Toggle SGML Header (+)


Section 1: 8-K (8-K)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 2, 2019
Exact Name of Registrant
Commission
I.R.S. Employer
as Specified in Its Charter
File Number
Identification No.
Hawaiian Electric Industries, Inc.
1-8503
99-0208097
Hawaiian Electric Company, Inc.
1-4955
99-0040500
State of Hawaii
(State or other jurisdiction of incorporation)
 1001 Bishop Street, Suite 2900, Honolulu, Hawaii  96813 - Hawaiian Electric Industries, Inc. (HEI)
900 Richards Street, Honolulu, Hawaii  96813 - Hawaiian Electric Company, Inc. (Hawaiian Electric)
(Address of principal executive offices and zip code)
 Registrant’s telephone number, including area code:
 (808) 543-5662 - HEI
(808) 543-7771 - Hawaiian Electric
 None
(Former name or former address, if changed since last report.)
  
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to 12(b) of the Act:
Registrant
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Hawaiian Electric Industries, Inc.
Common Stock, Without Par Value
HE
New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule12b-2 of the Securities Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
Hawaiian Electric Industries, Inc. [ ]
 
Hawaiian Electric Company, Inc. [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Hawaiian Electric Industries, Inc. [ ]
 
Hawaiian Electric Company, Inc. [ ]




Item 2.02 Results of Operations and Financial Condition.
On August 2, 2019, HEI issued a news release, “HEI Reports Second Quarter 2019 Earnings.” This news release is furnished as HEI Exhibit 99.



Item 9.01 Financial Statements and Exhibits.

(d) Exhibits    
 
HEI Exhibit 99
News release, dated August 2, 2019, “HEI Reports Second Quarter 2019 Earnings”

The information furnished in connection with this current report on Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.















SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. The signature of the undersigned companies shall be deemed to relate only to matters having reference to such companies and any subsidiaries thereof.

HAWAIIAN ELECTRIC INDUSTRIES, INC.
HAWAIIAN ELECTRIC COMPANY, INC.
(Registrant)
(Registrant)
/s/ Gregory C. Hazelton
/s/ Tayne S. Y. Sekimura
Gregory C. Hazelton
Tayne S. Y. Sekimura
Executive Vice President, Chief Financial
Senior Vice President and
Officer and Treasurer
Chief Financial Officer
 
 
 
 
Date: August 2, 2019
Date: August 2, 2019
 
 

1



EXHIBIT INDEX

        
Exhibit No.
Description
News release, dated August 2, 2019, “HEI Reports Second Quarter 2019 Earnings”


2
(Back To Top)

Section 2: EX-99 (EXHIBIT 99)

Exhibit


HEI Exhibit 99
399022896_heicatalyst2a31.jpg NEWS RELEASE
August 2, 2019

Contact:
Julie R. Smolinski
Telephone: (808) 543-7300
 
Director, Investor Relations & Strategic Planning
           E-mail: ir@hei.com
 
 
 
 
 
 
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 - 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.




1





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.

2





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.


3





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.







4





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.

###



5



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.

6



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.




7



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.


8



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
 
 
 

9



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
 
 
 
 
 
 

10
(Back To Top)