August 2, 2019 - 6:00 AM EDT
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HEI Reports Second Quarter 2019 Earnings

2Q 2019 Diluted Earnings Per Share (EPS) of $0.39 Utility Collaborating with Stakeholders to Achieve Clean Energy Future Good Loan and Deposit Growth at Bank

HONOLULU, Aug. 2, 2019 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE: HE) (HEI) today reported consolidated net income for common stock for the second quarter of 2019 of $42.5 million and diluted earnings per share of $0.39 compared to $46.1 million and EPS of $0.42 for the second quarter of 2018.

"HEI's earnings for the second quarter of 2019 are in line with our expectations for the year, and we are making great strides on our strategies across our enterprise," said Constance H. Lau, president and CEO of HEI.

"Together with our stakeholders, our utilities are working hard to reach our state's ambitious clean energy and carbon neutrality goals while delivering affordable, reliable energy for customers and ensuring system resilience. We recently commenced one of the largest renewables procurement processes ever undertaken by a U.S. utility—seeking up to 900 megawatts of new renewable generation, along with storage and grid services—even faster than planned."

"Our bank results were below recent quarters' performance due to volatility in American's investment portfolio driven by the lower interest rate environment as well as higher credit costs, including for one commercial exposure. The bank continued to deliver strong net interest margin, good loan and deposit growth and improving year-over-year efficiency. We are already seeing many of the benefits we anticipated from the consolidation of the bank's non-branch teammates into the new ASB Campus and we are confident in the future improvements American will deliver for our stakeholders," said Lau.

HAWAIIAN ELECTRIC COMPANY EARNINGS

Hawaiian Electric Company's1 net income for the second quarter of 2019 was $32.6 million compared to $31.2 million in the second quarter of 2018, primarily driven by the following after-tax items:

  • $6.5 million revenue increase resulting from rate increases and higher rate adjustment mechanism (RAM) revenues; the revenue increase included $3.6 million from Hawaiian Electric (Oahu), $2.4 million from Maui Electric (Maui County) and $0.5 million from Hawaii Electric Light (Hawaii Island); and
  • $3.3 million revenue increase from recovery of the Schofield generation project under the major project interim recovery (MPIR) mechanism.
    These items were partially offset by the following after-tax items:
  • $4.5 million higher operations and maintenance expenses2 compared to the second quarter of 2018, primarily due to higher overhaul expenses and generating station preventative maintenance and repairs, partially offset by the absence of Hawaii Island lava eruption response costs experienced in 2018;
  • $2.6 million higher depreciation expense due to increasing investments for the integration of more renewable energy, improved customer reliability and greater system efficiency; and
  • $0.9 million lower net income resulting from the inclusion of outages for preventative underground circuit maintenance in determining 2018 performance under the reliability performance incentive mechanism.

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, Hawaii Electric Light Company, Inc. on Hawaii Island, and Maui Electric Company, Limited, serving Maui County.

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 2019 net income was $17.0 million compared to $20.8 million in the first, or linked, quarter and $20.6 million in the prior year quarter.

The decrease in net income compared to the linked quarter was primarily due to lower net interest income resulting from an increase in amortization of premiums in the investment securities portfolio, as well as a higher provision for loan losses due to increased loss reserves for one commercial credit, increased reserves for loan portfolio growth, and additional loss reserves for the personal unsecured loan portfolio.

Compared to the second quarter of 2018, the decrease in net income was primarily driven by a higher provision for loan losses due to an increase in loan loss reserves for the personal unsecured loan portfolio, and a lower provision in the prior year due to a release of reserves for improved credit quality in the commercial, commercial real estate and home equity line of credit loan portfolios.

Total loans were $5.0 billion as of June 30, 2019, up $164.5 million or 6.8% annualized from December 31, 2018, driven mainly by increases in commercial loans, home equity lines of credit, and residential loans.

Total deposits were $6.3 billion at June 30, 2019, an increase of $98.5 million or 3.2% annualized from December 31, 2018. Low-cost core deposits were $5.4 billion as of June 30, 2019.

American's return on average equity was 10.5% in the second quarter of 2019 compared to 13.1% in the first quarter of 2019 and 13.6% in the prior year quarter.3  Return on average assets was 0.96% in the second quarter of 2019 compared to 1.18% in the first quarter of 2019 and 1.20% in the second quarter of 2018.

Please refer to American's news release issued on July 30, 2019 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 $7.1 million in the second quarter of 2019 compared to $5.7 million in the prior year quarter.  The higher net loss was primarily due to higher interest expense, higher HEI corporate expenses, and lower Pacific Current net income due primarily to the hiring of a management team at Pacific Current.

DIRECTOR APPPOINTED TO FILL VACANCY OF RETIRING HEI BOARD MEMBER

On July 31, 2019, the HEI Board elected Micah A. Kane to serve as a director of HEI and a member of its Nominating and Corporate Governance (NCG) Committee, both effective August 1, 2019. Mr. Kane was elected to fill the vacancies on the Board and on the NCG Committee created by the retirement of Dr. James K. Scott, who retired from the Board effective July 31, 2019.

Mr. Kane's extensive leadership experience and in-depth understanding of the communities HEI serves will add to the Board's oversight of HEI's Hawaii-focused strategy and operations.  Among other leadership roles, Mr. Kane's experience includes serving as President and CEO of Hawaii Community Foundation; as a trustee of Kamehameha Schools, a private school system established under the will of Princess Bernice Pauahi Bishop to educate Native Hawaiians; and as a director on the board of HEI's electric utility subsidiary, Hawaiian Electric Company.

WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE

HEI will conduct a webcast and conference call to review its second quarter 2019 earnings and 2019 EPS guidance on Friday, August 2, 2019, at 10:15 a.m. Hawaii time (4:15 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 the Investor Relations section 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 16, 2019, by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10131926.

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)


2019


2018


2019


2018

Revenues









Electric utility


$

633,784



$

608,126



$

1,212,279



$

1,178,553


Bank


81,687



77,104



164,739



152,523


Other


14



47



82



75


Total revenues


715,485



685,277



1,377,100



1,331,151


Expenses









Electric utility


578,090



552,982



1,100,025



1,072,040


Bank


60,435



50,187



117,365



100,719


Other


4,326



3,309



9,139



7,704


Total expenses


642,851



606,478



1,226,529



1,180,463


Operating income (loss)









Electric utility


55,694



55,144



112,254



106,513


Bank


21,252



26,917



47,374



51,804


Other


(4,312)



(3,262)



(9,057)



(7,629)


Total operating income


72,634



78,799



150,571



150,688


Retirement defined benefits expense—other than service costs


(761)



(1,564)



(1,524)



(3,397)


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


(23,533)



(22,001)



(46,656)



(43,519)


Allowance for borrowed funds used during construction


1,179



1,365



2,257



2,809


Allowance for equity funds used during construction


3,175



2,983



6,085



6,277


Income before income taxes


52,694



59,582



110,733



112,858


Income taxes


9,709



13,055



21,587



25,611


Net income


42,985



46,527



89,146



87,247


Preferred stock dividends of subsidiaries


473



473



946



946


Net income for common stock


$

42,512



$

46,054



$

88,200



$

86,301


Basic earnings per common share


$

0.39



$

0.42



$

0.81



$

0.79


Diluted earnings per common share


$

0.39



$

0.42



$

0.81



$

0.79


Dividends declared per common share


$

0.32



$

0.31



$

0.64



$

0.62


Weighted-average number of common shares outstanding


108,938



108,842



108,925



108,830


Weighted-average shares assuming dilution


109,255



108,963



109,324



109,053


Net income (loss) for common stock by segment









Electric utility


$

32,574



$

31,169



$

64,700



$

58,644


Bank


17,016



20,561



37,855



39,521


Other


(7,078)



(5,676)



(14,355)



(11,864)


Net income for common stock


$

42,512



$

46,054



$

88,200



$

86,301


Comprehensive income attributable to Hawaiian Electric Industries, Inc.


$

56,211



$

42,229



$

111,140



$

69,703


Return on average common equity (twelve months ended)1






9.4

%


8.6

%


This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.
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, 2019 and 2018 returns on average common equity (twelve months ended June 30) were 9.4% and 9.2%, 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

($ in thousands, except per barrel amounts)


2019


2018


2019


2018

Revenues


$

633,784



$

608,126



$

1,212,279



$

1,178,553


Expenses









Fuel oil


181,620



171,717



342,229



338,685


Purchased power


162,854



160,738



297,299



300,648


Other operation and maintenance


119,260



112,642



237,390



220,252


Depreciation


53,913



50,361



107,860



100,827


Taxes, other than income taxes


60,443



57,524



115,247



111,628


Total expenses


578,090



552,982



1,100,025



1,072,040


Operating income


55,694



55,144



112,254



106,513


Allowance for equity funds used during construction


3,175



2,983



6,085



6,277


Retirement defined benefits expense—other than service costs


(701)



(988)



(1,404)



(2,252)


Interest expense and other charges, net


(18,530)



(18,160)



(36,516)



(35,854)


Allowance for borrowed funds used during construction


1,179



1,365



2,257



2,809


Income before income taxes


40,817



40,344



82,676



77,493


Income taxes


7,744



8,676



16,978



17,851


Net income


33,073



31,668



65,698



59,642


Preferred stock dividends of subsidiaries


229



229



458



458


Net income attributable to Hawaiian Electric


32,844



31,439



65,240



59,184


Preferred stock dividends of Hawaiian Electric


270



270



540



540


Net income for common stock


$

32,574



$

31,169



$

64,700



$

58,644


Comprehensive income attributable to Hawaiian Electric


$

32,597



$

31,195



$

64,747



$

58,701


OTHER ELECTRIC UTILITY INFORMATION









Kilowatthour sales (millions)









   Hawaiian Electric


1,593



1,597



3,016



3,094


   Hawaii Electric Light


253



262



498



519


   Maui Electric


273



269



521



527




2,119



2,128



4,035



4,140


Average fuel oil cost per barrel


$

88.38



$

81.84



$

84.44



$

81.26


Return on average common equity (twelve months ended)1






7.8

%


7.2

%


This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.


1  Simple average. On a core basis, 2019 and 2018 returns on average common equity (twelve months ended June 30) were 7.8% and 7.7%, 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, 2019


March 31, 2019


June 30, 2018


2019


2018

Interest and dividend income











Interest and fees on loans


$

58,620



$

57,860



$

54,633



$

116,480



$

107,433


Interest and dividends on investment securities


7,535



10,628



8,628



18,163



17,830


Total interest and dividend income


66,155



68,488



63,261



134,643



125,263


Interest expense











Interest on deposit liabilities


4,287



4,252



3,284



8,539



6,241


Interest on other borrowings


411



528



393



939



889


Total interest expense


4,698



4,780



3,677



9,478



7,130


Net interest income


61,457



63,708



59,584



125,165



118,133


Provision for loan losses


7,688



6,870



2,763



14,558



6,304


Net interest income after provision for loan losses


53,769



56,838



56,821



110,607



111,829


Noninterest income











Fees from other financial services


4,798



4,562



4,744



9,360



9,398


Fee income on deposit liabilities


5,004



5,078



5,138



10,082



10,327


Fee income on other financial products


1,830



1,593



1,675



3,423



3,329


Bank-owned life insurance


2,390



2,259



1,133



4,649



2,004


Mortgage banking income


976



614



617



1,590



1,230


Other income, net


534



458



536



992



972


Total noninterest income


15,532



14,564



13,843



30,096



27,260


Noninterest expense











Compensation and employee benefits


25,750



25,512



23,655



51,262



48,095


Occupancy


5,479



4,670



4,194



10,149



8,474


Data processing


3,852



3,738



3,540



7,590



7,004


Services


2,606



2,426



3,028



5,032



6,075


Equipment


2,189



2,064



1,874



4,253



3,602


Office supplies, printing and postage


1,663



1,360



1,491



3,023



2,998


Marketing


1,323



990



1,085



2,313



1,730


FDIC insurance


628



626



727



1,254



1,440


Other expense


4,519



3,854



4,556



8,373



8,657


Total noninterest expense


48,009



45,240



44,150



93,249



88,075


Income before income taxes


21,292



26,162



26,514



47,454



51,014


Income taxes


4,276



5,323



5,953



9,599



11,493


Net income


$

17,016



$

20,839



$

20,561



$

37,855



$

39,521


Comprehensive income


$

31,291



$

27,091



$

16,579



$

58,382



$

23,464


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









Return on average assets


0.96



1.18



1.20



1.07



1.16


Return on average equity


10.46



13.09



13.56



11.76



13.07


Return on average tangible common equity


11.97



15.03



15.68



13.48



15.13


Net interest margin


3.82



3.99



3.76



3.90



3.76


Efficiency ratio


62.36



57.80



60.13



60.06



60.58


Net charge-offs to average loans outstanding


0.29



0.39



0.32



0.34



0.30


As of period end











Nonaccrual loans to loans receivable held for investment


0.79



0.83



0.57






Allowance for loan losses to loans outstanding


1.17



1.12



1.11






Tangible common equity to tangible assets


8.2



8.1



7.6






Tier-1 leverage ratio


8.7



8.7



8.6






Total capital ratio


14.0



13.9



13.9






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


$

15.0



$

18.0



$

11.1



$

33.0



$

22.0



This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.
Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.


EXPLANATION OF HEI'S USE OF CERTAIN UNAUDITED NON-GAAP MEASURES

HEI and Hawaiian Electric Company management use certain non-GAAP measures, which exclude certain items that are not reflective of ongoing operations or that are not expected to reoccur, to evaluate the performance of HEI and the utility.  Management believes these non-GAAP measures provide useful supplemental information and are a better indicator of the companies' core operating activities. Core earnings and other financial measures as presented below 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 HEI and the utility.

The reconciling adjustments from GAAP earnings to core earnings exclude the 2017 impact of the federal tax reform act due to the adjustment of the deferred tax balances and the $1,000 non-executive 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. Management has shown adjusted non-GAAP (core) net income, adjusted non-GAAP (core) ROACE in order to provide better comparability of ROACE 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

($ in millions)

2019


2018

HEI CONSOLIDATED NET INCOME




GAAP (as reported)

$

203.7



$

178.7


Excluding special items (after-tax):




One-time non-executive bank employee bonus related to federal tax reform



0.7


Federal tax reform impacts2



13.4


Non-GAAP (core) net income

$

203.7



$

192.9


HEI CONSOLIDATED AVERAGE COMMON EQUITY

$

2,155.8



$

2,089.0


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




Based on GAAP

9.4

%


8.6

%

Based on non-GAAP (core)3

9.4

%


9.2

%





Note:  Columns may not foot due to rounding




1  Accounting principles generally accepted in the United States of America




2  Reflects the lower rates enacted by federal tax reform, primarily the adjustments to reduce the unregulated net deferred tax asset balances

3  Calculated as core net income divided by average GAAP common equity




 

RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES



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

Unaudited






Twelve months ended June 30

($ in millions)




2019


2018

HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME







GAAP (as reported)




$

149.7



$

131.5


Excluding special items (after-tax):







Federal tax reform impacts2






9.2


Non-GAAP (core) net income




$

149.7



$

140.7


HAWAIIAN ELECTRIC CONSOLIDATED AVERAGE COMMON EQUITY


$

1,912.0



$

1,827.9


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





Based on GAAP




7.8

%


7.2

%

Based on non-GAAP (core)3




7.8

%


7.7

%









Three months ended June 30


Six months ended June 30

($ in millions)

2019

2018


2019


2018

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







GAAP (as reported)

$

119.3


$

112.6



$

237.4



$

220.3


      Excluding other O&M-related net income neutral items4


0.4



0.1




0.5




0.5


Non-GAAP (Adjusted other O&M expense)

$

118.9


$

112.5



$

236.9



$

219.8



Note:  Columns may not foot due to rounding

1  Accounting principles generally accepted in the United States of America

2  Reflects the lower rates enacted by federal tax reform, primarily the adjustments to reduce the unregulated net deferred tax asset balances

3  Calculated as core net income divided by average GAAP common equity

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

 

Contact:

Julie R. Smolinski

Telephone: (808) 543-7300


Director, Investor Relations & Strategic Planning

E-mail:  [email protected]

 

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

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/hei-reports-second-quarter-2019-earnings-300895559.html

SOURCE Hawaiian Electric Industries, Inc.


Source: PR Newswire (August 2, 2019 - 6:00 AM EDT)

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