Hawaiian Electric Industries, Inc. Reports Solid Third Quarter 2008 Results
HONOLULU--(BUSINESS WIRE)--Nov. 4, 2008--Hawaiian Electric Industries, Inc. (NYSE:HE) today reported consolidated net income for the third quarter of 2008 of $37.3 million, or $0.44 per share, compared to $19.9 million, or $0.24 per share for the third quarter of 2007.
"Our earnings showed significant improvement over our unusually low results in the third quarter of 2007, which included a utility customer refund accrual that reduced those results by $0.10 a share," said Constance H. Lau, HEI president and chief executive officer. "Our utilities continued to regain financial strength due to interim rate relief received primarily in the last quarter of 2007. The bank's earnings improved 31% quarter-over-quarter, benefitting from a steeper yield curve, continued good credit quality and lower expenses resulting from performance improvement initiatives. Additionally, holding and other companies' losses in the quarter were lower than in the same period in 2007 primarily due to lower interest expense," noted Lau.
UTILITY RESULTS
Electric utility net income for the third quarter of 2008 was $25.9 million compared with $12.9 million for the same quarter in 2007 and $23.7 million for the same quarter in 2006. "Third quarter earnings a year ago were unusually low as our Oahu utility accrued an $8.3 million, or $0.10 per share, net-of-tax refund related to its 2005 test year rate case and awaited rate increases to recover and earn a return on reliability investments and to recover higher operating costs," said Lau.
Kilowatthour sales were lower by 2.6% quarter-over-quarter due to greater customer conservation and a slowing economy. These two factors are expected to reduce our 2008 and 2009 sales forecasts slightly below original projections. "Clearly, with the economic downturn and the dramatic impact of rising fuel costs on electricity prices during the quarter, customers have redoubled their efforts to conserve energy. In view of the economic downturn, we expect this conservation trend to continue even with recent declines in the fuel price component of our customer bills," said Lau.
Other operations and maintenance (O&M) expenses were up 5% quarter-over-quarter as higher operations expenses for customer efficiency programs and production operations were partially offset by lower production maintenance expenses resulting primarily from changes in generating unit overhaul schedules. The expected increase in full-year 2008 O&M expenses continues to be roughly 6% over 2007, but actual levels could be influenced by a number of factors that cannot be predicted.
The utility also recorded $1.1 million in higher quarter-over-quarter depreciation expenses due to 2007 plant additions.
BANK RESULTS
Bank net income for the third quarter of 2008 was $15.4 million, compared to $11.7 million for the same quarter last year. Return on assets in the third quarter of 2008 was 1.11% compared to 0.69% in the third quarter of 2007.
Net interest income in the third quarter of 2008 was $52.3 million compared to $47.7 million in the third quarter of 2007. The impact of lower interest expense, primarily due to lower balances of borrowings and lower rates on deposits and borrowings, more than offset the decline in interest income primarily from lower investment balances and lower yields on loans. The lower balances of investments and borrowings in the third quarter of 2008 were a result of the balance sheet restructuring executed in June 2008. Net interest margin expanded to 4.08% in the third quarter of 2008, compared with 2.97% in the third quarter of 2007.
"We are pleased with the bank's third quarter results," said Lau. "In spite of the continued volatility in the financial and credit markets during the quarter, the bank continued to perform well. Third quarter results show the improvements in net interest margin and return on assets we expected to achieve from the June balance sheet restructuring."
The bank recorded a $2.0 million provision for possible loan losses in the third quarter, compared to a $2.7 million provision in the third quarter of 2007. "The overall credit quality of the bank's loan portfolio remains good. However, we are seeing the effects of the slowing economy in modestly rising delinquencies and the reclassification of some commercial loans. We remain cautious and continue to actively monitor our loan portfolios," added Lau.
Noninterest income in the third quarter of 2008 was $16.7 million compared to $17.2 million in the same quarter in 2007. Higher fee income from deposit liabilities was more than offset by lower fee income from other financial services, other financial products and other income.
Noninterest expense was $1.3 million lower in the third quarter of 2008 than in the third quarter of 2007. Lower services and other expenses were partially offset by an increase in compensation and benefits expense quarter over quarter. The $3.0 million increase in compensation and benefits was primarily due to a $0.9 million accrual for incentive compensation in the third quarter of 2008, compared with a $1.4 million reversal of accrued incentive compensation in the third quarter of 2007.
HOLDING AND OTHER COMPANIES' RESULTS
The holding and other companies' net losses were $4.1 million in the third quarter of 2008 compared with $4.7 million in the third quarter of 2007.
WEBCAST AND TELECONFERENCE
Hawaiian Electric Industries, Inc. will conduct a webcast and teleconference call to review its third quarter 2008 earnings on Wednesday, November 5, 2008, at 8:00 a.m. Hawaii Time (1:00 p.m. Eastern Time). The event can be accessed through HEI's website at http://www.hei.com or by dialing (800) 299-7089, passcode: 86433944 for the teleconference call.
An online replay of the webcast will be available at the same website beginning about two hours after the event. Replays of the teleconference call will also be available approximately two hours after the event through November 19, 2008, by dialing (888) 286-8010, passcode: 98026401.
Representing management will be Constance H. Lau, president and chief executive officer, Hawaiian Electric Industries, Inc. and chairman, Hawaiian Electric Company, Inc.; and Timothy K. Schools, president, American Savings Bank, F. S. B.
HEI supplies power to over 400,000 customers or 95% of Hawaii's population through its electric utilities, Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Ltd. and provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, F.S.B., one of Hawaii's largest financial institutions.
FORWARD-LOOKING STATEMENTS
This release may contain "forward-looking statements," which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as expects, anticipates, intends, plans, believes, predicts, estimates or similar expressions. In addition, any statements concerning future financial performance (including future revenues, expenses, earnings or losses or growth rates), ongoing business strategies or prospects and possible future actions, which may be provided by management, are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and assumptions about HEI and its subsidiaries, the performance of the industries in which they do business and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance.
Forward-looking statements in this release should be read in conjunction with the "Forward-Looking Statements" discussion (which is incorporated by reference herein) set forth on page iv of HEI's Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, and in HEI's future periodic reports that discuss important factors that could cause HEI's results to differ materially from those anticipated in such statements. Forward-looking statements speak only as of the date of this release.
Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months Nine months ended September 30, ended September 30, ---------------------- ----------------------- (in thousands, except per share amounts) 2008 2007 2008 2007 ---------------------------------------------------------------------- Revenues Electric utility $ 827,788 $ 567,615 $2,139,798 $1,508,005 Bank 87,675 105,507 279,469 317,493 Other (32) 339 (164) 2,749 ----------- ---------- ----------- ----------- 915,431 673,461 2,419,103 1,828,247 ----------- ---------- ----------- ----------- Expenses Electric utility 775,941 536,249 1,981,572 1,434,858 Bank 62,983 86,960 262,406 260,824 Other 2,378 2,235 8,648 10,698 ----------- ---------- ----------- ----------- 841,302 625,444 2,252,626 1,706,380 ----------- ---------- ----------- ----------- Operating income (loss) Electric utility 51,847 31,366 158,226 73,147 Bank 24,692 18,547 17,063 56,669 Other (2,410) (1,896) (8,812) (7,949) ----------- ---------- ----------- ----------- 74,129 48,017 166,477 121,867 ----------- ---------- ----------- ----------- Interest expense-other than on deposit liabilities and other bank borrowings (19,345) (19,589) (56,780) (59,382) Allowance for borrowed funds used during construction 967 656 2,564 1,840 Preferred stock dividends of subsidiaries (471) (474) (1,417) (1,420) Allowance for equity funds used during construction 2,426 1,336 6,432 3,770 ----------- ---------- ----------- ----------- Income before income taxes 57,706 29,946 117,276 66,675 Income taxes 20,425 10,065 40,892 22,481 ----------- ---------- ----------- ----------- Net income $ 37,281 $ 19,881 $ 76,384 $ 44,194 =========== ========== =========== =========== Basic earnings per common share $ 0.44 $ 0.24 $ 0.91 $ 0.54 =========== ========== =========== =========== Diluted earnings per common share $ 0.44 $ 0.24 $ 0.91 $ 0.54 =========== ========== =========== =========== Dividends per common share $ 0.31 $ 0.31 $ 0.93 $ 0.93 =========== ========== =========== =========== Weighted-average number of common shares outstanding 84,625 82,481 84,052 81,949 =========== ========== =========== =========== Adjusted weighted- average shares 84,842 82,640 84,182 82,180 =========== ========== =========== ===========
Net income (loss) by segment Electric utility $ 25,932 $ 12,875 $ 77,949 $ 23,978 Bank 15,405 11,731 11,888 35,909 Other (4,056) (4,725) (13,453) (15,693) ----------- ---------- ----------- ----------- Net income $ 37,281 $ 19,881 $ 76,384 $ 44,194 =========== ========== =========== ===========
Twelve months ended September 30, ------------------------- (in thousands, except per share amounts) 2008 2007 ------------------------------------------------- Revenues Electric utility $2,738,107 $ 2,014,034 Bank 387,471 419,960 Other 1,696 1,332 ------------ ------------ 3,127,274 2,435,326 ------------ ------------ Expenses Electric utility 2,522,443 1,908,246 Bank 343,067 348,485 Other 13,422 13,568 ------------ ------------ 2,878,932 2,270,299 ------------ ------------ Operating income (loss) Electric utility 215,664 105,788 Bank 44,404 71,475 Other (11,726) (12,236) ------------ ------------ 248,342 165,027 ------------ ------------ Interest expense-other than on deposit liabilities and other bank borrowings (75,954) (78,534) Allowance for borrowed funds used during construction 3,276 2,460 Preferred stock dividends of subsidiaries (1,887) (1,893) Allowance for equity funds used during construction 7,881 5,144 ------------ ------------ Income before income taxes 181,658 92,204 Income taxes 64,689 31,893 ------------ ------------ Net income $ 116,969 $ 60,311 ============ ============ Basic earnings per common share $ 1.40 $ 0.74 ============ ============ Diluted earnings per common share $ 1.39 $ 0.74 ============ ============ Dividends per common share $ 1.24 $ 1.24 ============ ============ Weighted-average number of common shares outstanding 83,788 81,781 ============ ============ Adjusted weighted- average shares 83,906 81,984 ============ ============
Net income (loss) by segment Electric utility $ 106,127 $ 36,985 Bank 29,086 45,176 Other (18,244) (21,850) ------------ ------------ Net income $ 116,969 $ 60,311 ============ ============
This information should be read in conjunction with the consolidated financial statements and the notes thereto for the year ended December 31, 2007 (included in HEI's Form 8-K dated February 21, 2008) and the consolidated financial statements and the notes thereto in HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2008, June 30, 2008 and September 30, 2008 (when filed). Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.
Hawaiian Electric Company, Inc. (HECO) and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three months ended Nine months ended September 30, September 30, --------------------- ----------------------- (in thousands) 2008 2007 2008 2007 ---------------------------------------------------------------------- Operating revenues $ 826,124 $ 561,720 $2,135,265 $1,499,766 ---------- ---------- ----------- ----------- Operating expenses Fuel oil 377,157 222,721 900,455 549,771 Purchased power 202,125 144,918 530,146 390,161 Other operation 61,599 54,113 176,600 154,949 Maintenance 25,174 28,594 72,777 85,799 Depreciation 35,419 34,273 106,254 102,812 Taxes, other than income taxes 74,201 51,389 194,058 138,839 Income taxes 15,035 4,976 47,507 15,974 ---------- ---------- ----------- ----------- 790,710 540,984 2,027,797 1,438,305 ---------- ---------- ----------- ----------- Operating income 35,414 20,736 107,468 61,461 ---------- ---------- ----------- ----------- Other income Allowance for equity funds used during construction 2,426 1,336 6,432 3,770 Other, net 1,486 3,819 3,693 (1,330) ---------- ---------- ----------- ----------- 3,912 5,155 10,125 2,440 ---------- ---------- ----------- ----------- Income before interest and other charges 39,326 25,891 117,593 63,901 ---------- ---------- ----------- ----------- Interest and other charges Interest on long-term debt 11,879 11,478 35,413 34,364 Amortization of net bond premium and expense 632 621 1,902 1,813 Other interest charges 1,352 1,075 3,397 4,090 Allowance for borrowed funds used during construction (967) (656) (2,564) (1,840) Preferred stock dividends of subsidiaries 228 228 686 686 ---------- ---------- ----------- ----------- 13,124 12,746 38,834 39,113 ---------- ---------- ----------- ----------- Income before preferred stock dividends of HECO 26,202 13,145 78,759 24,788 Preferred stock dividends of HECO 270 270 810 810 ---------- ---------- ----------- ----------- Net income for common stock $ 25,932 $ 12,875 $ 77,949 $ 23,978 ========== ========== =========== =========== OTHER ELECTRIC UTILITY INFORMATION Kilowatthour sales (millions) 2,593 2,663 7,478 7,568 Cooling degree days (Oahu) 1,530 1,566 3,779 3,666 Average fuel oil cost per barrel $ 133.99 $ 74.78 $ 111.37 $ 65.52
This information should be read in conjunction with the consolidated financial statements and the notes thereto for the year ended December 31, 2007 (included in HECO Exhibit 99.1 to HECO's Form 8-K dated February 21, 2008) and the consolidated financial statements and the notes thereto in HECO's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2008, June 30, 2008 and September 30, 2008 (when filed). Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.
American Savings Bank, F.S.B. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three months ended Nine months ended September 30, September 30, ------------------- ------------------- (in thousands) 2008 2007 2008 2007 ---------------------------------------------------------------------- Interest and dividend income Interest and fees on loans $ 61,100 $ 61,817 $186,312 $ 182,191 Interest and dividends on investment and mortgage- related securities 9,898 26,497 57,078 85,090 --------- --------- --------- --------- 70,998 88,314 243,390 267,281 --------- --------- --------- --------- Interest expense Interest on deposit liabilities 14,070 20,381 47,909 61,951 Interest on other borrowings 4,616 20,243 40,030 57,230 --------- --------- --------- --------- 18,686 40,624 87,939 119,181 --------- --------- --------- --------- Net interest income 52,312 47,690 155,451 148,100 Provision for loan losses 1,979 2,700 4,034 3,900 --------- --------- --------- --------- Net interest income after provision for loan losses 50,333 44,990 151,417 144,200 --------- --------- --------- --------- Noninterest income Fees from other financial services 6,318 7,153 18,554 20,539 Fee income on deposit liabilities 7,328 6,583 20,889 19,095 Fee income on other financial products 1,771 1,977 5,214 5,845 Loss on sale of securities - - (17,388) - Other income 1,260 1,480 8,810 4,733 --------- --------- --------- --------- 16,677 17,193 36,079 50,212 --------- --------- --------- --------- Noninterest expense Compensation and employee benefits 19,172 16,173 56,451 52,733 Occupancy 5,489 5,418 16,276 15,707 Equipment 3,175 3,630 9,510 10,893 Services 3,688 6,385 13,531 22,638 Data processing 2,794 2,596 8,019 7,799 Loss on early extinguishment of debt - - 39,843 - Other expense 8,085 9,456 26,932 27,972 --------- --------- --------- --------- 42,403 43,658 170,562 137,742 --------- --------- --------- --------- Income before income taxes 24,607 18,525 16,934 56,670 Income taxes 9,202 6,794 5,046 20,761 --------- --------- --------- --------- Net income $ 15,405 $ 11,731 $ 11,888 $ 35,909 ========= ========= ========= =========
Net interest margin (%) 4.08 2.97 3.49 3.05
This information should be read in conjunction with the consolidated financial statements and the notes thereto for the year ended December 31, 2007 (included in HEI Exhibit 13 to HEI's Form 8-K dated February 21, 2008) and the consolidated financial statements and the notes thereto in HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2008, June 30, 2008 and September 30, 2008 (when filed). Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.
CONTACT: Hawaiian Electric Industries, Inc. Suzy P. Hollinger, 808-543-7385 Manager, Treasury and Investor Relations Facsimile: 808-203-1155 shollinger@hei.com
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