Attached files
| file | filename |
|---|---|
| 8-K - 8-K - HAWAIIAN ELECTRIC INDUSTRIES INC | heiheform8-k02x14x17.htm |
HEI Exhibit 99
NEWS RELEASEFebruary 14, 2017
Contact: | Clifford H. Chen | Telephone: (808) 543-7300 |
Treasurer, Manager, Investor | E-mail: ir@hei.com | |
Relations & Strategic Planning | ||
HAWAIIAN ELECTRIC INDUSTRIES REPORTS 2016 YEAR END
& FOURTH QUARTER EARNINGS
2016 Net Income of $248.3 Million and Core Net Income1 of $190.1 Million;
2016 Diluted Earnings Per Share (EPS) of $2.29 and Core EPS1 of $1.75;
Fourth Quarter Net Income of $44.6 Million; EPS of $0.41;
Board Declares Dividend of $0.31 Per Share
Selected 2016 Highlights:
• | Consolidated Reported net income of $248.3 million in 2016 vs $159.9 million in 2015, up 55% largely due to the merger and spin-off related items; |
Core net income1 of $190.1 million in 2016 vs $175.7 million in 2015, up 8%
• | Consolidated Reported EPS of $2.29 in 2016 vs $1.50 in 2015, up 53%; |
Consolidated Core EPS1 of $1.75 in 2016 vs $1.65 in 2015, up 6%
• | Consolidated Reported ROE of 12.4%; Consolidated Core ROE1 of 9.5% |
◦ | Utility ROE of 8.1% |
◦ | Bank ROE of 10.1% 2 |
• | Continued legacy of delivering value for customers and Hawaii: |
• | Record 25% of electricity on Hawaiian Electric’s grid was from renewable sources3 |
• | Moving closer to achieving Hawaii’s 2020 renewable portfolio standard target of 30% |
◦ | Avoided-oil equivalent of 2.2 million barrels which would have cost our state more than $119 million4 in imported oil in 2016 |
◦ | Led the nation in the integration of customer-sited solar: by the end of 2016, an estimated 26% of single-family homes on the islands we serve (up from 23% at the end of 2015) and approximately 15% of our total customers have solar systems |
◦ | 29% of single family homes have installed or have been approved to install PV systems |
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1 Non-GAAP measure that excludes merger and spin-off-related income and costs after-tax including costs related to the terminated LNG contract which required PUC approval of the merger with NextEra Energy, Inc. See the “Explanation of HEI’s Use of Certain Unaudited Non-GAAP measures” and the related reconciliation.
2 | Calculated using net income divided by average GAAP common equity, simple average method. |
3 | Based upon preliminary Renewable Portfolio Standard information as of 12/31/16. |
4 | Estimate based on the 2016 average price per barrel of $53.49 and as compared to 2008 oil usage levels. |
Hawaiian Electric Industries, Inc.
February 14, 2017
Page 2
• | Utility other operations and maintenance (O&M) expense5 decreased 2% from the 2015 level |
• | Bank provided approximately $1.8 billion of credit to consumers and businesses and originated over 3,500 mortgages |
• | Bank named one of Hawaii Business “Best Places to Work” for the 7th consecutive year; American Banker “Best Banks to Work For” list for the 4th consecutive year and only Hawaii bank to make the national list |
• | Bank implemented a new e-Banking platform making banking easier for customers |
• | Consolidated company contributed more than 22,000 volunteer hours and more than $2 million of charitable contributions to community organizations |
• | History of uninterrupted dividends since 1901 |
• | HEI remains an independent public company following our terminated merger with NextEra Energy and cancelled spin-off of American Savings Bank |
HONOLULU - Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported 2016
year-end consolidated net income for common stock of $248.3 million and diluted earnings per share (EPS) of $2.29 compared to $159.9 million and EPS of $1.50 for 2015. For the fourth quarter of 2016, consolidated net income for common stock was $44.6 million and EPS of $0.41 compared to $42.3 million and EPS of $0.39 for the fourth quarter of 2015. The financial results for 2016 include the one-time increase to net income of $58.2 million due to the terminated merger with NextEra Energy, Inc., the related terminated liquefied natural gas (LNG) contract and the associated cancelled spin-off of ASB Hawaii, Inc., as compared to $15.8 million net expense in 2015. Excluding these items, core earnings1 for 2016 were $190.1 million and core EPS1 of $1.75 compared to $175.7 million and $1.65 respectively for 2015. The financial results for the fourth quarter of 2015 included $2.2 million net expense for the terminated merger with NextEra Energy, Inc. and the related cancelled spin-off of ASB Hawaii, Inc. Excluding these items, core earnings1 for the fourth quarter of 2016 were $44.6 million and core EPS of $0.41 compared to $44.5 million and EPS of $0.41 for the fourth quarter of 2015.
“Following the termination of our proposed merger with NextEra Energy, HEI and its operating subsidiaries, Hawaiian Electric, Maui Electric, Hawaii Electric Light and American Savings Bank, have moved forward strongly as an independent public company, delivering a consolidated core return on
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5 | Excludes net income neutral expenses covered by surcharges or by third parties and merger-related costs including the terminated LNG contract costs which required PUC approval of the merger with NextEra Energy, Inc. See “Explanation of HEI’s Use of Certain Unaudited Non-GAAP measures” and the related reconciliation. |
Hawaiian Electric Industries, Inc.
February 14, 2017
Page 3
equity1 of 9.5% for 2016. HEI’s unique combination of companies continues to provide essential electricity and banking services for Hawaii and invest in the growth of Hawaii’s economy,” said Constance Lau, HEI president and chief executive officer.
“In 2016, Hawaiian Electric and its subsidiaries invested $318 million, over twice the utility’s earnings, in the modernization and improvement of Hawaii’s electric grids, and we achieved an energy portfolio powered by 25% renewable resources3 in 2016. While advancing towards our 100% goal for 2045, we remained focused on increasing customer value. In 2016, Hawaiian Electric management worked hard to reduce overall operation and maintenance expenses from 2015 levels. Our activities at the utility are focused on creating, at reasonable cost and working with third party energy developers and producers, the renewable energy platform of the future for the benefit of all of Hawaii, while also maintaining the service and reliability that our customers have come to expect,” added Lau.
“American Savings Bank closed 2016 with a strong fourth quarter and achieved important strategic objectives including the successful implementation of their new e-banking platform. We plan to build upon the bank’s success in the coming years with the building of its new headquarters. The bank is well positioned to continue to grow in 2017, as it works continually to improve efficiency and customer experience,” said Lau.
HAWAIIAN ELECTRIC COMPANY EARNINGS CONSISTENT WITH EXPECTATIONS
Full Year Results:
Hawaiian Electric Company’s6 full-year 2016 net income was $142.3 million compared to $135.7 million in 2015. Excluding after-tax costs related to the terminated merger with NextEra Energy, Inc. and the related terminated LNG contract totaling $2.2 million and $0.5 million in 2016 and 2015, respectively, Hawaiian Electric Company’s core net income was $144.5 million in 2016 and $136.2 million in 2015. The $8.3 million core net income increase from the prior year was primarily driven by the following after-tax items:
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Note: Amounts indicated as “after-tax” in this earnings release are based upon adjusting items for the composite statutory tax rates of 39% for the utilities and 40% for the bank.
6 | Hawaiian Electric Company, unless otherwise defined, refers to the three utilities, Hawaiian Electric Company, Inc. on Oahu, Maui Electric Company, Limited, and Hawaii Electric Light Company, Inc. |
Hawaiian Electric Industries, Inc.
February 14, 2017
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• | $8 million higher net revenues7 primarily due to recovery of costs for clean energy, reliability and system efficiency investments; and |
• | $6 million lower O&M expenses5 compared to 2015 which included a regulatory decision denying recovery of enterprise resource planning software costs and additional reserves for environmental costs. |
These items were partially offset by $6 million higher depreciation expense as a result of increasing investments for the integration of more renewable energy, improved customer reliability and greater system efficiency.
Fourth Quarter Results:
Fourth quarter 2016 net income of $34.1 million was $1.1 million higher than the fourth quarter of 2015 primarily driven by $2 million (after-tax) higher net revenues in 2016 attributable to the recovery of costs for clean energy, reliability and system efficiency investments partially offset by $1 million (after-tax) higher depreciation expense in the fourth quarter of 2016 as a result of increasing investments for the integration of more renewable energy, improved customer reliability and greater system efficiency.
AMERICAN SAVINGS BANK: SOLID FINANCIAL PERFORMANCE
Full Year Results:
American Savings Bank’s (American) full-year 2016 net income was $57.3 million compared to $54.7 million in 2015. The $2.5 million increase from the prior year was primarily driven by the following after-tax items:
• | $11 million higher net interest income driven mainly by commercial real estate and consumer loan and investment portfolio growth; partially offset by |
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7 | Net revenues represent the after-tax impact of “Revenues” less the following expenses which are largely pass through items in revenues: “fuel oil,” “purchased power” and “taxes, other than income taxes” as shown on the Hawaiian Electric Company, Inc. and Subsidiaries’ Consolidated Statements of Income. |
Hawaiian Electric Industries, Inc.
February 14, 2017
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• | $6 million higher provision for loan losses largely related to commercial real estate and consumer lending activities; and |
• | $2 million higher noninterest expense primarily due to costs related to the conversion and upgrade of American’s e-banking platform. |
American achieved loan growth of 2.6% in 2016 primarily driven by commercial real estate and consumer loans that also helped to improve net interest margin. At the same time, American strategically reduced exposure to shared national credits by $93 million or 2.0% of total loans.
Total deposits were $5.5 billion at December 31, 2016, an increase of $524 million or 10.4% from December 31, 2015. Core deposits increased $342 million or 7.5% from December 31, 2015. The average cost of funds was 0.23% for the full year 2016, up 1 basis point from the prior year.
Overall, American’s return on average equity for the full year remained solid at 9.90% in 2016 compared to 9.93% in 2015, and the return on average assets for the full year was 0.92% in 2016 compared to 0.95% in 2015.
Fourth Quarter Results:
Fourth quarter 2016 net income of $16.2 million was $1.1 million higher than the third, or linked quarter and $1.3 million higher than the fourth quarter of 2015.
Compared to the linked quarter of 2016, the $1.1 million increase in the fourth quarter of 2016 was primarily driven by the following on an after-tax basis:
• | $3 million lower provision for loan losses primarily due to reserves for specific commercial credits in the third quarter of 2016; and |
• | $1 million higher net interest income driven mainly by higher yields in the commercial real estate and commercial markets loan portfolios and investment portfolio growth. |
These increases were partially offset by the following on an after-tax basis:
• | $1 million lower noninterest income primarily due to the gain on sale of real estate and higher mortgage banking income in the third quarter of 2016; and |
• | $1 million higher noninterest expense. |
Hawaiian Electric Industries, Inc.
February 14, 2017
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Compared to the fourth quarter of 2015, the $1.3 million higher net income in the fourth quarter of 2016 was primarily driven by $3 million (after-tax) higher net interest income mainly due to higher yields and growth in the commercial real estate and consumer loan portfolios, partially offset by $1 million (after-tax) higher noninterest expense.
American’s fourth quarter of 2016 return on average equity was 11.1%, up from 10.4% in the linked quarter and 10.7% in the fourth quarter of 2015. Return on average assets was 1.02% for the fourth quarter of 2016, compared to 0.97% from the linked quarter and 1.01% in the same quarter last year.
Please refer to American’s news release issued on January 30, 2017, for additional information on American.
HOLDING AND OTHER COMPANIES
The holding and other companies’ net income was $48.7 million in 2016 compared to a net loss of $30.6 million in 2015. Excluding one-time merger-related items of $60.3 million net income in 2016 and $15.2 million net expenses in 2015, the holding and other companies’ adjusted net losses in 2016 and 2015 were $11.7 million and $15.4 million, respectively. The holding company’s adjusted 2016 results included favorable tax adjustments as HEI moved out of a federal net operating loss position, enabling the recognition of tax benefits of approximately $4 million.
Fourth quarter net losses were $5.7 million in 2016 compared to $5.6 million in the fourth quarter of 2015. Excluding after-tax costs related to the terminated merger with NextEra Energy, Inc. and the cancelled spin-off of ASB Hawaii, Inc. of $1.9 million in the fourth quarter of 2015, the holding and other companies’ net losses in 2016 and 2015 were $5.7 million and $3.8 million, respectively. The higher net loss was primarily driven by an adjustment to tax benefits of approximately $2 million in the fourth quarter of 2016.
BOARD DECLARES QUARTERLY DIVIDEND
On February 13, 2017, the board of directors maintained HEI’s quarterly cash dividend of $0.31 cents per share, payable on March 10, 2017, to shareholders of record at the close of business on
Hawaiian Electric Industries, Inc.
February 14, 2017
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February 24, 2017 (ex-dividend date is February 22, 2017). The cumulative 2016 dividend is $1.24 per share.
Dividends have been paid uninterrupted since 1901. At the indicated annual dividend rate and the closing price per share on February 13, 2017 of $33.68, HEI’s dividend yield is 3.7%.
WEBCAST AND CONFERENCE CALL
HEI TO ANNOUNCE 2017 EPS GUIDANCE IN EARNINGS CONFERENCE CALL
Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its 2016 earnings on Tuesday, February 14, 2017, at 10:00 a.m. Hawaii time (3:00 p.m. Eastern time). HEI will announce 2017 EPS guidance during the scheduled webcast and conference call.
Interested parties within the United States may listen to the conference by calling (888) 317-6016 and international parties may listen to the conference by calling (412) 317-6016 or by accessing the webcast on HEI’s website under the heading “Investor Relations.” 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, 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 the same website beginning about two hours after the event. Replays of the conference call will also be available approximately two hours after the event through February 28, 2017, by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10097589.
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,
Hawaiian Electric Industries, Inc.
February 14, 2017
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Limited and 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.
NON-GAAP MEASURES
See “Explanation of HEI’s Use of Certain Unaudited Non-GAAP Measures” and related reconciliations on pages 15 to 16 of this release.
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 “will,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “predicts,” “estimates” or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions 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 the accuracy of assumptions concerning 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 Note Regarding Forward-Looking Statements” and “Risk Factors” discussions (which are incorporated by reference herein) set forth in HEI’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 and HEI’s future periodic reports that discuss important factors that could cause HEI’s results to differ materially from those anticipated in such statements. These forward-looking statements speak only as of the date of the report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric Company, American and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | ||||||||||||||||
Three months ended December 31 | Years ended December 31 | |||||||||||||||
(in thousands, except per share amounts) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | ||||||||||||||||
Electric utility | $ | 544,668 | $ | 555,434 | $ | 2,094,368 | $ | 2,335,166 | ||||||||
Bank | 72,627 | 68,511 | 285,924 | 267,733 | ||||||||||||
Other | 100 | 87 | 362 | 83 | ||||||||||||
Total revenues | 617,395 | 624,032 | 2,380,654 | 2,602,982 | ||||||||||||
Expenses | ||||||||||||||||
Electric utility | 476,024 | 487,772 | 1,809,900 | 2,061,050 | ||||||||||||
Bank | 47,820 | 45,858 | 198,572 | 183,921 | ||||||||||||
Other | 5,124 | 7,180 | 24,007 | 35,458 | ||||||||||||
Total expenses | 528,968 | 540,810 | 2,032,479 | 2,280,429 | ||||||||||||
Operating income (loss) | ||||||||||||||||
Electric utility | 68,644 | 67,662 | 284,468 | 274,116 | ||||||||||||
Bank | 24,807 | 22,653 | 87,352 | 83,812 | ||||||||||||
Other | (5,024 | ) | (7,093 | ) | (23,645 | ) | (35,375 | ) | ||||||||
Total operating income | 88,427 | 83,222 | 348,175 | 322,553 | ||||||||||||
Merger termination fee | — | — | 90,000 | — | ||||||||||||
Interest expense, net—other than on deposit liabilities and other bank borrowings | (19,011 | ) | (19,915 | ) | (75,803 | ) | (77,150 | ) | ||||||||
Allowance for borrowed funds used during construction | 868 | 539 | 3,144 | 2,457 | ||||||||||||
Allowance for equity funds used during construction | 2,315 | 1,562 | 8,325 | 6,928 | ||||||||||||
Income before income taxes | 72,599 | 65,408 | 373,841 | 254,788 | ||||||||||||
Income taxes | 27,492 | 22,615 | 123,695 | 93,021 | ||||||||||||
Net income | 45,107 | 42,793 | 250,146 | 161,767 | ||||||||||||
Preferred stock dividends of subsidiaries | 473 | 473 | 1,890 | 1,890 | ||||||||||||
Net income for common stock | $ | 44,634 | $ | 42,320 | $ | 248,256 | $ | 159,877 | ||||||||
Basic earnings per common share | $ | 0.41 | $ | 0.39 | $ | 2.30 | $ | 1.50 | ||||||||
Diluted earnings per common share | $ | 0.41 | $ | 0.39 | $ | 2.29 | $ | 1.50 | ||||||||
Dividends per common share | $ | 0.31 | $ | 0.31 | $ | 1.24 | $ | 1.24 | ||||||||
Weighted-average number of common shares outstanding | 108,553 | 107,460 | 108,102 | 106,418 | ||||||||||||
Adjusted weighted-average shares | 108,769 | 107,797 | 108,309 | 106,721 | ||||||||||||
Net income (loss) for common stock by segment | ||||||||||||||||
Electric utility | $ | 34,119 | $ | 32,993 | $ | 142,317 | $ | 135,714 | ||||||||
Bank | 16,217 | 14,953 | 57,279 | 54,730 | ||||||||||||
Other | (5,702 | ) | (5,626 | ) | 48,660 | (30,567 | ) | |||||||||
Net income for common stock | $ | 44,634 | $ | 42,320 | $ | 248,256 | $ | 159,877 | ||||||||
Comprehensive income attributable to Hawaiian Electric Industries, Inc. | $ | 118,471 | $ | 38,075 | $ | 241,389 | $ | 160,993 | ||||||||
Return on average common equity (twelve months ended)1 | 12.4 | % | 8.6 | % | ||||||||||||
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.
1 On a core basis, 2016 and 2015 returns on average common equity were 9.5% and 9.4%. See reconciliation of GAAP to non-GAAP measures.
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Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31 | 2016 | 2015 | ||||||
(dollars in thousands) | ||||||||
Assets | ||||||||
Cash and cash equivalents | $ | 278,452 | $ | 300,478 | ||||
Accounts receivable and unbilled revenues, net | 237,950 | 242,766 | ||||||
Available-for-sale investment securities, at fair value | 1,105,182 | 820,648 | ||||||
Stock in Federal Home Loan Bank, at cost | 11,218 | 10,678 | ||||||
Loans receivable held for investment, net | 4,683,160 | 4,565,781 | ||||||
Loans held for sale, at lower of cost or fair value | 18,817 | 4,631 | ||||||
Property, plant and equipment, net of accumulated depreciation of $2,444,348 and $2,339,319 at the respective dates | 4,603,465 | 4,377,658 | ||||||
Regulatory assets | 957,451 | 896,731 | ||||||
Other | 447,621 | 480,457 | ||||||
Goodwill | 82,190 | 82,190 | ||||||
Total assets | $ | 12,425,506 | $ | 11,782,018 | ||||
Liabilities and shareholders’ equity | ||||||||
Liabilities | ||||||||
Accounts payable | $ | 143,279 | $ | 138,523 | ||||
Interest and dividends payable | 25,225 | 26,042 | ||||||
Deposit liabilities | 5,548,929 | 5,025,254 | ||||||
Short-term borrowings—other than bank | — | 103,063 | ||||||
Other bank borrowings | 192,618 | 328,582 | ||||||
Long-term debt, net—other than bank | 1,619,019 | 1,578,368 | ||||||
Deferred income taxes | 728,806 | 680,877 | ||||||
Regulatory liabilities | 410,693 | 371,543 | ||||||
Contributions in aid of construction | 543,525 | 506,087 | ||||||
Defined benefit pension and other postretirement benefit plans liability | 638,854 | 589,918 | ||||||
Other | 473,512 | 471,828 | ||||||
Total liabilities | 10,324,460 | 9,820,085 | ||||||
Preferred stock of subsidiaries - not subject to mandatory redemption | 34,293 | 34,293 | ||||||
Shareholders’ equity | ||||||||
Preferred stock, no par value, authorized 10,000,000 shares; issued: none | — | — | ||||||
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 108,583,413 shares and 107,460,406 shares at the respective dates | 1,660,910 | 1,629,136 | ||||||
Retained earnings | 438,972 | 324,766 | ||||||
Accumulated other comprehensive loss, net of tax benefits | (33,129 | ) | (26,262 | ) | ||||
Total shareholders’ equity | 2,066,753 | 1,927,640 | ||||||
Total liabilities and shareholders’ equity | $ | 12,425,506 | $ | 11,782,018 | ||||
The Consolidated Balance Sheet as of December 31, 2015 reflects the retrospective application of ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which was adopted in first quarter 2016.
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.
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Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended December 31 | Years ended December 31 | |||||||||||||||
(dollars in thousands, except per barrel amounts) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | $ | 544,668 | $ | 555,434 | $ | 2,094,368 | $ | 2,335,166 | ||||||||
Expenses | ||||||||||||||||
Fuel oil | 120,441 | 135,930 | 454,704 | 654,600 | ||||||||||||
Purchased power | 150,073 | 148,287 | 562,740 | 594,096 | ||||||||||||
Other operation and maintenance | 107,273 | 106,570 | 405,533 | 413,089 | ||||||||||||
Depreciation | 46,761 | 44,540 | 187,061 | 177,380 | ||||||||||||
Taxes, other than income taxes | 51,476 | 52,445 | 199,862 | 221,885 | ||||||||||||
Total expenses | 476,024 | 487,772 | 1,809,900 | 2,061,050 | ||||||||||||
Operating income | 68,644 | 67,662 | 284,468 | 274,116 | ||||||||||||
Allowance for equity funds used during construction | 2,315 | 1,562 | 8,325 | 6,928 | ||||||||||||
Interest expense and other charges, net | (17,090 | ) | (17,200 | ) | (66,824 | ) | (66,370 | ) | ||||||||
Allowance for borrowed funds used during construction | 868 | 539 | 3,144 | 2,457 | ||||||||||||
Income before income taxes | 54,737 | 52,563 | 229,113 | 217,131 | ||||||||||||
Income taxes | 20,119 | 19,071 | 84,801 | 79,422 | ||||||||||||
Net income | 34,618 | 33,492 | 144,312 | 137,709 | ||||||||||||
Preferred stock dividends of subsidiaries | 229 | 229 | 915 | 915 | ||||||||||||
Net income attributable to Hawaiian Electric | 34,389 | 33,263 | 143,397 | 136,794 | ||||||||||||
Preferred stock dividends of Hawaiian Electric | 270 | 270 | 1,080 | 1,080 | ||||||||||||
Net income for common stock | $ | 34,119 | $ | 32,993 | $ | 142,317 | $ | 135,714 | ||||||||
Comprehensive income attributable to Hawaiian Electric | $ | 32,460 | $ | 33,862 | $ | 141,070 | $ | 136,594 | ||||||||
OTHER ELECTRIC UTILITY INFORMATION | ||||||||||||||||
Kilowatthour sales (millions) | ||||||||||||||||
Hawaiian Electric | 1,678 | 1,738 | 6,660 | 6,754 | ||||||||||||
Hawaii Electric Light | 272 | 273 | 1,067 | 1,065 | ||||||||||||
Maui Electric | 282 | 290 | 1,118 | 1,138 | ||||||||||||
2,232 | 2,301 | 8,845 | 8,957 | |||||||||||||
Wet-bulb temperature (Oahu average; degrees Fahrenheit) | 68.9 | 71.9 | 69.6 | 70.6 | ||||||||||||
Cooling degree days (Oahu) | 1,151 | 1,395 | 4,788 | 5,082 | ||||||||||||
Average fuel oil cost per barrel | $ | 57.90 | $ | 61.59 | $ | 53.49 | $ | 74.71 | ||||||||
Twelve months ended December 31 | 2016 | 2015 | ||||||||||||||
Return on average common equity (%) (simple average) | ||||||||||||||||
Hawaiian Electric | 8.26 | 8.02 | ||||||||||||||
Hawaii Electric Light | 7.28 | 7.22 | ||||||||||||||
Maui Electric | 8.08 | 8.52 | ||||||||||||||
Hawaiian Electric Consolidated1 | 8.07 | 7.96 | ||||||||||||||
This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC.
1 On a core basis, 2016 and 2015 returns on average common equity were 8.2% and 8.0%. See reconciliation of GAAP to non-GAAP measures.
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Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31 | 2016 | 2015 | ||||||
(dollars in thousands, except par value) | ||||||||
Assets | ||||||||
Property, plant and equipment | ||||||||
Utility property, plant and equipment | ||||||||
Land | $ | 53,153 | $ | 52,792 | ||||
Plant and equipment | 6,605,732 | 6,315,698 | ||||||
Less accumulated depreciation | (2,369,282 | ) | (2,266,004 | ) | ||||
Construction in progress | 211,742 | 175,309 | ||||||
Utility property, plant and equipment, net | 4,501,345 | 4,277,795 | ||||||
Nonutility property, plant and equipment, less accumulated depreciation of $1,232 and $1,229 at respective dates | 7,407 | 7,272 | ||||||
Total property, plant and equipment, net | 4,508,752 | 4,285,067 | ||||||
Current assets | ||||||||
Cash and cash equivalents | 74,286 | 24,449 | ||||||
Customer accounts receivable, net | 123,688 | 132,778 | ||||||
Accrued unbilled revenues, net | 91,693 | 84,509 | ||||||
Other accounts receivable, net | 5,233 | 10,408 | ||||||
Fuel oil stock, at average cost | 66,430 | 71,216 | ||||||
Materials and supplies, at average cost | 53,679 | 54,429 | ||||||
Prepayments and other | 23,100 | 36,640 | ||||||
Regulatory assets | 66,032 | 72,231 | ||||||
Total current assets | 504,141 | 486,660 | ||||||
Other long-term assets | ||||||||
Regulatory assets | 891,419 | 824,500 | ||||||
Unamortized debt expense | 208 | 497 | ||||||
Other | 70,908 | 75,486 | ||||||
Total other long-term assets | 962,535 | 900,483 | ||||||
Total assets | $ | 5,975,428 | $ | 5,672,210 | ||||
Capitalization and liabilities | ||||||||
Capitalization | ||||||||
Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 16,019,785 and 15,805,327 shares) | $ | 106,818 | $ | 105,388 | ||||
Premium on capital stock | 601,491 | 578,930 | ||||||
Retained earnings | 1,091,800 | 1,043,082 | ||||||
Accumulated other comprehensive income (loss), net of income taxes | (322 | ) | 925 | |||||
Common stock equity | 1,799,787 | 1,728,325 | ||||||
Cumulative preferred stock — not subject to mandatory redemption | 34,293 | 34,293 | ||||||
Long-term debt, net | 1,319,260 | 1,278,702 | ||||||
Total capitalization | 3,153,340 | 3,041,320 | ||||||
Current liabilities | ||||||||
Accounts payable | 117,814 | 114,846 | ||||||
Interest and preferred dividends payable | 22,838 | 23,111 | ||||||
Taxes accrued | 172,730 | 191,084 | ||||||
Regulatory liabilities | 3,762 | 2,204 | ||||||
Other | 55,221 | 54,079 | ||||||
Total current liabilities | 372,365 | 385,324 | ||||||
Deferred credits and other liabilities | ||||||||
Deferred income taxes | 733,659 | 654,806 | ||||||
Regulatory liabilities | 406,931 | 369,339 | ||||||
Unamortized tax credits | 88,961 | 84,214 | ||||||
Defined benefit pension and other postretirement benefit plans liability | 599,726 | 552,974 | ||||||
Other | 76,921 | 78,146 | ||||||
Total deferred credits and other liabilities | 1,906,198 | 1,739,479 | ||||||
Contributions in aid of construction | 543,525 | 506,087 | ||||||
Total capitalization and liabilities | $ | 5,975,428 | $ | 5,672,210 | ||||
The Consolidated Balance Sheet as of December 31, 2015 reflects the retrospective application of ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which was adopted in first quarter 2016.
This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC.
12
American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited)
Three months ended | Years ended December 31, | |||||||||||||||||||
(in thousands) | December 31, 2016 | September 30, 2016 | December 31, 2015 | 2016 | 2015 | |||||||||||||||
Interest and dividend income | ||||||||||||||||||||
Interest and fees on loans | $ | 51,203 | $ | 50,444 | $ | 47,136 | $ | 199,774 | $ | 184,782 | ||||||||||
Interest and dividends on investment securities | 4,965 | 4,759 | 4,550 | 19,184 | 15,120 | |||||||||||||||
Total interest and dividend income | 56,168 | 55,203 | 51,686 | 218,958 | 199,902 | |||||||||||||||
Interest expense | ||||||||||||||||||||
Interest on deposit liabilities | 2,013 | 1,871 | 1,467 | 7,167 | 5,348 | |||||||||||||||
Interest on other borrowings | 1,172 | 1,464 | 1,510 | 5,588 | 5,978 | |||||||||||||||
Total interest expense | 3,185 | 3,335 | 2,977 | 12,755 | 11,326 | |||||||||||||||
Net interest income | 52,983 | 51,868 | 48,709 | 206,203 | 188,576 | |||||||||||||||
Provision for loan losses | 1,497 | 5,747 | 839 | 16,763 | 6,275 | |||||||||||||||
Net interest income after provision for loan losses | 51,486 | 46,121 | 47,870 | 189,440 | 182,301 | |||||||||||||||
Noninterest income | ||||||||||||||||||||
Fees from other financial services | 5,585 | 5,599 | 5,667 | 22,384 | 22,211 | |||||||||||||||
Fee income on deposit liabilities | 5,714 | 5,627 | 5,746 | 21,759 | 22,368 | |||||||||||||||
Fee income on other financial products | 2,144 | 2,151 | 2,006 | 8,707 | 8,094 | |||||||||||||||
Bank-owned life insurance | 1,017 | 1,616 | 1,016 | 4,637 | 4,078 | |||||||||||||||
Mortgage banking income | 1,529 | 2,347 | 1,003 | 6,625 | 6,330 | |||||||||||||||
Gains on sale of investment securities, net | — | — | — | 598 | — | |||||||||||||||
Other income, net | 470 | 1,165 | 1,387 | 2,256 | 4,750 | |||||||||||||||
Total noninterest income | 16,459 | 18,505 | 16,825 | 66,966 | 67,831 | |||||||||||||||
Noninterest expense | ||||||||||||||||||||
Compensation and employee benefits | 22,920 | 22,844 | 23,705 | 90,117 | 90,518 | |||||||||||||||
Occupancy | 4,077 | 3,991 | 4,115 | 16,321 | 16,365 | |||||||||||||||
Data processing | 3,431 | 3,150 | 3,002 | 13,030 | 12,103 | |||||||||||||||
Services | 2,961 | 2,427 | 2,474 | 11,054 | 10,204 | |||||||||||||||
Equipment | 1,745 | 1,759 | 1,578 | 6,938 | 6,577 | |||||||||||||||
Office supplies, printing and postage | 1,644 | 1,483 | 1,452 | 6,075 | 5,749 | |||||||||||||||
Marketing | 982 | 747 | 844 | 3,489 | 3,463 | |||||||||||||||
FDIC insurance | 839 | 907 | 881 | 3,543 | 3,274 | |||||||||||||||
Other expense | 4,539 | 4,591 | 3,991 | 18,487 | 18,067 | |||||||||||||||
Total noninterest expense | 43,138 | 41,899 | 42,042 | 169,054 | 166,320 | |||||||||||||||
Income before income taxes | 24,807 | 22,727 | 22,653 | 87,352 | 83,812 | |||||||||||||||
Income taxes | 8,590 | 7,623 | 7,700 | 30,073 | 29,082 | |||||||||||||||
Net income | $ | 16,217 | $ | 15,104 | $ | 14,953 | $ | 57,279 | $ | 54,730 | ||||||||||
Comprehensive income | $ | 2,540 | $ | 13,176 | $ | 9,477 | $ | 52,077 | $ | 54,017 | ||||||||||
OTHER BANK INFORMATION (annualized %, except as of period end) | ||||||||||||||||||||
Return on average assets | 1.02 | 0.97 | 1.01 | 0.92 | 0.95 | |||||||||||||||
Return on average equity | 11.09 | 10.36 | 10.66 | 9.90 | 9.93 | |||||||||||||||
Return on average tangible common equity | 12.90 | 12.06 | 12.48 | 11.53 | 11.68 | |||||||||||||||
Net interest margin | 3.59 | 3.57 | 3.55 | 3.59 | 3.53 | |||||||||||||||
Efficiency ratio | 62.12 | 59.54 | 64.15 | 61.89 | 64.87 | |||||||||||||||
Net charge-offs (recoveries) to average loans outstanding | 0.40 | 0.20 | (0.08 | ) | 0.24 | 0.04 | ||||||||||||||
As of period end | ||||||||||||||||||||
Nonaccrual loans to loans receivable held for investment | 0.49 | 1.11 | 1.00 | |||||||||||||||||
Allowance for loan losses to loans outstanding | 1.17 | 1.24 | 1.08 | |||||||||||||||||
Tangible common equity to tangible assets | 7.82 | 8.03 | 8.05 | |||||||||||||||||
Tier-1 leverage ratio | 8.6 | 8.6 | 8.8 | |||||||||||||||||
Total capital ratio | 13.4 | 13.3 | 13.3 | |||||||||||||||||
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions) | $ | 9.0 | $ | 9.0 | $ | 7.5 | $ | 36.0 | $ | 30.0 | ||||||||||
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.
13
American Savings Bank, F.S.B.
BALANCE SHEETS DATA
(Unaudited)
December 31 | 2016 | 2015 | |||||||||||
(in thousands) | |||||||||||||
Assets | |||||||||||||
Cash and due from banks | $ | 137,083 | $ | 127,201 | |||||||||
Interest-bearing deposits | 52,128 | 93,680 | |||||||||||
Restricted cash | 1,764 | — | |||||||||||
Available-for-sale investment securities, at fair value | 1,105,182 | 820,648 | |||||||||||
Stock in Federal Home Loan Bank, at cost | 11,218 | 10,678 | |||||||||||
Loans receivable held for investment | 4,738,693 | 4,615,819 | |||||||||||
Allowance for loan losses | (55,533 | ) | (50,038 | ) | |||||||||
Net loans | 4,683,160 | 4,565,781 | |||||||||||
Loans held for sale, at lower of cost or fair value | 18,817 | 4,631 | |||||||||||
Other | 329,815 | 309,946 | |||||||||||
Goodwill | 82,190 | 82,190 | |||||||||||
Total assets | $ | 6,421,357 | $ | 6,014,755 | |||||||||
Liabilities and shareholder’s equity | |||||||||||||
Deposit liabilities–noninterest-bearing | $ | 1,639,051 | $ | 1,520,374 | |||||||||
Deposit liabilities–interest-bearing | 3,909,878 | 3,504,880 | |||||||||||
Other borrowings | 192,618 | 328,582 | |||||||||||
Other | 101,635 | 101,029 | |||||||||||
Total liabilities | 5,843,182 | 5,454,865 | |||||||||||
Common stock | 1 | 1 | |||||||||||
Additional paid in capital | 342,704 | 340,496 | |||||||||||
Retained earnings | 257,943 | 236,664 | |||||||||||
Accumulated other comprehensive loss, net of tax benefits | |||||||||||||
Net unrealized losses on securities | $ | (7,931 | ) | $ | (1,872 | ) | |||||||
Retirement benefit plans | (14,542 | ) | (22,473 | ) | (15,399 | ) | (17,271 | ) | |||||
Total shareholder’s equity | 578,175 | 559,890 | |||||||||||
Total liabilities and shareholder’s equity | $ | 6,421,357 | $ | 6,014,755 | |||||||||
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.
14
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. Core earnings and other financial measures as presented here 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 are limited to the fees, reimbursements, costs and associated taxes related to the terminated merger between HEI and NextEra Energy, Inc., and the cancelled spin-off of ASB Hawaii, Inc., and the terminated liquefied natural gas (LNG) contract which required the Hawaii Public Utilities Commission approval of the merger with 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. Management does not consider these items to be representative of the company’s fundamental core earnings.
The accompanying table also provides the calculation of utility GAAP O&M adjusted for costs related to the terminated merger discussed above. “O&M-related net income neutral items” which are O&M expenses covered by specific surcharges or by third parties have also been excluded. 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 | Three months ended December 31 | Years ended December 31 | |||||||||||
($ in millions, except per share amounts) | 2016 | 2015 | 2016 | 2015 | |||||||||
HEI CONSOLIDATED (INCOME) EXPENSES RELATED TO THE TERMINATED MERGER WITH NEXTERA ENERGY AND CANCELLED SPIN-OFF OF ASB HAWAII | |||||||||||||
Pre-tax (income) expenses | $ | — | $ | 2.5 | $ | (84.9 | ) | $ | 18.2 | ||||
Current income taxes (benefits) | — | (0.3 | ) | 24.7 | (2.4 | ) | |||||||
After-tax (income) expenses | $ | — | $ | 2.2 | $ | (60.3 | ) | $ | 15.8 | ||||
HEI CONSOLIDATED LNG CONTRACT COSTS2 | |||||||||||||
Pre-tax expenses | $ | — | $ | — | $ | 3.4 | $ | — | |||||
Current income taxes (benefits) | — | — | (1.3 | ) | — | ||||||||
After-tax (income) expenses | $ | — | $ | — | $ | 2.1 | $ | — | |||||
HEI CONSOLIDATED NET INCOME | |||||||||||||
GAAP (as reported) | $ | 44.6 | $ | 42.3 | $ | 248.3 | $ | 159.9 | |||||
Excluding special items (after-tax): | |||||||||||||
(Income) expenses related to the terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii | — | 2.2 | (60.3 | ) | 15.8 | ||||||||
Costs related to the terminated LNG contract2 | — | — | 2.1 | — | |||||||||
Non-GAAP (core) net income | $ | 44.6 | $ | 44.5 | $ | 190.1 | $ | 175.7 | |||||
HEI CONSOLIDATED DILUTED EARNINGS PER COMMON SHARE | |||||||||||||
GAAP (as reported) | $ | 0.41 | $ | 0.39 | $ | 2.29 | $ | 1.50 | |||||
Excluding special items (after-tax): | |||||||||||||
(Income) expenses related to the terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii | — | 0.02 | (0.56 | ) | 0.15 | ||||||||
Costs related to the terminated LNG contract2 | — | — | 0.02 | — | |||||||||
Non-GAAP (core) diluted earnings per common share | $ | 0.41 | $ | 0.41 | $ | 1.75 | $ | 1.65 | |||||
Years ended December 31 | |||||||||||||
2016 | 2015 | ||||||||||||
HEI CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average) | |||||||||||||
Based on GAAP | 12.4 | % | 8.6 | % | |||||||||
Based on non-GAAP (core)3 | 9.5 | % | 9.4 | % | |||||||||
Note: Columns may not foot due to rounding | |||||||||||||
1 Accounting principles generally accepted in the United States of America | |||||||||||||
2 The LNG contract was terminated as it was conditioned on the merger with NextEra Energy closing | |||||||||||||
3 Calculated as core net income divided by average GAAP common equity | |||||||||||||
15
RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES | |||||||||||||
Hawaiian Electric Company, Inc. and Subsidiaries | |||||||||||||
Unaudited | Three months ended December 31 | Years ended December 31 | |||||||||||
($ in millions) | 2016 | 2015 | 2016 | 2015 | |||||||||
HAWAIIAN ELECTRIC CONSOLIDATED COSTS RELATED TO THE TERMINATED MERGER WITH NEXTERA ENERGY | |||||||||||||
Pre-tax expenses | $ | — | $ | 0.4 | $ | 0.1 | $ | 0.8 | |||||
Current income taxes (benefits) | — | (0.2 | ) | — | (0.3 | ) | |||||||
After-tax expenses | $ | — | $ | 0.2 | $ | 0.1 | $ | 0.5 | |||||
HAWAIIAN ELECTRIC CONSOLIDATED LNG CONTRACT COSTS2 | |||||||||||||
Pre-tax expenses | $ | — | $ | — | $ | 3.4 | $ | — | |||||
Current income taxes (benefits) | — | — | (1.3 | ) | — | ||||||||
After-tax expenses | $ | — | $ | — | $ | 2.1 | $ | — | |||||
HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME | |||||||||||||
GAAP (as reported) | $ | 34.1 | $ | 33.0 | $ | 142.3 | $ | 135.7 | |||||
Excluding special items (after-tax): | |||||||||||||
Costs related to the terminated merger with NextEra Energy | — | 0.2 | 0.1 | 0.5 | |||||||||
Costs related to the terminated LNG contract2 | — | — | 2.1 | — | |||||||||
Non-GAAP (core) net income | $ | 34.1 | $ | 33.2 | $ | 144.5 | $ | 136.2 | |||||
Years ended December 31 | |||||||||||||
2016 | 2015 | ||||||||||||
HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average) | |||||||||||||
Based on GAAP | 8.07 | % | 7.96 | % | |||||||||
Based on non-GAAP (core)3 | 8.19 | % | 7.99 | % | |||||||||
Three months ended December 31 | Years ended December 31 | ||||||||||||
($ in millions) | 2016 | 2015 | 2016 | 2015 | |||||||||
HAWAIIAN ELECTRIC CONSOLIDATED OTHER OPERATION AND MAINTENANCE (O&M) EXPENSE | |||||||||||||
GAAP (as reported) | $ | 107.3 | $ | 106.6 | $ | 405.5 | $ | 413.1 | |||||
Excluding O&M-related net income neutral items4 | 1.3 | 1.6 | 5.9 | 7.0 | |||||||||
Excluding costs related to the terminated merger with NextEra Energy | — | 0.4 | 0.1 | 0.8 | |||||||||
Excluding costs related to the terminated LNG contract2 | — | — | 3.4 | — | |||||||||
Non-GAAP (Adjusted other O&M expense) | $ | 106.0 | $ | 104.6 | $ | 396.2 | $ | 405.3 | |||||
Note: Columns may not foot due to rounding | |||||||||||||
1 Accounting principles generally accepted in the United States of America | |||||||||||||
2 The LNG contract was terminated as it was conditioned on the merger with NextEra Energy closing | |||||||||||||
3 Calculated as core net income divided by average GAAP common equity | |||||||||||||
4 Expenses covered by surcharges or by third parties recorded in revenues | |||||||||||||
16