Tag Archives: income

ETF Stats For January 2015 – Negative Start

The ETF industry began the year with a thud. Listings decreased by ten, including five actively managed ETFs, and assets dropped by a percentage point. Although 13 new ETFs launched in the first month of the year, 23 other products closed, delisted, and liquidated. Product count now stands at 1,652, consisting of 1,442 ETFs and 210 ETNs. Additionally, 120 of the ETFs are classified as being actively managed, and 44 have been identified as being fund-of-funds products. Assets under management (“AUM”) fell more than $19 billion to $1.98 trillion. This was just a 1% decline and is actually quite healthy given the 3% drop in the S&P 500 for the month. ETFs with more than $10 billion in assets increased from 44 to 47 and account for 57.6% of all assets. It takes $1.2 billion in assets to be an ‘average’ sized product, although only 224 (< 14%) can claim being above average. Trading activity didn't change much from December . Total dollar volume came in at $1.87 trillion, just 0.5% higher for the month. The quantity of highly traded products averaging more than $1 billion a day jumped from nine to twelve. These dozen represent less than 1% of the listed products but account for 59.4% of all trading activity. Actively managed ETFs made significant inroads last year with 56 launches and just 2 closures for a net increase of 54 funds. Things went the other way in January with no new actively managed ETFs coming to market and five shutting down. The year is far from over, but the early trend is unfavorable. Our stats table changed this month with rows for actively managed ETF listing counts and AUM included at the bottom of the table. There is no such thing as an actively managed ETN, so we are using the ETN column to display the monthly change count for listings and percentage change of AUM. Likewise, the Total column displays the year-to-date change for each measurement. January 2015 Month End ETFs ETNs Total Currently Listed U.S. 1,442 210 1,652 Listed as of 12/31/2014 1,451 211 1,662 New Introductions for Month 13 0 13 Delistings/Closures for Month 22 1 23 Net Change for Month -9 -1 -10 New Introductions 6 Months 95 5 100 New Introductions YTD 13 0 13 Delistings/Closures YTD 22 1 23 Net Change YTD -9 -1 -10 Assets Under Mgmt ($ billion) $1,953 $26.2 $1,980 % Change in Assets for Month -1.0% -2.6% -1.0% % Change in Assets YTD -1.0% -2.6% -1.0% Qty AUM > $10 Billion 47 0 47 Qty AUM > $1 Billion 246 4 250 Qty AUM > $100 Million 745 37 782 % with AUM > $100 Million 51.7% 17.6% 47.3% Monthly $ Volume ($ billion) $1,796 $69.9 $1,866 % Change in Monthly $ Volume +0.0% +15.3% +0.5% Avg Daily $ Volume > $1 Billion 11 1 12 Avg Daily $ Volume > $100 Million 97 4 101 Avg Daily $ Volume > $10 Million 316 12 328 Actively Managed ETF Count (w/ change) 120 -5 mth -5 ytd Actively Managed AUM ($ billion) $17.6 +2.2% mth +2.2% ytd Data sources: Daily prices and volume of individual ETPs from Norgate Premium Data. Fund counts and all other information compiled by Invest With An Edge. New products launched in January (sorted by launch date): Direxion Daily FTSE Developed Market Bull 1.25x Shares (NYSEARCA: LLDM ) , launched 1/7/15, is part of the new Lightly Leveraged series from Direxion that aims to provide magnified equity exposure while mitigating the long term volatility decay impacts of daily leverage reset. LLDM is designed to return 125% of the daily performance of the FTSE Developed ex North America Index that includes stocks of large- and mid-capitalization companies in 24 developed countries. Japan tops the list with about a 22% allocation, and Britain is next with 17%. LLDM is a fund-of-funds holding the Vanguard FTSE Developed Markets ETF (NYSEARCA: VEA ), and the expense ratio is capped at 0.50% until 9/1/16 ( LLDM overview ). Direxion Daily FTSE Emerging Markets Bull 1.25x Shares (NYSEARCA: LLEM ) , launched 1/7/15, seeks to return 125% of the daily performance of a FTSE index that includes 22 emerging market countries. China, Taiwan, India, and Brazil each have over a 10% allocation. Countries included with allocations of less than 0.25% include Czech Republic, Hungary, Pakistan, Malta, Spain, and Morocco. The fund-of-funds currently invests in the Vanguard FTSE Emerging Markets ETF (NYSEARCA: VWO ). The fund’s expense ratio is capped at 0.50% until 9/1/16 ( LLEM overview ). Direxion Daily S&P 500 Bull 1.25x Shares (NYSEARCA: LLSP ) , launched 1/7/15, is designed to return 125% of the daily performance of the S&P 500 Index and is a fund-of-funds currently utilizing SPDR S&P 500 ETF (NYSEARCA: SPY ). Information technology and financials top the sector allocation list. The ETF’s expense ratio is capped at 0.50% until 9/1/16 ( LLSP overview ). Direxion Daily Small Cap Bull 1.25x Shares (NYSEARCA: LLSC ) , launched 1/7/15, seeks to return 125% of the daily performance of the Russell 2000 Index. The fund-of-funds invests in iShares Russell 2000 ETF (NYSEARCA: IWM ). Financials tops the sector allocations at 24%, and information technology follows at 17%. The fund’s expense ratio is capped at 0.50% until 9/1/16 ( LLSC overview ). Master Income Fund (NYSEARCA: HIPS ) , launched 1/7/15, will invest in 300 high income yielding securities, which will typically have pass-through structures. It will spread the holdings across MLPs, REITs, BDCs, and debt-based closed-end funds. Based on the underlying index, the initial yield on HIPS is estimated to be about 6.5%. The fund sports an expense ratio of 0.87% ( HIPS overview ). JPMorgan Diversified Return Emerging Markets Equity ETF (NYSEARCA: JPEM ) , launched 1/8/15, will provide exposure to large- and mid-cap equity securities from emerging markets. Stocks are selected using a screening process combining value, momentum, and quality factors, and individual stocks are weighted based on their liquidity. Up to 20% of its assets may be invested in other exchange traded funds. The fund is relatively diversified at about 450 holdings, with iShares MSCI India (BATS: INDA ) being the largest. JPEM’s expense ratio will be capped at 0.45% until 3/1/16 ( JPEM overview ). iShares MSCI International Developed Momentum Factor ETF (NYSEARCA: IMTM ) , launched 1/15/15, provides exposure to large- and mid-cap stocks in developed international markets that are displaying higher price momentum over the last 6 to 12 months relative to the other securities in the space. Japan leads the country allocation at 30%, and health care is on top for sectors at nearly 28%. Investors will pay 0.30% annually to own this fund ( IMTM overview ). iShares MSCI International Developed Quality Factor ETF (NYSEARCA: IQLT ) , launched 1/15/15, will select large- and mid-capitalization stocks in developed international markets that are identified as having high quality characteristics. For this fund, high quality is defined as relatively high return on equity, low debt to equity ratios, and low earnings variability. The country allocation is led by the U.K. with 25%, and the most represented sector is financials at almost 27%. The fund’s annual expenses are 0.30% ( IQLT overview ). QuantShares Hedged Dividend Income ETF (NYSEARCA: DIVA ) , launched 1/15/15, invests in stocks with stable or growing dividends that trade at high yields. In an effort to reduce risk, short positions will be established in stocks with unstable or low dividends. The ETF will be rebalanced to 100% long and 50% short at monthly intervals. The initial yield is estimated to be 3.5%, and the expense ratio will be capped at 0.99% until 10/31/15 ( DIVA overview ). ETFS Zacks Earnings Large-Cap U.S. Index ETF (NYSEARCA: ZLRG ) , launched 1/20/15, will select holdings from the 1,000 largest U.S. equities based on both a quantitative and qualitative review of their earnings. The first step is to rank equities by the most significant positive changes in earnings estimates as published by all sell side analysts. The second step involves identifying firms with the lowest sector-adjusted accruals. Positions are apportioned into sixteen sectors which are equally weighted, and stocks within each sector are equally weighted. The fund sports an expense ratio of 0.66% ( ZLRG overview ). ETFS Zacks Earnings Small-Cap U.S. Index ETF (NYSEARCA: ZSML ) , launched 1/20/15, will select holdings from among the 1,001-3,000 largest U.S. equities based on both a quantitative and qualitative review of their earnings. First, equities are ranked by the most significant positive changes in earnings estimates as published by sell side analysts. The top 5% are then ranked by their relative sector-adjusted accruals with lower accruals being ranked higher. Positions are divided into 15 sectors which are equally weighted, and stocks within each sector are equally weighted. ZSML’s annual expense ratio is 0.66% ( ZSML overview ). ETFS Diversified-Factor Developed Europe Index ETF (NYSEARCA: SBEU ) , launched 1/27/15, will select its holdings from the 700 largest and most liquid stocks listed across 16 European countries. The fund will hold positions based on the following four factors: low volatility, value, momentum, and size. Once stocks are selected, they will be weighted through a proprietary strategy. The country allocation is led by the U.K. with 32%, and the most represented sector is financials at almost 23%. Investors will pay 0.40% annually to own this fund ( SBEU overview ). ETFS Diversified-Factor U.S. Large Cap Index ETF (NYSEARCA: SBUS ) , launched 1/27/15, will select its holdings from the 500 largest and most liquid stocks listed on U.S. exchanges. The fund will hold positions based on factors related to low volatility, value, momentum, and size. Once stocks are selected, they will be weighted through a proprietary strategy. Of the 500 stocks in the universe, 485 are held in the fund. SBUS has an expense ratio of 0.40% ( SBUS overview ). Product closures/delistings in January : ProShares Short 30 Year TIPS/TSY Spread (NYSEARCA: FINF ) ( ProShares closes 17 ETFs ) ProShares Ultra Russell Midcap Growth (NYSEARCA: UKW ) ProShares Ultra Russell Midcap Value (NYSEARCA: UVU ) ProShares Ultra Russell1000 Growth (NYSEARCA: UKF ) ProShares Ultra Russell1000 Value (NYSEARCA: UVG ) ProShares Ultra Russell2000 Growth (NYSEARCA: UKK ) ProShares Ultra Russell2000 Value (NYSEARCA: UVT ) ProShares Ultra Russell3000 (NYSEARCA: UWC ) ProShares UltraPro 10 Year TIPS/TSY Spread (NYSEARCA: UINF ) ProShares UltraPro Short 10yr TIPS/TSY Spread (NYSEARCA: SINF ) ProShares UltraShort Russell Midcap Growth (NYSEARCA: SDK ) ProShares UltraShort Russell Midcap Value (NYSEARCA: SJL ) ProShares UltraShort Russell1000 Growth (NYSEARCA: SFK ) ProShares UltraShort Russell1000 Value (NYSEARCA: SJF ) ProShares UltraShort Russell2000 Growth (NYSEARCA: SKK ) ProShares UltraShort Russell2000 Value (NYSEARCA: SJH ) ProShares UltraShort Russell3000 (NYSEARCA: TWQ ) AdvisorShares Accuvest Global Opportunities (NYSEARCA: ACCU ) ( AdvisorShares closes 2 funds ) AdvisorShares Athena International Bear ETF (NYSEARCA: HDGI ) AdvisorShares Gartman Gold/British Pound (NYSEARCA: GGBP ) ( AdvisorShares closes 2 currency hedged gold funds ) AdvisorShares International Gold (NYSEARCA: GLDE ) Russell Equity (NYSEARCA: ONEF ) ( Russell closes its last remaining ETF ) Morgan Stanley S&P 500 Crude Oil ETN (NYSEARCA: BARL ) ( press release ) Product changes in January: First Trust Value Line Equity Allocation Index Fund (FVI) underwent an extreme makeover and became the First Trust Total US Market AlphaDEX ETF (NASDAQ: TUSA ) effective January 12 ( press release ). Guggenheim added the word ‘Country’ to the name of Guggenheim MSCI Emerging Markets Equal Country Weight (NYSEARCA: EWEM ) effective January 20. The Janus purchase of VelocityShares was announced in October , and the deal closed in 2014. Janus renamed two of the ETFs to Janus Velocity Tail Risk Hedged Large Cap ETF (NYSEARCA: TRSK ) and Janus Velocity Volatility Hedged Large Cap ETF (NYSEARCA: SPXH ) effective January 23. EGShares Low Volatility Emerging Markets Dividend ETF (NYSEARCA: HILO ) was renamed EGShares EM Quality Dividend ETF and began tracking a new index effective January 26. Prior to 10/28/11, the fund was called EGShares Emerging Markets High Income Low Beta ETF. Announced Product Changes for Coming Months: iShares moves its four allocation ETFs to its Core lineup effective February 2. WisdomTree Euro Debt Fund (NYSEARCA: EU ) will have its last day of trading on February 11 ( press release ). Previous monthly ETF statistics reports are available here . Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

There’s A Reason Utilities Are On The Monopoly Board, I Just Bought One

Summary Today I am going to stay on the Monopoly board and discuss a close cousin to REITs, Utilities. I see strong correlations to real estate and utilities – they both deliver essential services measured by a long runway for demand. There’s a reason utilities are on the Monopoly board… you can’t win the game by owning just real estate. Many of you know me as a real estate analyst, and while around 90% of my research is in the REIT sector, I occasionally drift outside of my circle of competence into other asset sectors. Today, I am going to stay on the Monopoly board, though, and discuss a close cousin to REITs, Utilities. You see, I need to diversify my holdings into other dividend-paying stocks, and while I’m attracted to the short and mid-term forecast for US real estate, I know it’s important not to hold all of my eggs in one basket. In addition, I see strong correlations to real estate and utilities – they both deliver essential services measured by a long runway for demand. Arguably, utilities are much more stable over the long term, as the asset class is generally consider to be the lowest-risk compared with the overall stock market. Don’t worry. I will continue my “day job” of analyzing REITs, but I wanted to write this article for two purposes: (1) I wanted to tell you about a stock I recently added to my portfolio; and (2) I wanted to provide you with the research on this selection. I recognize that the long-term capital appreciation is limited with my new stock selection; however, my reasons for the pick will be summarized below. All About Connecticut Water Connecticut Water Service, Inc. (NASDAQ: CTWS ) was founded in 1956, and is headquartered in Clinton, Connecticut. The company serves nearly 125,500 customers, which is around 400,000 people, in 56 towns in Connecticut and Maine. Around 93% of the company’s net income is attributable to regulated operations, and there are two subsidiaries: Connecticut Water Company and Maine Water Company. Around 90% of the company’s business is residential, and the business has over 2,100 miles of pipeline. Here’s a snapshot of the company’s geographic representation in Connecticut (around $297 million in revenue as of 9/30/14): Also, more recently, Connecticut Water has extended operations in Maine, where the company generated around $51 million in revenue (as of 9-30-14): Since 2012, Connecticut Water acquired around 32,000 new customers (36% growth) through investments in Aqua Maine and Biddeford & Saco Water Company. Over the last 25 years, the company has purchased 60 total water systems (40 of these over the last 7 years). The water market is highly fragmented, as the company estimates that there are over 800 separate water systems and 300 wastewater operations, making the Connecticut and Maine ripe markets for consolidation. An Incredibly Stable Dividend Alternative As I side, I focus on REITs, but I know it’s also important to maintain a diversified investment portfolio. Consequently, I decided to pursue limited exposure in the Utilities sector. I currently own Consolidated Edison (NYSE: ED ), and I have been closely monitoring Duke Energy (NYSE: DUK ) and Piedmont Natural Gas (NYSE: PNY ), both in my backyard (I live in South Carolina). Last week, I attended the World MoneyShow in Orlando, and I listened to Connecticut Water’s CEO Eric Thornburg explain his company’s business model. One of the primary attractions to his company’s business model (as he explained) is the powerful earnings platform. For example, take a look at the company’s more recent revenue history: (click to enlarge) Now compare the above-referenced income history with the earnings per share history: (click to enlarge) Perhaps the most impressive trend is the company’s dividend history – Connecticut Water has paid 234 consecutive quarterly dividends without interruption or reduction. Even more impressive than that, the company has increased its dividend payment for over 45 years in a row. (click to enlarge) Small Cap, Big Credit Rating Connecticut Water is a small-cap utility with a market cap of around $400 million. Here’s a snapshot of the company’s year-over-year trading history: (click to enlarge) As of January 2015, it is rated A by Standard & Poor’s, and as illustrated below, the company has a well-balanced debt-to-equity ratio (with no near-term debt maturities): (click to enlarge) The company has assets of around $646 million and debt of around $173 million. Here’s a snapshot of its balance sheet: (click to enlarge) Enterprise Value is around $534 million: (click to enlarge) I’m Turning on the Spigot Connecticut Water offers a compelling opportunity for investing in a conservative growth stock with a proven track record for executing accretive acquisitions. This selection is seemingly more conservative than most of the other stocks that I write about; however, I am targeting a regionally focused utility that offers diversification and scale. I was equally impressed with the management team (with an average of 25 years of utility experience), and especially the insight provided by the CEO at the World MoneyShow last week. He fielded several questions from the audience, and tactfully responded with well-articulated “sleep well at night” commentary. As evidenced by the F.A.S.T. Graph below, Connecticut Water’s historical earnings performance meets my criteria for quality: (click to enlarge) Now, let’s look at F.A.S.T. Graph’s forecasting chart (below). As you can see, the shares are trading at $36.14 (with a P/E multiple of 19.2x). Assuming a target of 21x P/E at year-end 2015, the shares could grow by ~14% (to $41.79), translating to an annualized total return of 18.75%. Of course, I have to remember that the potential for long-term share price appreciation is limited with utilities stocks. I much more confident in the dividend growth – a record that is unblemished due to the high-quality balance sheet and sound dividend payout ratio (of 59%). (click to enlarge) In closing, I know that utilities stocks tend to hold up better in falling markets, since investors are usually in less of a rush to sell their lower-risk investments when the broader environment curdles. Accordingly, remember that utilities are more risky than most asset classes within the bond market, but they are generally seen as being lower-risk compared to the overall stock market. There’s a reason utilities are on the Monopoly board… you can’t win the game by owning just real estate. The secret is to invest in a broad portfolio of dividend-paying stocks. Connecticut Water is sound utility selection that should provide me with very predictable dividend income, and by reinvesting all of the dividends, I expect to “sleep well at night”. (Remember: Connecticut Water is a small-cap stock, so investors should limit exposure). For more information on Connecticut Water’s DRIP program, click HERE . (click to enlarge) Forbes Real Estate Investor : For more information, check out my newsletter HERE . Sources : Yahoo Finance, F.A.ST. Graphs, and CTWS Investor Presentation. Disclaimer: This article is intended to provide information to interested parties. As I have no knowledge of individual investor circumstances, goals, and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended. Disclosure: The author is long O, DLR, VTR, HTA, STAG, CSG, GPT, ROIC, HCN, OHI, LXP, KIM, WPC, DOC, UDF, EXR, MYCC, BX, TCO, ED, CTWS. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Empire District Electric’s (EDE) CEO Brad Beecher on Q4 2014 Results – Earnings Call Transcript

Empire District Electric Co (NYSE: EDE ) Q4 2014 Earnings Conference Call February 6, 2015 13:00 ET Executives Dale Harrington – Director, IR Brad Beecher – President & CEO Laurie Delano – VP, Finance & CFO Analysts Brian Russo – Ladenburg Thalmann Paul Zimbardo – UBS Michael Goldenberg – Luminus Management Tim Winter – Gabelli & Company Operator Welcome to the Empire District Electric Company Fourth Quarter 2014 Results Conference Call and Webcast. [Operator Instructions]. I would now like to turn the conference over to Dale Harrington. Please go ahead, sir. Dale Harrington Thank you, Dan and good afternoon, everyone. I would like to welcome you to our year-end 2014 earnings conference call but let me begin by introducing Brad Beecher, President and Chief Executive Officer and Laurie Delano, Vice President Finance and Chief Financial Officer who in a few moments will be providing an overview of our 2014 results and our 2015 expectations as well as some highlights on other key matters. Our press release announcing 2014 results was issued yesterday afternoon. The press release and a live webcast of this call including our slide presentation are available on our website at www.empiredistrict.com. A replay of the call will be available on our website through May 6th of this year. Before we begin I must remind you that our discussion today includes forward-looking statements and the use of non-GAAP financial measures. Slide 2 of our accompanying slide deck and the disclosures in our SEC filings present a list of some of the risks and factors that could cause future results to differ materially from our expectation. I will caution that these lists are not exhaustive and the statements made in our discussion today are subject to risks and uncertainties that are difficult to predict. Our SEC filings are also available upon request or maybe obtained from our website or from the SEC. I would also direct you to our earnings press release for further information on why we believe the presentation of estimated earnings per share impact of individual items and the presentation of gross margin each of which are non-GAAP presentations is beneficial for investors in understanding our financial results. And with that I will now turn the call over to Brad Beecher. Brad Beecher Thank you, Dale. Good afternoon everyone and thank you for joining us. 2014 was a good year for Empire shareholders. The one year total shareholder return was about 35.6%, record earnings record high stock prices, a strong balance sheet with improved retained earnings and a sustainable growing dividend that increased by 2% in the fourth quarter were highlights for the year. Today we will discuss further our financial results for the fourth quarter and 12 months ended December 31, 2014 period, recent activities impacting the company and our outlook for 2015. As shown on slide 3, yesterday we reported consolidated earnings for the fourth quarter of 2014 of 11.1 million or $0.26 per share compared to the same quarter in 2013 when earnings were 15.2 million or $0.35 per share. Earnings for the 12 months ended December 31, 2014 period were 67.1 million or a $1.55 per share. 12 months ended 2013 earnings were 63.4 million or a $1.48 per share. During their meeting yesterday the Board of Directors declared a quarterly dividend of $0.26 per share payable March 16, 2015 for shareholders of record as of March 2nd. In December we completed in-service testing for the Asbury Air Quality Control System. The Missouri Public Service Commission staff determined that as of December 15, 2014 the Asbury AQCS equipment hadn’t met the in-service criteria. The determination by the staff that the in-service criteria have been met is a vital step for the rate case we filed in Missouri on August 29th of last year. As you may recall in order for the commission staff to allow a December 31 true-up date it was required that that Asbury be in service prior to February 1, 2015. Recovery of costs associated with the Asbury AQCS is the primary component of the Missouri Case. I will remind you that we’re seeking the increased electric rates by about $24.3 million annually or about 5.5%. Missouri Commission staff has indicated in testimony filed January 29th that the true-up period for this case will in [ph] December 31, 2014. Local public hearings for this case have been scheduled for February 19 in Joplin and February 20th in Reeds Spring. The Missouri Commission has scheduled an evidentiary hearing at its offices in Jefferson City, the weeks of April 6 through 10 and April 13 through 17. In the interim the Missouri Commission staff will be conducting a construction audit and prudence review on the Asbury Project. True-up direct testimony is scheduled to be filed on April 30th and a true-up evidentiary hearing occur in May 13th. New customer rates as a result of this case will be effective no later than July 26, 2015. Initially we provided a cost estimate for the Asbury AQCS project without AFUDC of between a $112 million and a $130 million. We later updated investors that we expected to be in the bottom half of the range. Today as a result of solid project management I’m proud to report we expect cost to be around a 112 million without AFUDC and around a 120 million including AFUDC. In December we filed a request with the Kansas Corporation Commission for an environmental cost recovery rider, rates from our Kansas request will be effective no later than August 3, 2015. Additionally we plan to file a request for an environmental cost recovery rider in Arkansas later this month. In Oklahoma we filed a request on January 9th to amend our Southwest Power Pool Transmission Tariff. Our proposed amendment request the removal of a requirement to file a base rate case by July 2015. The SPP tariff was established in January 2012 to allow recovery of our Oklahoma share of transmission charges assessed by the Southwest Power Pool. A requirement of that tariff was that Empire must file a base rate case by July 2015 because of the Asbury Air Quality Control System completion in early ’15 and the Riverton 12 combined cycle [ph] conversion projects scheduled for 2016 and Oklahoma filing in 2015 would necessitate a second rate case filing in 2016. Since rate cases are costly for customers we are asking for this Oklahoma requirement to be removed. If our request is approved we would plan to file a single rate case in 2016 to capture costs from both the Asbury and Riverton projects. We announced yesterday that our 2015 earnings guidance falls within the weather normalized range of a $1.30 to a $1.45 per share down from our 2014 results of a $1.55 per share. The lower range reflects the full year of high expense primarily related to the Asbury AQCS upgrade and a new maintenance contract for the Riverton facility offset with only a partial year of new Missouri rates to recover their Asbury investment and other increased cost. I will now turn the call over to Laurie to provide additional details of our financials. Laurie Delano Thank you, Brad. Good afternoon everyone. I’m very pleased to be reviewing such positive financial results with you today, the information I would discuss today will supplement the press release we issued late yesterday and as always the earnings per share numbers referenced throughout the call are provided on an after-tax estimated basis. I will briefly touch on our 2014 fourth quarter results before I discuss our annual results. Our fourth quarter earnings of $0.26 per share reflect a more normal quarter of winter weather when compared to the previous year’s fourth quarter. They also reflect increases in operating and maintenance expenses when compared to last year. Slide 4, shows the quarter-over-quarter changes that impacted our earnings. Gross margins for revenues less fuel and purchase power expense decreased $1.5 million decreasing earnings by $0.02 per share quarter-over-quarter. We estimate the impact of the warmer weather and other volume metric factors compared to last year decreased revenue by about $3.2 million, decreasing margin by about $0.03 per share. This decrease was driven primarily by an 8.1% decrease in sales for our residential customers. Commercial sales were only down about 1%, the weather impact on commercial sales was mitigated in part of increased sales throughout our territory as well as increased sales at the New Mercy Hospital as it prepares to open in March. Increases in operating and maintenance expenses, decreased earnings about $0.06 per share driven by increased transmission operation and production maintenance expenses. Small changes in depreciation, AFUDC and other income and expense rounded out the remaining $0.01 per share decrease in earnings for the fourth quarter. Turning to our annual rates, as Brad mentioned earlier, our net income increased $3.7 million or $0.07 per share. Slide 5, provides a breakdown of the various components that resulted in this year-over-year per share increase. Consolidated gross margin increased $17.1 million over 2013 adding an estimated $0.25 per share. As shown on in the callout box on slide 5, we estimate that increased customer rates from our Missouri rate case effective in April 1 of 2013 added about $12.5 million to revenue or about $0.16 per share to margin. We estimate weather and other volume metric increases on the electric side of the business added an estimate $4.6 million to revenue year-over-year or about $0.05 per share to margin. The weather effect from the gas segment added about a penny per share. The volume metric change was driven by a combination of weather and higher commercial sales again including positive impacts from the construction of the New Mercy hospital. Increased customer accounts added an estimate $1.5 million year-over-year increasing margin about a penny per share. Changes in other miscellaneous revenues primarily related to SPP transmission revenues and non-volume fuel related items netted together rounded out the remaining increase in electric segment, revenues adding a combined net impact of $0.02 per share to margin. Increases in our consolidated operating and maintenance expense offset the positive margin impact decreasing earnings about $0.17 per share. The callout box on slide 5 provides a breakdown of this impact. As we’ve discussed on previous calls the largest individual O&M increase was for transmission operation expenses primarily related to SPP charges. This added expense reduced earnings about $0.08 per share. Increases in distribution and production maintenance along with general LIBOR cost combined to reduced earnings about $0.11 per share, other smaller cost increases reduced earnings to a total of $0.02 per share. These increases were offset by the effect of lower healthcare cost about $0.02 per share as well as the $0.02 per share positive effect of the regulatory reversal of a gain on sale of the assets that we recorded in 2013. And as you all will recall we also recorded a similar entry in 2013 for our planned disallowance. This 2013 write-off also has the impact of increasing earnings year-over-year by $0.03 per share. Continuing on with slide 5, depreciation and amortization expenses decreased earnings per share $0.05 driven by higher levels of plant and service and increased depreciation rates resulting from our April 2013 Missouri case. Increases in property taxes brought earnings down another $0.02 per share. Increased allowance for funds used during construction or AFUDC added about $0.06 per share to earnings reflecting our Asbury and Riverton construction projects. Small changes in other income and deductions in the effects of additional stock issued under our various stock plans round out the remaining $0.03 decrease in earnings per share. On our balance sheet we have $90.3 million in retained earnings as of December 31, 2014. We had $44 million of short term debt outstanding at the end of 2014 and we currently have $68 million outstanding. We received the proceeds from our $60 million private placement of first mortgage bonds on December 1. As Brad said we announced in our press release yesterday that we expect our full year 2015 weather normalized earnings to be within the range of a $1.30 to a $1.45 per share. Before I talk about the drivers for our new guidance I would like to review our actual 2014 results as compared to our original 2014 guidance. Slide 6 provides this information, in developing our 2014 guidance we assumed 30 year average weather, modest growth as Joplin continued the three building projects and the extra quarter of Missouri rates from our 2013 rate case and revenues from our 2013 Arkansas rate case filing. This was offset with a corresponding effect of increased O&M expenses. Our actual 2014 results of a $1.55 were higher than the midpoint of our original guidance range primarily due to one higher than expected electric and gas sales and two lower than expected operating and depreciation expenses. Higher sales added about $0.03 to our earnings per share on the electric side of the business, and about a penny to our gas segment results. Favorable weather and higher commercial sales again inclusive of the New Mercy hospital were the primary drivers. Decreased cost totaling $0.06 per share were driven by lower than expected generating plant operating expenses and lower than expected SPP charges. Also depreciation was lower due to the timing of various in-service dates of our construction projects. On slide 7 we highlight the drivers of our decrease in earnings expectations in 2015. First as in the past our estimates are based on normal weather with a modest positive sales growth as we have previously disclosed we still expect this growth to be at a level of less than 1% per year over the next several years. We’re also assuming our Missouri rate case will be effective as filed. We also assume our Arkansas and Kansas rate case filings will go into effect as filed. Operating and maintenance expenses will be higher primarily due to a new maintenance contract for our Riverton facility. Depreciation expense will increase reflecting the Asbury AQCS project in service for a full year and an estimated 20 year life rate and we will also see increased depreciation for assets placed in service since our last case. The impact on depreciation from the Asbury AQCS project alone is approximately $0.09 on an earnings per share basis. We will also see increases in property tax and interest expense. The higher interest expense reflects our December 2014 debt issuance and expected issuance in 2015. Our AFUDC impact will be lower in 2015 now that as Asbury is complete and in service. Other factors considered in our range are variations in customer growth and usage as well as variations in operating and maintenance expense. Again our range does not take into account any changes to our Missouri rate case filing or reflect any December 31, 2014 true-up numbers. As a reminder we have summarized the components of our Missouri rate case as currently filed on slide 8. On slide 9, we provide the historical and projected capital expenditures and net plant in-service numbers that reflect our current capital expenditure plan. No changes have been made since the update we provided last quarter. The 2015 expenditures reflect our ongoing cost for the Riverton combined cycle project. On this slide w also present our net plant levels less deferred taxes to approximate our estimated rate base. To finance these projects we expect to issue some debt financing in the middle of 2015. Right now we believe the debt offering will be in the range of $60 million but could be subject to change based on expenditure timing and other factors. This financing combined with the addition of internal equity from our dividend reinvestment and stock purchase plans and our combined build of retained earnings will help keep us near our target 50:50 debt equity capital structure. I will now turn the discussion back over to Brad. Brad Beecher Thank you, Laurie. As Laurie referenced and as shown in slide 10, in addition to the work completed in Asbury we’re moving ahead with construction at our Riverton power plant. The foundation work is complete and most of the major equipment is on-site for the Riverton Unit 12 conversion. As of December 31, our total cost of this project is 88.5 million. As a reminder we estimate our total cost of completion to be between a 165 million to a 175 million. We continue to successful execute our growth strategy to build rate base infrastructure to serve our customers and meet environmental regulations. The completion of the Asbury AQCS and on-going Riverton 12 combined cycle projects are the largest additions to these plan. Empire remains a high quality, pure play, regulated electric and natural gas utility. We’re focused on our vision of making lives better every day with reliable energy and service. We’re committed to meeting today’s energy challenges with least cost resources while ensuring reliable energy for our customers and attractive return for our shareholders and a rewarding environment for our employees. I will now turn the call back to the operator for your questions. Question-and-Answer Session Operator [Operator Instructions]. And our first question comes from Brian Russo of Ladenburg Thalmann. Please go ahead. Brian Russo When I look at kind of the midpoint of your 2015 guidance, kind of implies about an 8% earned ROE which is quite a meaningful amount of regulatory lag versus you know kind of 9-8 current allowed ROE. I just want to maybe drill deeper into the lag. I think you quantified the impact for the Asbury depreciation. Could we quantify the O&M impact as well and then kind of differentiate what structural lag versus what’s just timing lag related to your base rate cases. Laurie Delano We don’t really anticipate a huge O&M impact from the Asbury project, we will see an increase in our consumables, limestone, activated carbon and those sorts of things. However we actually recovered those back through our fuel adjustment. Obviously we will see an increase in property taxes from the Asbury project and if you look at the slide where our rate case summarization takes place you will see that we have asked for about $2.9 million in property taxes associated with that case. So that kind of gives you a feel for what that directionally might be. Brian Russo Okay, can you remind us of the lag that you experience on transmission cost and property taxes each year? Brad Beecher Today neither property taxes or transmission expenses are recovered in trackers and so they go through a normal procedure. So in this case what we’re recovering in our rates is reflective of the rates that we received in April of 2013. So, we have asked for in this current case the transmission expenses to be included in our fuel adjustment cost to help reduce that lag in the future. But that’s something that will have to be taken in account in this current case. Your other question, you had asked earlier relating to structural lag versus lag on timing of the cases. I have a hard time differentiating that, in Missouri we have a 11 month process and using this case is a good example for illustration is any – we have filed the case at the end of August of last year. We will expect rates by about July, we’re going to get a true-up through the end of the year and so that’s about as tight as we can cut it as it relates to the biggest CapEx expenditure. So we have 6 or 7 months lag on those big CapEx after they go in service before we get recovery in rates. And so that’s what we experienced on Asbury and we’re seeing today and it’s the kind of representative of the kind of lag we will see on Riverton 12 as well. Brian Russo Okay. In your last Missouri rate case you guys actually settled and rates went into effect in April. Was that several months earlier than the 11 month process or was the filing date different than this go around [ph]? Brad Beecher Brian, my memory is the rates went into effect a little bit early and when you get into settlement sometimes that’s one of the variables that we consider when we’re deciding whether to sell or not, it’s where the rates can go in a little bit early. I don’t recall the exact dates on the last case we will have to – we can dig that out later. Brian Russo Okay, so I guess if you did settled rates went into effect earlier obviously there would be less lag in ’15? Brad Beecher If that were to happen, that’s true. Brian Russo And then just back to your comment, the lag experience with Asbury this year and then the lag associated with Riverton upgrade next year. Is it kind of implied that you’re going to be experiencing similar regulatory lag in ’16 and ’15 and 2017 should be the year where we see improved returns? Brad Beecher What I was trying to get across is we’re going to have similar lag on Riverton 12 as we have on Asbury AQCS so that would say we’re going to have lag in 2016 and you can look at our CapEx forecast for ’16, ’17 and ’18 and we do drop off after Riverton 12 and that should give our shareholders a little bit of a better change to recover their allowed rate of return. Operator Our next question comes from Julien Dumoulin-Smith of UBS. Please go ahead. Paul Zimbardo It’s actually Paul Zimbardo. First question, on the estimated rate base slides, it looks like there is a little bit of a change from the last quarter, is that just bonus depreciation or something of alike? Laurie Delano For the rate base slides, yes, that would be correct. Paul Zimbardo And does that impact the rate case filing at all? Brad Beecher So, when we made the rate case filing bonus depreciation had not yet been extended and so our filing did not reflect that and same way when we put this slide together last quarter it had not yet being extended. So that accelerated depreciation will be reflected as one of the many true-ups that will happen at the end of the December 31 true-up. And as you pointed out bonus depreciation is a reduction or offset to rate base. Paul Zimbardo So a follow-up on the last question about quantifying some of those 2015 earnings driver, I apologize if I missed it, did you say what the impact of the new maintenance contract was– Laurie Delano I didn’t say but on the slide that summarizes our rate case filing assumptions, we call that out at $3.9 million. Operator [Operator Instructions]. Our next question comes from Michael Goldenberg of Luminus Management. Please go ahead. Michael Goldenberg So I want to go back to 2016, I understand 2015 is a big down year but I was under the assumption – I think we have discussed on a several occasion, you kind of always seem to point investors to when you think about long term, when you think about 2016, do rate base times equity times ROE and all these little changes in O&M are long haul, they even out and then structural lag probably should be more than let’s say a 100 bps that was kind of the impression that I think over the years have got. Is it fair to say that that may no longer be the best way to think about the company structurally? Brad Beecher If you look at the last several years for EDE we have been closer to 200 basis points regulatory lag and we have been looking at about 8% ROE in something that’s in that 10% kind of ROE range as people think about our allowed ROEs and so we have had closer to 200 basis points of lag historically. For 2014 we were at about 8.75% I think actually ROE, so we got down to about a 150 basis point to lag [inaudible]. In the big CapEx years we’re going to struggle a little bit more but as growth has come down in our industry and I’m really talking about our sales growth, it really tends to exacerbate regulatory lag when you don’t have any new kilowatt hour sales to help pay for increased expenses. Michael Goldenberg So help me understand this then, generally the way the rate cases work even with in stage with structural lag in your first year of rate case, let’s say it’s a three year cycle. Your drag is generally the lowest right when you get the rates and then I agree that if you have a lot of CapEx then by the end of year three that structural lag increases and that’s generally the way it works so. I kind of thought or was working on the assumption that if you take the period of July ’15 through June ’16, structure, that should be the time of your least drag. Is that not the right way or is the drag actually going to then get even worse? Brad Beecher I think you’re thinking about it correctly. Once our rates go into effect in ’15 until such time as we start big depreciation expense on Riverton 12 going into service, that will be the time of least regulatory lag in that kind of window, that year after you get rates and before you start depreciation and O&M on the new assets coming into service. Michael Goldenberg Okay and just to be precise, Riverton depreciation starts when? Laurie Delano Well we’re assuming that Riverton will come online in mid-2016 and so you would assume that deprecation would start immediately after it comes online Michael Goldenberg So then we would see drags of even more than 200 bps? Laurie Delano Well we haven’t really quantified that but – I mean it’s – you’re going to see the same, a little bit the same scenario again depending on what the depreciation amount is for Riverton and the other thing you see is AFUDC benefit dropping off when that plant comes into service, you know that’s happening on the Asbury project also. Brad Beecher And then as we’ve talked about earlier when the new plants come online we have got property taxes that get assessed [ph] and we have lag on property taxes as well. Michael Goldenberg But yes you get the revenue step up to make up for all of that and give you as much to the bottom-line as AFUDC used to, isn’t that the general concept, that when a plant goes into service. If everything is done ideally then revenue just increases for the amount that the expenses are and the net income stays roughly the same for a $1 off CapEx whether it’s AFUDC or cash. Laurie Delano Yes, when your rates go into effect that’s true but in those intervening months until they go into effect the time that plant comes online that’s where you’re going to drag. Michael Goldenberg And then just finally, conceptually thinking, yes it’s very good ’14 right? You made $1.55 and that’s before rate case, now you actually are going to get new rates and you do know how to CapEx and yet your earnings are going down and just judging by the structure of going into ’16 and then more depreciation. It’s hard to see how structurally putting in all this CapEx is actually – instead given the situation Missouri, does it actually incentivize investment where the company actually financially hurts from putting in more and more CapEx? Brad Beecher Well in the end our business model in Missouri is we earn a return on assets that we build to serve our customers. We’re going through structural pain and this is a perfect example, Asbury went into service. It’s been used to service customers, we’re depreciating it today and expensing it in early ’15. We’re paying property taxes, we’re paying O&M and we’re getting no recovery from customers until rates go into effect no later than July 26th and that is Missouri structural lag and it is a disincentive but it is the world that we live in. We’ve worked very, very hard in the Missouri legislature last couple of years trying to get some relief on plan in-service, trying to get relief on property taxes and we have so far being unsuccessful. Operator [Operator Instructions]. And another question just came in from Tim Winter of Gabelli & Company. Please go ahead. Tim Winter I just had one follow-up, Brad. Where is the legislation stand right now in Missouri to give property taxes and transmission expenses [ph] and whatever else included. Brad Beecher At the current time Tim to my knowledge there is not any legislation filed related to plant in-service and/or property taxes. We have got a lot of uncertainty in the state right now as the governor is got a statewide energy plan underway, I don’t know if you participated but there has been input meetings across the state and we would expect a statewide energy plan to come out sometime May kind of timeframe. We have got 111(d) and how that’s going to get finalized. So right now we’re still – I’m expecting a pretty quiet year in Jeff City, not saying that something can’t get done but I’m expecting a pretty quiet year in Jeff City, not saying that something can’t get done but I’m expecting a pretty quiet year in Jeff City as it relates to this topic. Tim Winter The statewide energy plan include something about – would address this issue? Because you’re not the only utility in the state that has this issue. Brad Beecher We’re absolutely not the only utility in the state with this issue. The statewide energy plan is comprehensive, it’s everything that you can think about from solar to distributed generation to responses and emergencies to what we need to build assets just about everything has been talked about in one work group or another. So, it’s a work in progress, it’s being led by a member of the governor staff and so we will have to see where it goes. But we certainly brought up this concern. Operator And this concludes our question and answer session. I would like to turn the conference back over to Brad Beecher for any closing remarks. Brad Beecher Thank you. Before we close I remind you that Laurie and I will be at the UBS Analyst Day in Boston on March 3rd and 4th and Laurie and Dale will be the AJA Mini-Forum in Dallas on March 17th and 18th. Also we will be saying goodbye to Jen Watson at the end of April as she has decided to retire. Jen has served Empire in the Secretary and Treasurer positions since 1995. We thank Jen for her service and wish her the best. The Board has named Dale Harrington to replace Jen as Secretary beginning May 1, 2015. Dale will also continue in this role of Director of Investor Relations. Thank you for joining us today and have a great weekend. Operator The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com . Thank you!