Tax ruling cuts HEI earnings
By Deborah Adamson
Advertiser Staff Writer
Hawaiian Electric Industries, one of the state's three largest companies by revenue, reported a more than 50 percent decline in net income for the second quarter, deflated by an unfavorable tax ruling involving a real estate investment trust subsidiary. Without the charge, profits would have risen by 29 percent.
The Honolulu-based parent of Hawaiian Electric Co. and American Savings Bank earned $11.2 million, or 14 cents a share, in the quarter, down from $25.8 million or 34 cents for continuing operations in the like period a year ago.
The company recorded a $24 million charge, equivalent to 30 cents a share, in the quarter related to the REIT subsidiary of American Savings Bank losing a court ruling over taxes. The company is appealing the case to the state Supreme Court.
Without the charge, HEI would have earned $35.2 million or 44 cents a share in the quarter, which beat Wall Street's expectations. Analysts were expecting profits of 38 cents a share, according to a survey by Thomson First Call.
Revenue rose by 3 percent to $461.8 million from $448.7 million a year ago. A 4.5 percent increase in HECO's revenue to $370.6 million more than offset a 3 percent decline for American Savings Bank to nearly $90 million.
"I'm very pleased with the results. They were very strong," said Robert Clarke, HEI's chairman, president and chief executive. "Both of our companies — American Savings Bank and HECO — really rely on the strength of the local economy. It has been, as you know, showing a lot of signs of broadbased strength in the last 12 months."
HECO, a bellwether for the health of the state's economy, had a 17 percent increase in net income to $21.7 million. Kilowatthour sales rose by 2.8 percent quarter-over-quarter, driven by strength in visitor arrivals, military activity and a strong real estate market.
Boosting the bottom line was a $2.3 million drop in retirement benefits expenses as investment returns rose last year. The refinancing of debt at a lower interest rate also reduced costs.
As for American Savings Bank, the thrift had a net loss of $6.9 million, which included the REIT charge. Without the charge, profits would have been $17 million compared with $13.5 million a year ago.
Asset quality of loans rose and as a result, delinquent and non-accrual loans fell as a percentage of total loans.
Shares of HEI rose by 22 cents to $26.50 yesterday.
Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.
