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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: February 11, 1994
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<CAPTION>
Exact Name of Registrant Commission I.R.S. Employer
as Specified in Its Charter File Number Identification No.
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Hawaiian Electric Industries, Inc. 1-8503 99-0208097
Hawaiian Electric Company, Inc. 1-4955 99-0040500
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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.
(808) 543-7771 - Hawaiian Electric Company, Inc.
None
(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
On February 11, 1994, Hawaiian Electric Industries, Inc. (HEI), issued
the following news release:
HAWAIIAN ELECTRIC INDUSTRIES, INC. REPORTS
1993 EARNINGS; ANNOUNCES LAWSUIT SETTLEMENT
HONOLULU -- Hawaiian Electric Industries, Inc. (NYSE-HE) today reported net
income for the year ended December 31, 1993 of $48.7 million, or $1.88 per
share, compared with a net loss of $11.6 million, or 48 cents per share, in
1992.
Results for 1993 include a charge of $15 million, or 58 cents per
share, to establish an additional reserve to cover the settlement of a lawsuit
filed by the Hawaii Insurance Commissioner and Hawaii Insurance Guaranty
Association (HIGA) against HEI. Under the agreement, HEI would pay $32 million
to the Insurance Commissioner as the rehabilitator/liquidator of the Hawaiian
Insurance Group (HIG) in return for a dismissal of the lawsuit and a release of
claims against HEI, its affiliates and their past and present officers and
directors. The $15 million charge is the net of tax cost of the settlement
after utilization of previously established reserves. The lawsuit was filed
after the December 1992 discontinuance of HEI's insurance business, HIG. The
discontinuance and writeoff of the business was primarily responsible for
1992's loss. The settlement, which is subject to court approval, was announced
February 10.
"We agreed to a settlement in order to get on with our business, and to
avoid the time, expense and risk a protracted lawsuit would inevitably entail.
The settlement will help diminish the insurance problems that our community is
experiencing," said Robert F. Clarke, President and Chief Executive Officer of
HEI. "HEI has been a responsible member of this community for many years and
engaging in prolonged litigation would not be in the best interests of HEI's
shareholders, HIG policyholders and the community."
For the three months ended December 31, 1993, HEI's net income was $2.5
million or 9 cents per share, versus a net loss of $4.4 million, or 18 cents
per share, in the same period of 1992.
For the year, earnings from continuing operations were essentially
unchanged from 1992 results at $61.7 million. However, as a result of a 7%
increase in the average number of shares outstanding, earnings per share from
continuing operations declined 6% to $2.38 in 1993. For the quarter, earnings
from continuing operations increased 5% to $17.3 million and earnings per share
were 63 cents, down 6%, from the same period in 1992.
Operating income at Hawaiian Electric Company and its subsidiaries
(HECO) was up 15% for the year and 28% for the quarter from 1992 levels due in
part to rate increases and the establishment of a regulatory asset for vacation
earned by employees, but not yet taken. Excluding the effect of this regulatory
asset, HECO operating income for the year was up 11% while net income was
relatively flat. Kilowatthour sales of electricity during the year were down
0.1% compared to 1992 primarily because of cooler weather, a downturn in the
state economy and conservation.
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Operating income at American Savings Bank increased 41% for the year
and 24% in the quarter, primarily because of higher average loan balances and
increased net interest rate spread. Annual loan production was $564 million,
compared with $601 million in 1992. American Savings' spread -- the difference
between interest earned on assets and cost of funds -- was 3.99% in 1993,
compared with 3.45% in 1992.
"The bank's 1993 results are especially impressive, considering that
1992 operating income was up 24% from the prior year," Clarke said.
HEI's other nonutility operations were hampered in 1993 by Hawaii's
economic slowdown. In addition, Hawaiian Tug & Barge Corp. sold a tug and barge
for intrastate shipping of heavy fuel oil at a previously announced net loss of
$1 million and has exited that line of business. The HEI corporate operating
loss from continuing operations increased $4.6 million in 1993 compared to 1992
primarily due to a refinement in the method of identifying costs chargeable to
subsidiaries, resulting in lower allocations to subsidiaries and more expenses
retained by the parent company.
Hawaiian Electric Industries is a diversified electric utility holding
company that delivers essential services to the people of Hawaii through its
electric utility, savings bank, maritime freight transportation and residential
real estate development subsidiaries.
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CONSOLIDATED STATEMENTS OF INCOME
Hawaiian Electric Industries, Inc. and subsidiaries
(Unaudited)
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<Caption >
Quarter ended Year ended
December 31, December 31,
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1993 1992 1993(3) 1992
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(in thousands, except per share amounts)
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REVENUES
Electric utility.................................... $217,322 $221,109 $879,110 $778,690
Savings Bank........................................ 50,551 50,394 199,734 202,995
Other............................................... 13,818 10,103 63,326 49,698
-------- -------- --------- ---------
281,691 281,606 1,142,170 1,031,383
-------- -------- --------- ---------
EXPENSES
Electric utility.................................... 183,377 194,569 759,545 674,849
Savings bank........................................ 37,859 40,170 155,617 171,668
Other............................................... 15,525 13,104 69,370 48,647
-------- -------- --------- ---------
236,761 247,843 984,532 895,164
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OPERATING INCOME (LOSS)
Electric utility.................................... 33,945 26,540 119,565 103,841
Savings bank........................................ 12,692 10,224 44,117 31,327
Other(1)............................................ (1,707) (3,001) (6,044) 1,051
-------- -------- --------- ---------
44,930 33,763 157,638 136,219
-------- -------- --------- ---------
Interest expense--electric utility and other........ (14,329) (13,458) (53,192) (47,141)
Allowance for borrowed funds used during
construction...................................... 885 550 3,869 2,095
Preferred stock dividends of electric utility
subsidiaries...................................... (1,630) (1,659) (6,518) (6,710)
Allowance for equity funds used during
construction...................................... 1,704 1,742 6,973 6,781
-------- -------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES............................... 31,560 20,938 108,770 91,244
Income taxes(2)..................................... 14,233 4,471 47,086 29,529
-------- -------- --------- ---------
INCOME FROM CONTINUING OPERATIONS................... 17,327 16,467 61,684 61,715
LOSS FROM DISCONTINUED OPERATIONS................... (14,825) (20,855) (13,025) (73,297)
-------- -------- --------- ---------
NET INCOME (LOSS)................................... $2,502 $(4,388) $48,659 $(11,582)
======== ======== ========= =========
EARNINGS (LOSS) PER COMMON SHARE
CONTINUING OPERATIONS............................. $0.63 $0.67 $2.38 $2.54
DISCONTINUED OPERATIONS........................... (0.54) (0.85) (0.50) (3.02)
-------- -------- --------- ---------
$0.09 $(0.18) $1.88 $(0.48)
======== ======== ========= =========
DIVIDENDS PER COMMON SHARE.......................... $0.58 $0.57 $2.29 $2.25
======== ======== ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING......................... 27,531 24,614 25,938 24,275
======== ======== ========= =========
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(1) Includes higher corporate general and administrative expenses due
to the refinement in the allocation of corporate-level expenses.
For the quarter and year ended December 31, 1993, corporate-level
expenses allocated to subsidiaries decreased approximately
$2 million and $7 million, respectively.
(2) Income tax expense was greater than the same period last year
primarily due to five factors; (a) income from continuing operations
increased, (b) recapture of tax benefits due to the sale of a barge
constructed with cash from the Maritime Administration Capital
Construction Fund (CCF), (c) maritime freight transportation operations
can no longer recognize immediate tax benefits from contributions to
the CCF because of the adoption of SFAS No. 109, (d) under SFAS No. 109,
the tax calculated on AFUDC must be shown in income taxes rather than
netted against AFUDC and (e) the federal tax rate increased 1% to 35%
retroactive to January 1, 1993. Also, income tax expense was relatively
low in 1992 due to the utilization of capital loss carryforwards.
(3) In 1993, consolidated HECO established a regulatory asset for vacation
earned by employees, but not yet taken. The recognition of the regulatory
asset increased 1993 operating income by $4.0 million and net income by
$2.4 million.
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Additional Information on Lawsuit Settlement
HEI will fund the settlement to be paid to the Insurance Commissioner
as rehabilitator/liquidator of the Hawaiian Insurance Group out of available
cash and short-term borrowings. HEI intends to seek reimbursement from certain
of its insurance carriers. HEI's claims against its insurance carriers will
require resolution of several insurance coverage and other policy issues and
the outcome of such claims cannot be predicted at this time. Recoveries from
HEI's insurance carriers, if any, will be recognized when realized.
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SIGNATURE
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.
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HAWAIIAN ELECTRIC INDUSTRIES, INC. HAWAIIAN ELECTRIC COMPANY, INC.
(Registrant) (Registrant)
/s/ Robert F. Mougeot /s/ Paul Oyer
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Robert F. Mougeot Paul A. Oyer
Financial Vice President and Financial Vice President and
Chief Financial Officer Treasurer
(Principal Financial Officer of HEI) (Principal Financial Officer of HECO)
Date: February 11, 1994 Date: February 11, 1994
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