| Hawaiian Electric Industries, Inc. Reports 2003 Yearend And Fourth Quarter Earnings |
| Hawaiian Electric Industries, Inc. (NYSE:HE) today reported 2003 income from continuing operations of $118.0 million, or $3.16 per share, compared with $118.2 million, or $3.26 per share in 2002. "The Company performed well in 2003," said Robert F. Clarke, HEI chairman, president and chief executive officer. "Net income for 2003 held steady compared with 2002 although the Company was faced with significant earnings challenges," said Clarke. "At the utility, increased kilowatthour sales helped offset some of the impact of a $23.9 million increase in its retirement benefits expenses." On an after-tax basis, the year-over-year increase in retirement benefits expenses at the utility amounted to $14.6 million and for the entire Company it amounted to $16.4 million. "At the bank, earnings matched 2002's record earnings despite margin compression which squeezed bank net interest income by $3.8 million." Margin compression resulted from the decline in asset yields from high refinancing volumes and the inability of the bank to reduce its cost of funds at the same rate. "The holding and other companies reduced their net loss from continuing operations by $11.1 million as interest costs were lower, lawsuits were settled and there were no investment writedowns," added Clarke. Electric utility net income was $78.9 million in 2003 versus $90.2 million in 2002. "Warmer weather and increases in usage and the number of residential customers contributed to kilowatthour sales growth of 2.4% in 2003," said Clarke. As the utility focused on capital expenditures to ensure reliability, maintenance expenses were down $1.9 million in 2003 compared with 2002. More than offsetting kilowatthour sales increases and decreased maintenance expenses were year-over-year increases in gross retirement benefits expenses of $23.9 million ($14.6 million, net), an increase in depreciation of $5.1 million and $3.1 million of charges related to a settlement reached in December 2003, relating to the Keahole expansion project on the island of Hawaii. Bank net income of $56.3 million for 2003 matched 2002's record earnings of $56.2 million despite margin compression, which started to pressure earnings beginning in September 2002 and continued throughout most of 2003. As a result of margin compression, the interest rate spread was 16 basis points lower at 3.08% in 2003 versus 3.24% in 2002. In the first half of 2003, the bank refinanced certain Federal Home Loan Bank (FHLB) advances to lower interest costs paid and lengthen maturities of outstanding advances, resulting in lower interest expense of $4.6 million for the year. Loan delinquencies and charge-offs during 2003 were lower, which translated into a $6.7 million lower provision for loan losses compared with 2002. "Asset quality improved across our portfolio in large part due to the strong Hawaii real estate market and strengthening Hawaii economy," said Clarke. Noninterest income was also higher as the bank sold securities at a $4.1 million gain versus a $0.6 million loss in 2002. The bank's general and administrative expenses were $8.4 million higher in 2003 due to increased costs of transforming from a traditional thrift to a full-service community bank, including hiring and training personnel in growing lines of business and increased retirement benefits expenses. The bank's efficiency ratio--the cost of earning $1 of revenue--for 2003 was 61% compared with 58% for 2002. The holding and other companies' net loss was $17.1 million in 2003 versus $28.2 million in 2002. The net loss decreased due to lower interest costs, settlement of lawsuits and no investment writedowns. Consolidated net income for the fourth quarter was $37.4 million, or $0.99 per share compared with $26.4 million, or $0.72 per share for the fourth quarter of 2002. Electric utility net income for the fourth quarter was $22.3 million compared with $20.4 million for the same quarter of 2002. Kilowatthour sales were 3.2% higher than in the fourth quarter of 2002, driven up by warmer weather and increases in usage and number of residential customers. Maintenance costs were $4.0 million lower quarter-over-quarter due to the timing and scope of generating unit overhauls compared to 2002, and the utility's focus on capital expenditures to ensure reliability. Partially offsetting these positives were $3.6 million higher net retirement benefits expenses and $1.3 million higher depreciation expenses in the fourth quarter of 2003, compared with the same quarter of 2002. In addition, the utility recorded two items in the fourth quarter of 2003 that it had not recorded in the fourth quarter of 2002: the previously mentioned $3.1 million Keahole settlement charge and a reduction of a previously recorded charge (third quarter 2003) for a notice of violation from $1.6 million to $0.8 million (not tax deductible) based on a conditional settlement reached with the State of Hawaii. Further information about these settlements is included in the Company's filings with the Securities and Exchange Commission. Bank net income for the fourth quarter of 2003 was $14.0 million versus $13.4 million for the fourth quarter of 2002. Net interest income was up $1.0 million for the fourth quarter of 2003 as compared with the same quarter of 2002. In addition, the provision for loan losses was $1.5 million lower in the fourth quarter of 2003 compared with the fourth quarter of 2002, reflecting lower delinquencies and charge-offs in the bank's loan portfolio. These positives were offset by a decrease in other income. The holding and other companies' net income was $1.1 million in the fourth quarter of 2003 versus a net loss of $7.4 million in same quarter of 2002, primarily due to lower interest costs, settlement of lawsuits and no investment writedowns. HEI strives to provide value to its shareholders, its customers and the Hawaii community through a unique combination of operating companies - a utility and a bank. HEI provides electric utility services to 95% of Hawaii's residents and a wide array of banking services to consumers and businesses through the state's third largest bank. Forward-Looking Statements This release may contain "forward-looking statements," which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as expects, anticipates, intends, plans, believes, predicts, estimates or similar expressions. In addition, any statements concerning future financial performance (including future revenues, expenses, earnings or losses or growth rates), ongoing business strategies or prospects and possible future actions, which may be provided by management, are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and assumptions about HEI and its subsidiaries, the performance of the industries in which they do business and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance. Forward-looking statements in this release should be read in conjunction with the "Forward-Looking Statements and Risk Factors" discussion (which is incorporated by reference herein) set forth on page v of HEI's Form 10-Q for the quarter ended September 30, 2003, 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. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended Years ended
December 31, December 31,
------------------- -----------------------
(in thousands, except per
share amounts) 2003 2002 2003 2002
---------------------------------------------------------------------
Revenues
Electric utility $353,994 $337,533 $1,396,685 $1,257,176
Bank 89,745 98,622 371,320 399,255
Other 10,482 (452) 13,311 (2,730)
--------- --------- ----------- -----------
454,221 435,703 1,781,316 1,653,701
--------- --------- ----------- -----------
Expenses
Electric utility 307,625 292,723 1,220,120 1,062,220
Bank 66,893 76,845 278,565 306,372
Other 4,912 6,670 19,064 18,676
--------- --------- ----------- -----------
379,430 376,238 1,517,749 1,387,268
--------- --------- ----------- -----------
Operating income (loss)
Electric utility 46,369 44,810 176,565 194,956
Bank 22,852 21,777 92,755 92,883
Other 5,570 (7,122) (5,753) (21,406)
--------- --------- ----------- -----------
74,791 59,465 263,567 266,433
--------- --------- ----------- -----------
Interest expense-other
than bank (16,118) (17,674) (69,292) (72,292)
Allowance for borrowed
funds used during
construction 529 463 1,914 1,855
Preferred stock dividends
of subsidiaries (502) (502) (2,006) (2,006)
Preferred securities
distributions of trust
subsidiaries (4,009) (4,009) (16,035) (16,035)
Allowance for equity
funds used during
construction 1,192 977 4,267 3,954
--------- --------- ----------- -----------
Income from continuing
operations before income
taxes 55,883 38,720 182,415 181,909
Income taxes 18,444 12,345 64,367 63,692
--------- --------- ----------- -----------
Income from continuing
operations 37,439 26,375 118,048 118,217
Loss from discontinued
operations, net of
income taxes - - (3,870) -
--------- --------- ----------- -----------
Net income $37,439 $26,375 $114,178 $118,217
========= ========= =========== ===========
Per common share
Basic earnings (loss)
Continuing operations $0.99 $0.72 $3.16 $3.26
Discontinued operations - - (0.10) -
--------- --------- ----------- -----------
$0.99 $0.72 $3.06 $3.26
========= ========= =========== ===========
Diluted earnings (loss)
Continuing operations $0.99 $0.72 $3.15 $3.24
Discontinued operations - - (0.10) -
--------- --------- ----------- -----------
$0.99 $0.72 $3.05 $3.24
========= ========= =========== ===========
Dividends $0.62 $0.62 $2.48 $2.48
========= ========= =========== ===========
Weighted-average number
of common shares
outstanding 37,771 36,658 37,348 36,278
========= ========= =========== ===========
Adjusted weighted-average
shares 37,936 36,869 37,487 36,477
========= ========= =========== ===========
Income (loss) from
continuing operations by
segment
Electric utility $22,339 $20,386 $78,911 $90,205
Bank 13,984 13,410 56,261 56,225
Other 1,116 (7,421) (17,124) (28,213)
--------- --------- ----------- -----------
Income from continuing
operations $37,439 $26,375 $118,048 $118,217
========= ========= =========== ===========
This information should be read in conjunction with the consolidated
financial statements and the notes thereto incorporated by reference
in HEI's Annual Reports on SEC Form 10-K for the years ended December
31, 2002 and 2003 (when filed) and the consolidated financial
statements and the notes thereto in HEI's Quarterly Reports on SEC
Form 10-Q for the quarters ended March 31, 2003, June 30, 2003 and
September 30, 2003.
Hawaiian Electric Company, Inc. (HECO) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended Years ended
December 31, December 31,
------------------- ---------------------
(in thousands) 2003 2002 2003 2002
----------------------------------------------------------------------
Operating revenues $353,257 $336,527 $1,393,038 $1,252,929
--------- --------- ----------- -----------
Operating expenses
Fuel oil 94,257 91,694 388,560 310,595
Purchased power 94,915 85,711 368,076 326,455
Other operation 40,927 36,337 155,531 131,910
Maintenance 16,838 20,814 64,621 66,541
Depreciation 27,690 26,361 110,560 105,424
Taxes, other than income
taxes 33,154 31,349 130,677 120,118
Income taxes 13,310 12,619 50,175 56,729
--------- --------- ----------- -----------
321,091 304,885 1,268,200 1,117,772
--------- --------- ----------- -----------
Operating income 32,166 31,642 124,838 135,157
--------- --------- ----------- -----------
Other income
Allowance for equity funds
used during construction 1,192 977 4,267 3,954
Other, net 1,156 706 1,903 3,141
--------- --------- ----------- -----------
2,348 1,683 6,170 7,095
--------- --------- ----------- -----------
Income before interest and
other charges 34,514 33,325 131,008 142,252
--------- --------- ----------- -----------
Interest and other charges
Interest on long-term debt 9,965 10,290 40,698 40,720
Amortization of net bond
premium and expense 511 509 2,131 2,014
Preferred securities
distributions of trust
subsidiaries 1,919 1,919 7,675 7,675
Other interest charges (190) 185 1,512 1,498
Allowance for borrowed
funds used during
construction (529) (463) (1,914) (1,855)
Preferred stock dividends
of subsidiaries 229 229 915 915
--------- --------- ----------- -----------
11,905 12,669 51,017 50,967
--------- --------- ----------- -----------
Income before preferred
stock dividends of HECO 22,609 20,656 79,991 91,285
Preferred stock dividends
of HECO 270 270 1,080 1,080
--------- --------- ----------- -----------
Net income for common
stock $22,339 $20,386 $78,911 $90,205
========= ========= =========== ===========
OTHER ELECTRIC UTILITY
INFORMATION
Kilowatthour sales
(millions) 2,506 2,427 9,775 9,544
Cooling degree days (Oahu) 1,260 1,187 5,010 4,798
Average fuel cost per
barrel $34.72 $33.73 $36.23 $29.10
American Savings Bank, F.S.B. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended Years ended
December 31, December 31,
----------------- ------------------
(in thousands) 2003 2002 2003 2002
----------------------------------------------------------------------
Interest and dividend income
Interest and fees on loans $48,393 $50,782 $198,948 $203,082
Interest on mortgage-related
securities 27,320 31,618 107,496 135,252
Interest and dividends on
investment securities 1,648 1,917 6,384 7,896
-------- -------- --------- ---------
77,361 84,317 312,828 346,230
-------- -------- --------- ---------
Interest expense
Interest on deposit liabilities 12,626 16,300 53,808 73,631
Interest on Federal Home Loan
Bank advances 11,213 15,281 48,280 58,608
Interest on securities sold under
repurchase agreements 5,177 5,387 21,236 20,643
-------- -------- --------- ---------
29,016 36,968 123,324 152,882
-------- -------- --------- ---------
Net interest income 48,345 47,349 189,504 193,348
Provision for loan losses 300 1,750 3,075 9,750
-------- -------- --------- ---------
Net interest income after
provision for loan losses 48,045 45,599 186,429 183,598
-------- -------- --------- ---------
Other income
Fees from other financial
services 4,853 5,873 22,817 21,254
Fee income on deposit
liabilities 4,714 4,017 16,971 15,734
Fee income on other financial
products 2,260 2,416 9,920 10,063
Fee income on loans serviced for
others, net (353) 205 155 (164)
Gain (loss) on sale of
securities - - 4,085 (640)
Other income 910 1,794 4,544 6,778
-------- -------- --------- ---------
12,384 14,305 58,492 53,025
-------- -------- --------- ---------
General and administrative
expenses
Compensation and employee
benefits 16,094 15,548 65,805 59,594
Occupancy and equipment 7,859 7,699 30,546 30,086
Data processing 2,712 2,939 10,668 11,167
Professional services 1,496 3,626 8,670 9,376
Office supplies, printing and
postage 1,199 1,241 4,850 4,746
Communication 1,054 1,004 4,072 3,465
Marketing 1,387 955 3,973 3,967
Other 5,776 5,115 23,582 21,339
-------- -------- --------- ---------
37,577 38,127 152,166 143,740
-------- -------- --------- ---------
Income before minority interests
and income taxes 22,852 21,777 92,755 92,883
Minority interests 10 42 124 173
Income taxes 7,505 6,972 30,959 31,074
-------- -------- --------- ---------
Income before preferred stock
dividends 15,337 14,763 61,672 61,636
Preferred stock dividends 1,353 1,353 5,411 5,411
-------- -------- --------- ---------
Net income for common stock $13,984 $13,410 $56,261 $56,225
======== ======== ========= =========
Interest rate spread (%) 3.16 3.12 3.08 3.24
CONTACT: Hawaiian Electric Industries, Inc. Suzy P. Hollinger, 808-543-7385 (Manager, Investor Relations) shollinger£hei.com |