Tag Archives: industry

The Time To Hedge Is Now! 700 Percent Profits On Men’s Wearhouse

Summary Introduction and a brief overview of the series. 700 percent profit since August. Taking profits or riding a little more? Discussion of the risks of employing this strategy versus not being hedged. Back to Bear Rally = Another Chance! Introduction and Series Overview If you are new to this series you will likely find it useful to refer back to the original articles, all of which listed with links in this instablog . In the Part I of this series I provided an overview of an inexpensive strategy to protect an equity portfolio from heavy losses in a market crash. In Part II, I provided more explanation of how the strategy works and gave the first two candidate companies to choose from as part of a diversified basket using put option contracts. I also provided an explanation of the candidate selection process and an example of how it can help grow both capital and income over the long term. Part III provided a basic tutorial on options. Part IV explained my process for selecting options and Part V explained why I do not use ETFs for hedging. Parts VI through IX primarily provide additional candidates for use in the strategy. Part X explains my rules that guide my exit strategy. All of the above articles include varying views that I consider to be worthy of contemplation regarding possible triggers that could lead to another sizeable market correction. I want to make it very clear that I am not predicting a market crash. Bear markets are a part of investing in equities, plain and simple. I like to take some of the pain out of the downside to make it easier to stick to my investing plan: select superior companies that have sustainable advantages, consistently rising dividends and excellent long-term growth prospects. Then I like to hold onto to those investments unless the fundamental reasons for which I bought them in the first place changes. Investing long term works! I just want to reduce the occasional pain inflicted by bear markets. We are already past the average duration of all bull markets since 1920. The current bull is now longer in duration (nearing 82 months) than all but two bull markets during that time period (out of a total of 15). The three longest bulls prior to this are 1949-1956 (70 months), 1921-1929 (97 months), and 1990-2000 (117 months). So, I am preparing for the inevitable next bear market. I do not know when the strategy will pay off, and I will be the first to admit that I am earlier than I suggested at the beginning of this series. I feel confident that the probability of experiencing another major bear market continues to rise. It may have started already or it may not come until 2017, before we take another hit like we did in 2008-09. But I am not willing to risk losing 30-50 percent of my portfolio to save the less than two percent per year cost of a rolling insurance hedge. I am convinced that the longer the duration of the bull market the worse the resulting bear market will be. I do not enjoy writing about the potentiality of down markets, but the fact is: they happen. I don’t mind being down by as much as 15 percent from time to time; that is just a hiccup in the buy-and-hold investing strategy. But I do try to avoid the majority of the pain from larger market drops. To understand more about the strategy, please refer back to the first and second articles of this series. Without that foundation, the rest of the articles in this series may not make sense and could sound more like speculating with options rather than an inexpensive way to protect your portfolio against catastrophic loss. 1220 percent profit since August I originally recommended buying puts on Men’s Wearhouse (NYSE: MW ) back in my August Update to this series. The stock was then trading at a price of $58.49 per share. Friday, after the company slashed its outlook for the current quarter on weaker-than-expected sales, the shares closed at $22.65 per share. In August I recommended buying two put options expiring in January 2016 with a strike price of $0.75 or less for each $100,000 in equity portfolio value. The bid premium at that time was $0.55 and the ask premium was $0.75. If one was patient it was possible to buy those put option for even less that the $0.55 bid premium not long after the article was published. Today, those MW $45 put options are trading at a premium of about $6.00. If we assume the worst case scenario of buying the put options at the ask premium of $0.75, then the profit that is available today is 700 percent [($6.00 – $0.75) / $0.75]. My target price of $25.00 was achieved. Thus, I am suggesting that those who ventured into this positions at my earlier recommendation consider what to do next. This one is likely to continue to be very volatile for the next few days and weeks. Taking profits now or riding a little longer? There may be more profit available, but sometimes it does little good to get greedy. The stock could just as easily rebound next week and leave us wishing we had taken profits. However, it should be noted that if the stock were to remain at this level through the January 20th expiration date, the value of the put option would rise to $22.00. If the stock rebounded by 25 percent between now and then, rising to about $28.50, the options should expire at about a $16.50 premium for a potential profit of 2,100 percent. There is a tradeoff to be considered. Do we take the profit now and cover the cost of our other hedge positions or do we hold onto the position to maintain the insurance coverage and hope that the stock remains depressed for 2½ months? That is a decision each investor needs to make for themselves. For my own portfolio, I intend to take some of the profits on part of my position and let the rest ride. My sense is that MW could linger below $30 until January unless management guides higher due to increased holiday sales. But such an announcement is not likely to come until mid-December or later, so there is still plenty of time to weigh our options (pun intended). I want to emphasize that this strategy is not a get rich quick plan. It is a hedge strategy to provide insurance against a major bear market. When I have the opportunity to take some profits and reduce the cost of my hedging strategy, I will often take at least some of what the market gives me. When one of our candidates implodes as MW just did and like MU and TEX did for us previously, it is prudent to take advantage of situation. I have tried to be clear from the beginning that the strategy has the potential to cost less than one percent of a portfolio value per year for this very reason. Any one of the candidates has the potential to surprise big to the downside over the life of the hedge, thereby helping to offset part or all of the cost of the hedge in any given year. It only takes one good plunge surprise to pay for the most of the cost of our total hedge for a year. The MW situation is just one more example of how that works. If an investor decides to employ this hedge strategy, each individual needs to do some additional due diligence to identify which candidates they wish to use and which contracts are best suited for their respective risk tolerance. I do not always choose the option contract with the highest possible gain or the lowest cost. I should also point out that in many cases I will own several different contracts with different strikes on one company. I do so because as the strike rises the hedge kicks in sooner, but I buy a mix to keep the overall cost down. To build such positions one would need to follow future articles as I provide the best option contracts on the best candidates each month. I build my own positions from the positions listed in the articles. Discussion of the risks of employing this strategy versus not being hedged. I want to discuss risk for a moment now. Obviously, if the market continues higher beyond January 2016 all of our earlier option (except JNK ) contracts could expire worthless. I am not ready to roll positions yet, but will probably when the open interest on contracts expiring in May, June and July have reached at least 50 or more. We need some liquidity to be able to move in and out of positions when necessary. I have never found insurance offered for free. We could lose all of our initial premiums paid plus commissions. If I expected that to happen I would not be using the strategy myself. But it is one of the potential outcomes and readers should be aware of it. And if that happens, I will initiate another round of put options for expiration in July 2016 or January 2017, using from one to two percent of my portfolio to hedge for another year. The longer the bulls maintain control of the market the more the insurance will cost me. But I will not be worrying about the next crash. Peace of mind has a cost. I just like to keep it as low as possible. Mine is a unique hedging strategy. But it is not the only hedging strategy that can work. Each investor needs to consider which strategy makes the most sense for their own purposes. The main reason I am writing these articles is raise the awareness of investors that hedging is a prudent part of an overall investment strategy. One does not need to be hedged at all times; that would be overkill and far too expensive. But when the equities market has been hovering at all-time record highs for months and the bulls have been in charge for as long as is the case in the current environment, investors need to consider whether they can stand another bear market without protecting against those losses. Because of the uncertainty in terms of how much longer this bull market can be sustained and the potential risk versus reward potential of hedging versus not hedging, it is my preference to risk a small percentage of my principal (perhaps as much as two percent) to insure against losing a much larger portion of my capital (30 percent or more). But this is a decision that each investor needs to make for themselves. I do not commit more than two percent of my portfolio value to an initial hedge strategy position and have never committed more than ten percent to such a strategy in total. The ten percent rule may come into play when a bull market continues much longer than expected (like five years instead of two or three). And when the bull continues for longer than is supported by the fundamentals, the bear that follows is usually deeper than it otherwise would have been. In other words, at this point I expect a correction greater than the original 30 percent that I originally forecast. If the next recession does not begin until the second half of 2016 or 2017, I would expect the next bear market to be more like the last two. If I am right, protecting a portfolio becomes ever more important as the bull market continues. As always, I welcome comments and will try to address any concerns or questions either in the comments section or in a future article as soon as I can. The great thing about Seeking Alpha is that we can agree to disagree and, through respectful discussion, learn from each other’s experience and knowledge.

The Time To Hedge Is Now! 2,753 Percent Profits On Men’s Wearhouse

Summary Introduction and a brief overview of the series. 2,753 percent profit since August. Taking profits or riding a little more? Discussion of the risks of employing this strategy versus not being hedged. Back to Bear Rally = Another Chance! Introduction and Series Overview If you are new to this series you will likely find it useful to refer back to the original articles, all of which listed with links in this instablog . In the Part I of this series I provided an overview of an inexpensive strategy to protect an equity portfolio from heavy losses in a market crash. In Part II, I provided more explanation of how the strategy works and gave the first two candidate companies to choose from as part of a diversified basket using put option contracts. I also provided an explanation of the candidate selection process and an example of how it can help grow both capital and income over the long term. Part III provided a basic tutorial on options. Part IV explained my process for selecting options and Part V explained why I do not use ETFs for hedging. Parts VI through IX primarily provide additional candidates for use in the strategy. Part X explains my rules that guide my exit strategy. All of the above articles include varying views that I consider to be worthy of contemplation regarding possible triggers that could lead to another sizeable market correction. I want to make it very clear that I am not predicting a market crash. Bear markets are a part of investing in equities, plain and simple. I like to take some of the pain out of the downside to make it easier to stick to my investing plan: select superior companies that have sustainable advantages, consistently rising dividends and excellent long-term growth prospects. Then I like to hold onto to those investments unless the fundamental reasons for which I bought them in the first place changes. Investing long term works! I just want to reduce the occasional pain inflicted by bear markets. We are already past the average duration of all bull markets since 1920. The current bull is now longer in duration (nearing 82 months) than all but two bull markets during that time period (out of a total of 15). The three longest bulls prior to this are 1949-1956 (70 months), 1921-1929 (97 months), and 1990-2000 (117 months). So, I am preparing for the inevitable next bear market. I do not know when the strategy will pay off, and I will be the first to admit that I am earlier than I suggested at the beginning of this series. I feel confident that the probability of experiencing another major bear market continues to rise. It may have started already or it may not come until 2017, before we take another hit like we did in 2008-09. But I am not willing to risk losing 30-50 percent of my portfolio to save the less than two percent per year cost of a rolling insurance hedge. I am convinced that the longer the duration of the bull market the worse the resulting bear market will be. I do not enjoy writing about the potentiality of down markets, but the fact is: they happen. I don’t mind being down by as much as 15 percent from time to time; that is just a hiccup in the buy-and-hold investing strategy. But I do try to avoid the majority of the pain from larger market drops. To understand more about the strategy, please refer back to the first and second articles of this series. Without that foundation, the rest of the articles in this series may not make sense and could sound more like speculating with options rather than an inexpensive way to protect your portfolio against catastrophic loss. 2,753 percent profit since August I originally recommended buying puts on Men’s Wearhouse (NYSE: MW ) back in my August Update to this series. The stock was then trading at a price of $58.49 per share. Friday, after the company slashed its outlook for the current quarter on weaker-than-expected sales, the shares closed at $22.65 per share. In August I recommended buying two put options expiring in January 2016 with a strike price of $0.75 or less for each $100,000 in equity portfolio value. The bid premium at that time was $0.55 and the ask premium was $0.75. If one was patient it was possible to buy those put option for even less that the $0.55 bid premium not long after the article was published. After the close on Friday, those MW $45 put options were bid at a premium of about $21.40. If we assume the worst case scenario of buying the put options at the ask premium of $0.75, then the profit that is available today is 2,753 percent [($21.40 – $0.75) / $0.75]. And, of course, there is the possibility of getting a better premium than the current bid being offered. My target price of $25.00 was achieved. Thus, I am suggesting that those who ventured into this positions at my earlier recommendation consider what to do next. This one is likely to continue to be very volatile for the next few days and weeks. Taking profits now or riding a little longer? There may be more profit available, but sometimes it does little good to get greedy. The stock could just as easily rebound next week and leave us wishing we had taken profits. Or, the stock could go even lower between now and January. However, it should be noted that if the stock were to remain at this level through the January 20th expiration date, the value of the put option would equate to about $22.00. That probably isn’t enough additional gain for which to wait. If the stock rebounded by 25 percent between now and then, rising to about $28.50, the options should expire at about a $16.50 premium for a potential profit of 2,100 percent; much less than we could lock in now. It really is not much of a tradeoff to be considered. Do we take the profit now and cover the cost of our other hedge positions for the year or do we hold onto the position and hope that the stock remains depressed or goes lower over the next 2½ months? That is a decision each investor needs to make for themselves. For my own portfolio, I intend to take the profits on my position and deploy the proceeds over the next couple of months in a hedge position for 2016. My sense is that MW should linger below $30 until January unless management guides higher due to increased holiday sales. Such an announcement is not likely to come until mid-December or later. We have already exceeded my target so I recommend taking what the market gives you now. This is no time to get greedy. I want to emphasize that this strategy is not a get rich quick plan. It is a hedge strategy to provide insurance against a major bear market. When I have the opportunity to take some profits and reduce the cost of my hedging strategy, I will often take at least some of what the market gives me. When one of our candidates implodes as MW just did and like MU and TEX did for us previously, it is prudent to take advantage of situation. I have tried to be clear from the beginning that the strategy has the potential to cost less than one percent of a portfolio value per year for this very reason. Any one of the candidates has the potential to surprise big to the downside over the life of the hedge, thereby helping to offset part or all of the cost of the hedge in any given year. It only takes one good plunge surprise to pay for the most of the cost of our total hedge for a year. The MW situation is just one more example of how that works. If an investor decides to employ this hedge strategy, each individual needs to do some additional due diligence to identify which candidates they wish to use and which contracts are best suited for their respective risk tolerance. I do not always choose the option contract with the highest possible gain or the lowest cost. I should also point out that in many cases I will own several different contracts with different strikes on one company. I do so because as the strike rises the hedge kicks in sooner, but I buy a mix to keep the overall cost down. To build such positions one would need to follow future articles as I provide the best option contracts on the best candidates each month. I build my own positions from the positions listed in the articles. Discussion of the risks of employing this strategy versus not being hedged. I want to discuss risk for a moment now. Obviously, if the market continues higher beyond January 2016 all of our earlier option (except JNK ) contracts could expire worthless. I am not ready to roll positions yet, but will probably when the open interest on contracts expiring in May, June and July have reached at least 50 or more. We need some liquidity to be able to move in and out of positions when necessary. I have never found insurance offered for free. We could lose all of our initial premiums paid plus commissions. If I expected that to happen I would not be using the strategy myself. But it is one of the potential outcomes and readers should be aware of it. And if that happens, I will initiate another round of put options for expiration in July 2016 or January 2017, using from one to two percent of my portfolio to hedge for another year. The longer the bulls maintain control of the market the more the insurance will cost me. But I will not be worrying about the next crash. Peace of mind has a cost. I just like to keep it as low as possible. Mine is a unique hedging strategy. But it is not the only hedging strategy that can work. Each investor needs to consider which strategy makes the most sense for their own purposes. The main reason I am writing these articles is raise the awareness of investors that hedging is a prudent part of an overall investment strategy. One does not need to be hedged at all times; that would be overkill and far too expensive. But when the equities market has been hovering at all-time record highs for months and the bulls have been in charge for as long as is the case in the current environment, investors need to consider whether they can stand another bear market without protecting against those losses. Because of the uncertainty in terms of how much longer this bull market can be sustained and the potential risk versus reward potential of hedging versus not hedging, it is my preference to risk a small percentage of my principal (perhaps as much as two percent) to insure against losing a much larger portion of my capital (30 percent or more). But this is a decision that each investor needs to make for themselves. I do not commit more than two percent of my portfolio value to an initial hedge strategy position and have never committed more than ten percent to such a strategy in total. The ten percent rule may come into play when a bull market continues much longer than expected (like five years instead of two or three). And when the bull continues for longer than is supported by the fundamentals, the bear that follows is usually deeper than it otherwise would have been. In other words, at this point I expect a correction greater than the original 30 percent that I originally forecast. If the next recession does not begin until the second half of 2016 or 2017, I would expect the next bear market to be more like the last two. If I am right, protecting a portfolio becomes ever more important as the bull market continues. As always, I welcome comments and will try to address any concerns or questions either in the comments section or in a future article as soon as I can. The great thing about Seeking Alpha is that we can agree to disagree and, through respectful discussion, learn from each other’s experience and knowledge.

South Jersey Industries’ (SJI) CEO Mike Renna on Q3 2015 Results – Earnings Call Transcript

South Jersey Industries Incorporated (NYSE: SJI ) Q3 2015 Earnings Conference Call November 05, 2015 11:00 AM ET Executives Ann Anthony – Treasurer Mike Renna – President and CEO Steve Clark – SVP and CFO Jeff DuBois – EVP and President, South Jersey Gas Marissa Travaline – Director, IR Operator Good day, ladies and gentlemen, and welcome to the Quarter Three 2015 South Jersey Industries Earnings Conference Call. My name is Christie and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Ms. Ann Anthony, Treasurer for SJI. Please proceed ma’am. Ann Anthony [Indiscernible] SJI’s third quarter 2015 results and provide an update on our business. Joining me on our call today are Mike Renna, President and CEO of SJI; along with Steve Clark, our CFO; and Jeff DuBois, President of South Jersey Gas; as well as Marissa Travaline, our Director of Investor Relations. We also have several additional members of our senior management team available to help address questions following our prepared comments. Our third quarter earnings release was issued to the media this morning and is also available on our Web site at www.sjindustries.com. This release and the associated 10-Q provide an in-depth review of earnings on both a GAAP and non-GAAP basis using our non-GAAP measure of Economic Earnings. Reconciliations of Economic Earnings to the comparable GAAP measures are available in both documents. Let me remind you that throughout today’s call, we will be making references to future expectations, plans and opportunities for South Jersey Industries. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the company’s Form 10-K on file with the SEC. Also, as was the case in last quarter’s results, our 2014 per share numbers have been adjusted to reflect the impact of the stock split that occurred in May of this year. With that said, I’ll now turn the call over to our CFO, Steve Clark to review our year-to-date and third quarter results. Steve Clark Thanks, Ann. Good morning everyone. Thanks for joining us. Kicking off our discussion, year-to-date Economic Earnings totaled $55.8 million as compared with $72.8 million for the first nine months of 2014. As you would expect, the majority of the variance year-over-year is the result of a write-down of our investment in and the lack of operational contribution from the energy facility at Revel, which is responsible for approximately $11 million of this $17 million variance. Other significant contributors to the variance are an increase in reserves and write-offs of uncollectable accounts in our utility; increases in post retirement benefit costs and lower contributions from investment tax credits. The benefits realized in our commodity marketing business from the polar vortex that occurred in early 2014 also drove some of this variance. For the third quarter, Economic Earnings reflects a loss of $5 million in 2015 as compared with a loss of $3.4 million in the prior year period. Economic Earnings per share through September 30, 2015 were $0.81 as compared with $1.10 for the first nine months of 2014. For the quarter, Economic EPS reflected a loss of $0.07 as compared with a loss of $0.05 in the prior year period. Beyond the issues I just discussed, we still saw many positive contributors, including strong utility customer growth and much improved year-over-year contributions in our wholesale business and I’ll review that as I detail the results for the specific areas of our business. Starting with utility, South Jersey Gas’ net income through September 30, 2015 was up 4.6% at $44.4 million as compared with $42.4 million through September 30, 2014. For the quarter, utility net income reflected a loss of $3.4 million as compared with a net income contribution of $1 million in the third quarter of 2014. As I mentioned previously, these results were produced largely by the increased write-off of uncollectible accounts. The extreme conditions experienced in the last two winters produced significantly higher customer bills, higher than many customers were there for. As noted last quarter, this resulted in increased receivables, increased aging at those receivables and ultimately increased reserves and write-offs for those receivables. Compared to the prior year periods reserves and write-offs negatively impacted year-to-date and quarterly net income by $3 million and $1.8 million respectively. We continue to educate customers on ways to reduce usage through access programs for assistance and to take advantage of different bill repayment options we offer. Additionally, the quarter saw $700,000 impact to net income from increased cost associated with post-retirement benefits and a $1.1 million impact from higher depreciation and amortization. Infrastructure investments under our accelerated programs totaled $48.8 million year-to-date and added an incremental $1.3 million to net income for the first half of 2015. The planned investments are on target to reach roughly $70 million for 2015. Our AIRP and SHARP programs are expected to add $2.5 million in incremental income for 2015 while continuing to reinforce our system for the replacement of bare steel and cast iron gas main and a replacement of low pressure gas main with high pressure main along the barrier islands. Another major infrastructure reinforcement — infrastructure system reinforcement pending is the pipeline to provide natural gas to the former BL England electric generating station. Having received the certificate of filing from the Pinelands Commission’s staff in August, we now await final approval from the New Jersey Board of Public Utilities and acceptance of the BPUs determination by the Pineland Commission. We remain optimistic that we’ll obtain final approval of this project before year-end and that construction will commence in mid to late 2016 pending any appeals to the decision that may arise. Customer growth continues to be significant with our customers total up by nearly 6,900 or 1.9% for the 12-month period ending September 30, 2015. During the same time period, customer growth added $1.9 million incremental net income as compared with the prior year period. We continue to achieve this type of growth as a result of low natural gas prices and targeted marketing efforts that maximize the reach of our infrastructure to capitalize on customers additions from those on or near existing main. Shifting gears to the non-utility; our non-utility operations contributed a total of $11.5 million in Economic Earnings year-to-date through September 30, as compared with $30.4 million in the prior year period. In the third quarter of 2015, this segment produced a loss of $1.5 million as compared with a loss of $4.4 million in the third quarter of 2014. Our non-utility business is comprised of South Jersey Energy Services and South Jersey Energy Group. Within the South Jersey Energy Services, year-to-date results really reflect the impact of the write-down at Revel, with Economic Earnings of $5.4 million for the first nine months of 2015 as compared with $21.5 million for the same period in 2014. The Revel related impact was the largest contributor to the overall variance within this business line along with a reduction in the amount contributed by investment tax credits year-to-date. However, on a quarterly basis, Economic Earnings for Q3, 2015 match those of Q3 2014 at $800,000. These levels reflect the fact that neither the third quarter of 2014 nor the third quarter of 2015 saw noteworthy contributions from the Revel facility and both quarters also featured fairly moderate summer temperatures that requires less production from our portfolio of energy production facilities. With that in mind, our CHP portfolio reflected a loss of $8.6 million for the first nine months of 2015 as compared with Economic Earnings of $2.7 million for the first nine months of 2014. For the quarter, contributions from CHP reflect a loss of under $100,000 in 2015 as compared to a loss of $2.2 million in the third quarter of 2014. Moving over to our solar activities, net income was $16.6 million for the first nine months of 2015 as compared with $21.1 million for the first nine months of 2014. For the third quarter, solar contributed 1.5 million in 2015 as compared with 3.5 million in the third quarter of 2014. Lower levels of investment tax credits produce the variance. Although that variance is largely timing, as we expect to match 2014 solar investments by year-end based on the robust queue of solar projects we have in construction. We also remain on track for full year SREC production of 140,000 SRECs which will continue driving improved operating performance. To that end, the quarter reflected positive performance of approximately $200,000, a result that just not reflect the full value of our solar production in the second and third quarters of 2015 due to the timing of the certification of renewable energy certificates in Massachusetts which can take up to six months. We don’t recognize income from those SRECs until after the certification process is completed. We estimated that our 2015 Economic Earnings would have benefited by approximately $1 million, had all SRECs produced been certified as of 9/30. These earnings will be recognized over the next two quarters. For the first nine months of 2015. Our landfills produced a loss totaling $3.2 million as compared with a loss of $2.7 million in the prior year period. For the third quarter, these projects lost $800,000 in 2015 as compared with $400,000 in the same period in 2014. While we are just starting to see a slight uptick in performance from the sites, we are focused on improving. We also experienced some unrelated maintenance costs in the quarter. Addressing this issue is a high priority within SJI. Turning to South Jersey Energy Group, we remain very optimistic about the future of this business. Year-to-date, this area has added $6.1 million as compared to $8.8 million through September 30, of 2014. What’s important to note is that the current year’s performance was achieved without the benefit but the extreme volatility the region experienced throughout the first quarter of 2014. Volatility that drove the $18 million of Economic Earnings we experienced for the first quarter of 2014. In the current quarter, this area improved by nearly $3 million as compared with the third quarter of 2014 reducing its quarterly loss from $5.1 million to $2.3 million. This improvement was driven by the commencement of one fuel management contract in 2015 as well as improved performance of our marketing contracts. I also want to reaffirm our expectation that this business will exceed the $30 million of Economic Earnings that produced in 2014 or 2015. Finally, taking a look at the balance sheet, our equity-to-cap ratio was 41% at the end of the third quarter as compared to 43% in the third quarter of 2014. We’ve used our dividend reinvestment plan to issue equity totaling $9.7 million through September and we expect to further employ this resource during the fourth quarter of the year in support of our capital programs. We also maintain accumulated deferred tax benefits totaling $300 million related to our investments that we expect to realize between now and 2021 to help de-lever the balance sheet. At this time, I’ll turn the call over to Mike. Mike Renna Thanks, Steve. Good morning, everyone. With three quarters already under our belt, 2015 has so far presented our business with a few challenges. Certainly the write-down of our energy asset at the former Revel property had a significant impact on the current year. Now however, our focus is on moving SJI forward with a strategy that will create exceptional growth, improve the quality of our earnings and strengthen our balance sheet. From customer growth and infrastructure investment in our utility to a marked improvement in our commodity marketing and fuel management business lines to our investment in the pipeline to supply a repowered B.L. England generating facility and our stake in the vital PennEast pipeline, we are well positioned to deliver on our goal of achieving Economic Earnings of $150 million by 2020. Looking forward, steady contributions from recurring customer growth that far exceeds the industry average is expected to add nearly 12 million in Economic Earnings over the next five years as strong conversion effort continue to get a boost from access to an inexpensive and abundant supply of low cost natural gas. Infrastructure programs that support accelerated replacement of bare steel and cast iron mains as well as low pressure services also remain a key contributor year-over-year, driving incremental net income growth that is expected to top 18 million by 2020. In our non-utility businesses, our wholesale and retail commodity business lines are firmly positioned to drive low risk repeatable to income streams that are expected to contribute roughly 10% to 15% of Economic Earnings through 2020. Fuel supply management contract as additional plants come online will ultimately represent between 5% and 10% of our projected 150 million in 2020. And as we expand our organization to include a stake in PennEast, our 20% equity investment in this 105 million — 105 mile interstate transmission pipeline will be a boost to earnings as well as a significant benefit to our customers, as some of the nation’s lowest cost natural gas is delivered into our system. We also look forward to the possibility of constructing a new headquarters in Atlantic City to support organizational growth that has pushed us over 700 employees. We expect Atlantic City to remain a vital engine for economic development in Southern New Jersey and we look forward to being a central part of its resurgence. The agility and versatility of our business combined with the talent commitment of our workforce has enabled SJI to identify many opportunities that make up our strategic path forward. As a result, we expect to finish 2015 with earnings per share that meet our targeted range of $1.49 to $1.54. More importantly, we are confident in our ability to achieve our key strategic objectives, Economic Earnings of at least 150 million by 2020; strengthening our balance sheet; maintaining a low to moderate risk profile and perhaps most importantly, improving earnings quality to ensure that the foundation of our business is built on regulated, repeatable and reliable income streams. Now, I’ll turn the call back to the operator for Q&A. Question-and-Answer Session Operator Mike Renna Thank you. Before we conclude, as always, please feel free to contact Marissa Travaline, our Director overseeing Investor Relations or Ann Anthony, our Treasurer for any follow-up on the items we discussed today. Marissa can be reached at 609-561-9000 extension 4227 or by email at mtravaline@sjindustries.com. Ann can be reached at extension 4143 or by email at aanthony@sjindustries.com. Again thank you for joining us today. Operator Thank you for joining today’s conference, this concludes the presentation. 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