170
)
 
(57,235
)
 
(58,648
)
Allowance for borrowed funds used during construction
 
737

 
740

 
1,918

 
1,877

Allowance for equity funds used during construction
 
2,057

 
1,937

 
5,366

 
4,933

Income before income taxes
 
80,660

 
75,543

 
189,380

 
212,595

Income taxes
 
29,516

 
27,264

 
70,406

 
76,302

Net income
 
51,144

 
48,279

 
118,974

 
136,293

Preferred stock dividends of subsidiaries
 
471

 
471

 
1,417

 
1,417

Net income for common stock
 
$
50,673

 
$
47,808

 
$
117,557

 
$
134,876

Basic earnings per common share
 
$
0.47

 
$
0.47

 
$
1.11

 
$
1.33

Diluted earnings per common share
 
$
0.47

 
$
0.46

 
$
1.11

 
$
1.32

Dividends per common share
 
$
0.31

 
$
0.31

 
$
0.93

 
$
0.93

Weighted-average number of common shares outstanding
 
107,457

 
102,416

 
106,067

 
101,768

Adjusted weighted-average shares
 
107,738

 
103,026

 
106,347

 
102,478

Net income (loss) for common stock by segment
 
 
 
 
 
 
 
 
Electric utility
 
$
43,006

 
$
38,879

 
$
102,721

 
$
108,529

Bank
 
13,451

 
13,253

 
39,777

 
39,188

Other
 
(5,784
)
 
(4,324
)
 
(24,941
)
 
(12,841
)
Net income for common stock
 
$
50,673

 
$
47,808

 
$
117,557

 
$
134,876

Comprehensive income attributable to Hawaiian Electric Industries, Inc.
 
$
55,103

 
$
46,497

 
$
122,918

 
$
137,632

Return on average common equity (twelve months ended)1
 
 
 
 
 
8.1
%
 
10.1
%
Prior period financial statements reflect the retrospective application of Accounting Standards Update (ASU) No. 2014-01, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects,” which was adopted as of January 1, 2015 and did not have a material impact on the Company’s financial condition or results of operations.
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, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K. 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, 2015 and 2014 returns on average common equity (twelve months ended September 30) were 9.1% and 10.1%, respectively.  See reconciliation of GAAP to non-GAAP measures.

9


Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
 
September 30, 2015
 
December 31, 2014
Assets
 
 

 
 

Cash and cash equivalents
 
$
228,417

 
$
175,542

Accounts receivable and unbilled revenues, net
 
305,448

 
313,696

Available-for-sale investment securities, at fair value
 
785,837

 
550,394

Stock in Federal Home Loan Bank, at cost
 
10,678

 
69,302

Loans receivable held for investment, net
 
4,487,130

 
4,389,033

Loans held for sale, at lower of cost or fair value
 
5,598

 
8,424

Property, plant and equipment, net of accumulated depreciation of $2,318,227 and $2,250,950 at the respective dates
 
4,317,121

 
4,148,774

Regulatory assets
 
897,948

 
905,264

Other
 
453,099

 
542,523

Goodwill
 
82,190

 
82,190

Total assets
 
$
11,573,466

 
$
11,185,142

Liabilities and shareholders’ equity
 
 

 
 

Liabilities
 
 

 
 

Accounts payable
 
$
152,896

 
$
186,425

Interest and dividends payable
 
25,914

 
25,336

Deposit liabilities
 
4,825,954

 
4,623,415

Short-term borrowings—other than bank
 
171,992

 
118,972

Other bank borrowings
 
368,593

 
290,656

Long-term debt, net—other than bank
 
1,506,546

 
1,506,546

Deferred income taxes
 
643,951

 
633,570

Regulatory liabilities
 
362,251

 
344,849

Contributions in aid of construction
 
495,667

 
466,432

Defined benefit pension and other postretirement benefit plans liability
 
607,682

 
632,845

Other
 
456,726

 
531,230

Total liabilities
 
9,618,172

 
9,360,276

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: 107,458,641 shares and 102,565,266 shares at the respective dates
 
1,627,259

 
1,521,297

Retained earnings
 
315,759

 
296,654

Accumulated other comprehensive loss, net of tax benefits
 
(22,017
)
 
(27,378
)
Total shareholders’ equity
 
1,921,001

 
1,790,573

Total liabilities and shareholders’ equity
 
$
11,573,466

 
$
11,185,142

Prior period financial statements reflect the retrospective application of ASU No. 2014-01, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects,” which was adopted as of January 1, 2015 and did not have a material impact on the Company’s financial condition or results of operations.
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, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K.


10


Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three months ended September 30
 
Nine months ended September 30
(dollars in thousands, except per barrel amounts)
 
2015
 
2014
 
2015
 
2014
Revenues
 
$
648,127

 
$
803,565

 
1,779,732

 
2,262,056

Expenses
 
 

 
 

 
 
 
 
Fuel oil
 
195,633

 
309,432

 
518,670

 
865,989

Purchased power
 
160,518

 
192,882

 
445,809

 
546,121

Other operation and maintenance
 
103,653

 
108,313

 
306,519

 
295,483

Depreciation
 
44,356

 
41,594

 
132,840

 
124,790

Taxes, other than income taxes
 
61,310

 
75,188

 
169,440

 
212,783

Total expenses
 
565,470

 
727,409

 
1,573,278

 
2,045,166

Operating income
 
82,657

 
76,156

 
206,454

 
216,890

Allowance for equity funds used during construction
 
2,057

 
1,937

 
5,366

 
4,933

Interest expense and other charges, net
 
(16,557
)
 
(16,414
)
 
(49,170
)
 
(48,989
)
Allowance for borrowed funds used during construction
 
737

 
740

 
1,918

 
1,877

Income before income taxes
 
68,894

 
62,419

 
164,568

 
174,711

Income taxes
 
25,390

 
23,042

 
60,351

 
64,686

Net income
 
43,504

 
39,377

 
104,217

 
110,025

Preferred stock dividends of subsidiaries
 
228

 
228

 
686

 
686

Net income attributable to Hawaiian Electric
 
43,276

 
39,149

 
103,531

 
109,339

Preferred stock dividends of Hawaiian Electric
 
270

 
270

 
810

 
810

Net income for common stock
 
$
43,006

 
$
38,879

 
102,721

 
108,529

Comprehensive income attributable to Hawaiian Electric
 
$
43,010

 
$
38,889

 
$
102,732

 
$
108,561

OTHER ELECTRIC UTILITY INFORMATION
 
 
 
 
 
 
 
 
Kilowatthour sales (millions)
 
 
 
 
 
 
 
 
   Hawaiian Electric
 
1,874

 
1,815

 
5,016

 
5,062

   Hawaii Electric Light
 
282

 
273

 
792

 
793

   Maui Electric
 
312

 
296

 
848

 
844

 
 
2,468

 
2,384

 
6,656

 
6,699

Wet-bulb temperature (Oahu average; degrees Fahrenheit)
 
74.9

 
72.2

 
70.2

 
69.5

Cooling degree days (Oahu)
 
1,711

 
1,631

 
3,687

 
3,703

Average fuel oil cost per barrel
 
$
81.35

 
$
133.26

 
$
79.13

 
$
132.19

 
 
 
 
 
 
 
 
 
Twelve months ended September 30
 
 
 
 
 
2015
 
2014
Return on average common equity (%) (simple average)
 
 
 
 
 
 
 
 
   Hawaiian Electric
 
 
 
 
 
7.95
 
9.63
   Hawaii Electric Light
 
 
 
 
 
6.30
 
6.77
   Maui Electric
 
 
 
 
 
9.21
 
8.55
   Hawaiian Electric Consolidated
 
 
 
 
 
7.86
 
8.96
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, 2014 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, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.


11


Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands, except par value)
 
September 30, 2015
 
December 31, 2014
Assets
 
 

 
 

Property, plant and equipment
 
 
 
 
Utility property, plant and equipment
 
 

 
 

Land
 
$
52,283

 
$
52,299

Plant and equipment
 
6,216,114

 
6,009,482

Less accumulated depreciation
 
(2,246,614
)
 
(2,175,510
)
Construction in progress
 
196,681

 
158,616

Utility property, plant and equipment, net
 
4,218,464

 
4,044,887

Nonutility property, plant and equipment, less accumulated depreciation of $1,228 and $1,227 at respective dates
 
6,562

 
6,563

Total property, plant and equipment, net
 
4,225,026

 
4,051,450

Current assets
 
 

 
 

Cash and cash equivalents
 
10,704

 
13,762

Customer accounts receivable, net
 
162,468

 
158,484

Accrued unbilled revenues, net
 
123,578

 
137,374

Other accounts receivable, net
 
4,763

 
4,283

Fuel oil stock, at average cost
 
70,104

 
106,046

Materials and supplies, at average cost
 
58,973

 
57,250

Prepayments and other
 
46,891

 
66,383

Regulatory assets
 
79,950

 
71,421

Total current assets
 
557,431

 
615,003

Other long-term assets
 
 

 
 

Regulatory assets
 
817,998

 
833,843

Unamortized debt expense
 
7,586

 
8,323

Other
 
75,951

 
81,838

Total other long-term assets
 
901,535

 
924,004

Total assets
 
$
5,683,992

 
$
5,590,457

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
 
578,930

 
578,938

Retained earnings
 
1,032,690

 
997,773

Accumulated other comprehensive income, net of income taxes-retirement benefit plans
 
56

 
45

Common stock equity
 
1,717,064

 
1,682,144

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

 
34,293

Long-term debt, net
 
1,206,546

 
1,206,546

Total capitalization
 
2,957,903

 
2,922,983

Current liabilities
 
 
 
 

Short-term borrowings from non-affiliates
 
94,995

 
—

Accounts payable
 
124,779

 
163,934

Interest and preferred dividends payable
 
25,078

 
22,316

Taxes accrued
 
193,575

 
250,402

Regulatory liabilities
 
347

 
632

Other
 
75,450

 
65,146

Total current liabilities
 
514,224

 
502,430

Deferred credits and other liabilities
 
 
 
 

Deferred income taxes
 
625,422

 
602,872

Regulatory liabilities
 
361,904

 
344,217

Unamortized tax credits
 
83,648

 
79,492

Defined benefit pension and other postretirement benefit plans liability
 
570,028

 
595,395

Other
 
75,196

 
76,636

Total deferred credits and other liabilities
 
1,716,198

 
1,698,612

Contributions in aid of construction
 
495,667

 
466,432

Total capitalization and liabilities
 
$
5,683,992

 
$
5,590,457

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, 2014 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, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K.


12


American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited)
 
 
Three months ended 
 
Nine months ended September 30
(in thousands)
 
September 30, 2015
 
June 30, 2015
 
September 30, 2014
 
2015
 
2014
Interest and dividend income
 
 

 
 

 
 

 
 
 
 
Interest and fees on loans
 
$
46,413

 
$
46,035

 
$
45,532

 
$
137,646

 
$
133,065

Interest and dividends on investment securities
 
4,213

 
3,306

 
2,773

 
10,570

 
8,758

Total interest and dividend income
 
50,626

 
49,341

 
48,305

 
148,216

 
141,823

Interest expense
 
 

 
 

 
 
 
 
 
 
Interest on deposit liabilities
 
1,355

 
1,266

 
1,312

 
3,881

 
3,774

Interest on other borrowings
 
1,515

 
1,487

 
1,438

 
4,468

 
4,263

Total interest expense
 
2,870

 
2,753

 
2,750

 
8,349

 
8,037

Net interest income
 
47,756

 
46,588

 
45,555

 
139,867

 
133,786

Provision for loan losses
 
2,997

 
1,825

 
1,550

 
5,436

 
3,566

Net interest income after provision for loan losses
 
44,759

 
44,763

 
44,005

 
134,431

 
130,220

Noninterest income
 
 

 
 

 
 
 
 
 
 
Fees from other financial services
 
5,639

 
5,550

 
5,642

 
16,544

 
15,987

Fee income on deposit liabilities
 
5,883

 
5,424

 
5,109

 
16,622

 
14,175

Fee income on other financial products
 
2,096

 
2,103

 
1,971

 
6,088

 
6,325

Bank-owned life insurance
 
1,021

 
1,058

 
1,000

 
3,062

 
2,945

Mortgage banking income
 
1,437

 
2,068

 
875

 
5,327

 
1,749

Gains on sale of investment securities
 
—

 
—

 
—

 
—

 
2,847

Other income, net
 
2,389

 
239

 
634

 
3,363

 
1,920

Total noninterest income
 
18,465

 
16,442

 
15,231

 
51,006

 
45,948

Noninterest expense
 
 

 
 

 
 
 
 
 
 
Compensation and employee benefits
 
22,728

 
22,319

 
19,892

 
66,813

 
60,050

Occupancy
 
4,128

 
4,009

 
4,517

 
12,250

 
12,959

Data processing
 
3,032

 
2,953

 
2,684

 
9,101

 
8,715

Services
 
2,556

 
2,833

 
2,580

 
7,730

 
7,708

Equipment
 
1,608

 
1,690

 
1,672

 
4,999

 
4,926

Office supplies, printing and postage
 
1,511

 
1,303

 
1,415

 
4,297

 
4,487

Marketing
 
934

 
844

 
948

 
2,619

 
2,690

FDIC insurance
 
809

 
773

 
840

 
2,393

 
2,441

Other expense
 
5,116

 
4,755

 
4,182

 
14,076

 
11,198

Total noninterest expense
 
42,422

 
41,479

 
38,730

 
124,278

 
115,174

Income before income taxes
 
20,802

 
19,726

 
20,506

 
61,159

 
60,994

Income taxes
 
7,351

 
6,875

 
7,253

 
21,382

 
21,806

Net income
 
$
13,451

 
$
12,851

 
$
13,253

 
$
39,777

 
$
39,188

Comprehensive income
 
$
17,678

 
$
9,544

 
$
11,804

 
$
44,540

 
$
41,521

OTHER BANK INFORMATION (annualized %, except as of period end)
 
 
 
 
 
 
 
 
Return on average assets
 
0.92

 
0.89

 
0.98

 
0.92

 
0.97

Return on average equity
 
9.73

 
9.38

 
9.88

 
9.69

 
9.83

Return on average tangible common equity
 
11.43

 
11.04

 
11.67

 
11.40

 
11.63

Net interest margin
 
3.53

 
3.52

 
3.62

 
3.52

 
3.60

Net charge-offs to average loans outstanding
 
0.10

 
0.11

 
0.04

 
0.08

 
0.01

As of period end
 
 
 
 
 
 
 
 
 
 
Nonperforming assets to loans outstanding and real estate owned *
 
1.00

 
0.70

 
0.88

 
 
 
 
Allowance for loan losses to loans outstanding
 
1.06

 
1.04

 
1.00

 
 
 
 
Tangible common equity to tangible assets
 
8.23

 
8.16

 
8.48

 
 
 
 
Tier-1 leverage ratio *
 
8.8

 
8.8

 
9.1

 
 
 
 
Total capital ratio *
 
13.4

 
13.5

 
12.6

 
 
 
 
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)
 
$
7.5

 
$
7.5

 
$
8.8

 
 
 
 
* Regulatory basis. Capital ratios as of September 30, 2015 and June 30, 2015 calculated under Basel III rules, which became effective January 1, 2015.
Prior period financial statements reflect the retrospective application of ASU No. 2014-01, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects,” which was adopted as of January 1, 2015 and did not have a material impact on ASB’s financial condition or results of operations.
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, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

13


American Savings Bank, F.S.B.
BALANCE SHEETS DATA
(Unaudited)
(in thousands)
September 30, 2015
 
December 31, 2014
 
 
 
 

 
 

Assets
 
 

 
 

Cash and due from banks
 
$
103,934

 
$
107,233

Interest-bearing deposits
 
73,041

 
54,230

Available-for-sale investment securities, at fair value
 
785,837

 
550,394

Stock in Federal Home Loan Bank, at cost
 
10,678

 
69,302

Loans receivable held for investment
 
4,535,404

 
4,434,651

Allowance for loan losses
 
(48,274
)
 
(45,618
)
Net loans
 
4,487,130

 
4,389,033

Loans held for sale, at lower of cost or fair value
 
5,598

 
8,424

Other
 
307,089

 
305,416

Goodwill
 
82,190

 
82,190

Total assets
 
$
5,855,497

 
$
5,566,222

Liabilities and shareholder’s equity
 
 
 
 
Deposit liabilities–noninterest-bearing
 
$
1,422,843

 
$
1,342,794

Deposit liabilities–interest-bearing
 
3,403,111

 
3,280,621

Other borrowings
 
368,593

 
290,656

Other
 
103,553

 
118,363

Total liabilities
 
5,298,100

 
5,032,434

Common stock
 
1

 
1

Additional paid in capital
 
339,980

 
338,411

Retained earnings
 
229,211

 
211,934

Accumulated other comprehensive loss, net of tax benefits
 
 
 
 
     Net unrealized gains on securities
$
4,070

 

$
462

 
     Retirement benefit plans
(15,865
)
(11,795
)
(17,020
)
(16,558
)
Total shareholder’s equity
 
557,397

 
533,788

Total liabilities and shareholder’s equity
 
$
5,855,497

 
$
5,566,222


Prior period financial statements reflect the retrospective application of ASU No. 2014-01, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects,” which was adopted as of January 1, 2015 and did not have a material impact on ASB’s financial condition or results of operations.
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, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K.



14


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 and the adjusted return on average common equity (ROACE) for the utility and HEI consolidated.
The reconciling adjustment from GAAP earnings to core earnings is limited to the costs related to the pending merger between HEI and NextEra Energy, Inc. and the spin-off of ASB Hawaii, Inc. For more information on the pending merger, see HEI’s definitive proxy statement on Form DEFM14A filed on March 26, 2015. 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 pending 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
Unaudited
 
 
 
 
 
($ in millions, except per share amounts)
 
 
 
 
 
 
Three months ended September 30
 
Nine months ended September 30
 
2015
2014
 
2015
2014
HEI CONSOLIDATED NET INCOME
 
 
 
 
 
GAAP (as reported)
$
50.7

$
47.8

 
$
117.6

$
134.9

Excluding special items (after-tax):
 
 
 
 
 
Costs related to pending merger with NextEra Energy, Inc. and spin-off of ASB Hawaii, Inc
1.7

0.4

 
13.6

0.6

Non-GAAP (core)
$
52.4

$
48.3

 
$
131.1

$
135.4

HEI CONSOLIDATED DILUTED EARNINGS PER SHARE
 
 
 
 
GAAP (as reported)
$
0.47

$
0.46

 
$
1.11

$
1.32

Excluding special items (after-tax):
 
 
 
 
 
Costs related to pending merger with NextEra Energy, Inc. and spin-off of ASB Hawaii, Inc
0.02

—

 
0.13

0.01

Non-GAAP (core)
$
0.49

$
0.47

 
$
1.23

$
1.32

HEI CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average)
 
 
 
Twelve months ended September 30
 
 
 
 
2015
2014
Based on GAAP
 
 
 
8.1
%
10.1
%
Based on non-GAAP (core)2
 
 
 
9.1
%
10.1
%
 
 
 
 
 
 
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
 
 
 
 
 

15


RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES
 
Hawaiian Electric Company, Inc. and Subsidiaries
Unaudited
 
 
 
 
 
($ in millions)
 
 
 
 
 
 
Three months ended September 30
 
Nine months ended September 30
 
2015
2014
 
2015
2014
HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME
 
 
 
 
 
GAAP (as reported)
$
43.0

$
38.9

 
$
102.7

$
108.5

Excluding special items (after-tax):
 
 
 
 
 
Costs related to pending merger with NextEra Energy, Inc.
—

—

 
0.3

—

Non-GAAP (core)
$
43.0

$
38.9

 
$
103.0

$
108.5

 
 
 
 
 
 
HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY
 
 
 
Twelve months ended September 30
(ROACE) (simple average)
 
 
 
2015
2014
Based on GAAP
 
 
 
7.86
%
8.96
%
Based on non-GAAP (core)2
 
 
 
7.88
%
8.96
%
 
 
 
 
 
 
HAWAIIAN ELECTRIC CONSOLIDATED OTHER OPERATION
Three months ended September 30
 
Nine months ended September 30
AND MAINTENANCE (O&M) EXPENSE
2015
2014
 
2015
2014
GAAP (as reported)
$
103.7

$
108.3

 
$
306.5

$
295.5

Excluding O&M-related net income neutral items3
1.9

2.5

 
5.4

7.5

Excluding costs related to pending merger with NextEra Energy, Inc.
—

—

 
0.4

—

Non-GAAP (Adjusted other O&M expense)
$
101.8

$
105.8

 
$
300.7

$
288.0

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
 
 
 
 
 
3  Expenses covered by surcharges or by third parties recorded in revenues
 
 
 
 
 


16

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