August 3, 2018 - 6:00 AM EDT
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HEI Reports Second Quarter 2018 Earnings

2Q2018 Diluted Earnings Per Share (EPS) of $0.42 Schofield MPIR Approved as Utility Advances Renewable Strategy Another Record Quarter of Bank Earnings

HONOLULU, Aug. 3, 2018 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE: HE) (HEI) today reported consolidated net income for common stock for the second quarter of 2018 of $46.1 million and diluted earnings per share (EPS) of $0.42 compared to $38.7 million and EPS of $0.36 for the second quarter of 2017. 

"HEI delivered solid results for the second quarter of 2018 as we continue to make significant progress on our strategies across our companies," said Constance H. Lau, president and CEO of HEI.

"In the second quarter our utilities continued to pave the way to add more renewables while increasing resilience, reliability and customer options. We brought our state-of-the-art, flexible, Schofield Generating Station online in June, under budget. The facility uses biofuels and conventional fuels, enhances reliability as we add more solar and wind resources and is the first project approved for recovery under the Major Projects Interim Recovery (MPIR) mechanism. In addition, we applied to implement the first phase of our grid modernization plan to make our grid more renewable-ready and provide greater customer options. Our utilities are receiving national attention for their efforts and were named Investor-Owned Utility of the Year by Smart Electric Power Alliance for their grid modernization work and innovation."

"Our bank again delivered solid performance, with increased profitability and its second consecutive quarter of record earnings. American continues to execute well and benefit from the bottom line impacts of tax reform, and remains focused on making banking easier for customers and deepening customer relationships," said Lau.

HAWAIIAN ELECTRIC COMPANY EARNINGS
Hawaiian Electric Company's1 net income for the second quarter of 2018 was $31.2 million compared to $25.6 million in the second quarter of 2017, primarily driven by the following after-tax items:

  • $8 million higher rate adjustment mechanism (RAM) revenues, primarily due to lower RAM revenues in the second quarter of 2017 because of the return in 2017 to recording Oahu RAM revenues for accounting purposes on a lagged basis beginning June 1, 2017, instead of on a calendar year basis; and
  • $7 million of rate relief from Hawaiian Electric's 2017 test year and Hawaii Electric Light's 2016 test year.

These items were partially offset by the following after-tax items:

  • $6 million higher O&M expenses2 compared to 2017, primarily due to the reset of pension costs as part of rate case decisions, Hawaii Island lava eruption response costs, and higher vegetation management costs, partially offset by higher overhauls in the prior year quarter;
  • $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; and
  • $2 million lower net income, representing the reduction in revenue requirements from tax reform, based on test-year projections, which is higher than the actual second quarter tax savings.

 












Note:  Amounts indicated as after-tax in this earnings release are based upon adjusting items using the current year composite statutory tax rates of 25.75% for the utilities and 26.79% for the bank.


1

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



2

Excludes net income neutral expenses covered by surcharges or by third parties.  See the "Explanation of HEI's Use of Certain Unaudited Non-GAAP Measures" and the related reconciliation accompanying this release.

AMERICAN SAVINGS BANK EARNINGS
American Savings Bank's (American) second quarter of 2018 net income was $20.6 million compared to $19.0 million in the first, or linked, quarter and $16.7 million in the prior year quarter. 

Compared to the linked quarter of 2018, the $1.6 million net income increase in the second quarter of 2018 was primarily driven by higher net interest income, which was mainly due to good deposit growth that funded commercial and home equity lines of credit loan portfolio growth and lower provision for loan losses.  

Compared to the second quarter of 2017, the $3.8 million higher net income in the second quarter of 2018 was primarily driven by higher net interest income partially offset by lower noninterest income. Tax expense was approximately $2 million lower in the second quarter of 2018 compared to the second quarter of 2017, primarily due to the benefits of the lower federal corporate tax rate from tax reform.

Total loans were $4.8 billion at June 30, 2018, up $104 million or 4.4% annualized from December 31, 2017, driven mainly by increases in commercial and commercial real estate loans of $91 million.  

Total deposits were $6.1 billion at June 30, 2018, an increase of $226 million or 7.7% annualized from December 31, 2017, including $100 million in repurchase agreements that were transferred into deposit accounts.  Excluding such transfer, total deposits increased by 4.2% annualized.  Cost of funds was 0.24% for the second quarter of 2018, up 1 basis point from the linked quarter and up 3 basis points from the prior year quarter.

American's return on average equity3 for the second quarter of 2018 was 13.56%, compared to 12.58% in the linked quarter and 11.25% in the second quarter of 2017.  Return on average assets was 1.20% for the second quarter of 2018, compared to 1.12% in the linked quarter and 1.02% in the same quarter last year.

Please refer to American's news release issued on July 30, 2018 for additional information on American.














3

Bank return on average equity calculated using weighted average daily common equity.

HOLDING AND OTHER COMPANIES
The holding and other companies' net loss was $5.7 million in the second quarter of 2018 compared to $3.7 million in the prior year quarter.  The higher net loss was primarily driven by approximately $1 million lower tax benefits on expenses resulting from a lower corporate federal tax rate and higher interest expense due to higher interest rates and additional debt related to Pacific Current investments, partially offset by income related to Pacific Current's investment in Hamakua Energy.  

WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE
Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its second quarter 2018 earnings and 2018 EPS guidance on Friday, August 3, 2018, at 10:00 a.m. Hawaii time (4:00 p.m. Eastern time).

Interested parties within the United States may listen to the conference by calling (844) 834-0652 and international parties may listen to the conference by calling (412) 317-5198 or by accessing the webcast on HEI's website at www.hei.com under the "Investor Relations" section, sub-heading "News and Events."  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 at www.hei.com in addition to following HEI's, Hawaiian Electric Company's and American's press releases, HEI's and Hawaiian Electric Company's Securities and Exchange Commission (SEC) filings and HEI's public conference calls and webcasts. The information on HEI's website is not incorporated by reference in this document or in HEI's and Hawaiian Electric Company's SEC filings unless, and except to the extent, specifically incorporated by reference. Investors may also wish to refer to the Public Utilities Commission of the State of Hawaii (PUC) website at dms.puc.hawaii.gov/dms in order to review documents filed with and issued by the PUC. No information on the PUC website is incorporated by reference in this document or in HEI's and Hawaiian Electric Company's SEC filings.

An online replay of the webcast will be available at www.hei.com beginning about two hours after the event. Replays of the conference call will also be available approximately two hours after the event through August 17, 2018, by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10121450.

HEI supplies power to approximately 95% of Hawaii's population through its electric utilities, Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited; 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; and helps advance Hawaii's clean energy and sustainability goals through investments by its non-regulated subsidiary, Pacific Current, LLC.

NON-GAAP MEASURES
See "Explanation of HEI's Use of Certain Unaudited Non-GAAP Measures" and related reconciliations on page 9 of this release.

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME DATA

(Unaudited)



Three months ended June 30


Six months ended June 30

(in thousands, except per share amounts)


2018


2017


2018


2017

Revenues









Electric utility


$

608,126



$

556,875



$

1,178,553



$

1,075,486


Bank


77,104



75,329



152,523



148,185


Other


47



77



75



172


Total revenues


685,277



632,281



1,331,151



1,223,843


Expenses









Electric utility


552,982



500,393



1,072,040



968,643


Bank


50,187



50,332



100,719



98,833


Other


3,309



3,754



7,704



8,827


Total expenses


606,478



554,479



1,180,463



1,076,303


Operating income (loss)









Electric utility


55,144



56,482



106,513



106,843


Bank


26,917



24,997



51,804



49,352


Other


(3,262)



(3,677)



(7,629)



(8,655)


Total operating income


78,799



77,802



150,688



147,540


Retirement defined benefits expense—other than service costs


(1,564)



(1,906)



(3,397)



(3,782)


Interest expense, net—other than on deposit liabilities and other bank borrowings


(22,001)



(20,440)



(43,519)



(40,008)


Allowance for borrowed funds used during construction


1,365



1,143



2,809



2,032


Allowance for equity funds used during construction


2,983



3,027



6,277



5,426


Income before income taxes


59,582



59,626



112,858



111,208


Income taxes


13,055



20,492



25,611



37,408


Net income


46,527



39,134



87,247



73,800


Preferred stock dividends of subsidiaries


473



473



946



946


Net income for common stock


$

46,054



$

38,661



$

86,301



$

72,854


Basic earnings per common share


$

0.42



$

0.36



$

0.79



$

0.67


Diluted earnings per common share


$

0.42



$

0.36



$

0.79



$

0.67


Dividends declared per common share


$

0.31



$

0.31



$

0.62



$

0.62


Weighted-average number of common shares outstanding


108,842



108,750



108,830



108,712


Weighted-average shares assuming dilution


108,963



108,797



109,053



108,869


Net income (loss) for common stock by segment









Electric utility


$

31,169



$

25,644



$

58,644



$

47,109


Bank


20,561



16,733



39,521



32,546


Other


(5,676)



(3,716)



(11,864)



(6,801)


Net income for common stock


$

46,054



$

38,661



$

86,301



$

72,854


Comprehensive income attributable to Hawaiian Electric Industries, Inc.


$

42,229



$

41,031



$

69,703



$

76,209


Return on average common equity (twelve months ended)1






8.6

%


12.1

%


The Consolidated Statements of Income Data reflects the retrospective application of ASU No. 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," which was adopted in first quarter 2018. Nonservice cost was reclassified from "Expenses" to "Retirement defined benefits expense—other than service costs."


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


1  On a core basis, 2018 and 2017 returns on average common equity (twelve months ended June 30) were 9.2% and 8.9%, respectively.  See reconciliation of GAAP to non-GAAP measures.

 

Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME DATA

(Unaudited)




Three months ended June 30


Six months ended June 30

(dollars in thousands, except per barrel amounts)


2018


2017


2018


2017

Revenues


$

608,126



$

556,875



$

1,178,553



$

1,075,486


Expenses









Fuel oil


171,717



141,259



338,685



285,529


Purchased power


160,738



153,067



300,648



280,191


Other operation and maintenance


112,642



104,939



220,252



203,756


Depreciation


50,361



48,156



100,827



96,372


Taxes, other than income taxes


57,524



52,972



111,628



102,795


Total expenses


552,982



500,393



1,072,040



968,643


Operating income


55,144



56,482



106,513



106,843


Allowance for equity funds used during construction


2,983



3,027



6,277



5,426


Retirement defined benefits expense—other than service costs


(988)



(1,435)



(2,252)



(2,858)


Interest expense and other charges, net


(18,160)



(18,214)



(35,854)



(35,718)


Allowance for borrowed funds used during construction


1,365



1,143



2,809



2,032


Income before income taxes


40,344



41,003



77,493



75,725


Income taxes


8,676



14,860



17,851



27,618


Net income


31,668



26,143



59,642



48,107


Preferred stock dividends of subsidiaries


229



229



458



458


Net income attributable to Hawaiian Electric


31,439



25,914



59,184



47,649


Preferred stock dividends of Hawaiian Electric


270



270



540



540


Net income for common stock


$

31,169



$

25,644



$

58,644



$

47,109


Comprehensive income attributable to Hawaiian Electric


$

31,195



$

25,684



$

58,701



$

47,608


OTHER ELECTRIC UTILITY INFORMATION









Kilowatthour sales (millions)









   Hawaiian Electric


1,597



1,624



3,094



3,149


   Hawaii Electric Light


262



257



519



510


   Maui Electric


269



269



527



529




2,128



2,150



4,140



4,188


Average fuel oil cost per barrel


$

81.84



$

69.86



$

81.26



$

67.78


Return on average common equity (twelve months ended)1






7.19

%


7.23

%


The Consolidated Statements of Income Data reflects the retrospective application of ASU No. 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," which was adopted in first quarter 2018. Nonservice cost was reclassified from "Other operation and maintenance" to "Retirement defined benefits expense—other than service costs."


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


1  Simple average. On a core basis, 2018 and 2017 returns on average common equity (twelve months ended June 30) were 7.7% and 7.2%, respectively.  See reconciliation of GAAP to non-GAAP measures.

 

American Savings Bank, F.S.B.

STATEMENTS OF INCOME DATA

(Unaudited)




Three months ended


Six months ended June 30

(in thousands)


June 30, 2018


March 31, 2018


June 30, 2017


2018


2017

Interest and dividend income











Interest and fees on loans


$

54,633



$

52,800



$

52,317



$

107,433



$

103,059


Interest and dividends on investment securities


8,628



9,202



6,763



17,830



13,743


Total interest and dividend income


63,261



62,002



59,080



125,263



116,802


Interest expense











Interest on deposit liabilities


3,284



2,957



2,311



6,241



4,414


Interest on other borrowings


393



496



824



889



1,640


Total interest expense


3,677



3,453



3,135



7,130



6,054


Net interest income


59,584



58,549



55,945



118,133



110,748


Provision for loan losses


2,763



3,541



2,834



6,304



6,741


Net interest income after provision for loan losses


56,821



55,008



53,111



111,829



104,007


Noninterest income











Fees from other financial services


4,744



4,654



5,810



9,398



11,420


Fee income on deposit liabilities


5,138



5,189



5,565



10,327



10,993


Fee income on other financial products


1,675



1,654



1,971



3,329



3,837


Bank-owned life insurance


1,133



871



1,925



2,004



2,908


Mortgage banking income


617



613



587



1,230



1,376


Other income, net


536



436



391



972



849


Total noninterest income


13,843



13,417



16,249



27,260



31,383


Noninterest expense











Compensation and employee benefits


23,655



24,440



24,541



48,095



47,583


Occupancy


4,194



4,280



4,185



8,474



8,339


Data processing


3,540



3,464



3,207



7,004



6,487


Services


3,028



3,047



2,766



6,075



5,126


Equipment


1,874



1,728



1,771



3,602



3,519


Office supplies, printing and postage


1,491



1,507



1,527



2,998



3,062


Marketing


1,085



645



839



1,730



1,356


FDIC insurance


727



713



822



1,440



1,550


Other expense


4,556



4,101



4,906



8,657



9,412


Total noninterest expense


44,150



43,925



44,564



88,075



86,434


Income before income taxes


26,514



24,500



24,796



51,014



48,956


Income taxes


5,953



5,540



8,063



11,493



16,410


Net income


$

20,561



$

18,960



$

16,733



$

39,521



$

32,546


Comprehensive income


$

16,579



$

6,885



$

18,956



$

23,464



$

35,604


OTHER BANK INFORMATION (annualized %, except as of period end)









Return on average assets


1.20



1.12



1.02



1.16



1.00


Return on average equity


13.56



12.58



11.25



13.07



11.04


Return on average tangible common equity


15.68



14.57



13.06



15.13



12.82


Net interest margin


3.76



3.76



3.68



3.76



3.68


Efficiency ratio


60.13



61.04



61.73



60.58



60.81


Net charge-offs to average loans outstanding


0.32



0.28



0.21



0.30



0.25


As of period end











Nonaccrual loans to loans receivable held for investment


0.57



0.53



0.44






Allowance for loan losses to loans outstanding


1.11



1.14



1.19






Tangible common equity to tangible assets


7.64



7.66



7.88






Tier-1 leverage ratio


8.6



8.6



8.5






Total capital ratio


13.9



14.0



13.7






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


$

11.1



$

10.9



$

9.4



$

22.0



$

18.8



The Statements of Income Data reflects the retrospective application of ASU No. 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," which was adopted in first quarter 2018. Nonservice cost was reclassified from "Compensation and employee benefits" to "Other expense."


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

EXPLANATION OF HEI'S USE OF CERTAIN UNAUDITED NON-GAAP MEASURES
HEI and Hawaiian Electric Company management use certain non-GAAP measures to evaluate the performance of HEI and the utility.  Management believes these non-GAAP measures provide useful information and are a better indicator of the companies' core operating activities than the corresponding GAAP measures given the non-recurring nature of certain items.  Non-GAAP core measures presented here may not be comparable to similarly titled measures used by other companies.  The accompanying tables provide the return on average common equity (ROACE) and adjusted non-GAAP core ROACE for HEI and the utility.

The reconciling adjustments from GAAP earnings to core earnings used in the calculation of the twelve months ended June 30, 2017 ROACE include income, costs and associated taxes related to the terminated merger between HEI and NextEra Energy, Inc.  For more information on the transactions, see HEI's Form 8-K filed on July 18, 2016, and HEI's Form 8-K filed on July 19, 2016.  The reconciling adjustments from GAAP earnings to core earnings used in the calculation of the twelve months ended June 30, 2018 ROACE exclude the impact of the federal tax reform act recorded in the fourth quarter of 2017 due to the adjustment of deferred tax balances and the $1,000 employee bonuses paid by the bank related to federal tax reform.  Management does not consider these items to be representative of the company's fundamental core earnings and has shown the non-GAAP (core) ROACE in order to provide better comparability between periods.

The accompanying table also provides the calculation of utility GAAP other operation and maintenance (O&M) expense adjusted for "O&M-related net income neutral items," which are O&M expenses covered by specific surcharges or by third parties.  These "O&M-related net income neutral items" are grossed-up in revenue and expense and do not impact net income.

RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES

Hawaiian Electric Industries, Inc. and Subsidiaries (HEI)

(Unaudited)



Twelve months ended June 30


2018


2017

HEI CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average)




Based on GAAP

8.6

%


12.1

%

Based on non-GAAP (core)2

9.2

%


8.9

%





Hawaiian Electric Company, Inc. and Subsidiaries





Twelve months ended June 30





2018


2017

HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average)







Based on GAAP




7.19

%


7.23

%

Based on non-GAAP (core)2




7.69

%


7.23

%









Three months ended June 30


Six months ended June 30

($ in millions)

2018

2017


2018


2017

HAWAIIAN ELECTRIC CONSOLIDATED OTHER OPERATION AND MAINTENANCE (O&M) EXPENSE







GAAP (as reported)

$

112.6


$

104.9



$

220.3



$

203.8


Excluding other O&M-related net income neutral items3

0.1


0.9



0.5



2.0


Non-GAAP (Adjusted other O&M expense)

$

112.5


$

104.0



$

219.8



$

201.7



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

 

Contact:

Julie R. Smolinski

Telephone: (808) 543-7300


Manager, Investor Relations

E-mail:  [email protected]

 

Hawaiian Electric Industries, Inc. (PRNewsFoto/Hawaiian Electric Industries, Inc.)

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/hei-reports-second-quarter-2018-earnings-300691668.html

SOURCE Hawaiian Electric Industries, Inc.


Source: PR Newswire (August 3, 2018 - 6:00 AM EDT)

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