| Hawaiian Electric Industries, Inc. Reports Second Quarter 2003 Earnings |
Hawaiian Electric Industries, Inc. (NYSE:HE) today reported income from continuing operations for the three months ended June 30, 2003, of $25.8 million, or 69 cents per share, compared with $31.5 million, or 87 cents per share in the same quarter of 2002. For the six months ended June 30, 2003, income from continuing operations was $50.1 million, or $1.35 per share, compared with $58.3 million, or $1.62 per share in the same period last year. "Several factors worked against more positive second quarter results, including the effects of a weak Japanese economy and fear of terrorism and SARS on tourism, increased retirement benefits expense resulting from poor stock market performance in 2000 through 2002 and a tightening interest rate spread caused by the lowest interest rates in 45 years," said Robert F. Clarke, HEI chairman, president and chief executive officer. Electric utility net income during the quarter was $18.6 million versus $23.9 million in the same quarter last year. Electric utility net income for the first six months of 2003 was $36.2 million versus$44.2 million in the same period of 2002. "As expected, increased retirement benefits expense lowered electric utility net income by $3.9 million in the second quarter of 2003 versus the same quarter in 2002," said Clarke. "On the bright side, kilowatthour sales in the second quarter were up 1.2% compared to the same quarter in 2002 due to slightly warmer weather and increased commercial usage on the Big Island and Maui." Bank net income in the second quarter was $13.5 million compared to $14.8 million in the same quarter last year. Bank net income for the first six months of 2003 was $27.0 million versus $28.2 million in the same period in 2002. "The bank did an excellent job of managing margin compression through this difficult interest rate environment and was able to achieve second quarter earnings at the same level as the first quarter of 2003," said Clarke. Compared to the second quarter of last year, bank net income for the second quarter was down $1.3 million primarily due to the less favorable interest rate environment quarter-over-quarter. The interest rate spread was 3.02% in the second quarter of 2003 versus 3.31% in the same quarter of 2002. High prepayments of mortgage-related securities due to record-level refinancings significantly lowered the yield on those assets. Partially offsetting this decrease in yields was lower interest expense resulting from restructuring certain liabilities. Other positive factors during the second quarter included a lower provision for loan losses due to low delinquencies, increased fee income from other financial services and gain on sales of securities. These positives were partially offset by an increase in general and administrative expenses to execute the bank's continued strategic transformation to a full-service community bank. Net losses from continuing operations for the holding and other companies in the second quarter were $6.3 million compared to $7.2 million in the same quarter last year. Holding and other companies' net losses from continuing operations for the first six months of 2003 were $13.1 million versus $14.0 million in the same period of 2002. Lower losses in the second quarter of 2003 were due to lower interest expenses and investment losses. Losses from the discontinued international power operations for the quarter and six months ended June 30, 2003, were $3.9 million, or$0.10 per share, due primarily to a $3.2 million after-tax writedown of the Company's investment in CEPALCO, a Philippine electric distribution company located in the northern part of the island of Mindanao. The reduced valuation of CEPALCO resulted from the deteriorating political and economic environment that had significant adverse impacts on the electric power industry in the Philippines in the second quarter of 2003 and on the expected financial performance of CEPALCO. HEI discontinued its international operations in the third quarter of 2001. The investment was offered for sale at that time and continues to be available for sale, but remains unsold. HEI is the largest Hawaii-based company (based on reported revenues), providing 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 March 31, 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)
(in thousands, except per share amounts)
Three months Six months
ended June 30, ended June 30,
--------- --------- --------- ---------
2003 2002 2003 2002
--------- --------- --------- ---------
Revenues
Electric utility $354,529 $307,676 $683,441 $586,007
Bank 92,703 102,069 187,805 200,911
Other 1,524 (743) 2,146 (480)
--------- --------- --------- ---------
448,756 409,002 873,392 786,438
--------- --------- --------- ---------
Expenses
Electric utility 311,944 256,723 599,881 489,450
Bank 70,342 77,700 143,018 154,371
Other 5,017 3,953 9,952 7,387
--------- --------- --------- ---------
387,303 338,376 752,851 651,208
--------- --------- --------- ---------
Operating income (loss)
Electric utility 42,585 50,953 83,560 96,557
Bank 22,361 24,369 44,787 46,540
Other (3,493) (4,696) (7,806) (7,867)
--------- --------- --------- ---------
61,453 70,626 120,541 135,230
--------- --------- --------- ---------
Interest expense-other than
bank (17,879) (18,340) (35,859) (36,867)
Allowance for borrowed funds
used during construction 446 488 889 843
Preferred stock dividends of
subsidiaries (501) (502) (1,003) (1,003)
Preferred securities
distributions of
trust subsidiaries (4,009) (4,009) (8,018) (8,018)
Allowance for equity funds
used during construction 989 1,042 1,977 1,815
--------- --------- --------- ---------
Income from continuing
operations
before income taxes 40,499 49,305 78,527 92,000
Income taxes 14,739 17,847 28,440 33,670
--------- --------- --------- ---------
Income from continuing
operations 25,760 31,458 50,087 58,330
Discontinued operations, net
of income taxes
Loss from operations (3,870) -- (3,870) --
Net loss on disposals -- -- -- --
--------- --------- --------- ---------
Loss from discontinued
operations (3,870) -- (3,870) --
--------- --------- --------- ---------
Net income $21,890 $31,458 $46,217 $58,330
========= ========= ========= =========
Per common share
Basic earnings (loss)
Continuing operations $ 0.69 $ 0.87 $ 1.35 $ 1.62
Discontinued operations (0.10) -- (0.10) --
--------- --------- --------- ---------
$ 0.59 $ 0.87 $ 1.25 $ 1.62
========= ========= ========= =========
Diluted earnings (loss)
Continuing operations $ 0.69 $ 0.86 $ 1.34 $ 1.61
Discontinued operations (0.10) -- $ (0.10) --
--------- --------- --------- ---------
$ 0.59 $ 0.86 $ 1.24 $ 1.61
========= ========= ========= =========
Dividends $ 0.62 $ 0.62 $ 1.24 $ 1.24
========= ========= ========= =========
Weighted-average number of
common shares outstanding 37,195 36,189 37,047 36,005
========= ========= ========= =========
Adjusted weighted-average
shares 37,377 36,406 37,222 36,203
========= ========= ========= =========
Income (loss) from continuing
operations by segment
Electric utility $18,556 $23,850 $36,212 $44,209
Bank 13,494 14,812 27,002 28,163
Other (6,290) (7,204) (13,127) (14,042)
--------- --------- --------- ---------
Income from continuing
operations $25,760 $31,458 $50,087 $58,330
========= ========= ========= =========
Twelve months
ended June 30,
----------- -----------
2003 2002
----------- -----------
Revenues
Electric utility $1,354,610 $1,243,237
Bank 386,149 417,509
Other (104) (7,707)
----------- -----------
1,740,655 1,653,039
----------- -----------
Expenses
Electric utility 1,172,651 1,050,773
Bank 295,019 326,591
Other 21,241 13,906
----------- -----------
1,488,911 1,391,270
----------- -----------
Operating income (loss)
Electric utility 181,959 192,464
Bank 91,130 90,918
Other (21,345) (21,613)
----------- -----------
251,744 261,769
----------- -----------
Interest expense-other than bank (71,284) (76,069)
Allowance for borrowed funds
used during construction 1,901 1,914
Preferred stock dividends of subsidiaries (2,006) (2,006)
Preferred securities distributions of
trust subsidiaries (16,035) (16,035)
Allowance for equity funds
used during construction 4,116 3,834
----------- -----------
Income from continuing operations
before income taxes 168,436 173,407
Income taxes 58,462 61,207
----------- -----------
Income from continuing operations 109,974 112,200
Discontinued operations, net of income taxes
Loss from operations (3,870) (711)
Net loss on disposals -- (22,787)
----------- -----------
Loss from discontinued operations (3,870) (23,498)
----------- -----------
Net income $ 106,104 $ 88,702
=========== ===========
Per common share
Basic earnings (loss)
Continuing operations $ 2.99 $ 3.20
Discontinued operations (0.11) (0.67)
----------- -----------
$ 2.88 $ 2.53
=========== ===========
Diluted earnings (loss)
Continuing operations $ 2.97 $ 3.18
Discontinued operations (0.10) (0.66)
----------- -----------
$ 2.87 $ 2.52
=========== ===========
Dividends $ 2.48 $ 2.48
=========== ===========
Weighted-average number of
common shares outstanding 36,795 35,085
=========== ===========
Adjusted weighted-average shares 36,978 35,248
=========== ===========
Income (loss) from continuing operations by
segment
Electric utility $ 82,208 $ 88,368
Bank 55,064 54,612
Other (27,298) (30,780)
----------- -----------
Income from continuing operations $ 109,974 $ 112,200
=========== ===========
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, 2002 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 and June 30, 2003 (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.
Hawaiian Electric Industries, Inc. and Subsidiaries
GOODWILL
(Unaudited)
The Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets" on January 1, 2002. SFAS No. 142 requires that goodwill and
intangible assets with indefinite useful lives no longer be amortized,
but instead be tested for impairment at least annually.
The Company's $83.1 million of goodwill is in the bank segment and
was tested for impairment as of January 1 and September 30, 2002, and
will be tested for impairment annually as of September 30. As of
January 1 and September 30, 2002, there was no impairment of goodwill.
The fair value of the bank was estimated using a valuation method
based on a market approach, which takes into consideration market
values of comparable publicly traded companies and recent transactions
of companies in the industry.
Application of the provisions of SFAS No. 142 has affected the
comparability of the twelve months ended results of operations because
the goodwill in the bank segment is no longer being amortized over a
25 year period. Thus, the following "transitional" disclosures present
net income and earnings per common share "adjusted" as shown below:
Twelve months
ended
June 30,
------------------
(in thousands, except per share amounts) 2003 2002
----------------------------------------------------------------------
Consolidated
Reported net income $106,104 $88,702
Goodwill amortization, net of tax benefits - 1,929
--------- --------
Adjusted net income $106,104 $90,631
========= ========
Per common share
Reported basic earnings $2.88 $2.53
Goodwill amortization, net of tax benefits - 0.05
--------- --------
Adjusted basic earnings $2.88 $2.58
========= ========
Per common share
Reported diluted earnings $2.87 $2.52
Goodwill amortization, net of tax benefits - 0.05
--------- --------
Adjusted diluted earnings $2.87 $2.57
========= ========
Bank
Reported net income $55,064 $54,612
Goodwill amortization, net of tax benefits - 1,929
--------- --------
Adjusted net income $55,064 $56,541
========= ========
Hawaiian Electric Company, Inc. (HECO) and
Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months Six months
ended ended
June 30, June 30,
----------------- -----------------
(in thousands) 2003 2002 2003 2002
----------------------------------------------------------------------
Operating revenues $353,385 $306,616 $681,346 $583,949
-------- -------- -------- --------
Operating expenses
Fuel oil 102,168 74,355 193,007 133,590
Purchased power 95,264 76,520 180,618 153,621
Other operation 38,317 32,462 76,844 61,685
Maintenance 15,476 16,010 29,758 30,022
Depreciation 27,633 26,363 55,245 52,723
Taxes, other than income taxes 32,810 30,792 63,887 57,482
Income taxes 11,676 15,032 22,891 27,823
-------- -------- -------- --------
323,344 271,534 622,250 516,946
-------- -------- -------- --------
Operating income 30,041 35,082 59,096 67,003
-------- -------- -------- --------
Other income
Allowance for equity funds used
during construction 989 1,042 1,977 1,815
Other, net 869 762 1,636 1,577
-------- -------- -------- --------
1,858 1,804 3,613 3,392
-------- -------- -------- --------
Income before interest and other
charges 31,899 36,886 62,709 70,395
-------- -------- -------- --------
Interest and other charges
Interest on long-term debt 10,436 10,167 20,760 20,303
Amortization of net bond premium
and expense 528 507 1,041 1,007
Other interest charges 407 432 749 883
Allowance for borrowed funds used
during construction (446) (488) (889) (843)
Preferred stock dividends of
subsidiaries 229 229 458 458
Preferred securities distributions
of trust subsidiaries 1,919 1,919 3,838 3,838
-------- -------- -------- --------
13,073 12,766 25,957 25,646
-------- -------- -------- --------
Income before preferred stock
dividends of HECO 18,826 24,120 36,752 44,749
Preferred stock dividends of HECO 270 270 540 540
-------- -------- -------- --------
Net income for common stock $18,556 $23,850 $36,212 $44,209
======== ======== ======== ========
OTHER ELECTRIC UTILITY INFORMATION
Kilowatthour sales (millions) 2,407 2,379 4,686 4,602
Cooling degree days (Oahu) 1,283 1,253 2,111 2,072
Average fuel cost per barrel $ 38.76 $ 27.04 $ 37.36 $ 25.82
American Savings Bank, F.S.B. and
Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months Six months
ended ended
June 30, June 30,
--------------- -----------------
(in thousands) 2003 2002 2003 2002
----------------------------------------------------------------------
Interest and dividend income
Interest and fees on loans $50,425 $50,468 $100,898 $102,090
Interest on mortgage-related
securities 26,023 36,325 55,300 68,131
Interest and dividends on investment
securities 1,551 1,873 3,308 4,099
------- ------- -------- --------
77,999 88,666 159,506 174,320
------- ------- -------- --------
Interest expense
Interest on deposit liabilities 13,653 19,325 28,083 39,498
Interest on Federal Home Loan Bank
advances 12,052 14,440 25,618 28,422
Interest on securities sold under
repurchase agreements 5,431 5,612 10,772 9,573
------- ------- -------- --------
31,136 39,377 64,473 77,493
------- ------- -------- --------
Net interest income 46,863 49,289 95,033 96,827
Provision for loan losses 1,025 3,000 2,175 6,500
------- ------- -------- --------
Net interest income after provision
for loan losses 45,838 46,289 92,858 90,327
------- ------- -------- --------
Other income
Fees from other financial services 6,264 5,345 11,949 9,965
Fee income on deposit liabilities 3,964 4,151 7,834 7,626
Fee income on other financial
products 2,379 2,368 5,234 5,055
Fee income on loans serviced by
others, net (442) 100 (1,444) 513
Gain on sale of securities 1,554 117 2,366 273
Other income 985 1,322 2,360 3,159
------- ------- -------- --------
14,704 13,403 28,299 26,591
------- ------- -------- --------
General and administrative expenses
Compensation and employee benefits 16,701 15,276 32,794 29,293
Occupancy and equipment 7,476 7,376 14,668 14,491
Data processing 2,603 2,819 5,407 5,649
Consulting 1,459 1,146 4,177 2,792
Other 9,942 8,706 19,324 18,153
------- ------- -------- --------
38,181 35,323 76,370 70,378
------- ------- -------- --------
Income before minority interest and
income taxes 22,361 24,369 44,787 46,540
Minority interests 32 44 66 89
Income taxes 7,483 8,161 15,014 15,583
------- ------- -------- --------
Income before preferred stock
dividends 14,846 16,164 29,707 30,868
Preferred stock dividends 1,352 1,352 2,705 2,705
------- ------- -------- --------
Net income for common stock $13,494 $14,812 $27,002 $28,163
======= ======= ======== ========
Interest rate spread (%) 3.02 3.31 3.08 3.29
CONTACT: Hawaiian Electric Industries, Inc. |