Prepared by R.R. Donnelley Financial -- Form 8-K
 
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: July 22, 2002
 
Exact Name of Registrant
as Specified in Its Charter
  
Commission
File Number
  
I.R.S. Employer
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)
 
900 Richards Street, Honolulu, Hawaii 96813
(Address of principal executive offices and zip code)
 
Registrant’s telephone number, including area code:
 
(808) 543-5662—Hawaiian Electric Industries, Inc. (HEI)
(808) 543-7771—Hawaiian Electric Company, Inc. (HECO)
 
None
(Former name or former address, if changed since last report.)
 

 
Item 5.    Other Events
 
On July 22, 2002, HEI issued the following news release:
 
HAWAIIAN ELECTRIC INDUSTRIES, INC. REPORTS SECOND QUARTER 2002 EARNINGS
 
HONOLULU — Hawaiian Electric Industries, Inc. (NYSE—HE) today reported income from continuing operations for the three months ended June 30, 2002 of $31.0 million, or 86 cents per share, compared with $26.1 million, or 78 cents per share in the same quarter of 2001. For the six months ended June 30, 2002, income from continuing operations was $57.9 million, or $1.61 per share, compared with $53.9 million, or $1.62 per share in the same period last year.
 
“We had a strong second quarter,” said Robert F. Clarke, HEI chairman, president and chief executive officer. “Income from continuing operations was up 19% compared with the same quarter last year due to 45% net income growth from our bank and 5% net income growth from our utilities, partially offset by holding company investment writedowns and expenses. Earnings per share from continuing operations were up 10% for the quarter as compared with the same quarter last year notwithstanding an increase in the number of shares outstanding, primarily resulting from HEI’s November 2001 common stock offering.”
 
Electric utility net income during the quarter was $23.9 million versus $22.7 million in the same quarter last year. Electric utility net income for the six months was $44.2 million versus $44.1 million in the same period of 2001.
 
“Increases in usage and number of residential customers, warmer weather and sales growth in nontourism related commercial sectors boosted kilowatthour sales by 3.5% for the quarter despite lower visitor arrivals post-September 11,” said Clarke. Increased operation and maintenance expenses, taxes and depreciation as compared with the same quarter last year partially offset the earnings impact of the increase in kilowatthour sales. Maintenance expenses were higher primarily due to the timing and larger scope of generating unit overhauls.

1

 
Bank net income in the second quarter was $14.8 million compared to $10.2 million in the same quarter last year. Bank net income for the six months was $28.2 million versus $22.1 million in the same period of 2001.
 
“Our bank’s net income benefited from very favorable interest rates that lowered its cost of funds,” said Clarke. The interest rate spread was 3.31% in the recent quarter versus 3.07% for the same quarter of 2001. “Noninterest income for the quarter was also higher due to the absence of investment losses recorded in the second quarter of 2001, increased collection of service charges and increased financial services income,” added Clarke. In addition, the adoption of new accounting rules established by the Financial Accounting Standards Board calling for the discontinuation of goodwill amortization resulted in $1.0 million of the $4.6 million increase in bank net income for the second quarter as compared to the same quarter last year. For the first half of 2002, the discontinuation of goodwill amortization resulted in a $1.9 million increase in bank net income. These increases were partially offset by a decrease in gains on sales of securities and increases in operating, administrative and general expenses.
 
HEI is the largest Hawaii-based company, providing electric utility services to 95% of Hawaii’s residents and a wide array of banking services to consumers and businesses through the state’s third largest bank.

2

 
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 “Forward-looking statements” (which is incorporated by reference herein) set forth on page v of HEI’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 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.
 
###

3

 
Hawaiian Electric Industries, Inc. and Subsidiaries
 
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
    
Three months ended
June 30,
     
Six months ended
June 30,
     
Twelve months ended
June 30,
 
    
2002
     
2001
     
2002
     
2001
     
2002
     
2001
  
    
(in thousands, except per share amounts)
 
Revenues
                                                      
Electric utility
   
$
307,676
 
   
$
313,651
 
   
$
586,007
 
   
$
632,074
 
   
$
1,243,237
 
   
$
1,311,994
 
Bank
   
 
102,069
 
   
 
112,250
 
   
 
200,911
 
   
 
228,004
 
   
 
417,509
 
   
 
459,920
 
Other
   
 
(743
)
   
 
1,438
 
   
 
(480
)
   
 
598
 
   
 
(7,707
)
   
 
3,362
 
    
  
  
  
  
  
    
 
409,002
 
   
 
427,339
 
   
 
786,438
 
   
 
860,676
 
   
 
1,653,039
 
   
 
1,775,276
 
    
  
  
  
  
  
Expenses
                                                      
Electric utility
   
 
256,723
 
   
 
263,623
 
   
 
489,450
 
   
 
534,036
 
   
 
1,050,773
 
   
 
1,124,110
 
Bank
   
 
77,700
 
   
 
94,678
 
   
 
154,371
 
   
 
190,283
 
   
 
326,591
 
   
 
387,663
 
Other
   
 
5,094
 
   
 
4,338
 
   
 
9,263
 
   
 
6,723
 
   
 
15,782
 
   
 
10,882
 
    
  
  
  
  
  
    
 
339,517
 
   
 
362,639
 
   
 
653,084
 
   
 
731,042
 
   
 
1,393,146
 
   
 
1,522,655
 
    
  
  
  
  
  
Operating income (loss)
                                                      
Electric utility
   
 
50,953
 
   
 
50,028
 
   
 
96,557
 
   
 
98,038
 
   
 
192,464
 
   
 
187,884
 
Bank
   
 
24,369
 
   
 
17,572
 
   
 
46,540
 
   
 
37,721
 
   
 
90,918
 
   
 
72,257
 
Other
   
 
(5,837
)
   
 
(2,900
)
   
 
(9,743
)
   
 
(6,125
)
   
 
(23,489
)
   
 
(7,520
)
    
  
  
  
  
  
    
 
69,485
 
   
 
64,700
 
   
 
133,354
 
   
 
129,634
 
   
 
259,893
 
   
 
252,621
 
    
  
  
  
  
  
Interest expense—other than bank
   
 
(18,340
)
   
 
(19,939
)
   
 
(36,867
)
   
 
(39,524
)
   
 
(76,069
)
   
 
(78,077
)
Allowance for borrowed funds
used during construction
   
 
488
 
   
 
511
 
   
 
843
 
   
 
1,187
 
   
 
1,914
 
   
 
2,696
 
Preferred stock dividends of subsidiaries
   
 
(502
)
   
 
(501
)
   
 
(1,003
)
   
 
(1,003
)
   
 
(2,006
)
   
 
(2,006
)
Preferred securities distributions of
trust subsidiaries
   
 
(4,009
)
   
 
(4,009
)
   
 
(8,018
)
   
 
(8,018
)
   
 
(16,035
)
   
 
(16,035
)
Allowance for equity funds
used during construction
   
 
1,042
 
   
 
955
 
   
 
1,815
 
   
 
2,220
 
   
 
3,834
 
   
 
5,003
 
    
  
  
  
  
  
Income from continuing operations
before income taxes
   
 
48,164
 
   
 
41,717
 
   
 
90,124
 
   
 
84,496
 
   
 
171,531
 
   
 
164,202
 
Income taxes
   
 
17,180
 
   
 
15,605
 
   
 
32,221
 
   
 
30,620
 
   
 
59,758
 
   
 
57,711
 
    
  
  
  
  
  
Income from continuing operations
   
 
30,984
 
   
 
26,112
 
   
 
57,903
 
   
 
53,876
 
   
 
111,773
 
   
 
106,491
 
Discontinued operations, net of income taxes
                                                      
Loss from operations
   
 
—  
 
   
 
(524
)
   
 
—  
 
   
 
(543
)
   
 
(711
)
   
 
(55,486
)
Net loss on disposals
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
(22,787
)
   
 
—  
 
    
  
  
  
  
  
Loss from discontinued operations
   
 
—  
 
   
 
(524
)
   
 
—  
 
   
 
(543
)
   
 
(23,498
)
   
 
(55,486
)
    
  
  
  
  
  
Net income
   
$
30,984
 
   
$
25,588
 
   
$
57,903
 
   
$
53,333
 
   
$
88,275
 
   
$
51,005
 
    
  
  
  
  
  
Per common share
                                                      
Basic earnings
                                                      
Continuing operations
   
$
0.86
 
   
$
0.78
 
   
$
1.61
 
   
$
1.62
 
   
$
3.19
 
   
$
3.22
 
Discontinued operations
   
 
—  
 
   
 
(0.02
)
   
 
—  
 
   
 
(0.02
)
   
 
(0.67
)
   
 
(1.68
)
    
  
  
  
  
  
    
$
0.86
 
   
$
0.76
 
   
$
1.61
 
   
$
1.60
 
   
$
2.52
 
   
$
1.54
 
    
  
  
  
  
  
Diluted earnings
                                                      
Continuing operations
   
$
0.85
 
   
$
0.78
 
   
$
1.60
 
   
$
1.61
 
   
$
3.17
 
   
$
3.21
 
Discontinued operations
   
 
—  
 
   
 
(0.02
)
   
 
—  
 
   
 
(0.02
)
   
 
(0.67
)
   
 
(1.67
)
    
  
  
  
  
  
    
$
0.85
 
   
$
0.76
 
   
$
1.60
 
   
$
1.59
 
   
$
2.50
 
   
$
1.54
 
    
  
  
  
  
  
Dividends
   
$
0.62
 
   
$
0.62
 
   
$
1.24
 
   
$
1.24
 
   
$
2.48
 
   
$
2.48
 
    
  
  
  
  
  
                                                       
Weighted-average number of
    common shares outstanding
   
 
36,189
 
   
 
33,481
 
   
 
36,005
 
   
 
33,321
 
   
 
35,085
 
   
 
33,035
 
    
  
  
  
  
  
Adjusted weighted-average shares
   
 
36,406
 
   
 
33,646
 
   
 
36,203
 
   
 
33,477
 
   
 
35,248
 
   
 
33,172
 
    
  
  
  
  
  
Income (loss) from continuing operations by segment
                                                      
Electric utility
   
$
23,850
 
   
$
22,716
 
   
$
44,209
 
   
$
44,141
 
   
$
88,368
 
   
$
83,688
 
Bank
   
 
14,812
 
   
 
10,207
 
   
 
28,163
 
   
 
22,082
 
   
 
54,612
 
   
 
42,095
 
Other
   
 
(7,678
)
   
 
(6,811
)
   
 
(14,469
)
   
 
(12,347
)
   
 
(31,207
)
   
 
(19,292
)
    
  
  
  
  
  
Income from continuing operations
   
$
30,984
 
   
$
26,112
 
   
$
57,903
 
   
$
53,876
 
   
$
111,773
 
   
$
106,491
 
    
  
  
  
  
  
 
This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in HEI’s Annual Report on SEC Form 10-K for the year ended December 31, 2001 and the consolidated financial statements and the notes thereto in HEI’s Quarterly Report on SEC Form 10-Q for the quarters ended March 31, 2002 and June 30, 2002 (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.

4

 
Hawaiian Electric Industries, Inc. and Subsidiaries
 
GOODWILL
(Unaudited)
 
The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets” on January 1, 2002. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually.
 
The Company’s $83.2 million of goodwill is in the bank segment and was tested for impairment as of January 1, 2002 and will be tested for impairment annually in the third quarter. As of January 1, 2002, there was no impairment of goodwill. The fair value of the bank was estimated using a valuation method based on a market approach, which takes into consideration market values of comparable publicly traded companies and recent transactions of companies in the industry.
 
Application of the provisions of SFAS No. 142 has affected the comparability of current period results of operations with prior periods because the goodwill in the bank segment is no longer being amortized over a 25 year period. Thus, the following “transitional” disclosures present net income and earnings per common share “adjusted” as shown below:
 
    
Three months ended
June 30,
  
Six months ended
June 30,
  
Twelve months ended
June 30,
    
2002
   
2001
   
2002
   
2001
   
2002
   
2001
    
(in thousands, except per share amounts)
Consolidated
                                          
Reported net income
   
$
30,984
   
$
25,588
   
$
57,903
   
$
53,333
   
$
88,275
   
$
51,005
Goodwill amortization, net of tax benefits
   
 
—  
   
 
962
   
 
—  
   
 
1,916
   
 
1,929
   
 
3,824
    
  
  
  
  
  
Adjusted net income
   
$
30,984
   
$
26,550
   
$
57,903
   
$
55,249
   
$
90,204
   
$
54,829
    
  
  
  
  
  
Per common share
                                          
Reported basic earnings
   
$
0.86
   
$
0.76
   
$
1.61
   
$
1.60
   
$
2.52
   
$
1.54
Goodwill amortization, net of tax benefits
   
 
—  
   
 
0.03
   
 
—  
   
 
0.06
   
 
0.05
   
 
0.12
    
  
  
  
  
  
Adjusted basic earnings
   
$
0.86
   
$
0.79
   
$
1.61
   
$
1.66
   
$
2.57
   
$
1.66
    
  
  
  
  
  
Per common share
                                          
Reported diluted earnings
   
$
0.85
   
$
0.76
   
$
1.60
   
$
1.59
   
$
2.50
   
$
1.54
Goodwill amortization, net of tax benefits
   
 
—  
   
 
0.03
   
 
—  
   
 
0.06
   
 
0.06
   
 
0.11
    
  
  
  
  
  
Adjusted diluted earnings
   
$
0.85
   
$
0.79
   
$
1.60
   
$
1.65
   
$
2.56
   
$
1.65
    
  
  
  
  
  
Bank
                                          
Reported net income
   
$
14,812
   
$
10,207
   
$
28,163
   
$
22,082
   
$
54,612
   
$
42,095
Goodwill amortization, net of tax benefits
   
 
—  
   
 
962
   
 
—  
   
 
1,916
   
 
1,929
   
 
3,824
    
  
  
  
  
  
Adjusted net income
   
$
14,812
   
$
11,169
   
$
28,163
   
$
23,998
   
$
56,541
   
$
45,919
    
  
  
  
  
  

5

 
Hawaiian Electric Company, Inc. (HECO) and Subsidiaries
 
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
    
Three months ended
June 30,
     
Six months ended
June 30,
  
    
2002
     
2001
     
2002
     
2001
  
    
(in thousands)
  
Operating revenues
   
$
306,616
 
   
$
312,455
 
   
$
583,949
 
   
$
629,748
 
    
  
  
  
Operating expenses
                                    
Fuel oil
   
 
74,355
 
   
 
82,085
 
   
 
133,590
 
   
 
170,330
 
Purchased power
   
 
76,520
 
   
 
83,481
 
   
 
153,621
 
   
 
165,397
 
Other operation
   
 
32,462
 
   
 
30,096
 
   
 
61,685
 
   
 
59,870
 
Maintenance
   
 
16,010
 
   
 
13,015
 
   
 
30,022
 
   
 
28,212
 
Depreciation
   
 
26,363
 
   
 
25,363
 
   
 
52,723
 
   
 
49,972
 
Taxes, other than income taxes
   
 
30,792
 
   
 
29,426
 
   
 
57,482
 
   
 
59,917
 
Income taxes
   
 
15,032
 
   
 
14,362
 
   
 
27,823
 
   
 
27,966
 
    
  
  
  
    
 
271,534
 
   
 
277,828
 
   
 
516,946
 
   
 
561,664
 
    
  
  
  
Operating income
   
 
35,082
 
   
 
34,627
 
   
 
67,003
 
   
 
68,084
 
    
  
  
  
Other income
                                    
Allowance for equity funds used during construction
   
 
1,042
 
   
 
955
 
   
 
1,815
 
   
 
2,220
 
Other, net
   
 
762
 
   
 
960
 
   
 
1,577
 
   
 
1,937
 
    
  
  
  
    
 
1,804
 
   
 
1,915
 
   
 
3,392
 
   
 
4,157
 
    
  
  
  
Income before interest and other charges
   
 
36,886
 
   
 
36,542
 
   
 
70,395
 
   
 
72,241
 
    
  
  
  
Interest and other charges
                                    
Interest on long-term debt
   
 
10,167
 
   
 
10,072
 
   
 
20,303
 
   
 
20,001
 
Amortization of net bond premium and expense
   
 
507
 
   
 
507
 
   
 
1,007
 
   
 
1,037
 
Other interest charges
   
 
432
 
   
 
1,340
 
   
 
883
 
   
 
3,413
 
Allowance for borrowed funds used during construction
   
 
(488
)
   
 
(511
)
   
 
(843
)
   
 
(1,187
)
Preferred stock dividends of subsidiaries
   
 
229
 
   
 
229
 
   
 
458
 
   
 
458
 
Preferred securities distributions of trust subsidiaries
   
 
1,919
 
   
 
1,919
 
   
 
3,838
 
   
 
3,838
 
    
  
  
  
    
 
12,766
 
   
 
13,556
 
   
 
25,646
 
   
 
27,560
 
    
  
  
  
Income before preferred stock dividends of HECO
   
 
24,120
 
   
 
22,986
 
   
 
44,749
 
   
 
44,681
 
Preferred stock dividends of HECO
   
 
270
 
   
 
270
 
   
 
540
 
   
 
540
 
    
  
  
  
Net income for common stock
   
$
23,850
 
   
$
22,716
 
   
$
44,209
 
   
$
44,141
 
    
  
  
  
Other Electric Utility Information
                                    
Kilowatthour sales (millions)
   
 
2,379
 
   
 
2,298
 
   
 
4,602
 
   
 
4,539
 
Cooling degree days (Oahu)
   
 
1,253
 
   
 
1,223
 
   
 
2,072
 
   
 
2,133
 

6

American Savings Bank, F.S.B. and Subsidiaries
 
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
    
Three months ended
June 30,
     
Six months ended
June 30,
  
    
2002
   
2001
     
2002
   
2001
  
    
(in thousands)
 
Interest and dividend income:
                                
Interest and fees on loans
   
$
50,468
   
$
60,766
 
   
$
102,090
   
$
124,905
 
Interest on mortgage-related securities
   
 
36,325
   
 
38,393
 
   
 
68,131
   
 
76,195
 
Interest and dividends on investment securities
   
 
1,873
   
 
3,432
 
   
 
4,099
   
 
9,092
 
    
  
  
  
Total interest and dividend income
   
 
88,666
   
 
102,591
 
   
 
174,320
   
 
210,192
 
    
  
  
  
Interest expense:
                                
Interest on deposit liabilities
   
 
19,325
   
 
31,233
 
   
 
39,498
   
 
63,226
 
Interest on Federal Home Loan Bank advances
   
 
14,440
   
 
18,070
 
   
 
28,422
   
 
37,727
 
Interest on securities sold under repurchase agreements
   
 
5,612
   
 
7,509
 
   
 
9,573
   
 
16,359
 
    
  
  
  
Total interest expense
   
 
39,377
   
 
56,812
 
   
 
77,493
   
 
117,312
 
    
  
  
  
Net interest income
   
 
49,289
   
 
45,779
 
   
 
96,827
   
 
92,880
 
Provision for loan losses
   
 
3,000
   
 
3,000
 
   
 
6,500
   
 
6,000
 
    
  
  
  
Net interest income after provision for loan losses
   
 
46,289
   
 
42,779
 
   
 
90,327
   
 
86,880
 
    
  
  
  
Other income:
                                
Fees from other financial services
   
 
5,345
   
 
4,318
 
   
 
9,965
   
 
8,082
 
Fees from deposit liabilities
   
 
4,151
   
 
2,211
 
   
 
7,626
   
 
4,404
 
Fee income on other financial products
   
 
2,368
   
 
2,428
 
   
 
5,055
   
 
3,568
 
Gain on sale of securities
   
 
117
   
 
4,035
 
   
 
273
   
 
3,999
 
Loss on investments
   
 
—  
   
 
(5,417
)
   
 
—  
   
 
(6,164
)
Other income
   
 
1,422
   
 
2,084
 
   
 
3,672
   
 
3,923
 
    
  
  
  
Total other income
   
 
13,403
   
 
9,659
 
   
 
26,591
   
 
17,812
 
    
  
  
  
General and administrative expenses:
                                
Compensation and employee benefits
   
 
15,276
   
 
13,111
 
   
 
29,293
   
 
25,557
 
Office occupancy
   
 
7,376
   
 
7,109
 
   
 
14,491
   
 
14,099
 
Service bureau
   
 
2,664
   
 
2,419
 
   
 
5,340
   
 
4,844
 
Consulting
   
 
1,146
   
 
1,097
 
   
 
2,792
   
 
1,627
 
Amortization of goodwill and core deposit intangibles
   
 
432
   
 
1,677
 
   
 
865
   
 
3,345
 
Other
   
 
8,429
   
 
9,453
 
   
 
17,597
   
 
17,499
 
    
  
  
  
Total general and administrative expenses
   
 
35,323
   
 
34,866
 
   
 
70,378
   
 
66,971
 
    
  
  
  
Income before minority interest and income taxes
   
 
24,369
   
 
17,572
 
   
 
46,540
   
 
37,721
 
Minority interests
   
 
44
   
 
55
 
   
 
89
   
 
114
 
Income taxes
   
 
8,161
   
 
5,958
 
   
 
15,583
   
 
12,820
 
    
  
  
  
Income before preferred stock dividends
   
 
16,164
   
 
11,559
 
   
 
30,868
   
 
24,787
 
Preferred stock dividends
   
 
1,352
   
 
1,352
 
   
 
2,705
   
 
2,705
 
    
  
  
  
Net income for common stock
   
$
14,812
   
$
10,207
 
   
$
28,163
   
$
22,082
 
    
  
  
  
Interest rate spread (%)
   
 
3.31
   
 
3.07
 
   
 
3.29
   
 
3.08
 

7

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.
                                                         (Registrant)
      
HAWAIIAN ELECTRIC COMPANY, INC.
                                                      (Registrant)
   
/s/                                                                         
          
/s/        
   
Robert F. Mougeot
Financial Vice President, Treasurer
and Chief Financial Officer
(Principal Financial Officer of HEI)
          
Richard A. von Gnechten
Financial Vice President
(Principal Financial Officer of HECO)
 
Date: July 22, 2002
Date: July 22, 2002

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