HONOLULU--(BUSINESS WIRE)--Nov. 9, 2005--Hawaiian Electric
Industries, Inc. (NYSE:HE) today reported net income from continuing
operations for the quarter ended September 30, 2005, of $37.5 million,
or 46 cents per share, compared with $40.8 million, or 51 cents per
share, in the same quarter of 2004. For the nine months ended
September 30, 2005, income from continuing operations was $89.9
million or $1.11 per share, compared with $82.9 million or $1.05 per
share in the same period last year. The Company's results for the nine
months ended September 30, 2004, included a cumulative $24 million
charge to net income (30 cents per share) for an unfavorable tax
ruling involving its bank's real estate investment trust (REIT)
subsidiary, which was appealed, but subsequently settled in December
2004.
"Results were down quarter-over-quarter as increased utility
operations and maintenance costs continued," said Robert F. Clarke,
HEI's chairman, president and chief executive officer. "Our systems
are being run harder to meet high levels of demand that were set last
year. Fortunately, the Hawaii Public Utilities Commission has since
granted Hawaiian Electric Company interim rate relief, allowing the
utility future recovery of some of the increased costs of operating
and maintaining its system," added Clarke.
Electric utility net income for the third quarter of 2005 was
$22.6 million compared with $26.2 million for the same quarter last
year. Electric utility net income for the nine months ended September
30, 2005, was $54.6 million compared with $67.9 million for the same
period of 2004.
Kilowatthour sales were flat quarter-over-quarter. "We saw demand
levels increase significantly last year, so we are comparing sales
against a high bar. Also, increases in the number of residential
customers in the third quarter of 2005 were offset by lower usage due
to less humid weather and more energy conservation," said Clarke.
"Customers may be responding to the utility's campaign to promote
energy conservation and efficiency and possibly reacting to higher
fuel prices reflected in electric bills. In addition, several large
commercial customers were temporarily off-line for repairs and
renovation projects during the quarter, contributing to lower
commercial sales."
Other operations and maintenance expenses for the quarter were
higher by $6.7 million due to maintenance necessary to keep the
utility system working reliably. Depreciation costs were $2.1 million
higher. In light of the higher level of demand set last year, older
utility plant and equipment are being used more heavily, requiring
longer and more extensive maintenance. Increases in other operations
and maintenance costs resulted from 1) $2.3 million higher
transmission and distribution maintenance; 2) $1.6 million higher
production maintenance due primarily to higher steam generation
station maintenance; and 3) $1.6 million higher retirement benefits
expense due primarily to a decrease in the discount rate assumption
used to calculate the benefit obligation. The remaining increase in
operations and maintenance expense of $1.2 million includes increased
staffing and other costs to support demand, reliability and customer
service programs. Increased operations and maintenance expense is one
reason why Hawaiian Electric Company (HECO) filed a request with the
Hawaii Public Utilities Commission (HPUC) in November 2004 to increase
base rates on Oahu. On September 27, 2005, the HPUC granted HECO an
interim net increase in rates of 3.3%, or $41.1 million in net
revenues based on current annualized usage, subject to a final
decision and order by the HPUC. Increased rates became effective on
September 28, 2005, subject to refund with interest if and to the
extent they exceed rates finally approved by the HPUC.
On November 1, 2005, the Company announced that it would release
third quarter earnings following the evaluation of the application of
Financial Accounting Standards Board Interpretation No. 46R (FIN 46R),
"Consolidation of Variable Interest Entities," to its power purchase
agreement with Kalaeloa Partners L.P. (Kalaeloa). FIN 46R addresses
how a business enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting rights
and accordingly should consolidate the entity. As a result of HPUC
approval of an amendment to the Kalaeloa power purchase agreement,
Kalaeloa provided to HECO the data required to make the required
analysis. After performing its FIN 46R analysis, including evaluating
the information provided by Kalaeloa, management concluded that no
consolidation of Kalaeloa's financial statements with HECO's financial
statements is necessary.
Bank net income in the third quarter of 2005 was $15.9 million
compared to $15.4 million in the third quarter of 2004. Bank net
income for the nine months ended September 30, 2005 was $47.2 million,
compared with $24.4 million in the same period last year. The bank's
results for the nine months ended September 30, 2004, included a
cumulative $24 million charge in June 2004, related to an unfavorable
tax court ruling involving the bank's REIT subsidiary described above.
"The bank proved to be a winner again this quarter against the
flat yield curve," said Clarke. Bank net interest income increased to
$52.9 million in the third quarter of 2005 compared with $48.6 million
in the third quarter of 2004. "Strong growth in loans and core
deposits, as well as increased yields on loans and mortgage-related
securities more than offset margin compression pressure from the
flattening yield curve and the continued suspension of dividends paid
on the bank's Federal Home Loan Bank stock investment," said Clarke.
The bank's interest rate spread increased to 3.26% in the third
quarter of 2005, compared with 3.09% in the third quarter of 2004.
"Continued strong asset quality offset the need to increase the
provision for loan losses despite the additional loan growth in the
third quarter of 2005," said Clarke. "Comparatively, the bank released
$3.8 million of loan loss reserves in the third quarter of 2004 as
asset quality was strong and loan balances were stable."
Bank general and administrative expenses for the quarter ended
September 30, 2005, increased by $1.4 million from the same period in
2004. Compensation and employee benefits and services increased $1.9
million quarter-over-quarter as the bank continued investment in its
strategic plan to become a full-service community bank.
In December 2004, the bank's preferred stock of $75 million held
by HEI was converted to common equity. Accordingly, preferred stock
dividends payable to HEI were lower by $1.4 million in the third
quarter of 2005 compared with the same quarter of 2004.
The holding and other companies' results from continuing
operations were $(1.0) million in the third quarter of 2005 versus
$(0.8) million in the same quarter of 2004. The holding and other
companies' results from continuing operations for the nine months
ended September 30, 2005, were $(11.9) million compared with $(9.4)
million for the same period of 2004. Third quarter 2005 results from
continuing operations include an unrealized gain on held-for-sale
investment securities, net of taxes, of $4.2 million compared with a
$3.6 million realized gain on sale of investments, net of taxes, in
the third quarter of 2004. However, third quarter 2005 results from
continuing operations were lower than for the same quarter of 2004 due
in part to the reduction of preferred dividends from the bank
described above.
HEI supplies power to over 400,000 customers or 93% of the Hawaii
market through its electric utilities, Hawaiian Electric Company,
Hawaii Electric Light Company and Maui Electric Company and provides a
wide array of banking and other financial services to consumers and
businesses through American Savings Bank, the state's third largest
financial institution based on asset size.
Forward-Looking Statements
This release may contain "forward-looking statements," which
include statements that are predictive in nature, depend upon or refer
to future events or conditions, and usually include words such as
expects, anticipates, intends, plans, believes, predicts, estimates or
similar expressions. In addition, any statements concerning future
financial performance (including future revenues, expenses, earnings
or losses or growth rates), ongoing business strategies or prospects
and possible future actions, which may be provided by management, are
also forward-looking statements. Forward-looking statements are based
on current expectations and projections about future events and are
subject to risks, uncertainties and assumptions about HEI and its
subsidiaries, the performance of the industries in which they do
business and economic and market factors, among other things. These
forward-looking statements are not guarantees of future performance.
Forward-looking statements in this release should be read in
conjunction with the "Cautionary Statements and Risk Factors that May
Affect Future Results" discussion (which is incorporated by reference
herein) set forth on page iv of HEI's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2005, and in HEI's future periodic
reports that discuss important factors that could cause HEI's results
to differ materially from those anticipated in such statements.
Forward-looking statements speak only as of the date of this release.
Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months
ended September 30,
-----------------------------
(in thousands, except per share amounts) 2005 2004
----------------------------------------------------------------------
Revenues
Electric utility $491,339 $410,077
Bank 97,431 90,296
Other 7,145 6,386
-------------- --------------
595,915 506,759
-------------- --------------
Expenses
Electric utility 443,806 357,364
Bank 71,493 63,765
Other 3,377 3,944
-------------- --------------
518,676 425,073
-------------- --------------
Operating income (loss)
Electric utility 47,533 52,713
Bank 25,938 26,531
Other 3,768 2,442
-------------- --------------
77,239 81,686
-------------- --------------
Interest expense-other than bank (18,990) (18,376)
Allowance for borrowed funds used during
construction 558 859
Preferred stock dividends of subsidiaries (471) (475)
Preferred securities distributions of
trust subsidiaries - -
Allowance for equity funds used during
construction 1,406 1,934
-------------- --------------
Income from continuing operations before
income taxes 59,742 65,628
Income taxes 22,252 24,869
-------------- --------------
Income from continuing operations 37,490 40,759
Discontinued operations - gain (loss) on
disposal, net of income taxes - 1,913
-------------- --------------
Net income $37,490 $42,672
============== ==============
Per common share
Basic earnings (loss)
- Continuing operations $0.46 $0.51
- Discontinued operations - 0.02
-------------- --------------
$0.46 $0.53
============== ==============
Diluted earnings (loss)
- Continuing operations $0.46 $0.51
- Discontinued operations - 0.02
-------------- --------------
$0.46 $0.53
============== ==============
Dividends $0.31 $0.31
============== ==============
Weighted-average number of common shares
outstanding 80,903 80,509
============== ==============
Adjusted weighted-average shares 81,354 80,828
============== ==============
Income (loss) from continuing operations
by segment
Electric utility $22,587 $26,175
Bank 15,911 15,378
Other (1,008) (794)
-------------- --------------
Income from continuing operations $37,490 $40,759
============== ==============
Nine months ended Twelve months ended
ended September 30, ended September 30,
---------------------- -----------------------
(in thousands, except
per share amounts) 2005 2004 2005 2004
----------------------------------------------------------------------
Revenues
Electric utility $1,295,844 $1,127,295 $1,719,220 $1,481,289
Bank 286,601 269,536 381,349 359,281
Other 8,360 8,836 8,626 19,318
----------- ----------- ----------- -----------
1,590,805 1,405,667 2,109,195 1,859,888
----------- ----------- ----------- -----------
Expenses
Electric utility 1,174,058 984,528 1,566,298 1,292,153
Bank 209,508 193,886 274,932 260,779
Other 11,880 10,784 18,115 15,696
----------- ----------- ----------- -----------
1,395,446 1,189,198 1,859,345 1,568,628
----------- ----------- ----------- -----------
Operating income (loss)
Electric utility 121,786 142,767 152,922 189,136
Bank 77,093 75,650 106,417 98,502
Other (3,520) (1,948) (9,489) 3,622
----------- ----------- ----------- -----------
195,359 216,469 249,850 291,260
----------- ----------- ----------- -----------
Interest expense-other
than bank (56,955) (58,929) (75,202) (75,047)
Allowance for borrowed
funds used during
construction 1,460 2,236 1,766 2,765
Preferred stock
dividends of
subsidiaries (1,421) (1,425) (1,897) (1,927)
Preferred securities
distributions of trust
subsidiaries - - - (4,009)
Allowance for equity
funds used during
construction 3,675 5,056 4,413 6,248
----------- ----------- ----------- -----------
Income from continuing
operations before
income taxes 142,118 163,407 178,930 219,290
Income taxes 52,198 80,478 64,200 98,922
----------- ----------- ----------- -----------
Income from continuing
operations 89,920 82,929 114,730 120,368
Discontinued operations
- gain (loss) on
disposal, net of
income taxes (755) 1,913 (755) 1,913
----------- ----------- ----------- -----------
Net income $89,165 $84,842 $113,975 $122,281
=========== =========== =========== ===========
Per common share
Basic earnings (loss)
- Continuing
operations $1.11 $1.05 $1.42 $1.54
- Discontinued
operations (0.01) 0.02 (0.01) 0.02
----------- ----------- ----------- -----------
$1.10 $1.07 $1.41 $1.56
=========== =========== =========== ===========
Diluted earnings
(loss)
- Continuing
operations $1.11 $1.05 $1.42 $1.54
- Discontinued
operations (0.01) 0.02 $(0.01) 0.02
----------- ----------- ----------- -----------
$1.10 $1.07 $1.41 $1.56
=========== =========== =========== ===========
Dividends $0.93 $0.93 $1.24 $1.24
=========== =========== =========== ===========
Weighted-average number
of common shares
outstanding 80,795 79,204 80,745 78,283
=========== =========== =========== ===========
Adjusted weighted-
average shares 81,192 79,449 81,111 78,480
=========== =========== =========== ===========
Income (loss) from
continuing operations
by segment
Electric utility $54,616 $67,933 $67,860 $90,272
Bank 47,224 24,356 63,930 38,340
Other (11,920) (9,360) (17,060) (8,244)
----------- ----------- ----------- -----------
Income from continuing
operations $89,920 $82,929 $114,730 $120,368
=========== =========== =========== ===========
This information should be read in conjunction with the consolidated
financial statements and the notes thereto incorporated by reference
in HEI's Annual Report on SEC Form 10-K for the year ended December
31, 2004 and the consolidated financial statements and the notes
thereto in HEI's Quarterly Reports on SEC Form 10-Q for the quarters
ended March 31, 2005, June 30, 2005 and September 30, 2005 (when
filed). Results of operations for interim periods are not necessarily
indicative of results to be expected for future interim periods or the
full year. In April 2004, the HEI Board of Directors approved a
2-for-1 stock split in the form of a 100% stock dividend with a
distribution date of June 10, 2004. All share and per share
information above reflects the stock split.
In June 2004, ASB recorded a cumulative after-tax charge to net income
of $24 million for an unfavorable tax ruling involving its real estate
investment trust subsidiary, which was settled in December 2004. As a
result of the settlement, ASB recognized $3 million in additional net
income in the fourth quarter of 2004.
Hawaiian Electric Company, Inc. (HECO) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------- ---------------------
(in thousands) 2005 2004 2005 2004
----------------------------------------------------------------------
Operating revenues $489,877 $408,766 $1,292,374 $1,124,103
--------- --------- ----------- -----------
Operating expenses
Fuel oil 182,663 128,584 447,064 340,166
Purchased power 122,086 105,985 329,671 292,491
Other operation 41,974 39,151 125,084 110,297
Maintenance 21,141 17,219 58,916 50,125
Depreciation 30,655 28,586 92,297 86,074
Taxes, other than income
taxes 44,990 37,588 120,254 104,670
Income taxes 13,754 16,788 33,785 43,454
--------- --------- ----------- -----------
457,263 373,901 1,207,071 1,027,277
--------- --------- ----------- -----------
Operating income 32,614 34,865 85,303 96,826
--------- --------- ----------- -----------
Other income
Allowance for equity funds
used during construction 1,406 1,934 3,675 5,056
Other, net 1,191 1,157 2,811 2,886
--------- --------- ----------- -----------
2,597 3,091 6,486 7,942
--------- --------- ----------- -----------
Income before interest and
other charges 35,211 37,956 91,789 104,768
--------- --------- ----------- -----------
Interest and other charges
Interest on long-term debt 10,731 10,821 32,296 31,716
Amortization of net bond
premium and expense 545 578 1,658 1,724
Other interest charges 1,408 743 3,183 4,135
Allowance for borrowed
funds used during
construction (558) (859) (1,460) (2,236)
Preferred stock dividends
of subsidiaries 228 228 686 686
--------- --------- ----------- -----------
12,354 11,511 36,363 36,025
--------- --------- ----------- -----------
Income before preferred
stock dividends of HECO 22,857 26,445 55,426 68,743
Preferred stock dividends
of HECO 270 270 810 810
--------- --------- ----------- -----------
Net income for common
stock $22,587 $26,175 $54,616 $67,933
========= ========= =========== ===========
OTHER ELECTRIC UTILITY
INFORMATION
Kilowatthour sales
(millions) 2,672 2,675 7,538 7,516
Cooling degree days (Oahu) 1,649 1,651 3,900 3,883
Average fuel cost per
barrel $59.72 $42.72 $52.85 $40.38
This information should be read in conjunction with the consolidated
financial statements and the notes thereto incorporated by reference
in HECO's Annual Report on SEC Form 10-K for the year ended December
31, 2004 and the consolidated financial statements and the notes
thereto in HECO's Quarterly Reports on SEC Form 10-Q for the quarters
ended March 31, 2005, June 30, 2005 and September 30, 2005 (when
filed). Results of operations for interim periods are not necessarily
indicative of results to be expected for future interim periods or the
full year.
American Savings Bank, F.S.B. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
(in thousands) 2005 2004 2005 2004
----------------------------------------------------------------------
Interest and dividend income
Interest and fees on loans $52,649 $45,504 $151,819 $137,745
Interest on mortgage-related
securities 29,711 29,608 90,175 84,244
Interest and dividends on
investment securities 1,178 1,619 3,100 5,032
-------- -------- --------- ---------
83,538 76,731 245,094 227,021
-------- -------- --------- ---------
Interest expense
Interest on deposit liabilities 13,355 11,660 37,832 35,334
Interest on Federal Home Loan
Bank advances 11,393 11,143 33,509 31,987
Interest on securities sold
under repurchase agreements 5,885 5,345 18,410 15,822
-------- -------- --------- ---------
30,633 28,148 89,751 83,143
-------- -------- --------- ---------
Net interest income 52,905 48,583 155,343 143,878
Reversal of allowance for loan
losses - (3,800) (3,100) (8,400)
-------- -------- --------- ---------
Net interest income after
reversal of allowance for
loan losses 52,905 52,383 158,443 152,278
-------- -------- --------- ---------
Other income
Fees from other financial
services 6,512 5,980 18,708 17,722
Fee income on deposit
liabilities 4,311 4,619 12,574 13,276
Fee income on other financial
products 2,191 2,328 6,780 7,950
Gain (loss) on sale of securities - (86) 175 (70)
Other income 879 724 3,270 3,637
-------- -------- --------- ---------
13,893 13,565 41,507 42,515
-------- -------- --------- ---------
General and administrative
expenses
Compensation and employee
benefits 17,275 16,044 51,343 47,503
Occupancy 4,356 4,201 12,462 12,730
Equipment 3,413 3,319 10,114 10,364
Data processing 2,491 2,949 8,039 8,549
Services 3,986 3,292 11,594 9,013
Interest on income taxes 14 461 3,096 5,785
Other 9,325 9,151 26,209 25,199
-------- -------- --------- ---------
40,860 39,417 122,857 119,143
-------- -------- --------- ---------
Income before minority interests
and income taxes 25,938 26,531 77,093 75,650
Minority interests - 24 45 73
Income taxes 10,027 9,776 29,820 47,163
-------- -------- --------- ---------
Income before preferred stock
dividends 15,911 16,731 47,228 28,414
Preferred stock dividends - 1,353 4 4,058
-------- -------- --------- ---------
Net income for common stock $15,911 $15,378 $47,224 $24,356
======== ======== ========= =========
Interest rate spread (%) 3.26 3.09 3.18 3.07
This information should be read in conjunction with the consolidated
financial statements and the notes thereto incorporated by reference
in HEI's Annual Report on SEC Form 10-K for the year ended December
31, 2004 and the consolidated financial statements and the notes
thereto in HEI's Quarterly Reports on SEC Form 10-Q for the quarters
ended March 31, 2005, June 30, 2005 and September 30, 2005 (when
filed). Results of operations for interim periods are not necessarily
indicative of results to be expected for future interim periods or the
full year.
In June 2004, ASB recorded a cumulative after-tax charge to net income
of $24 million for an unfavorable tax ruling involving its real estate
investment trust subsidiary, which was settled in December 2004.
CONTACT: Hawaiian Electric Industries, Inc.
Suzy P. Hollinger, 808-543-7385
Facsimile: 808-543-7966
shollinger@hei.com
SOURCE: Hawaiian Electric Industries, Inc.
