Retirement expenses,
plant penalty sink HEI netNet income falls 9% despite
increased sales in kilowatthours
and improved bank profits
Hawaiian Electric Industries Inc., despite improved kilowatthour sales and an increase in bank earnings, saw third-quarter net income fall 9 percent as retirement expenses and other items dragged down results.
The state's largest utility company, which also owns American Savings Bank, said yesterday it had net income of $30.5 million, or 81 cents a share, compared with $33.5 million, or 91 cents a share, a year ago. The results matched the 82 cents a share forecast by First Call but was a penny shy of expectations by Thomson Financial.
Total revenues increased 5.1 percent to $453.7 million from $431.6 million a year ago.
"Kilowatthour sales were strong, bank net income was up 4 percent and the holding and other companies' net losses were down 24 percent this quarter," said Robert F. Clarke, Hawaiian Electric's chairman, president and chief executive officer. "However, retirement benefits expense continues to negatively impact earnings."
Retirement benefits expenses were $5.5 million higher in the quarter than a year ago, resulting in a net expense of $3.4 million. In addition, Hawaiian Electric accrued a $1.6 million proposed penalty that its Maui Electric Co. subsidiary is facing from the state of Hawaii Department of Health. The violations, announced last month, stem from two diesel engine generators exceeding the visible emission limits at the Maalaea Power Plant between February 1999 and June 2000. Maui Electric Co. has requested a hearing on the penalty.
Lastly, the timing and larger scope of overhauls lowered utility operating income by $2.3 million from a year ago and depreciation expense was $1.3 million higher than in the third quarter of 2002.
Meanwhile, kilowatthour sales rose 3 percent from a year ago due to warmer weather and higher residential and neighbor island commercial usage. But the electric utility's net income during the quarter fell 20.5 percent to $25.6 million from $20.4 million despite utility revenues rising 7.7 percent to $359.3 million from $333.6 million. The electricity utility's expenses rose 11.6 percent to $312.6 million from $280 million a year ago.
HEI's American Savings Bank subsidiary had a 4.3 increase in net income to $15.3 million from $14.7 million a year ago helped by lower loan loss provisions, securities gains and improvement in the value of the bank's mortgage servicing asset.
The bank lowered its loan loss provision to $600,000 from $1.5 million a year ago due to Hawaii's strong real estate market and low interest rates. Fee income from other financial services and deposit liabilities gained 9.5 percent to $10.4 million from $9.5 million a year ago. Sales of securities improved to a gain of $1.7 million from a loss of $900,000 in the year-ago period. And prepayments of loans slowed as interest rates increased over the quarter. That improved the value of the mortgage servicing asset to $1.9 million from $1.3 million ago. Bank revenues, though, slipped 6 percent to $99.7 million from $93.8 million.
The bank's net interest margin, which is the difference between what the bank pays depositors and what it brings in from loans, slipped to 3.01 percent from 3.28 percent a year ago.
Expenses incurred by the parent company resulted in other income -- which doesn't include the electricity utility and bank segments -- falling 24.3 percent to $5.1 million from $6.8 million.
