Prompt:
Human: We are happy to be with you as we turned the calendar to 2021, and I sincerely hope that everyone is staying healthy and safe.
Joining me on the call today are company's CIO, Greg Zimmerman; and company's CFO, Mark Peterson.
For the overview, clearly, 2020 was a year unlike any other we've experienced since the company was founded in 1997.
Early in the onset of the pandemic, we recognized the need to fortify the company's balance sheet to maintain sufficient liquidity for the long term.
Key among early actions was to defer an anticipated gaming venue investment of approximately 1 billion, along with deferring other uncommitted investment spending of approximately 600 million.
Additionally, we accessed our unsecured credit facility as a precautionary measure and suspended our monthly dividend to common shareholders.
We determined that these actions were prudent due to the extremely challenging environment in which our tenants have been operating.
As we speak today, our liquidity remains in a strong position with cash on hand in excess of 500 million.
This large reserve of cash reflects the fact that we are to return to normalcy.
However, as we announced in our quarterly disclosure on January 7, we generated positive cash flow in the fourth quarter and anticipate this trend to continue.
The recent paydown of our credit facility balance reflects this positive momentum and demonstrates our increased confidence.
Throughout 2020, our team was focused on the many challenges brought on by the pandemic, including monitoring tenant performance, assisting in reopening plans and collaborating to develop plans that ensure long-term stability and success for both our tenants and EPR Properties.
We have seen the success of this strategy with our nontheater tenants, where approximately 94% are open and rent collections have improved materially.
While our properties are still impacted by locally mandated closures and capacity restraints, performance and customer demand continued to improve, which we believe demonstrates our final thesis of people's desire for experiences.
As Greg will discuss in more detail, our theater tenants are still primarily challenged with limited film product, which should subside as we progress through 2021.
However, early indications from around the world indicate that when product is available and flowing, there is robust consumer demand.
Overall, we are pleased with both the progress and trajectory of our recovery as it is reflected in a continued increase in cash collections as we entered 2021.
Throughout the year, we made continuous progress.
And as I've stated before, I'm very proud of how our team has responded to the substantial challenges that they have faced.
Looking ahead, as we look forward in 2021, we're encouraged by the accelerated rollout of vaccines.
will continue to be a phased process, yet we also believe that as a society, we are more than ready to return to a sense of normalcy.
We also continue to be encouraged by the resiliency displayed by many of our tenants and anticipate that theaters will follow a similar pattern when they open more widely and key titles are consistently released.
As the country begins the recovery process, we look forward to getting back on the path to growth.
This process requires continued improvement and stabilization of our cash collections, which will allow us to exit our existing debt covenant waivers.
Upon achieving that goal, our focus will turn to reinstituting our common dividend and reinitiating our investment spending program.
The timing of achieving these milestones will be entirely dependent on a number of variables, including an effective vaccine deployment.
However, as today's results indicate, our progress has measurably improved in the early months of 2021, and we are optimistic that our goals are achievable during the second half of 2021.
At the end of the first quarter, our total investments were approximately 6.5 billion with 356 properties in service and 94.2% occupied.
During the quarter, our investment spending was 22.8 million and was entirely in our experiential portfolio, comprising build-to-suit development and redevelopment projects that were committed prior to the COVID-19 pandemic.
For the year, our investment spending was 85.1 million.
Our experiential portfolio comprises 281 properties with 43 operators, is 93.8% occupied and accounts for 91% of our total investments or approximately 5.9 billion of the total 6.5 billion.
We have three properties under development.
Our education portfolio comprises 75 properties with 12 operators, and at the end of the quarter was 100% occupied.
As the vaccine rollout accelerates, people are looking for safe and easily accessible ways to get out of their homes and come back together with friends.
Our operators are working hard to offer entertainment experiences which create memories in safe environments.
We're seeing that as consumers become increasingly confident in safety measures and restrictions are reduced, they're returning to our properties.
Now I'll update you on the operating status of our tenants, our deferral agreements and our rent payment time lines.
60% of our theaters were open as of February 22nd.
As we have previously noted, Cineworld made the decision to close all of its U.S., U.K. and Ireland theaters because of the lack of tentpole films from Hollywood.
Today, none of our 57 Regal theaters are open.
Theaters continue to face significant headwinds from the lack of tentpole films and capacity and concessions restrictions implemented by state and local governments.
These challenges will slowly begin to abate during vaccination ramp up and with loosening restrictions throughout the country.
Based on the current vaccine -- vaccination cadence, we believe major film releases and box office will begin to accelerate in the second half of 2021.
The 2021 film slate was strong before the pandemic.
Because a number of films scheduled for 2020 pushed to 2021, we believe the projected film slate will provide a strong content cadence for theaters to ramp up as vaccinations increase, normalcy returns and consumers feel more and more comfortable returning to the movies.
2021 tentpoles currently scheduled for release beginning in May include Black Widow, the Fast & Furious 9, Top Gun: Maverick, Jungle Cruise, Death on the Nile, A Quiet Place Part II, Dune, No Time to Die, Ghostbusters: Afterlife and MI7.
Box office strength will continue into 2022 with Jurassic World: Dominion pushing to mid-'22.
As demonstrated by consumer behavior in Asia and the Hollywood release schedule, we do not see evidence of structural changes in theater going habits as a result of the COVID-19 pandemic.
In Asia, the consumer bounced back quickly.
China's box office continues to perform solidly even in weeks without products.
During the Lunar New Year holiday, Detective Chinatown three opened with the highest grossing opening day, $163 million and opening weekend, $398 million, in history outpacing Avengers: Endgame.
Over the Lunar New Year holiday, Detective Chinatown three and Hi, Mom each grossed over $620 million.
In January, Demon Slayer became Japan's highest grossing movie ever.
Further, as provided by the continued recovery and resilience of our other experiential tenants, which I'll discuss in a moment, customers still want to engage in entertaining, affordable out-of-home experiences.
Once they know the operator is open and become comfortable with new protocols, we see that they are returning to experiential assets.
We are confident the same will hold true for theaters as vaccinations ramp up and normalcy returns.
As we have said throughout the COVID-19 pandemic, the studio's decision to push the vast majority of tentpoles to theatrical release in 2020 and 2022 is the best evidence of their commitment to the exhibition economic model.
The economics are straightforward.
Tentpole films cost well over $100 million to produce so the studios need theatrical release to maximize revenue for major pictures.
Of the projected top 30 box office films scheduled for release beginning in February 2020, only six films were moved to nontheatrical release and one other, Wonder Woman 1984, was released simultaneously to theaters and HBO Max.
In uniquely trying times, studios took the opportunity to test alternative delivery channels and for those with streaming services to add subscribers.
Even when in parts of the country, people could not leave their homes and theaters were either completely shut down or open with capacity and concessions restrictions, these releases had limited success.
After a couple of major tests with Wonder Woman 1984's simultaneous theatrical and HBO Max release and the release of Mulan, Trolls World Tour and Soul to premium video-on-demand or streaming video-on-demand, the studios withheld the vast majority of top films from digital-only distribution to preserve theatrical release in 2021.
On its recent earnings call, Disney reaffirmed it will release Black Widow theatrically, subject to opening cadence and consumer sentiment about going back to the movies, proving that all things being equal, Disney continues to see the enormous power of theatrical release for major motion pictures.
Likewise, Paramount recently publicly confirmed that Top Gun: Maverick will be released theatrically in July, again, subject to vaccination rollout.
In summary, despite the unique challenges presented by COVID-19, Hollywood continues to recognize that consumers still prefer to see movies on the big screen and don't embrace PVOD as a viable value alternative.
The decision to push theatrical release dates for the vast majority of major films, even after a unique period of experimentation, demonstrates that theatrical exhibition remains the preferred medium for consumers and the best format to deliver returns to the studios for major releases.
I also want to update you on our other major customer groups.
Approximately 94% of our nontheater operators are open or for seasonal businesses are closed in the normal course.
These businesses continue operating with appropriate safety protocols to comply with state and local requirements.
Performance remains fluid, depending on the impact of COVID-19 in each locale.
However, at a high level, our operators are resilient and performance has generally exceeded their expectations in the face of this lengthy pandemic.
Furthermore, we are seeing the benefit of owning drive-to value-oriented destinations.
I'll now provide a brief update on each of our property types.
The ski season is under way.
All of our ski resorts are open, and we're pleased with the results to date.
All of our Topgolf locations, all of our Andretti carting locations and all of our family entertainment centers are open.
All but one of our U.S. gyms are open.
About 61% of our attractions had opened for normal operations prior to normal seasonal shutdowns.
As we have indicated in past calls, a few of our attractions missed all or part of the season due to governmental health and sanitation measures and the financial feasibility of operating with reduced occupancy in a truncated season.
All of our cultural operators are open.
Except for the Kartrite Resort & Indoor Waterpark, all of our experiential lodging assets are open.
Kartrite remains subject to New York state's phased reopening plans, and we are planning for a Kartrite reopening in summer 2021.
Resorts World Catskills is open.
Finally, turning to our education portfolio, all of our early education centers are open.
We are seeing a steady increase in demand monthly as COVID restrictions ease and parents return to work.
All of our private schools remain open, utilizing a combination of in-person, online and hybrid instruction models.
Varying state and local requirements continue to influence each school's instruction model.
Volatility in reopening plans for public school systems has benefited private schools, and we believe parents continue to see the value of private school instruction.
We continued progress in executing our strategy to reduce our overall education portfolio.
In December, we sold six private schools and four early childhood education centers for net proceeds of $201 million.
These assets were sold at cash and GAAP cap rates based on base rents of 8.1% and 9%, respectively.
Note that over the past two years, we also collected average annual percentage rents of 6.3 million from three of the private schools based on total tuition levels.
However, these percentage rents were scheduled to expire over the next few years.
Overall, the assets included in this sale were an excellent investment for us with an unlevered internal rate of return of 13% over the life of our ownership.
Additionally, we sold four experiential properties and two vacant land parcels for net proceeds of around 23 million.
Total disposition proceeds in the quarter were 224 million.
During the quarter, we terminated all seven of our AMC transition leases and took back the properties.
We are executing our plans for each location.
In December, we completed the sale of one of the transition lease properties for an industrial use.
We are in various stages of active negotiation to sell another 5.
We anticipate these will result in various uses, including industrial, multifamily, office, retail and theater reuse.
We also took over management of two of our theaters.
One of the transition lease properties in Columbus, Ohio; and the former Goodrich Savoy in Champaign, Illinois.
We have retained a well-respected experienced theater management company to operate both locations on our behalf and both are open for business.
I want to take a moment to update you on the status of our cash collections and deferral agreements.
Cash collections have continued to improve in conjunction with reopenings.
Tenants and borrowers paid 46% of pre-COVID contractual cash revenue for the fourth quarter versus 29% and 43% in the second and third quarters, respectively.
As Mark will go over, we expect first quarter cash collections to significantly exceed fourth-quarter collections.
In January, we collected 66%.
And in February, collections are currently 64%.
In each case, of pre-COVID contractual cash revenue.
During the quarter, due to the continuing impact from COVID-19, we reserved the outstanding principal loan balance of 6.1 million and the unfunded commitment of 12.9 million for one of our attractions operators.
Customers representing approximately 95% of our pre-COVID contractual cash revenue, which includes each of our top 20 customers, are either paying their pre-COVID contract rent or interest or have deferral agreement in place.
In those deferral agreements, we have granted approximately 5% of permanent rent and interest payment reductions.
However, there can be no assurance that additional permanent rent or interest payment reductions or other term modifications will not occur in future periods in light of the continued adverse effect of the pandemic and financial condition of our customers, particularly with the ongoing uncertainty in the theater industry.
As we've discussed, our exhibition partners have faced and continue to face serious headwinds.
It goes without saying that the lack of product and reopening restrictions have weighed heavily on box office performance since early 2020 and continue to dramatically impact projected box office performance.
Our goal has been to work diligently with all of our customers to structure appropriate deferral and repayment agreements to facilitate their ability to reopen efficiently and help ensure their long term health, while also protecting our position and rights as landlord.
We intended to help them through a period where they have significantly reduced or no cash flow, allowing them to ramp back up to stabilize cash flow.
We individually tailored each deal, considering the variables impacting each business and improved our position through various arrangements.
These agreements are generally structured with rent and mortgage payments commencing and ramping up through 2021 and in some cases, after 2021.
Repayment of deferred amounts typically commences in 2021 and depending on the deferred amount to allow our customers some breathing room, the deferral repayment period generally extends beyond 2021.
The vast majority of our arrangements provide for repayment of all deferred rent.
As we have stated previously, in a few cases, we have provided rent concessions, but we've generally received equal or greater value through additional lease term, additional collateral or other benefits.
In most cases, our customers have paid and continue to pay third-party expenses, including ground rent, taxes and insurance.
Mark will provide additional color on the revenue recognition and cash collections implications for the first quarter of 2021.
Today, I'll discuss our financial performance for the quarter and year, which continued to be impacted by the disruption caused by COVID-19, provide an update on our balance sheet and strong liquidity position and close with some estimated forward information.
FFO as adjusted for the quarter was $0.18 per share versus $1.26 in the prior year, and AFFO for the quarter was $0.23 per share compared to $1.25 in the prior year.
Note that the operating results for the prior year included the public charter school portfolio, which was sold during the fourth quarter of 2019 and are included in discontinued operations.
Total revenue from continuing operations for the quarter was 93.4 million versus 170.3 million in the prior year.
This decrease was due to the accounting for the various agreements with customers as a result of the COVID-19 impact similar to what we discussed last quarter.
During the quarter, we wrote off 2.4 million in receivables related to putting two additional customers on a cash basis of accounting, bringing the total for the year for such write-offs to 65.1 million, including 38 million of straight-line rent.
Additionally, due primarily to the Kartrite Resort & Indoor Waterpark remaining closed due to COVID-19 restrictions, we had lower other income and lower other expense of 7.4 million and 8.7 million, respectively.
Percentage rents for the quarter totaled 3 million versus 6.4 million in the prior year.
This decrease related primarily to the closure of properties due to COVID-19 restrictions.
I would like to point out, as I did last quarter, that we are defining percentage rents here as amounts due above fixed rent and not payments in lieu of fixed rent based on a percentage of revenue.
Therefore, AMC and other theater tenants that were in the fourth quarter making cash payments based on a percentage of their revenue against contractual rents are recognized as minimum rent.
Property operating expense of 16.4 million for the quarter was up slightly versus prior year, but was up about 2.5 million from the last quarter due to increased vacancy, including the terminated AMC leases that Greg described.
Transaction costs were $0.8 million for the quarter compared to 5.8 million in the prior year.
The decrease is related primarily to lower costs incurred related to the transfer of early education properties to Crème de la Crème.
Interest expense increased by 7.9 million from prior year to 42.8 million.
This increase was primarily due to the precautionary measure we took last March to draw 750 million on our 1 billion revolving credit facility, which provided us with additional liquidity during this uncertain time.
Due to stronger collections and significant liquidity, including 224 million in net proceeds received from property dispositions in the fourth quarter, we reduced the outstanding balance by 160 million to 590 million at year-end.
Subsequent to year-end, we used a portion of our cash on hand to further reduce this balance by 500 million, resulting in a current balance of 90 million on our revolver.
As I noted last quarter, we are also paying higher rates of interest on our bank credit facilities, as well as our private placement notes during the covenant relief period.
The next slide lays out fourth-quarter results reflecting the impact of the receivable write-offs I discussed earlier.
These write-offs totaled $0.03 per share for the quarter and $0.86 per share for the year.
During the quarter, we had other items that were excluded from FFO as adjusted.
Gain on sale of real estate was 49.9 million and gain on insurance recovery, which is included in other income, was 0.8 million.
We recognized a total of 22.8 million in impairment charges because of shortening in our expected hold periods on four theaters as we expect to sell each of these properties.
In addition, we recognized net credit loss expense of 20.3 million that was due primarily to fully reserving the outstanding principal balance and unfunded commitment related to notes receivable from one borrower, as Greg discussed.
We also recognized severance expense of 2.9 million due to the retirement of an executive as previously announced.
Our results for the full-year 2020 were clearly impacted by COVID-19 as FFO as adjusted per share was $1.43 versus $5.44 in the prior year, and AFFO per share was $1.89 versus $5.44 in the prior year.
Note again that the prior period results included the public charter school portfolio that was sold during 2019 and those results, including 24.1 million in termination fees, are included in discontinued operations.
As discussed last quarter, we have classified our tenants and borrowers into categories based on how we accounted for them in the context of our annualized pre-COVID contractual cash revenue level of 624 million, which consists of cash rent, including tenant reimbursements and percentage rents and interest payments.
This annualized cash revenue excludes properties under -- properties operated under a TRS structure.
The changes of these classifications from last quarter were not very significant, but include a new category to reflect sold properties, most of which was previously classified under the first category titled, no payment deferral.
There was also a slight increase in the new vacancies category, primarily as a result of the terminated AMC leases.
Now let's move to our balance sheet and capital markets activities.
Our debt to gross assets was 40% on a book basis at December 31.
At year-end, we had total outstanding debt of 3.7 billion, of which 3.1 billion is fixed rate debt or debt that has been fixed through interest rate swaps with a blended coupon of approximately 4.6%.
Additionally, our weighted average debt maturity is approximately five years, and we have no scheduled debt maturities until 2022 when only our revolving credit facility matures.
As previously announced, due to the continued pressure on near-term quarterly results, as a result of the impact of COVID-19, during the quarter, we further amended our bank credit facilities and private placement notes to obtain an extension through the end of 2021, subject to certain conditions, of the waivers of the same four covenants temporarily suspended in June.
This amendment provides us additional time and flexibility to work with our customers during this period of uncertainty.
Note that we can elect to get out of the covenant relief period early, subject to certain conditions, and there was no change in the interest rate schedules from that agreed to previously.
We believe we have sufficient liquidity to see us through the market disruption caused by COVID-19.
We had over 1 billion of cash on hand at year-end.
Cash flow from operations was positive for the fourth quarter at approximately 6 million.
And we expect our operating cash flow to be substantially higher as we move into 2021.
This positive trajectory and our substantial liquidity gave us confidence in our decision, subsequent to year-end, to pay down our 1 billion line of credit to 90 million, while still maintaining about 500 million of cash on hand.
In addition, subsequent to year-end, we reduced the balance outstanding on our private placement notes by 23.8 million to 316.2 million as a result of certain property sales and in accordance with the recent amendment to those notes.
There was no prepayment penalty on this paydown.
As previously announced, due to the uncertainties created by the COVID-19 disruption, we are not providing forward earnings guidance.
However, we would like to update you on the expected ranges of contractual cash revenue that we expect to recognize in our financial statements for the first quarter of 2021, as well as our expected collections for the same period.
Because there have been changes in the portfolio due to permanent rent reductions, acquisitions and dispositions, changes in the occupancy levels and other items, we are moving away from reporting against pre-COVID contractual cash revenue to current contractual cash revenue for purposes of our guidance and future reporting.
This slide shows a reconciliation of those amounts, which begins with pre-COVID contractual cash revenue, including percentage rents, for both the quarter and annualized of 156 million and 624 million, respectively, and then subtracts out pre-COVID percentage rents of 4 million and 15 million, respectively.
From there, we make the additional adjustments to the portfolio I just described, to come to the current contractual cash revenue amount of 136 million for the first quarter and 545 million annualized.
Note that both of these amounts are before the impact of any temporary abatements or deferrals.
Accordingly, the expected range we expect to recognize in Q1 of '21 is 98 million to 105 million or 72 to 77% of such contractual cash revenue.
Additionally, the expected range we expect to collect in Q1 of 2021 is 87 million to 93 million or 64 to 68% of such contractual cash revenue.
Differences from the full amount of contractual cash revenue relate to deferrals granted and the associated accounting, as well as abatements.
No one is happier than EPR to put 2020 behind us, and we look forward like many consumers to begin again enjoying the experiences that our properties offer.
 Assistant:

Chosen response:
qtrly affo per diluted common share $0.23.
qtrly total revenue from continuing operations$93.4 million versus $170.3 million.
approximately 94% of company's non-theatre and 60% of company's theatre locations were open for business as of february 23, 2021.


Prompt:
Human: Our featured speakers today are Mark Parrell, our President and CEO; Michael Manelis, our Chief Operating Officer and Bob Garechana, our Chief Financial Officer.
Your commitment and hard work got the company through 2020, and I know you are ready to drive our recovery in 2021.
Turning to the business, we are encouraged by the recovery in demand in all of our markets, and especially in our urban sub-markets.
In real estate demand is the unsolvable problem, without it no other economic factor matters, and in our business both urban and suburban, we see plenty of it.
This positive trend in spite of a worsening pandemic, and renewed shutdowns in our markets gives us even more of a cause for optimism.
If demand is this strong now, we think that when the vaccines are more fully distributed, and cities reopen our business will really hum.
The fact that this is likely to coincide with our traditional leasing season with its higher seasonal demand, positions us especially well.
Admittedly though, pricing remains weak, but there are signs of the beginnings of improvement.
We also see declining forward concessions.
With occupancy firming and strong demand going into our busiest time of the year, we believe that we can recover considerable ground on the pricing side as 2021 plays out.
While we see signs of recovery, our current results reflect the still challenging climate in many of our markets.
You may remember that on prior calls, I made clear that the impact of lower rents and higher concessions in 2020, and currently will take some time to fully manifest itself in our reported numbers.
That impact arrived in the form of our fourth quarter 2020 same store revenue results, as we continue entering into new leases, and renewing existing leases at lower rents, reflecting the post-pandemic leasing climate, as well as amortizing concessions from leases written in 2020.
But just as our reported results lagged our actual operating environment on the way down, they will also lag it on the way up.
So you should expect relatively weak same store revenue results in the first half of 2021, with a marked improvement in our revenue numbers in the second half of the year, as we benefit from improving pricing, higher occupancy, and lower concessions, plus easier post-pandemic comparable periods.
The interplay of our expectations of increasing occupancy, pricing that is improving, but will be lower than last year's pricing until mid-year or so and the amortization of 2020 and '21 concessions, creates considerable modeling complexity for us, and for our investors and analysts.
Because of this more complex picture than usual, we thought it was particularly important that we reinstate guidance to give investors a better idea of management's view of the year.
Our guidance is at the wider than usual range to account for the multitude of factors, both positive and negative, that may impact our business in 2021.
All of this is of course premised on the continuing progress in controlling the virus, and an assumption that other general economic conditions remain supportive.
Turning to the long term, we believe that the fundamental factors that have long made Equity Residential an attractive place to invest your capital remain just as true now as before the pandemic.
First, our capital is invested in markets that will continue to be the centers of the knowledge economy, that drives the growth of this country, centers of Innovation and Technology, Finance, Entertainment, Medicine and Life Sciences.
Even in the pandemic, we have seen announcements of new high quality jobs in our urban centers like Amazon's announcement that it's putting 3,000 new technology and software development jobs in the Seaport District of Boston, and with the recent commencement of construction on Disney's new building in Hudson Square in New York, that will lead to a significant influx of new content creation and technology jobs.
And while the remote work trend may change the number of days that we are in the office we are by our nature social animals.
Our need to interact with each other, to create, to share ideas, to manage our businesses and to start new ones is not being met by meetings on a video screen.
Second, we believe that the entertainment, cultural, and social attractions that fill the great urban centers in which we operate, will soon reopen, and will again prove to be magnets for affluent renters.
We believe that many renters desire both the work proximity I just mentioned, as well as easy access to the amazing entertainment, cultural and social opportunities our cities will provide once they are reopened, not to mention the ability to live in an exciting, dynamic, and diverse community.
Our residents that live in our more urban properties do so because they value the lifestyle of our country's great urban centers.
Third, we have a highly skilled, affluent customer base able to afford our rent and to accept future rent increases as conditions improve.
Our residents are well-employed in growing industries like technology, biotech and new media.
Industries that we also think are less susceptible over time the job loss, from increasing waves of automation, and offshoring.
In the pandemic period overall unemployment rose to almost 15% and is now around 6%, while job losses for those with the Bachelor's degree or better, which is our target demographic peaked at 8.4% and is now gone down to 3.8%.
Our resident base proved its quality again in the fourth quarter, as we collected 97% of our expected residential revenues.
We think the quality of our customer base is over the long haul one of our greatest strengths.
Fourth, the superior location and quality of our portfolio makes our properties attractive places for our residents to live, and also makes our properties attractive places for private investors to invest their capital.
This makes our properties liquid, and appreciating over the long-term.
Capital has long been drawn to the higher quality properties we own, and that will continue to be the case, even in markets like New York and San Francisco, once the pandemic abates.
We also believe that the lower long-term capital spending required to maintain our properties and income stream compares favorably with that of older lower quality apartment buildings.
But our portfolio can always be improved and you should expect us to be more active recyclers of capital over the next few years.
As I have said on prior calls, even before the pandemic, in order to create the most stable and growing cash flow stream possible for our investors, we are inclined to further diversify our portfolio in the higher-end suburban locations in our current markets, as well as into a few select new markets with favorable long-term supply and demand characteristics, and a growing affluent renter base.
These affluent renters are found in abundance in our existing markets, but there are also increasing concentrations of them in denser suburbs near city centers of our existing markets, and in places like Denver, which is a market we reentered in 2016.
You've seen us do this over the last few years, as we have acquired properties in suburban Seattle in Washington, D.C. with strong resident demographics.
We are looking hard at several other suburban assets, as well as development and acquisition opportunities in Denver, that we find appealing long term.
We will fund this by lowering our concentration of assets in city centers in our existing markets, and by exiting assets elsewhere that do not meet our return parameters.
To close, we have the best team in the business, ready to maximize results as the pandemic ends, and a sturdy balance sheet that gives us ample flexibility.
We are tremendously optimistic about our company's future, because we believe that the markets in which we operate will thrive when we get to the other side of this pandemic, and with the rollout of vaccines we are on our way.
So 2020 has been the most challenging year that we have faced in our business.
Working together we got through 2020 by serving our customers, taking care of each other, and driving the best results possible given the circumstances.
Despite the challenges we are excited that 2020 is behind us and optimistic that 2021 will be a year of recovery.
As Mark mentioned, we have begun to see improvement in both Physical Occupancy and pricing.
Notably, this is the first time this has occurred since the beginning of the pandemic.
We continue to test price sensitivity in many markets by reducing both the value and quantity of concessions being granted, and beginning to raise rates.
In November, concessions averaged just over six weeks free on about 45% of our applications and recent weeks concessions have averaged just under six weeks and only about a third of our applications.
All that said, it will take some time to fully recover from the unprecedented events that have occurred, particularly in our hardest hit markets.
While we are optimistic about the recovery, it is hard to handicap its pace, especially in New York and San Francisco, our hardest hit cities.
Demand continues to be robust and has carried us through much of the winter season with increased move-in activity, well above seasonal norms.
Application count exceeded 2019 levels by 25% in the fourth quarter and we were able to generate sufficient front door activity that have move-in, outpace move-out despite higher turnover compared to the 2019 record low level.
We haven't seen this net gain and move-ins since the onset of the pandemic.
Applications have remained robust in January albeit below December's levels but that isn't surprising since improved occupancy has allowed us to start testing pricing and we have fewer units available to sell.
The chart on pricing trend, which includes the impact on concessions is a good indicator of where rents are headed and it has been improving across both the urban and suburban markets for the last eight weeks or so.
Blended rates, which combines new lease changes and renewal rates achieved, will continue to be negative for some time as this metric compares new leases written or renewed with those that were before the pandemic began.
That said, the rate of change of Blended rates has flattened and for the first time, we have seen modest sequential improvement in new lease rates which is helpful.
We continue to experience negotiation pressure on renewal rates and we are still renewing residents who signed leases pre-pandemic.
We have found some stability in the percent of residents renewing, which stands at approximately 52% in January, we expect that to improve to around 54% for February and March, which is still below our usual retention rates for this time of year.
Before moving to market commentary, I want to summarise that while the operating environment remains challenging, we continue to see good demand for our product and we are starting to see early signs of pricing improvement.
We have a long way to go, but recovery is in sight.
Now let me provide some brief market commentary.
Starting with Boston, strong application volume and improved retention through the fourth quarter resulted in steady gains in occupancy to position us to 95.5% today.
This market has been dialing back concession use and raising rates consecutively for the past four weeks.
At present concessions are being used on about 25% to 30% of our applications and averaging right at six weeks, which is compared to 50% use back in November.
Long-term demand drivers remain positive with a very bullish outlook for biotech and pharma space fueling job creation.
At this point, it is hard to forecast exactly how some of the traditional demand drivers associated with Boston play out, notably students, both domestic and international and the jobs that support that infrastructure.
We expect to have a better view on these by late spring, early summer before the fall semester.
Anecdotally, I will tell you that January did see a few applications from foreign addresses, which we haven't seen for several months.
Boston will have its challenges in '21 but its performance over the last two months has definitely improved.
In 2021, we look to regain more occupancy, which will allow us to then recapture some of the rate we lost last year.
New York continues to feel the outsized impact from the pandemic, but there are early signs of recovery.
We recently had our best traffic week in the last 12 months and our best leasing weeks since August.
Leasing activity is still driven by deal seekers and interest city movers, which is running about 10 points higher than normal.
We still see move-outs to the suburbs in New Jersey and Connecticut, but that number is normalizing.
Occupancy has improved in the market and is just above 91.5%, which is the first time we have been over 90% since September of 2020.
Some additional color on recent traffic includes that we are just now starting to have former residents reaching out to our property teams contemplating moving back to the city.
Like in Boston, we are seeing the first signs of international students and specific to New York, UN workers looking to come back.
And finally, we saw a few roommate type prospects emerging from their parents basements.
Many of these prospects are looking for late spring or early summer time frames in anticipation of their offices opening back up.
We still see a good amount o f deal hoppers and upgraders as well as prospects from the outer boroughs who can now afford to live in Manhattan and many of them are telling our on-site teams they think the market bottom is near and they don't want to miss out.
Concessions remain prevalent in this market was 70% of the applications receiving about two months free.
Rates are beginning to show signs of improvement and we are just starting to gradually dial back concessions.
For 2021, our focus in New York will be recapturing as much of the occupancy rate as possible while lowering and possibly eliminating the use of concessions.
While the market will still produce a negative decline for the year, New York has upside potential given the dramatic declines we saw in 2020.
Recovery in this market will be fueled by a lack of competitive new supply, the return to office and the continued growth of the big tech employers in the market.
Moving to D.C. which has been our most resilient market on the East Coast, occupancy remained solid at 95.5%, but the market continues to feel the impact from the delivery of Class A multifamily product, which is not being absorbed as efficiently in previous years.
Federal government employment has grown, but the overall job growth has declined.
Concession use was up in the quarter with the largest amount focused in the district.
The good news, however, is that as fast as concessions came into the market during the fourth quarter, they have now been greatly reduced.
Since mid-December we are only using concessions on 15% of the applications and they've been averaging just below one month.
2021 will be focused on balancing occupancy and rate as we faced supply pressure from yet another 12,000 units being delivered into the market.
Recent signs of improvement provide us more confidence in the market's ability to absorb the new units and allow for continued rate recovery, which could make D.C. one of our better performing markets in 2021.
Denver, albeit a small portfolio for us is holding up well.
For 2021, all five of our Denver communities will be included in the same store results.
Occupancy is sitting around 96% and both new lease change and renewal rates are improving.
Renewals are showing positive growth rates in December and January and concession use is trending down.
In Seattle, we are seeing early indications that the bottom may be behind us.
Occupancy continues to improve as traffic is up over January 2020 by about 6%, and we are seeing weekly application numbers that are closer to peak leasing season levels.
Concessions remain common in the market, especially in the urban submarkets.
During the fourth quarter, concessions averaged about six weeks free and about 55% of our applications.
Strength in occupancy both at our properties and more generally in the overall market are allowing for a gradual reduction in concessions.
We have heard from our Seattle teams that many prospects are less concerned about the monthly rate right now as they are about getting a deal.
While current rent freeze restrictions may limit renewal performance in the first half of the year, overall fundamentals for this market support a recovery.
Recent home price appreciation and the increase in this quarter's job postings from the technology companies should continue to drive strong demand for our product.
The focus in Seattle in 2021 is maintaining the strong occupancy we currently have while pushing rate.
San Francisco remains our most challenged market, but even here there are some very early signs of recovery.
Occupancy is just below 94% and has improved 150 basis points since the beginning of November.
The Downtown portfolio remains pressured on rate with concessions that average six weeks in the quarter and about two third of our applications.
January concessions improved to a one-month average on less than half the applications.
Anecdotally, stories from our teams across the Bay are reporting that people who left to go to other areas like Denver and Sacramento are now looking to move back to be near their office or in desirable school districts.
The extent of the Bay Area recovery will improve as we get even more clarity on tech companies plans regarding return to office.
There have been headlines about corporate relocations at a state and clearly, that is not a positive for the market, but it is important to keep reading.
The Bay Area continues to attract venture capital and is yet to be replaced as the epicentre of the tech economy.
Bay Area tech companies are also feeling a bit more optimistic and their ability to receive H1B visas under the new administration, which could increase demand in this market.
'21 will continue to be concentrated in Oakland and in the South Bay.
Feedback from our local team was that the recent lifting of the stay-at-home order can definitely be felt in the downtown market with much more active streets and outdoor restaurant seating filled to the new lower allowed capacity levels.
These are the first signs of bringing life back to the city.
Our focus in San Francisco in '21 is to build back our occupancy, particularly in the downtown submarket, get rid of concessions, and then push rate.
While San Francisco will produce a revenue decline in '21, hit like New York has a lot of upside potential due to the steep decline in 2020.
Finally, moving to Southern California, which continues to hold up much better than the Bay Area, despite some pretty difficult pandemic related headlines in the LA area.
Our Los Angeles portfolio maintained occupancy above 95% through the quarter, concession use was modest and averaged just under one month on about 20% of our applications.
Operationally, the story is similar to the third quarter with continued pressure from new supply in the Downtown, Korea Mid-Wilshire corridor.
West LA continues to feel the pressure from the slow restart of online content creation but new lease and renewal rates have shown some stability through the fourth quarter and into January.
The suburban portfolio has very strong occupancy at or near 97% and the submarkets of Inland Empire, Santa Clarita Valley and Ventura County continue to experience modest year-over-year gains in rental income.
For '21, LA should be one of our better markets.
We have recaptured our occupancy, concession use is already been dial back and now our opportunity is on increasing rate and managing delinquency.
I will finish with Orange County and San Diego, which are primarily suburban markets for us and have averaged around 97% occupancy through the quarter.
These markets continue to demonstrate resilience and produced higher resident retention then in any of our other markets.
Both of these markets are presenting opportunities to increase rates and are expected to continue to perform well through 2021.
In closing, we remain optimistic that the early signs of recovery that we now see will continue.
And that through '21, we will build occupancy on the back of strong demand leading to improved pricing power.
Our efforts over the next several months will be focused on seeking out opportunities to maximize the trade-off between rate and occupancy while ensuring the well-being of our employees and residents.
As a result, our same store revenue, NOI, and normalized FFO ranges are wider than normal.
Let's start with our full-year 2021 total same store revenue guidance range, which is between -9% and -7%.
Note that this guidance is on a GAAP basis since we report same store revenues in the same manner and include the straight lining of concessions as required.
That said, let me take a moment to highlight the main drivers that will shape revenue performance for the year, along with our thoughts and how 2021 might play out.
You heard both Mark and Michael talk about the improvements we are already seeing.
We would expect this to continue and that as we get into the second quarter, occupancy should become a tailwind that begin to contribute to year-over-year improvement.
Much like occupancy, the middle and higher end of our guidance anticipate the pricing improvements discussed to continue both an improved leasing rates and reduce concessions.
This positive trend, however, will take a little longer to manifest itself in our reported numbers.
For leasing rates, it will take some time, not only to start writing new leases and renewing existing ones at levels above the prior year, but also to reset a meaningful part of the leasing book.
The good news is, that not only are we starting to see improving trends, these improvements may gain even more traction in time to coincide with our prime leasing season and resulting in positive year-over-year rates by mid-year.
The other element of pricing that is worth touching base upon is concessions.
As I mentioned earlier, we recognized concessions on a straight-line basis as required by GAAP.
That means as disclosed on Page 12 of the release, of the $31 million in cash residential concessions granted in 2020, we still have approximately $19 million of unamortized concessions that were reduced revenue in 2021, which is about 75 basis points of same store revenue.
Any new concession granted in 2021 will also be straight-lined.
So the earlier in the year that the concession is granted, the more of it that will be recognized in the 2021 financial statements.
We expect concessions granted will taper off during the first half of the year.
But because of the combination that I just described, 2020 unamortized residuals and the timing of new 2021 concessions, this improvement will fully manifest itself in 2021 reported GAAP results.
And finally some thoughts on bad debt.
As Mark mentioned, our collections have remained strong and consistent at approximately 97%.
We incurred in approximately $30 million reduction in revenues for the fourth quarter 2020 due to uncollected rent.
The middle range of our 2021 guidance assumes that this continues with only slight improvement very late in the year.
We hope that we can do better than that, but given the regulatory environment, we remain cautious in our assumptions.
Specifically, same store revenue performance will be sequentially negative from Q4 2020 to Q1 2021, and likely not improve until the second half of the year.
As fundamentals improve, consistent with our expectations, reported results will catch up from this improvement and benefit both sequentially and from a year-over-year comparison basis.
We expect same store revenue results in the second half of the year to be better than the first half results and to position us very well for continued growth and recovery.
Now, some color on same store expenses.
Our full-year guidance range for same store expenses is 3% to 4%.
The drivers of same store expenses remained largely unchanged.
The four largest expense categories continue to be real estate taxes, on-site payroll, utilities, and repairs and maintenance.
As you think about how this plays out quarterly, this comparison issue will especially be pronounced in the second quarter since many activities and corresponding expenses were halted in the first few months of the pandemic.
Now a little color on the major categories.
Real estate taxes are expected to grow in the mid 3% range, which is slightly lower than prior years.
While municipalities continue to be stretched, we are seeing some jurisdictions provide relief on assessed values and that coupled with aggressive appeals activity should help control growth.
Perhaps even more pronounced this year than usual will be the timing and success of this appeals activity which may present an outsized impact on where the number ultimately settles out.
Payroll ended 2020 flat to 2019.
This is the second year in a row that payroll growth has been less than 1%.
And while many of our efficiency initiatives were delayed because of the pandemic, our hard-working on-site colleagues have continued to gain in efficiencies.
As a result, 2020 makes for yet another difficult comparison for 2021.
By continuing our efficiency initiatives and keeping our eye on the ball, we should still be able to limit payroll growth for the full year to around 2%.
That leaves us with the final two categories of utilities and repairs and maintenance.
Both are estimated to have more meaningful growth in the 4% to 5% range.
In previous years, utilities benefited from a modest or declining commodity price growth.
In 2021, we're expecting higher natural gas prices, which is driving our forecasted growth.
For repairs and maintenance, a good amount of the growth encompasses catching up on activities that were delayed as a result of the pandemic, keeping in mind that this expense declined in 2020.
Our guidance range for normalized FFO in 2021 is $2.60 per share to $2.80 per share.
Major drivers for the change between our 2020 normalized FFO of $3.26 per share and the midpoint of $2.70 from our 2021 guidance include a $0.60 decline in same store NOI based on the revenue and expense assumptions outlined.
Keep in mind that nearly one third of that decline stems from the difficult comparable period in the first quarter of 2020.
A $0.07 decline primarily due to disposition activity that occurred in 2020 which is more than offset by a positive $0.14 contribution from lower anticipated interest expense, predominant due to taking those disposition proceeds and paying down nearly $1 billion in debt in 2020, and finally a negative $0.03 in other items.
The backloaded nature of the recovery in our NOI will also of course impact our NFFO numbers, which should improve on the back half of 2021.
A final note on the balance sheet, our financial position remains extremely strong, despite the impact of the pandemic.
As I just mentioned, in 2020 we paid down nearly $1 billion of debt using disposition proceeds, extended our already long weighted average maturities to nine years and continue to reduce our weighted average rate.
This activity has positioned us extremely well and in the year with net debt to normalized EBITDA of 5.0 times, nearly $2 billion in available liquidity, and very limited maturities until 2023.
Our access-to-debt capital remains excellent, positioning us well for opportunities should they present themselves.
 Assistant:

Chosen response: sees full year 2021 normalized ffo per share of $2.60 to $2.80.


Prompt:
Human: escotechnologies.com, under the link Investor Relations.
Before we get into the financials, I'll provide a brief update on today's COVID environment.
We continue monitoring the situation on a regular basis, and our primary goals remain the same; stay ahead of the curve, provide a safe working environment and protect the health of our employees.
The decisive actions we've taken and the operating protocols we've implemented since the start of the pandemic were done with a clear focus, which was to protect our strong financial condition, to deliver products and services and support of our customers, all while keeping our employees safe and healthy.
Our solid operating results in Q1 coupled with our strong liquidity position demonstrates that the measures we've taken will allow us to successfully navigate through this challenge.
Our actions will benefit as we're going forward as things continue to move toward a more normal state.
And I'm confident that our disciplined approach to operating the business will result in our continued success throughout the balance of fiscal 2021.
While Gary will provide financial details, I'll offer top level comment by noting that while our Q1 A&D sales were lower than prior year due to COVID's impacts on commercial aerospace.
Our portfolio diversity allowed us to overcome this headwind as we substantially increased our adjusted earnings per share from prior year, due to the strong performance from our other operating units.
Our Navy business remained strong and well-funded.
Our test business continues to outperform with increased margins and our USG business saw some meaningful calendar year-end spending across the utility customer base.
Coupled with the cost reduction actions we recently implemented, USG delivered an adjusted EBITDA margin of nearly 25%, up from approximately 19% in the prior year's Q1.
We're fortunate to have strong and experienced leadership teams across the company, who continues to demonstrate their ability to effectively manage costs, to meet changing market demands.
Our teams are actively addressing the challenges of today, while continuing to focus on being even stronger tomorrow.
ESCO will continue to benefit from our leadership positions in several niche markets, where we deliver set of unique and highly technical products and solutions, specifically designed to meet our customer needs.
This makes it difficult for our solutions to be replaced by alternative sources.
The fundamentals of our portfolio remain strong and our goal remains the same, to create long-term shareholder value.
Navigating today's COVID world, our number one financial priority remains the same, maintaining our substantial liquidity.
As I said from the start of the pandemic, when challenging times pop-up unexpectedly, cash is king.
I'm extremely pleased with the significant cash flow we generated in Q1, as normally our first quarter is the weakest quarter of the year, when it comes to cash generation.
Following up on the strong cash flow performance of the past year, we kicked-off fiscal 2021 with a record amount of cash flow, resulting in a free cash flow conversion ratio of 127% of net earnings.
Clearly, our working capital initiatives are taking hold across the company, and while impressive today, we have set larger goals for the future.
Today, we have approximately $740 million of liquidity at our disposal between cash on hand and available credit capacity while carrying a modest leverage ratio of 0.38.
In the release, we called out a couple of discrete items, which are described in detail and are excluded from the calculation of adjusted EBITDA and adjusted earnings per share in both Q1 periods.
I'll briefly touch on a few comparative highlights.
We reported adjusted earnings per share of $0.55 a share, which increased $0.12 or 28% from the $0.43 we reported in prior year Q1.
The $0.55 also exceeded the consensus estimate of $0.45.
Given the backdrop of today's COVID operating environment, I'm pleased to report that we deliver Q1 adjusted EBITDA of over $29 million, which is approximately 4.5% higher than Q1 of last year, despite the noted sales decline in A&D that Vic mentioned, related to softness within commercial aerospace, which historically is one of our most profitable operating units.
Total sales in Q1 decreased $9 million compared to Q1 of last year, but Navy and space sales were up $4 million in A&D, which helped to mitigate the decline in commercial aerospace and Test and USG sales were up a combined $2 million.
Despite the noted increase in USG's Q1 sales resulting from the release of some pent-up demand, Doble continues to expect some near-term deferrals of project deliverables and maintenance work as many utility customers, both domestic and international are continuing their COVID protocols, reflecting the various mandates restricting onsite personnel at customer locations.
Consistent with their earlier communications, we believe the back half of 2021 will be stronger than the first half.
And as vaccine rollouts continue to accelerate, this should allow Doble's customers to return to a more normal operating environment.
We took several cost reduction actions recently, and as a result, we increased our Q1 gross margin by 150 basis points to 39.4% and reduced our SG&A spending by nearly 3%.
These favorable outcomes were achieved despite adding the recent ATM acquisition in October, which is not fully operating at capacity during its transition to Crissair, and despite our continued spending on R&D and new product development to benefit our future.
Amortization of intangibles, interest expense, and tax expense as a percent of pre-tax income also decreased in Q1, as we look at all costs and spending similarly.
Entered orders were solid, as we booked $158 million in new business and ended the quarter with a backlog of $512 million with a book-to-bill of 97%.
As we move forward throughout 2021, I'll remind you that our DoD business, led by our participation on the Block V contract for additional Virginia class submarines, where we booked several large orders during fiscal 2020 will be delivering products against these large multi-year programs, which will mathematically reduce the optics of our book-to-bill going forward.
As we work through the year, COVID will continue to bring along some uncertainty, which makes it difficult to predict how our near-term operations will be affected using our normal forecasting methodologies.
And as a result of this uncertainty, we'll continue our current protocol of not providing finite earnings per share guidance for the balance of the year.
Consistent with our November communications, from a directional perspective, we can point to several areas where we see positive momentum.
Our commercial aerospace and our utility end markets are showing some degree of customer stabilization, which supports our current outlook suggesting movement toward a recovery in the second half of 2021.
The increasing distribution of the COVID vaccine is anticipated to benefit and accelerate the recovery of commercial air travel and utility spending with customers resuming more normal buying patterns.
While we solidly beat Q1, we still expect the first half of 2021 to be slightly down compared to the first half of 2020 and the outlook for the second half of 2021 is expected to be a favorable comparison to the second half of fiscal 2020, given the various elements of recovery that we are anticipating.
We expect to show growth in fiscal 2021 adjusted EBITDA and adjusted earnings per share compared to fiscal 2020 with adjusted EBITDA and adjusted earnings per share reasonably consistent with that reported in 2019.
If we complete any additional acquisitions during the year, it is expected they would contribute to these expectations.
I won't spend much time recapping the first quarter.
The commentary and release captures my perspective, but I will offer some qualitative comments about our end markets and our expectations for the balance of the year.
Starting with our A&D Segment, while we're seeing some signs of modest recovery in commercial aerospace, we expect continued softness over the next three to six months.
We are seeing some stabilization in OEM build rates and increase in airline passenger traffic, and flight miles evidenced by the fact that quite a few air carriers bringing more of their idle fleet back in the service, and daily TSA passenger boarding numbers are moving in the right direction.
Just as we saw in Q1, the defense portion of our A&D business is and will continue to remain strong for the foreseeable future, given our backlog and platform positions.
We also see the current situation in aerospace market as an opportunity for ESCO and we continue to look at suppliers, our competitors where we may be able to provide assistance by a partnering or through an acquisition.
Our Test business delivered a really solid Q1 by significantly beating our internal expectations and delivering an EBITDA margin of nearly 13% versus 11% last Q1.
Test outlook remains solid, given the diversity of its served markets.
While USG had a really strong first quarter coupled with favorable sales mix driving a solid EBIT margin, we now expect USG's sales outlook to be -- we do expect it to be soft for Q2 before returning to more normal levels in the second half of the year.
As COVID vaccine gets more widely distributed throughout utility service personnel, we expect USG market to come back on line more quickly as they can relax some of today's social distancing guidelines, utility service personnel can return to their normal site visit routines.
We continue to communicate with and support our utility customers remotely and our client service engineers are doing a really good job of capitalizing on their relationships with their utility counterparts to provide real-time solutions.
This has been accomplished through a lot of creative means and positions Doble for success when the current site restrictions are eased.
I'm pleased with the enthusiasm surrounding USG's pipeline of new products and solutions and we continue to see NRG's end market is improving as new investments in renewable energy are increasing in both wind and solar.
Our new solar product introductions have been growing far better than anticipated and we expect that trend to continue.
Moving on to M&A, we continue to evaluate several opportunities and we'll continue taking a prudent and deliberate approach.
We expect to take action on these opportunities to grow our business as we have in the past.
Our board is supportive of our M&A strategy and our current balance sheet provides us with plenty of liquidity to allow us to add to our existing portfolio.
Regarding our recent acquisition of ATM, I am pleased to report the integration into our Crissair facility in Valencia, California is on track and should be completed within the next two to three months, which should further improve ATM's contribution margin.
So to wrap-up, we delivered a solid first quarter from both the cash flow and earnings standpoint.
As we move through the fiscal 2021, our plan is continue to focus on the fundamentals and look for opportunities to leverage our infrastructure through M&A, to create additional operating efficiencies, ensure we're well positioned for long-term success.
So with that, I'd be glad to take any questions.
 Assistant:

Chosen response: current business outlook for 2021 is consistent with commentary included in company's previous earnings release.


Prompt:
Human: technologies.com under the link, Investor Relations.
There continue to be a lot of challenges to overcome on a regular basis.
We're seeing some supply chain issues with delivering cost inflation, as well as the ongoing challenges from COVID.
In spite of that, we continue to see great efforts and contributions from our body across the company and for that I'm very appreciative.
Since beginning of the pandemic, our primary goal has been the same to provide safe working environment and protect the health of our employees.
We continue to do that now and we appreciate everybody's efforts to create a safe and collaborative environment our facilities worldwide.
Overall, we're very happy with how we finished fiscal 2021.
The fourth quarter showed some stabilization in our overall business with sales growth of two of the three business platforms and good margin improvement compared to our third quarter results.
Cash generation was also strong, as we continue to see benefits from our ongoing focus on working capital improvement.
Chris will get into some financial deals -- the details in a few minutes, but I wanted to start off with some top level commentary.
From a segment perspective, there are several positives to report.
Within A&D, we're seeing signs of recovery in commercial aerospace as passenger boardings continue to solidify.
More importantly, we're starting to see some order momentum from this set of businesses.
All of our businesses in selling commercial aerospace sector saw a nice order improvement in the quarter.
We're also seeing good order strength in the military side of the business.
Sales of our commercial aerospace customers were still be down in fourth quarter, but the rate of decline was improved compared to what we saw in the first half of the year.
Overall, our navy and space businesses remain strong and well-funded, but sales there were a little weaker in the quarter, which is mostly a function of a very strong fourth quarter last year by our VACCO subsidiary.
Our Test business has seen a nice pickup in its overall piece of business, we had double-digit sales growth there in Q4, and we also saw order growth of over 30%, some exciting numbers.
in the U.S., we have seen some sizable order growth from the power line filter business.
These are used in data centers to ensure clean power supply, and we've seen a lot of government activity driving the order increases.
We also had a strong quarter in Asia from a top line perspective and are excited about our prospects there, as we move forward.
We did experience a little margin pressure test during Q4, definitely seeing some impacts of inflation, we're all very aware of these days.
The team at the testing is very focused on managing our overall cost profile and also price execution, so that we see margin trends turn around in fiscal 2022.
USG business had an exciting quarter with the closing of two acquisitions.
By now, you've all heard a lot about Altanova and Phenix, but we're very excited to get these deals closed.
These businesses will strengthen USG for the long term and we're very excited to have these teams on board with our ESCO.
The business is going through the hard work of integration now doing a full product and channel assessment to gain proper alignment of the businesses on a global basis.
The acquisition to get the USG business a bit of a top line boost in the quarter and we look forward to more of that next year.
The underlying business did delivered growth in Q4 and that was good to see.
The core business -- core Doble business was a bit up and down in the fiscal '21 where we really finished the year strong.
The energy business grew 25% for the full year and the fourth quarter was consistent with that as well.
USG margins were a big part of our '21 story because the team took actions late last year to reduce cost, and we really saw good flow-through from that throughout the year and definitely saw in fourth quarter as well.
Overall, the fundamentals of our portfolio remain strong.
We're excited about the outlook for '22.
We feel good about that and are ready for the return of growth after two tough years in COVID environment.
I'll start briefly by touching on a few comparative highlights.
Sales in the fourth quarter were flat to prior year Q4 with A&D down 16%, USG was up 16% and Test grew 11%.
So we did see growth from two of the three businesses, but we do continue to fight some headwinds in the A&D Group.
Adjusted EBIT margins were 13.7% in the quarter compared to 13.9% in the prior year quarter.
The margin decline was driven primarily by deleverage within the A&D Group, given the sizable revenue drop there.
Below the EBIT line, we saw interest expense of approximately $800,000 in the quarter compared to nearly $1.5 million in the prior year Q4.
Additionally, we saw tax rate favorability compared to prior year Q4.
All these items delivered adjusted earnings per share of $0.85 per share above prior year's $0.80 per share.
Segment highlights in the quarter are as follows.
A&D did see sales weakness in the quarter as previously mentioned, the group was down 16%, in the quarter we saw declines in all major markets with commercial aerospace down 15%, space down 10% and the Navy business down 27%.
The space and Navy reductions are a function of timing and comparisons, as our VACCO subsidiary was very strong in the prior year quarter.
We did see great strong order growth by the A&D Group in Q4.
Orders were up over 25%, as we saw the commercial aerospace driven businesses pick up nicely during the quarter.
PTI, Crissair and Mayday lead the order growth for Q4, a nice indicator as we head into fiscal '22.
USG saw sales growth of 16% in the quarter.
If you exclude the impact of the Q4 acquisitions, the growth was approximately 8%.
The core utility business from Doble was up approximately 4% in the quarter, the renewables business at NRG delivered 29% growth in the quarter capping off a very successful 2021.
The margins from USG were very good in the quarter with adjusted EBIT up to 24.3% in the quarter compared to 18.8% last year.
We continue to get good flow-through from prior cost reductions and we also had favorable mix on instrument, contract and service sales.
We saw good orders for USG in Q4 and including the recent acquisitions we move into fiscal '22 with a record backlog position of $92 million.
This compares to $51 million at the end of last year.
The test business also saw strong growth in the quarter with revenues increasing by 11% compared to prior year Q4.
This growth was led by strength in China, which was up over 30%, the Americas also experienced solid growth driven by the power filter business Vic mentioned previously.
We did see margin pressure in this business, during the quarter as adjusted EBIT margins went from 16.8% in the prior year to 15.3% in the current quarter.
The business is experiencing inflation driven by materials and labor, as they manage increasing demand.
We are very focused on driving cost containment, productivity and price increases to offset these impacts as we move forward.
On the orders front, we saw continued strength in the pace of business for test, orders were a record $74 million in the quarter, which is an increase of over 35% compared to last year's Q4.
Now a few comments on the full year performance.
The A&D Group had a full year sales decline of 11%, the main driver of the sales drop was commercial aerospace, which was down 29% for the year, this was somewhat offset by 4% increase from the Navy business.
USG at a full-year sales increase of 6% excluding the fourth quarter acquisitions the growth was 4% and this was driven by 29% growth at NRG.
Test grew by 6% during fiscal '21 and for the full year consolidated adjusted EBITDA was $131 million or 18.3% compared to $133 million and 18.3% in the prior year.
We were able to hold EBITDA margins on reduced sales.
Adjusted earnings per share finished the year at $259 million compared to $267 million in the prior year overall of 3% reduction of earnings per share, which is consistent with the underlying sales decline that we experienced.
Orders for the year were $767 million before considering the impact of fourth quarter acquisitions last year's orders were $798 million but included very large in Navy orders received by Globe during 2020.
Backlog ended September 21, is at $592 million compared to $511 million at the end of September 2020.
Year-to-date, operating cash flow achieved a record of $123 million in '21.
Going back to fiscal '18, we have seen steady improvement with operating cash flow increasing at a double-digit compound annual growth rate.
We continue to see great results from our focus on driving balance sheet improvements, operating capital turnover continues to improve, and we see overall balance sheet and cash flow management as a long-term value lever for ESCO.
We have a focus program with each subsidiary and will continue driving for long-term improvement of our returns on capital.
Overall, while we continue to see some challenging conditions in a few of our end markets, we were still able to deliver solid results in 2021.
Our balance sheet remains strong and gives us great flexibility moving forward, our overall net debt position and leverage ratios leave us with the strength to invest in our core business and to expand via acquisition.
We continue to aggressively look for new companies that can be added to our portfolio.
We will continue to aggressively pursue additional deals in 2022.
And we told you last quarter, our number one focus remains the same increasing and maximizing our liquidity to position us for future M&A growth and continued investment in new products and solutions.
We still have ample capacity for further acquisitions and we obviously continue to invest in the core business to enhance the organic growth profile.
Our significant cash generation this year is a testament to this focus on liquidity.
We delivered free cash flow conversion at 129% of net earnings in '21 and we'll continue to build on the momentum achieved from our working capital initiatives.
In the release, we provided earnings per share guidance for fiscal '22.
We have seen some good trends developing with orders and are excited to issue guidance that calls for earnings per share in the range of $310 million to $320 million or growth of 20% to 24% in fiscal '22.
This earnings per share range assumes '22 sales in the range of $810 million to $830 million or growth of 13% to 16%.
We expect A&D to grow sales in the range of 10% to 12%, USG to grow in the range of 28% to 32% and test to grow 3% to 5%.
Backlog positions for all three businesses have solidified nicely during the fourth quarter and are supportive of these growth ranges.
We do have some headwinds next year with increased interest expense to $4 million in a projected tax rate of 23% to 24%, but the plan still deliver strong earnings per share in spite of these items.
We are now breaking out guidance by quarter for '22, but we do expect the Q1 results to be lower than Q2 to Q4.
The core utility-based business has been up and down over the last year and we see Q1 a little weaker there and while the test backlogs are strong right now, we don't see that growth kicking in until after Q1.
So, that's the financial summary.
Since I touched on quite a few of my thoughts earlier in my commentary, I'll just offer a few more comments before we move into the Q&A.
As Chris mentioned we feel good about the year, we just finished, and are excited for 2022 and a return to growth.
We feel great about our end market exposure and a diverse portfolio allows us to manage through periods like we've just experienced over the last few years.
We've been able to continue investing in the core business and we know how important driving organic growth is, and these programs are key to achieving that.
Examples of this across our portfolio include the F8000-series of power system simulators launched by Doble in 2021 in the Red Edge Power Lines Filters that are driving growth for test.
We've also been able to strengthen the portfolio with the ATM acquisition earlier in '21, Altanova and Phenix in the fourth quarter and then NEco in the first quarter of 2022.
These acquisitions all bring unique value to the ESCO and we're committed to delivering value to the shareholders, with these transactions.
We spent the last two days with their Board for our year-end meetings, we had a great set of meetings and covered a lot of important topics.
We appreciate all your hard work and are counting on you as we go into 2022.
So, with that, I think we're ready for Q&A.
 Assistant:

Chosen response: compname reports q4 adjusted earnings per share of $0.85.


Prompt:
Human: I'm Jeff Kotkin, Eversource Energy's Vice President for Investor Relations.
These factors are set forth in the news release issued yesterday.
Additionally, our explanation of how and why we use certain non-GAAP measures and how those measures reconcile to GAAP results is contained within our news release and the slides we posted yesterday and in our most recent 10-K and 10-Q.
Speaking today will be Joe Nolan, our President and Chief Executive Officer; and Phil Lembo, our Executive Vice President and CFO.
Also joining us today are John Moreira, our Treasurer and Senior VP for Finance and Regulatory; and Jay Buth, our VP and Controller.
We hope that all on the phone are safe and well, and we look forward to seeing you in person later this year.
I know the most recent months have resulted in weather challenges across the country.
In the West, our peers have [Phonetic] to deal with heat and wildfires.
in New England with an increased level of thunderstorm activity dropped off by a glancing blow from Tropical Storm Elsa.
Employees have worked around the clock many days restoring power to our customers from tree-caused damage to our overhead [Phonetic] system, while our implementation of new technology in vegetation management has limited the scope of many of the resulting power outages.
Our dedicated crews continue to be on the front line completing a large amount of emergency restoration work, in fact, in humid conditions over the past month and a half and doing so in a safe and effective manner.
The work has been excellent and we continue to receive notes of appreciation from both our customers and municipal leaders.
I was out all day in Connecticut.
The day also passed through and I cannot say enough about our team in preparing for and responding to storm damage in coastal regions of Connecticut in Massachusetts.
We greatly appreciate the recognition of those efforts that we received from Connecticut PURA Commissioners at the July 14 meeting.
As I mentioned during our first quarter earnings call, improving our relationship with Connecticut policymakers and customers is my top priority as CEO.
Earlier this week, a number of Connecticut legislators joined several state community education and labor leaders at our Berlin Connecticut campus to celebrate the 1st class of students who are completing our new Lineworker certification program in partnership with the Hartford based Capital Community College.
We continue to see steady monthly improvements in our customer favorability ratings and we appreciate the positive feedback we are receiving from municipal leaders.
But we have to prove ourselves during the next major storm.
I strongly believe that the changes we are implementing to our communication systems and processes will put us in a much better place the next time a multi-day storm cleanup effort occurs.
Next I want to provide an update on the offshore wind partnership with Orsted.
Over the past few months, we have continued to make significant progress on the three projects that I noted on Slide 3.
Perhaps the most significant development was the agreement we reached with Dominion Energy to charter the Jones Act-compliant wind turbine installation vessel, currently under construction in Brownsville, Texas.
Once construction of the vessel was complete in late 2023, it will seal to New London, Connecticut where it will be used to install wind turbines for Revolution Wind and Sunrise Wind.
The vessel will be one of the largest, most advanced of its kind in the world and will provide a more efficient approach to construction and use the feeder barges.
Work has recently begun at New London at the state-owned ocean facing Deepwater peer to convert into a major state area for offshore wind.
As you know, the primary variable in our construction timetable to siting approvals.
We continue to be on a good path to secure Federal Bureau of Ocean Management or BOEM approval of 132MW South Fork project in January of 2022, which will enable construction to begin early next year and will be completed before the end of 2023.
During hearings spring [Phonetic] resulted in Rhode Island Coastal Resource Management Council approval of the project, we indicated that we would install 12 11-megawatt turbines in connection with this project.
We are making progress on the 2 larger projects as well.
State permitting applications in Rhode Island for Revolution Wind and in New York for Sunrise Wind we're filed last December.
In April, the Rhode Island Energy Facility Siting Board issued a preliminary decision in order and Revolution Wind schedule with advisory opinions for local and state agencies to be submitted by August 26, 2021.
Evidentiary hearings are due to begin by mid October.
The Sunrise Wind application was deemed complete by New York officials on July 1, initiating the formal review process for the project.
As we noted in May, BOEM was targeting the completion of the review of Revolution Wind for the third quarter of 2023.
Based on that review schedule, we now expect to be able to achieve commercial operation in 2025.
We have not yet received the schedule for BOEM's review of the Sunrise project, but we are in a good position with our New London stacking area, our turbine installation ship and our suppliers.
So depending on the BOEM review schedule that we expect to receive within the next few months, we expect Sunrise will reach commercial operation in 2025 as well.
These dates are consistent with the vision of the Biden administration, which continues to accelerate to review of offshore wind projects proposed for the Atlantic Coast.
It is also consistent with the administration's target of having 30,000MW of offshore wind operating in the United States by 2030.
Offshore wind is one of several initiatives underway to help our states achieve the greenhouse gas reduction targets.
On July 14, PURA took major -- took a major step forward in furthering the state's clean energy goals when it approved a comprehensive program to support the state's push for having at least 125,000 zero emission vehicles on the road by the end of 2025.
The order is described on slide 4.
We appreciate a number of the changes that PURA made to the draft decision to enhance the programs expected success.
We will submit the implementation plan based on the PURA order by October 15.
Also on that slide is a description of a proposal that Massachusetts Utilities submitted on July 14 to further develop the infrastructure that is needed to support rapid conversion of the states vehicles to zero emissions.
As you can see on the slide, by the end of this year, we will have invested $55 million in our Massachusetts Electric Vehicle program helping to connect about 4,000 charge ports.
However since transportation is responsible for more than 40% of the states' greenhouse gas emissions, significantly more support is needed to help the state beat its targets of reducing greenhouse gas emissions by 50% by 2030 and 70% by 2040.
Massachusetts had only 36,000 electric vehicles registered as of January 1, 2021 and in 2020, only 3% of the light duty vehicle sold in the state where EVs.
While that percentages above average for the country as a whole, it needs to be enhanced significantly going forward since at the current pace, we will have fewer than 500,000 EVs in Massachusetts, as of 2030.
We need more than 1 million EVs by then for the state to reach its targets.
We have proposed spending more than $190 million on EV support from 2022 to 2025, including $68 million of capital investment.
These investments are described on the slide and include the expanded Charter infrastructure investment, some rate incentives in new opportunities to add EV infrastructure in environmental justice communities.
Our support for our stage greenhouse gas reduction efforts is discussed at length in our 2020 Sustainability Report, which was posted on our website earlier this month.
A link to the new report is included on Slide 5.
The revamp report has incorporated a number of enhancements to provide you with more visibility into our environmental, social and governance efforts.
We're also pleased to share updates on our 20:30 carbon neutrality goal, including our first third party verification of our 20-20 greenhouse gas footprint.
We have a number of teams within Eversource cast with making our 2030 goal a reality.
They include a team focusing on reducing emissions in 5 principal areas.
Another team working on developing the strategy to offset emissions that cannot be eliminated by 2030 and another team that's encouraging all 9,300 Eversource employees to contribute to their best ideas on how we could achieve our 2030 goal.
They've have already developed some truly innovative proposals that we are evaluating.
Their enthusiasm is just more evident on why I am so confident about Eversource's future.
I'll start with our results for the quarter in slide 6.
We are in $0.77 per share for the quarter, including $0.02 per share of costs primarily relating to the transitioning of Eversource Gas Company of Massachusetts into the Eversource systems.
Excluding these costs, we earned $0.79 per share in the second quarter and $1.87 per share in the first half of 2021.
So let's take a look at each of the segments performance in the quarter.
Our Electric Transmission business earned $0.40 per share in the second quarter of 2021 compared with earnings of $0.39 per share in the second quarter of 2020, a higher level of necessary investment in our transmission facilities was partially offset by higher share count there.
Our Electric Distribution business earned $0.35 per share in the second quarter of '21 compared with earnings of $0.34 per share in the second quarter of 2020.
Higher distribution revenues were partially offset by higher O&M, depreciation and property taxes.
The higher O&M was largely driven by increased storm activity in the second quarter of 2021 and higher employee medical expenses.
The higher medical expenses is mostly due to the fact that in the second quarter of 2020, in the midst of the worst COVID in New England -- the worst of COVID in New England, many routine medical appointments were being canceled, but this is largely returned to normal now in our area.
Our Natural Gas Distribution business earned $0.01 per share in the second quarter of both 2021 and 2020.
As you know, natural gas utilities in New England tend to have relatively neutral results in the second quarter.
Our Water Distribution business Aquarion earned $0.03 per share in the second quarters of both 2021 and 2020.
Beginning next year, we expect Aquarion revenues to be bolstered by previously announced acquisition of New England Service Company or any SC owns the number of small water utilities that serve approximately 10,000 customers in Connecticut, Massachusetts and New Hampshire.
We continue to expect to close the transaction before the end of this year.
State regulators are currently reviewing the acquisition and its benefits to customers.
Our parents in other company segment had modest second quarter losses in both years.
Turning to Slide 7, you can see that we have reiterated our amended earnings guidance that we issued in May.
We continue to expect ongoing earnings toward the lower end of our $3.81 to $3.93 per share guidance.
This incorporates $28.6 million pre-tax charge relating to our performance in Connecticut, following the devastating impact of tropical storm Isaias last summer.
We recorded the charge in the first quarter of this year.
We also continue to project long-term earnings per share growth in the upper half of the range of the 5% to 7% through 2025 excluding the impact of our new offshore wind projects.
From our financial results, I will turn to the status of various regulatory initiatives and I'll start in Connecticut.
We have updated summary of various proceedings in the appendix of our slides.
I mentioned earlier that the Public Utilities Regulatory Authority or PURA has finalized the $28.6 million civil penalty associated with our storm performance last summer that follow the April 28 release of a final storm performance decision that we discussed on our first quarter call.
As you know we have appealed that April 28 decision in Connecticut Superior Court.
Do not have a full schedule for those court proceedings, but expect the case to take many months before the court renders a decision.
A scheduling conference will be held later next month.
The April 28 storm order also required a 90 basis point reduction in Connecticut Light and Powers distribution ROE on top of the $28.6 million penalty.
That pancaking of penalty forms, one of the principal basis of our appeal since we believe it violates the state law that was in effect at the time of the storm.
Additionally hearings in the temporary rate reduction docket commenced in May will continue next month.
A supplemental hearing is scheduled for August 9, at which time additional testimonial evidence may be presented on certain issues including the applicability in term of the 90 basis point penalty.
Pure justice Week notified parties that written testimony on the applicability in term of that penalty may be filed in advance of the August 9 hearing, no later than August 4.
CL&P's distribution ROE for the 12 months ended March 31, 2021 was 8.86% and its authorized distribution return was 9.25%.
The scheduled for this proceeding currently indicates a decision date of October 13.
We will continue to update you as this docket proceeds.
Regardless of the status of this rate review, we and our regulators share a common goal of providing nearly 1.3 million Connecticut electric customers with safe, reliable service and to help the state meet its aggressive carbon reduction and clean energy goals.
Turning to Massachusetts, Joe mentioned our electric vehicle initiative earlier.
On July 1, we submitted two other proposals to the Department of Public Utilities.
As you can see on slide 8, the first was an extension of the grid modernization plan that we began implementing with the DPU approval back in 2018.
The investments we've made on this first phase have allowed us to reduce the scope of outages, monitor power conditions much more closely and assist in the installation of distributed energy resources throughout the Massachusetts service territory.
The program is submitted to the Massachusetts DPU earlier this month, call for the investment of another $200 million from 2022 through 2025 to further improve substation automation, wireless communications and expand other programs that would have a number of other benefits including reducing peak demand in line losses.
Reducing line losses, an important element in achieving our 2030 carbon neutrality goal.
In the same docket, we're asking the DPU to take the first steps to allow us to embark on a 6-year effort to implement advanced metering infrastructure for our nearly 1.5 million Massachusetts Electric customers along with a new communications network, Meter Data Management System and Customer Information system.
We project capital investment associated with the full program to be in the $500 million to $600 million range over the period of 2023 through 2028.
These technologies are critical enabling investment that support the state's 2050 clean energy goals.
Currently, there is no full schedule for the docket at this time.
Finally, I just want to cover recent financings and rating agency actions.
In recent months, both Moody's and Standard and Poor's have changed CL&P's outlook to negative.
Moody's changed Eversource parent outlook to negative as well.
While we're not happy with these developments, we understand these changes are primarily related to the ongoing regulatory proceedings in Connecticut, such as the temporary rate reduction docket and the ROE penalty stemming from the ESI's report.
We are pleased that Moody's recently affirmed PSNH, Public Service New Hampshire's rating and outlook recognizing the constructive outcome of last year's distribution rate proceeding in New Hampshire.
Also, we recently filed an application to issue up to $725 million of long-term debt at Eversource Gas Company of Massachusetts.
Since we purchased the former Columbia Gas asset last year, Eversource Gas of Massachusetts has been borrowing long term exclusively through the Eversource parent.
We believe that borrowing at the subsidiary level ultimately will be less costly for customers and we expect DPU decision on this application later this year.
Like NSTAR Gas and Yankee Gas, we would expect Eversource Gas of Massachusetts to borrow in the private markets.
 Assistant:

Chosen response:
q2 earnings per share $0.77.
qtrly earnings per share $0.79 excluding items.
reaffirmed previously disclosed 2021 earnings per share projection toward lower end of range of $3.81 to $3.93 per share.