Prompt:
Human: I'm Vice President, Investor Relations and Corporate Development for HNI Corporation.
Actual results could differ materially.
In the second quarter, our members executed at a high level, delivering substantial year-over-year profit improvement.
The post pandemic recovery continues to provide reasons to be encouraged about both the general environment and our opportunities at HNI.
However, the macro backdrop along with our strong growth also presented new challenges in the quarter related to labor availabilities, supply chain capacity and inflation.
Our teams managed through those challenges to deliver strong results.
Our two differentiated business segments are well positioned to benefit from the recovery of the cycle, multiple secular trends and numerous HNI specific growth initiatives.
We have a track record of effectively deploying capital, driving annual productivity and cost savings and managing through macro and operational challenges.
First, non-GAAP earnings per share doubled year-over-year, despite increasing pressure from inflation and returning costs.
Second, our Residential Building Products segment delivered exceptional performance.
Third, demand in Workplace Furnishings is recovering.
I will start by providing some detail on those highlights.
Marshall will then cover our third quarter outlook.
I will conclude with some general comments.
Our first highlight for the quarter.
We doubled non-GAAP earnings per share versus the prior year, despite increasing pressures in returning costs.
Non-GAAP earnings per share of $0.40 was up 100% from the $0.20 reported in second quarter 2020.
In the quarter, we overcame greater than expected pressures related to material inflation, labor availability and supply chain capacity.
We generated 22% sales growth and our network ramps up to meet that demand.
In addition, as we discussed last quarter, some of the costs related to temporary measures taken in the second quarter of 2020 returned.
Despite these pressures, we grow strong margin expansion and profit growth.
Overall, the second quarter shows the power of our diversified revenue streams, our ability to react quickly to changing market dynamics and our overall operational capability associated with our member owner culture.
Our second highlight for the quarter, we delivered exceptional revenue and profit growth in our Residential Building Products segment.
On a year-over-year basis, total revenue growth exceeded 50% in the quarter and operating profit more than doubled, with operating margins expanding more than 500 basis points from second quarter 2020 levels.
From a channel perspective, new construction revenue was up more than 30% from year ago levels and remodel retrofit sales increased nearly 90% versus the prior year quarter.
Orders were equally strong in the quarter, growing 53% year-over-year.
As the quarter progressed the comps became more difficult, order growth moderated but remained at high levels.
Our value propositions, growth initiatives and supply chain strength continue to resonate with homeowners, homebuyers and builders.
As we look forward, we remain optimistic about the prospects for both remodel retrofit and new construction.
Long-term demographic trends and a persisting housing supply demand and balance will continue to support a prolong housing cycle and elevated remodeling activity.
Nesting and deurbanization trends also provide secular support.
And we have an outstanding opportunity to grow the category in both new construction and remodel retrofit.
As a reminder in new construction two-thirds of homebuyers see having a fireplace is a must-have feature of the home, but less than 40% buy one.
And on the remodel retrofit side, we estimate that only about 3% of all remodeling projects involve a fireplace.
To take advantage of these opportunities, we are driving a better connection with the homebuyer and homeowner and we'll continue to make investments and launch tools that will assist and influence homebuyers and homeowners in their purchase in remodeling journeys.
An example of our investment in our model home is our model home virtual tour capability, where we content -- where our content and messaging seamlessly plugs into the builders virtual experience.
This allows us to reach the homebuyer early in the decision process with consistent and effective content.
We have strong competitive positions in both new construction and R&R, our vertically integrated business model, unmatched product depth and pricing breadth, strong builder relationships and regional distribution infrastructure, all provide differentiation for this business.
As a result, we have significant opportunities ahead of us to grow revenue in the Building Products business.
The third highlight for the quarter.
Our Workplace Furnishings segment is recovering.
On an organic basis, net sales in this segment increased 9% and orders grew 32% versus the prior year period.
Second quarter non-GAAP operating income grew 21% year-over-year despite the pressures discussed earlier.
Our small-to-mid sized customers continue to outperform as does demand in the public sector with orders in our businesses focused on these markets increasing 55% year-over-year in the second quarter, putting us back to pre-pandemic levels.
In addition, the North American contracting market continues to recover with orders in our contract businesses up more than 23% in the second quarter year-over-year.
And in the past five weeks, contract orders were up approximately 30% versus the prior year period.
Looking to the back half, we believe Workplace Furnishings has turned the corner and expect to drive revenue growth through the remainder of the year.
Recent order patterns are encouraging and are indicative of our agility, our competitive position and improving demand trends.
Market demand signals indicate activity will continue to ramp in the back half.
As a result, we continue to expect year-over-year revenue growth in our Workplace Furnishings segment to accelerate as the recovery in our contract business gains momentum.
Our Workplace Furnishings businesses have unmatched price point breadth, channel access and market reach and we are investing in multiple strategic initiatives aimed at driving continued outperformance.
A few examples of our growth initiatives include, the December 2020 acquisition of Design Public Group.
We are seeing strong momentum with DPG.
Year-to-date orders are up over 40% with record bookings in May and June.
DPG is also giving us more access in greater insight into the work-from-home segment and e-commerce possibilities.
Another example, is our recently launched ESR app.
This is a mobile app we built to drive engagement with dealer sales reps and currently provides quick access to marketing content, product information, digitalization and order status updates, all from a single mobile enabled platform.
Over 600 dealer sales reps are already using the app.
We expect that number to grow as we add more capability.
Additionally, we are investing to make our contract dealers more efficient and effective.
This includes technology to streamline the design and selling processes and platforms to make the back-office more efficient.
These investments along with our existing competitive differentiators position us well to benefit from office reentry, work-from-home and deurbanization trends.
Let's start with our outlook for consolidated revenue growth.
We expect third quarter revenue to grow in the mid 20% range compared to the prior year quarter.
Because of our seasonality, this outlook implies third quarter volume will be substantially above second quarter levels, the sequential growth in the mid 20% range.
That level of growth when combined with the general labor and sourcing environment is presenting new challenges.
Our staffing levels and overall supply chain capacity are ramping up, but not as fast as demand.
As a result, we expect labor and supply chain constraints will limit third quarter revenue growth versus the prior year quarter by 4 to 6 percentage points.
That headwind is included in our outlook.
This is a timing impact.
We can solve these constraints over time, we are capturing demand and expect that 4 to 6 percentage points of growth to flow to subsequent quarters.
Let's move to our third quarter outlook for the Residential Building Products segment.
Recent order trends, new home construction activity, the outlook for remodel and retrofit demand and expected benefits tied to our multiple growth initiatives combine to suggest that revenue growth rate in the mid to high 20% range compared to the prior year quarter.
We see continued momentum of both remodel retrofit and new construction.
Now let's shift to our outlook for Workplace Furnishings.
Strong second quarter order trends, our growing backlog and a low prior year comparable adjusted growth rate including acquisition impacts in the low to mid 20% range on a year-over-year basis.
Let's shift to third quarter profitability.
Compared to the prior year quarter, we expect the impact of strong volume growth to be mostly offset by cost challenges related to inflationary pressures, increased growth investments and return of costs associated with temporary actions taken in the prior year or expect operating income to be modestly higher than the third quarter of 2020, operating margins will likely compress in a year-over-year basis.
We do expect margin expansions return post the third quarter, as our recent price actions take hold and we anniversary the temporary cost actions taken during the pandemic.
Finally some comments on our cash flow and balance sheet expectations.
Quarter ending debt levels were approximately $179 million, modestly higher than last quarter and down slightly from the second quarter of last year.
The gross leverage ratio at the end of the second quarter of 2021 was approximately 0.9, unchanged from last quarter.
On sequential basis, while our leverage ratio was unchanged, cash increased by more than $24 million.
We expect free cash flow to ramp up in the second half consistent with normal seasonality and our projected cash flow provide ample capacity for continued growth investment, dividend payments and opportunistic M&A and buyback activity.
Let me wrap up by stating that as we look to the rest of 2021 and into 2022, we remain optimistic about our businesses and our markets.
We continue to gain momentum in Workplace Furnishings, where our winning customer experiences, the multiple strategic investments discussed earlier and our operational excellence will combine to provide a competitive advantage as the market recovers.
Recall our focus in our Workplace Furnishings segment is a combination of driving revenue growth and expanding margins.
We are increasingly confident in the recovery of the Workplace Furnishings market as order strength is broadening across customer groups, project sizes and geographically.
Our improving order growth in the quarter and over the past five weeks is encouraging.
Our unique industry leading Residential Building Products platform is positioned for sustained long-term revenue growth.
Our growth strategies in this segment continue to gain traction and we see strong demand supported by demographics and low housing inventories.
As a reminder, our focus in our Building Products segment is on maintaining our strong margins, while continuing to drive strong revenue growth.
As we move to the next stage of the recovery, we do so position to grow revenue, expand margins and increase cash flow.
 Assistant:

Chosen response:
q2 non-gaap earnings per share $0.40.
expects q3 consolidated revenue to grow in mid-20 percent range compared to prior-year quarter.


Prompt:
Human: On the call today are Jeff Jones, our President and CEO, and Tony Bowen, our CFO.
Some of the figures that we'll discuss today are presented on a non-GAAP basis.
Such statements are based on current information and management's expectations as of this date and are not guarantees of future performance.
As a result, our actual outcomes and results could differ materially.
You can learn more about these risks in our Form 10-K for fiscal 2020 and our other SEC filings.
During Q&A, we ask that participants limit themselves to one question with a follow-up, after which they may choose to jump back into the queue.
We hope that you and your families are staying safe and healthy in these unprecedented times.
We're also saddened by the senseless acts of racial injustice which continue to plague our country and has tragically taken lives.
We are committed to continue building a culture of belonging at H&R Block and doing our part in our communities to help bring about needed change.
First, I'll discuss how we've responded since the start of the pandemic.
I'll then provide our perspective on the industry in our results followed by thoughts on how we are executing the remainder of the tax season.
I'll next discuss Wave, including an exciting new product that began rolling out to more small business owners last week.
Finally, I'll share perspectives on our future and Tony will review our fiscal '20 results, capital allocation and thoughts on fiscal '21.
The pandemic has created business challenges beyond anything we've experienced.
Our financial results have been impacted.
We've drawn our full line of credit and we've demonstrated agility and innovation, quickly making dramatic changes to our operating model to continue to serve clients.
And in doing so, we've accelerated our efforts to transform H&R Block.
Never has our purpose been more important as we help consumers gain access to their much needed refunds and assist small business owners as they navigate the financial uncertainty caused by the pandemic.
In mid-March, as the spread of the virus began to impact our business, we quickly turned to our crisis playbook, which enabled us to effectively and efficiently react to an extremely challenging situation.
In our retail locations, virtually every state pursued lockdown policies that both affected our ability to operate and prevented people from leaving home to be served the way they want it.
At the peak, nearly 20% of our office network was closed to the public.
For those offices that remained open, we made dramatic changes by limiting in-person service including requiring drop-off in nearly half the network and increasing the use of our virtual capabilities.
In short, our obligation to follow local orders is subject to far greater scrutiny than local independents.
Regardless of how we operated, one of our top priorities has been providing for the health and safety of our associates, franchisees and clients, while helping clients access their refunds.
The teams worked diligently to keep our offices clean, followed social distancing protocols and complied with ever-changing city and state guidelines.
Because of these changes, bringing digital solutions to our clients became more important than ever.
As you may recall, coming into this year, our primary objective was to digitally enable every aspect of our business to deliver our expertise to consumers in new and exciting ways.
These efforts have been instrumental in allowing us to meet the needs of our clients using methods we didn't have in the past.
We have seen a dramatic increase in returns, leveraging our digital capabilities, including Tax Pro Go, Tax Pro Review and Approve Online feature.
Approve Online allows filers to review their returns, approve it and pay their fees off from their mobile device.
With a significant portion of our clients historically visiting offices more than once to complete their returns, this capability provides tremendous convenience, especially during these uncertain times.
We also enhanced our digital capabilities for our tax pros because many of them couldn't serve clients from our offices.
Within two weeks, we stood up a work-from-home model, allowing thousands of tax pros to prepare returns without having to come into the office.
This capability will be invaluable moving forward.
Our efforts during this crisis to continue to meet the needs of clients, digitally enable our business, and serve our clients however they want, has led to strong feedback with service quality scores improving 2 points in Assisted and 5 points in DIY building on significant increases in both areas in fiscal '19.
Beyond taking care of our clients, we also took significant measures to take care of our associates.
Our tax pros are our greatest asset and I'm proud of the investment we made to create a leading benefit program for our seasonal associates if they were directly impacted.
And finally, I'm also proud of how we've responded in our continuing commitment to our communities.
We joined the American Express 'Stand for Small' coalition in support of small businesses.
At Wave, we provided instant payouts to all of our payments customers for free to give them instant access to their money.
And we offered free tax preparation to frontline workers through Tax Pro Go in May and June, which received overwhelmingly positive feedback.
With this context on our operations, I'd like to spend a minute on what we're seeing in the industry as a result of the pandemic, as well as our results.
Industry returned volume has been unusual due to the filing extension as well as the stimulus package.
Through June 5, the IRS reported total filings down 6%.
The IRS's volume includes millions of returns completed by those who typically don't file.
They did so this year to receive stimulus payments.
We believe the vast majority of these returns were completed through the IRS's fillable form site, which is inflating the number of DIY returns in the market.
Excluding these returns, we estimate DIY e-files are down approximately 4% compared to Assisted e-files, down 15% through June 5.
We expect this gap to moderate toward the end of the tax season and we'll provide more thoughts during our Q1 call.
With respect to our volumes in DIY, we've maintained relatively flat shares through early June.
In Assisted, we had share gains through the end of April, but are seeing that moderate in this extended filing season.
It's important to recognize that an extension like this has never happened in U.S. history.
So there is no precedent for forecasting consumer behavior.
Despite states beginning to reopen, there is no business as usual.
We have more offices open and have expanded our hours of operation compared to a typical first quarter but a substantial portion of these locations are not serving clients in the office.
Instead, we continue to interact with our clients either virtually or through drop-off.
And while we have more tax pros working than normal this time of year, it is far less than the number we would have at the end of a typical tax season in April.
For these reasons, client volumes may be impacted.
As such, we've updated our marketing plans for the quarter to make sure consumers know we're open and to help them understand the variety of drop-off and digital options we have available.
We're doing this through multiple channels to make sure we appropriately target those who haven't filed.
In addition to the help we're providing consumers, we're also doing everything we can to help small business owners during this difficult time.
We've added a free Small Business Resource Center on our website to provide regular updates on government assistance programs.
Additionally, in May, we launched our recovery action plan service, which helps entrepreneurs navigate the CARES Act, including loan programs and tax credits.
This is another great example of leveraging our human advantage.
Turning to Wave, after posting strong results of over 40% revenue growth through mid-March, we've seen flat revenues in April and May as small businesses were impacted by the pandemic.
We've taken measures to ensure we are limiting operating losses at Wave without sacrificing key investments in the business.
Despite these actions, we expect the near term performance and resulting valuation of the business to be negatively impacted similar to many other businesses during this pandemic.
As such, we have recorded a non-cash impairment of goodwill which Tony will talk about later.
While there has been a short term impact on the business, we remain confident in the long term viability and future growth of Wave.
One reason for this confidence is Wave's innovation and the pipeline of valuable products and services we are working on for the future.
A great example of this is Wave Money, which was expanded to more customers last week.
Wave Money is a business bank account that does what others can't, manage all aspects of bookkeeping automatically, giving entrepreneurs more time to focus on their business.
This is the first to market, software-powered small business bank account, which provide several unique benefits to Wave customers including no monthly fees or minimums, seamless integration to Wave's accounting platform for expense categorization and tax readiness and instant access to funds via Wave payments.
We are excited about this product as we continue to innovate to simplify the lives of small business owners.
In summary, as we navigate this new normal, we haven't lost sight of what we've accomplished this year making significant progress toward our strategic objectives in ways we couldn't have anticipated.
We are taking this opportunity to thoroughly and objectively evaluate our progress, determine what we can do better and to reinforce our sense of urgency in these efforts.
We remain committed to continuing the transformation of our business.
We're in the process of evaluating and reprioritizing our strategic imperatives, while simultaneously, examining our expense structure to identify areas where we can save to help fund the future.
This work is ongoing and will remain fluid given our current operating environment.
We'll be providing more detail later this year.
With that, I'll hand the call over to Tony.
The last time we spoke, we were on track to deliver on our outlook for the tax season in the fiscal year.
However, like most companies, the pandemic has negatively impacted our business and financial performance.
Because of the timing of the pandemic aligned with the time in our fiscal year in which we recognize the majority of our revenue, we withdrew our fiscal year '20 financial outlook.
As such, I won't be detailing our performance against those expectations as I normally would.
I will, however, provide insights regarding our fiscal year '20 financial results, how we see the remainder of the tax season impact in our financial performance in fiscal '21 and actions we're taking to enable continued investment for future growth.
In fiscal '20, we recognized revenues of $2.6 billion, representing a 14.7% decline from the prior year, driven by lower tax return volumes as a result of the extension of the federal tax filing deadline, partially offset by the contribution of Wave.
Regarding expenses, total operating expenses increased 3.4%, driven entirely by the impairment of Wave goodwill and Wave's operating expenses.
Excluding Wave, our total operating expenses would have declined, though at a lower percentage than the decline in revenue due to legal fees, COVID-19 related benefits, and planned investments in technology.
We recorded a $106 million non-cash goodwill impairment at Wave due to the pandemic and its impact on small businesses.
As Jeff mentioned, we've been pleased with Wave's performance since the acquisition with solid growth through mid-March.
However, revenue growth has slowed during the pandemic, which has impacted the invoicing and payments volume of small businesses.
We remain confident in Wave's future and in our ability to continue to deliver tremendous value to small business owners through Wave's innovative platform.
Turning to the rest of the income statement, interest expense increased by $9 million.
Approximately half of this increase was due to higher draws on our line of credit during the normal course of the business through our fiscal third quarter, while the other half was due to additional interest associated with the $2 billion draw in late March.
The changes in revenue and expenses resulted in a pre-tax loss from continuing operations of $3 million.
GAAP earnings per share was positive at $0.03 due to favorable discrete tax items.
Adjusted earnings per share, which excludes the impact of the impairment and amortization of intangibles related to Wave and tax office acquisitions, was $0.84.
In discontinued operations, there were no changes to accrued contingent liabilities related to Sand Canyon during the year.
I'll now turn to capital allocation and the balance sheet.
Despite the unique circumstances related to COVID-19, our capital allocation priorities remain the same.
At the top of the list is maintaining adequate liquidity for our operational needs.
Our current liquidity position remains strong as we ended the year with $2.7 billion in cash, which includes the full $2 billion drawn on our line of credit.
As we announced in late March, we believe we have sufficient funds to support the business at the start of tax season '21.
Our line of credit is subject to various conditions including a covenant, which requires us to maintain a debt to EBITDA ratio of 3.5 times on April 30.
Based on our fiscal year '20 financial results, we did not meet this covenant, but we have secured a waiver with our lenders with no changes to the terms of our line of credit.
After ensuring adequate liquidity, we then made strategic investments back into the business that we believe will drive sustainable growth, ultimately benefiting our shareholders.
As Jeff mentioned, given the pandemic's impact to our business, we have undertaken a review of our expense structure to eliminate any unnecessary spend in order to continue funding the initiatives that will fuel future growth.
I'll talk about these expense measures in a moment.
The last step of our capital allocation process is to deploy excess capital through quarterly dividends and share repurchases.
I'm pleased to announce that despite the financial impact of COVID-19 and the extended tax season, our Board of Directors has declared a $0.26 per share dividend payable July 1.
We've never missed a dividend payment since going public in 1962.
We remain committed to performing an annual review of the dividend after each fiscal year.
With respect to share repurchases, in fiscal '20, we repurchased a total of 10.1 million shares for $247 million at an average price of $24.36.
We made no share repurchases in the fourth quarter.
For the past two years, we have committed to, at a minimum, repurchasing shares to offset dilution from equity grants and opportunistic share repurchases thereafter.
Given the uncertainty created by COVID-19, we have not yet determined our share repurchase approach for fiscal '21.
I'll now discuss our thoughts on -- regarding fiscal '21.
As a reminder, last year, we provided our fiscal year financial outlook on our Q4 call.
Given, we haven't yet completed the current tax season and there remains uncertainty due to the pandemic, we will not be providing a financial outlook at this time.
Instead, we plan to provide a tax season recap on our first quarter call in September and our full financial outlook for fiscal '21 on our second quarter call in December.
Let me provide some high-level thoughts on how we expect to close out the tax season and our efforts to mitigate cost increases as a result of the extension.
First, while it's natural to expect all volume loss in Q4 of fiscal '20 to shift into the first quarter of fiscal '21, that may not necessarily be the case.
As Jeff mentioned, during this quarter, we are still operating under a modified model.
While we have more offices open than usual, we are still operating with just half of our total network and a substantial portion unable to serve clients face to face.
This may impact our ability to retain clients and attract new clients to the brand.
Regarding expenses, due to the extension of the tax season, we anticipate additional cost during the first quarter.
We expect an increase of approximately $10 million in marketing expense and approximately $10 million in interest expense.
Additionally, we expect variable expenses related to compensation benefits and bad debt to be approximately 40% of incremental Assisted revenues generated.
We are actively evaluating ways to mitigate any additional cost by taking a detailed look at all spend categories and making prudent reductions across our business.
We're still in the process of finalizing these plans but I can offer a few areas of focus, including renegotiating rents with landlords across our retail footprint, implementing a hiring freeze, eliminating merit increases for fiscal '21, examining vendor spend to renegotiate existing contracts, and reducing capital expenditures to only what is necessary.
In addition to these savings, we have entered into a non-binding letter of intent with MetaBank to be the provider of our financial products, including Refund Transfer, Refund Advance, Emerald Advance and Emerald Card, which will result in savings.
MetaBank is a leader in providing financial solutions to consumers and have significant experience in the tax preparation industry.
We're excited to partner with them to continue providing valuable products to our clients.
In summary, we've taken prudent steps to adjust to the pandemic, including our modified operating model, line of credit draw, and cost reduction efforts.
These measures will allow us to operate effectively, while enabling continued investments in our future.
We've been challenged during the last few months unlike any other time in our history.
The resilience and dedication of our team, our strong financial foundation, and our ability to adjust our operating model has enabled us to continue delivering tremendous value to our clients at a time when they need us most.
I am confident we'll come out of this crisis stronger than ever as we continue the work to transform our business.
I look forward to speaking with you in September.
 Assistant:

Chosen response:
announced a quarterly dividend of $0.26 per share.
h & r block - have adequate liquidity to meet anticipated operating cash needs through start of tax season 2021.
evaluated wave's goodwill during q4, which resulted in an impairment of $106 million.


Prompt:
Human: Neil, you may begin.
We understand it's a busy last few days of the earnings season, and everyone is quite familiar with the environment, so we will jump right in.
During the first weeks of this pandemic, we took decisive action and focused on capital pricing through several critical steps.
We suspended dividend distributions on both our common and preferred securities, preserving approximately $72.5 million, and we deferred all planned capital expenditures for the balance of the year, saving approximately $20 million.
Additionally, at the corporate level, we reduced our SG&A run rate by 25% for 2020.
While at our properties, we suspended operations at 21 of our 48 hotels, which led to a reduction in operating expenses, approximating 80% on a go-forward basis.
These were difficult but necessary moves, and we undertook these actions to ensure we had sufficient flexibility through this pandemic.
Early in the quarter, we amended our credit facility to access our senior revolving credit facility and received a full financial covenant holiday for five quarters with the next covenant test on June 30, 2021.
We've had a decade-long relationship with the lead banks in our bank group, and we appreciate their partnership during this unique time.
We have spent most of the most of the second quarter reopening hotels.
Each of them adapted to a highly efficient operating model, provided anticipatory service from behind plexiglass and engaged a completely new guest profile.
And they did so safely, graciously and effectively.
The lion's share of the 27 hotels that were opened in April and May consisted of our limited service drive-to resort offerings that were able to drive rate and occupancy, exceeding our internal forecasts.
Early April is when we saw the trough for our open portfolio, bottoming out around 19% occupancy but incrementally growing through the balance of the quarter, ending June at 39% occupancy.
Most of the 27 hotels that have remained open throughout the pandemic and the seven hotels that have opened since June one are able to run with a marginally sized staff, allowing for lower breakeven levels and the ability to generate gross operating profit with occupancies around 25% to 30% or a 60% to 70% RevPAR decline for EBITDA level breakeven at properties.
Our focused service portfolio, whether branded or independent, offer significantly more flexibility as it relates to staffing levels and job sharing opportunities, minimizing costs and ultimately allowing us to either profitably maintain operations or reopen assets more expeditiously.
As we've discussed on past calls, our franchise model and close alignment with HHM and our operating teams also allows us to adapt our staffing and operating models in real time.
This close relationship, coupled with our cluster strategy to maximize revenues and generate marketing advantage and economies of scale for cost efficiencies and sales, has yielded consistent market share outperformance versus our comp set prior to the pandemic.
This relationship has proven to be critically beneficial over the past five months in determining which hotels to open, consolidating demand to optimize breakeven and driving local decisions.
This will continue to drive outperformance throughout the recovery phase.
We expect to have substantially all of our hotels operating by the end of September.
And now more than ever, our ability to stay nimble and leverage our flexible operating model in close connection with our independent franchise operator, allows us to reopen and operate our hotels in a cost-efficient manner, gives us the opportunity to reduce our cash burn rates and breakeven levels meaningfully and sets up our portfolio to generate cash flow as we navigate this recovery.
Drive-to resorts have been our strongest performers.
Local regulations and travel bans dictated our opening of these hotels.
But with each month of performance, we are seeing meaningful growth in occupancy and strong rate integrity.
We expect a longer leisure season this year with disrupted schools, work-from-home employees, low gas prices and continued stimulus.
Our Sanctuary Beach resort was the best-performing asset during the second quarter, ending the period at 71% occupancy with a $340 ADR, and success continued in July with RevPAR growth of 12.4% for the month.
The ramp began in mid-April and extended throughout the quarter as travelers became more comfortable leaving their homes and socially distancing on the California coast.
We opened Hotel Milo in Santa Barbara more recently, but it is ramping up quickly, particularly around the weekends, where ADR is close to prior years.
On the East Coast, the Annapolis Waterfront hotel on the Chesapeake and the Mystic Marriott, which opened in mid-June, are delivering operating profits this summer.
South Florida has been more choppy.
Government-mandated closures impacted our portfolio as Key West was closed to visitors and nonessential personnel, and Miami Beach hotels were mandated to close to prohibit the spread of the virus.
Restrictions at both municipalities were lifted on June 1, and this led us to reopening our Parrot Key hotel in Key West and two of our Miami Beach hotels, the Winter Haven and the Cadillac.
Early results in both locations were promising, but notably at the Parrot Key, which saw travelers arrive from the Southeast and even from the Northeast and Midwest.
But the recent rise in case counts across the Sunbelt led to the closure of Miami Beach and restrictions at bars and restaurants in Key West over the July four weekend, which hampered the rapid ramp-up we were seeing in these markets.
We believe occupancies at these hotels will reaccelerate in conjunction with decreasing case counts and easing restrictions across the southern states, but the third quarter may still be challenged with weather or headlines in Miami Beach.
But judging from the number of New Yorkers still coming to Miami in even these conditions, we expect a seasonally high fourth and first quarters to be robust once again in Miami Beach.
Our urban gateway markets have been hard at work.
The headlines surrounding corporate travel, international travel and events remain bleak.
But fortunately, the domestic travel restrictions and quarantines instituted by major coastal cities should ease in the coming weeks and months on a city-by-city basis and should open us up for more leisure travel.
Our operating model alignment with the teams at each of our hotels provides the speed of decision-making on innovative ways to drive operating profits from each of our locations.
We've been able to open hotels as we source new business in each of our clusters, and our limited service business model allows us to staff very efficiently during this low demand period.
Our sales and marketing teams have stayed nimble throughout the pandemic, remaining cognizant of travelers' increased selectivity as it pertains to authentic and relevant experiences, but also proactively staying connected with local demand generators.
This approach was very productive during the second quarter as our team secured contracts with local hospitals and frontline personnel across our portfolio, with perhaps the biggest success in New York City.
We housed government groups and medical staff at our JFK assets, police and fire department crews in Brooklyn and at our Hilton Garden Inns in Tribeca and Midtown East, and lastly, contracted with a leading medical institution in lower Manhattan at our Hampton Inn in the Seaport.
All of this led to 61% occupancy for our seven open New York City hotels during the second quarter.
Our sales team has since pivoted from first responder business to more normal business.
Despite the bleak headlines on corporate travel among the largest companies, some parts of the economy are beginning to travel.
Our sales in our local property teams directly have had success sourcing new business to our hotels.
In Philadelphia, the team secured Major League Baseball and the NFL to build a base for transient compression; in New York, baseball and hockey teams for shorter stays.
In each of our markets, we have sourced significant design and construction business.
There are a lot of buildings to prepare for a post-COVID build-out or projects under development.
In Boston, we contracted a buyout for the Boxer to a local university to house their students from September through May.
For universities and even a hybrid model, travel demand will increase relative to the spring or summer.
We have secured business with TV broadcasters and news organizations in Washington, D.C. Content production and studios are beginning to mobilize in Southern California near our Courtyard West side, and Netflix and other producers are producing on the East Coast cities as well.
All of our submarkets are seeing a more general purpose healthcare business, patients and family for elective surgeries, but also medical equipment and other technology vendors.
Consulting and financial services has been slower to get on the road, but we hear of the first banks beginning to travel or consider buyouts for meetings or allocating inventory hotel inventory for employees to avoid commutes or simply arranging daywork rooms.
Early results from July are promising, with ADR only down 25% across the portfolio year-over-year as occupancy showed some signs of growth, especially in our urban markets outside of New York.
A few more thoughts on New York.
Prior to COVID-19, New York was one of the toughest markets in the U.S. to achieve rate growth despite record visitation year-over-year as the city was seeing new supply increasing approximately 4% each year over the last several years.
We have already seen the headlines of big-box hotels in New York closing their doors forever as many as 5,000 rooms among them so far, and we think of this as the tip of the iceberg in terms of hotel closures.
Industry researchers have estimated that 20% of New York's total room count, about 25,000 keys, could permanently close.
New York City is dominating the headlines as it pertains to hotel closures, but there are corners of every market filled with distressed assets that were troubled to produce margin even before the pandemic.
They are now obsolete and will improve the supply picture.
The pandemic is also bringing about a decline in short-term rental demand as seen in recent data showing the top 25 markets experiencing significant year-over-year decline in inventory available.
Five of the top MSAs, including Boston, New York and Los Angeles, are seeing year-over-year declines from 25% to 40%.
Travelers are choosing the proven cleanliness of hotels versus the unknown of short-term rentals, and cities and landlords are finally enforcing current regulations and forcing transparency.
The pandemic will fundamentally change the models of these platforms as we've already seen in Airbnb strategy's shift to longer duration stays versus short-term offerings, and these changes will be materially positive for hotel portfolios with urban gateway market exposure like Hersha's.
Hersha has been a developer, owner and operator in New York for over 20 years.
Post 9/11, we increased our development pipeline in Manhattan.
Post GFC, we acquired troubled developers hotels under construction.
This time, we have sufficient exposure to Manhattan, but expect to enjoy a strong recovery in New York in the next 12 to 24 months.
After 9/11 and after the GFC, New York rebounded with the highest growth rates in the country for the early years of the recovery.
After 9/11, there were significant deletions from supply.
So after a steep recovery in 2003 and 2004, the market continued to produce double-digit RevPAR for three more years.
Post 2009, New York rebounded quickly in 2010 and continue to grow in mid-single digits for three to four more years, but new supply made the rest of the cycle a bit more choppy, although values continue to reach new highs.
This time, as demand returns, the supply story will be very different.
More permanent hotel closures, no construction financing, zoning restrictions for hotel development,etc.
And we expect our category killing select service portfolio in New York can meaningfully outperform.
Before transitioning to Ash to discuss our expense savings and burn rate reductions, I want to update you on our pending asset sales.
As a quick reminder, we announced accretive binding sales agreements on four assets in our portfolio: the Duane Street Hotel in New York City; the Blue Moon hotel on Miami Beach; and the exit of the 50% ownership in two South Boston Hotel, two hotels: The Courtyard South Boston, the Holiday and Express South Boston.
Since our last earnings call, we've had follow-up discussions with each of the buyers who have asked for additional time to close on the individual transactions.
In conjunction with these requests, we negotiated the right to sweep the deposits on each of the consolidated asset dispositions and a buy sell right for our JV.
Along with the extensions, we have provided a reduction in purchase price for the buyers at each of these assets, resulting in total expected net proceeds of $70 million.
We remain cautiously optimistic that these transactions will close as the buyers are not reliant on material financing, but we now anticipate these agreements will close in the fourth quarter or in early 2021.
In addition to these four asset sales, we have multiple levers to pull should the impact to the travel industry remain at depressed levels into the second half of next year, and we continue to explore various strategies to fortify our balance sheet.
Some investors have asked if we would raise additional common equity.
It's hard to see a scenario where that level of dilution would make sense.
We are more likely to sell additional hotels as a private debt market emerges in 2021.
We are encouraged by a thawing, at least in the transaction markets that should gain momentum in the coming three to four months.
Our hotels are differentiated in the acquisitions market.
Nearly all of our hotels are unencumbered of ground leases, management and often brand.
They are newly built or recently repositioned with very little capex required for the foreseeable future.
They are high-quality and well-located in prominent innovation-oriented submarkets in the leading gateway markets of the U.S. Difficult times like these demonstrate the hustle and the accountability of our team.
We have visited most of our hotels across the last few months and are grateful for the quality and character of our team at our hotels and our offices.
It's a tighter group today, but it reminds us that small groups of committed people can do great things.
For Jay, Ash and I, this is our 21st year in the public markets.
We have navigated three cycles and nearly a dozen major demand troughs together.
Past demand troughs have proven that cities and economies rebound and America grows.
Domestic and international travelers get comfortable getting back on planes, trains and automobiles to visit the cities that make up this great nation.
The last several weeks have showed that the recovery for lodging is unlikely to be linear, and near-term forecast indicated it's difficult to pinpoint how business travel will resume after Labor Day.
But the steps we have taken to date and our highly adaptable and flexible operating model will sustain us until we achieve a more stable environment that can showcase the value of our exceptional portfolio.
I'll focus the majority of my time today and the actions we've taken to date from a liquidity preservation perspective, most specifically as it pertains to newly implemented asset management initiatives that have allowed us to minimize our cash burn rate and breakeven levels as we navigate the pandemic.
Our top priorities at the beginning of this outbreak were amending our credit facility and attaining a covenant holiday, which we were able to do in short order and before our peers, but we also focused on cost-saving measures to preserve our liquidity profile and to minimize operational losses.
Our franchise model and close relationship with our third-party independent operators leads to significant flexibility as it relates to executing cost savings initiatives at our hotel, and our ability to make these changes in real-time has led to and will continue to lead to substantial savings for our portfolio.
In our 33 currently operating hotels, we've not only rightsized our on-site staff, but have also employed various asset management initiatives to lower our cost per occupied room, which resulted in a declining monthly cash burn rate through the balance of the second quarter.
Our operational strategy allows us to run our hotels with very lean labor models until demand achieves levels warranting additional staffing, typically between 30% and 40% occupancy.
We're able to do this by applying various cost-cutting strategies such as cross-utilizing management personnel, outsourcing and job sharing within the hotel and across our clusters to lower our overall expense base.
Our franchise model has also allowed us to minimize our property level severance cost through this pandemic.
At the end of the first quarter, we accrued less than $1 million for these costs, and we did not record any further severance costs during the second quarter and would not anticipate any further costs for the remainder of the year.
We've also zero-based budgeted our hotels and rightsized labor models with expectations to save 300 to 500 basis points when lodging returns to more stabilized levels.
As demand begins to pick back up and occupancy levels start to materialize from these low levels, we will begin to phase back in staffing levels as necessary.
We anticipate that the availability of labor will increase dramatically over the next few years with anticipated closures in restaurants, retail and other service industries, alleviating some of the increases in labor costs that we have witnessed during the past three to four years.
We've also focused on revised cleaning protocols, decluttering and scaling back in-room amenities, such as bedding accessories, and other nonessential amenities, pens, bill pads, paper menus,etc.
And we forecast this reduction should generate substantial savings on a guest supplies for occupied room moving forward.
Prior to the pandemic, many of our limited service offerings included a complementary breakfast buffet for our guests, which we have eliminated for safety reasons.
At these hotels, we have turned to a more informal grab-and-go style option, which has not only been well received by our guests, but has significantly brought down our cost per occupied room for this category.
In conjunction with our Earthview Sustainability Team, we've been implementing additional cost-cutting and efficiency measures to curb energy expenses, which will continue creating savings and margin improvements even after the impact of COVID-19.
We're reducing utility costs through operational and energy-saving initiatives, such as lowering heating and cooling set point for rooms and public spaces while also working closely with our engineering teams on preventative maintenance procedures.
All of these measures allowed us to reduce our operating expenses by 77% during the quarter.
And on a long-term basis, we expect many of our newly applied expense mitigation practices to extend beyond the pandemic.
In addition to expense savings measures, we have leveraged our Earthview platform to generate new revenue opportunities, such as a green and wellness strategy that provides various sustainable meeting room options and wellness rooms.
So all of these operating strategies have also positively impacted our breakeven levels.
During the second quarter for the 21 comparable hotels that remained open throughout the period, we were able to effectively breakeven on an EBITDA basis even with severely depressed operational levels as these 21 hotels had a RevPAR decline of 78% and approximately 34% occupancy.
Based on this history, we are comfortable that on a property level basis, our entire portfolio breaks even with a 65% to 70% RevPAR decline with occupancies approaching 40% and a 25% to 30% ADR decrease.
At the corporate level, our RevPAR breakeven occurs at 40% to 50% decline, factoring in 50% to 55% occupancies at a 15% to 20% ADR discount.
With our current operating model, we were able to generate gross operating profit at 80% of our open hotels during June and would anticipate that nearly all of our open hotels can generate positive GOP during the third quarter.
As I mentioned, with the execution of the aforementioned expense savings initiative, we're able to breakeven at below 40% at our open hotel, and we're forecasting that our next 25% to 35% occupancy gains should flow through at approximately 80% to the GOP line.
On our prior earnings call, we outlined our cash burn rate forecast, which was originally projected to be $11 million per month, including all hotel operating expenses, corporate SG&A and debt service expenses.
During April, which we would deem to be the trough of the industry with our comparable portfolio ending the month at 14% occupancy, our corporate cash burn rate actualized at $10.5 million.
Our burn rate sequentially decreased through the balance of the quarter, reducing to $8.6 million for the month of May and closing the quarter at $7.8 million for June.
Our cash burn rate for the second quarter totaled $26.9 million, 18% below our downside scenario and 13% below our internal forecast at the beginning of the period.
During the second quarter, we spent $5.4 million on capital projects, bringing our year-to-date spend to $16.4 million.
We anticipate a significantly reduced capex load for the back half of the year with estimated spend for 2020 at approximately $20 million, half of what we had planned to spend at the beginning of the year.
Since 2017, we've allocated close to $200 million for product upgrades and ROI-generating capital projects across approximately 50% of our total room count.
This puts our portfolio in great shape coming out of this crisis in terms of capital allocation needs and market share gains, and most of our hotels will not need substantial capital infusion for the foreseeable future.
Last quarter, discussions with our lending group resulted in a 5-quarter covenant holiday with our next covenant test set to occur on June 20 June 30, 2021.
Parameters around the covenant tests are yet to be set, and we'll continue to have an active dialogue with our bank group as we move through the balance of the year and into 2021 as to what these tests will look like.
As of June 30, we have drawn $95 million on our $250 million senior credit facility and ended the second quarter with $23.2 million in cash on hand.
During the second quarter, we also took advantage of the low rate environment and entered into a new interest rate swap on the debt at the Courtyard L.A. West side at 3.425%.
As demand scenarios remain unpredictable, we continue to fortify our balance sheet through liquidity enhancing and cost savings measures to navigate this crisis.
Until then, our sales and marketing teams will remain acutely focused on driving incremental revenue through unique opportunities, while our asset management and sustainability teams will continue implementing strategic initiatives to significantly reduce our cost structure, which will lead to a resumption of our industry-leading portfolio free cash flow generation as the recovery progresses across the coming quarters.
So that concludes my portion of the call.
We can now proceed to Q&A, where Jay, Neil and I are happy to address any questions that you may have.
 Assistant:

Chosen response: suspended its full-year 2020 guidance.


Prompt:
Human: Neil, you may begin.
Before turning it over to Ash to provide some further details on our recent capital raise, the newly amended credit facility and what we are seeing in our portfolio year-to-date and through the first quarter.
The conclusion of the fourth quarter closes the most challenging year in Hersha's history.
And our above property team members, many here in our offices today, enabled us to remain nimble, make prudent decisions and execute multiple levers to provide financial flexibility for the foreseeable future.
Jay, Ash and I stand it out on our team shoulders as we share some good news today.
We begin 2021 with optimism toward the recovery as the rollout of vaccinations gains momentum and more and more people choose to travel.
January started off stronger than we anticipated for our portfolio returning to greater than $60 RevPAR with South Florida and Washington DC offsetting lock downs on the West Coast and the Northeast.
We had our first month of hotel level positive EBITDA in January, and we are encouraged with February performance to date.
The booking pace for President's Day weekend across the portfolio was the strongest since the pandemic one year ago.
We agree that leisure demand aided by continued government stimulus will again come first, but with significantly more pent-up demand than was actualized last summer.
We are also encouraged by data from the airlines.
Most corporate accounts anticipate returning to at least 50% of pre-COVID travel by the end of 2021 and more than 40% of these accounts expect a full recovery in corporate travel by 2022.
The return of leisure travel will kick-start this year's recovery to be sure, but the industry should see meaningful acceleration with the return of business travel, which we believe could begin as early as the second quarter and ramp up through the back half of the year.
Drive-to resorts have been our strongest performers since the inception of the pandemic.
This portfolio of hotels is about 25% of our pre-pandemic EBITDA, had a weighted average occupancy nearing 40% and realized ADR growth of 2% for the full year 2020.
Government mandated shutdowns in California impacted performance in December and January for our coastal California properties, but we are seeing immediate improvement in February with the lifting of these restrictions.
Not only have leisure travelers returned, but we are also seeing early signs of business and small group activity.
New corporate accounts for near-term projects and deposits for spring and fall weddings are building a base at the Sanctuary Beach Resort and Hotel Milo.
Across the country in Key West the Parrot Key Hotel and Villas was our best performing asset during the fourth quarter, generating 55% occupancy and 8.4% year-over-year ADR growth to $306 for the period.
The holiday weeks were especially strong, most notably the period between Christmas and New Year's which had greater than 90% occupancy and saw ADR exceed 2019 levels at the hotel.
We are expecting several strong quarters ahead at this exceptionally positioned resort.
Our largest asset the Cadillac Hotel and Beach Club on Miami Beach is seeing increased demand on weekends entering special events, generating occupancies approximating 90% with rate on pace to improve incrementally throughout the balance of the quarter.
Momentum has been has been building year-to-date in Miami from leisure demand, and recent announcements around major corporate relocations highlight the tremendous draw to the region, which leaves us optimistic for this year's recovery and substantial market growth for years to come.
Urban destinations were essentially shut down from March to September of last year and then again from November through January.
We believe that the reopening of museums, national parks, theaters, sports venues and more bars and restaurants in the coming months will lead to a pickup in both pent up leisure and business demand to our great cities.
As travel begins to resume, which we have already seen in warmer climates such as South Florida and even at our lifestyle hotels up north over President's Day weekend, our unique portfolio provides us multiple levers to capture market share while continuing to operate in a cost-efficient manner as occupancy builds toward normalization.
Washington DC has been a very strong performing market, despite the significantly abbreviated inauguration activity.
Although the public was unable to attend the event the St Gregory Hotel contracted with media outlets including CBS, BBC and Al Jazeera.
The Hilton Garden Inn, M Street and the Hampton Inn Mason serve the men and women of the National Guard who were deployed to the city leading up to and through the event.
The Ritz Carlton Georgetown was able to hold a $1,000 ADR for the peak nights for the few leisure guests in town.
Washington has begun 2021 on strong footing ending January with portfolio revenues more than double our expectations at the beginning of the month.
The new presidential administration is expected to lead through a pickup in activity among the lobbying, federal government and diplomatic segments, and we are also looking forward to the upcoming Cherry Blossom Festival in the coming quarter.
One of our better performing markets during the fourth quarter from our forecast perspective was our New York City portfolio, finishing the quarter with close to 40% occupancy, which came in spite of having few leisure oriented attractions open in the city.
We continue to see strong performance from our JFK submarket, but also saw an uptick in first responder business at our Brooklyn and lower Manhattan asset.
These customers, the New York Fire and Police Departments and a few medical groups continue to get rest at the new hotel Brooklyn and the Hampton Inn Seaport resulting in January occupancy of 97% and 51% respectively.
Although this business is transitory and related to the ongoing COVID-19 spread we are grateful that these frontline workers are able to utilize our hotels to stay safe and guide us through this homestretch of this pandemic.
Urban market recovery is not only driven by vaccine distribution and the return of business and international travel, but as meaningfully enhanced with reductions or deterioration of supply.
In markets around the country aging hotels are being rendered obsolete the Wardman Park in D.C, the Embassy Suites in Philadelphia, the Buckminster in Boston.
New York more than anywhere else consultants of forecasted an array of figures regarding the permanent supply reduction in New York.
It may not actualize as high as 25% as some of predicted, but the confirmed closures in 2020 alone provide a concrete realism that the supply will contract.
Adding to this is the newly announced proposal requiring special permits for new hotels and expansions in zoning districts throughout the city by the Department of Planning.
Public hearings on this proposal have commenced, and if passed will materially impact hotel construction across the five boroughs and provide a significant tailwind for hotel owners for years to come.
Before Ash takes a deeper dive into our balance sheet and burn rates, I want to spend a few minutes on our capital allocation strategy and sources of additional liquidity.
As we've outlined on our previous earnings calls, dispositions represented the lowest cost of capital as we considered alternatives to raise liquidity and increase our financial flexibility.
We ran wide and robust marketing processes with multiple brokers beginning this fall.
Our strong locations in major gateway markets attracted tremendous interest from private equity firms, family offices and residential developers.
These were fee-simple hotels that have remained open throughout the pandemic unencumbered of management and onerous labor contracts, many were unencumbered of brand, all of which made the bidding process quite competitive.
Our goal is to generate $150 million to $200 million in proceeds from asset sales to pay down our senior credit facility.
The 6 recently announced asset sales will generate net proceeds of approximately $191 million.
The Sheraton Wilmington closed in December while the Courtyard San Diego closed last week.
The residents in Coconut Grove, Capitol Hill Hotel Washington and Holiday Inn Express Cambridge are all expected to close by the end of the first quarter, while the sale of the Duane Street Hotel is slated to close in early Q2.
Many of these hotels represented those with capital intensive projects on the horizon and the successful completion of these sales will lower our capex budget by approximately $20 million over the coming years.
As part of a long-term capital recycling strategy, the dispositions achieve liquidity and flexibility at a reasonable cost.
We transacted at a discount to pre-COVID value, but we focused our sales on mature hotels, hotels that we don't for nearly 10 years, hotels that would require additional capital investment during the recovery, and the slowest growth hotel in each of our geographic clusters.
The successful sale of these hotels marginally improves the absolute RevPAR and EBITDA per key of the remaining portfolio, but meaningfully enhance this portfolio quality, EBITDA growth rate and reduces capex spending and disruption at these assets in the recovery.
We were also pleased to announce last week and fund just yesterday our strategic financial commitment with affiliates of Goldman Sachs Merchant Bank providing a $150 million unsecured term loan, which can be expanded to $200 million.
This capital infusion in conjunction with asset sales led to the successful amendment of our credit facility, extending our covenant waiver until June 2022 and eliminating term loan maturities in 2021.
We are pleased to have cleared the runway and provided the financial flexibility to focus on the ramp up of our portfolio in the coming year.
As we've discussed on prior calls and in investor meetings, we've been steadfast in our approach to capital allocation.
Considering the cash flow profile and liquidity of our assets and the upcoming recovery and travel and lodging, we were loads to pursue a transaction that would be unnecessarily dilutive to shareholders or constrain our strategic alternatives in the future.
For this capital raise, we ran a fulsome process.
We were delighted with the depth and quality of investors interested in financing our portfolio and look forward to future transactions with many of them.
Ultimately, the Goldman Merchant Bank offered the prepayment flexibility to draw and pick features and importantly the potential for future partnership in the coming cycle.
As we navigate through the tail end of the crisis and into the recovery we remain bullish on our portfolio positions in the markets where we operate, innovation oriented urban gateway markets and regional resorts, a short drive away from them.
2020 showcase the allure of drive-to resorts for all segments of the traveler, and we believe this trend will not go away soon, but we remind investors that innovation markets provided strong results prior to the pandemic, and these markets have the most to recover with the rollout of the vaccine.
Since the pandemic Facebook and Google have expanded office space near our hotels on Manhattan's West side and our Tribeca, Union Square and Midtown East hotels will all have major new office developments opening in the coming years.
Amazon announcing the addition of 3,000 jobs in the Boston Seaport, walking distance from our Envoy Hotel.
Our Courtyard LA is well positioned in Culver City for the booming tech and studio related office growth [Indecipherable].
Philadelphia has attracted several new life science and pharma companies downtown in state-of-the-art new space.
Even our locations in Miami are attracting new Class A office space, in Coconut Grove and on Miami Beach as there is increasing momentum from Northeastern asset management firms and West Coast technology firms.
All of this proving out the corporate expansion remains intact and will add to the already robust demand generators in our gateway markets, particularly for our carefully assembled submarkets and locations.
Our disposition announcements this year should also reinforce the high quality nature of our portfolio.
Our hotels are precisely the kind of hotel sophisticated investors seek.
Our hotels have a high absolute RevPAR, while still producing sector-leading margins.
The hotels are young and purpose-built for today's traveler with minimal capex requirements for the foreseeable future.
Our hotels are fee simple and have prepayable financing and have few management or brand encumbrances all located in the most valuable markets in the United States.
Our portfolio has proven to be attractive to a vast buyer pool and still offers incredible operational and financial leverage to this recovery.
And with the increased financial flexibility from our capital infusion and no near-term encumbrances following our credit facility amendment, we are able to focus on capturing market share and operating our hotels in a cost-efficient manner to drive cash flow.
As Neil mentioned, I'm going to do a deeper dive on our recently announced capital transactions, bank amendment, and their impact on our balance sheet and interest expense before closing with an update on our operating results and current outlook.
Last week, we announced a strategic financing commitment with affiliates of Goldman Sachs Merchant Bank to provide a $150 million in unsecured notes, which can be upsized to $200 million at any point on or before September 30th of this year with a maturity date on the notes of February of 2026.
We successfully closed on this financing yesterday and look forward to furthering our partnership with GS's Merchant Bank.
When we began our capital raising process earlier this year to provide us additional liquidity and optionality we prioritize two items, capital that was not dilutive to our equity and significant prepayment flexibility, and this bespoke solutions satisfied both of these key criteria and several others that we had prioritized.
This capital is unsecured and fully subordinated to our bank facility and allows us to defer cash interest on 50% of our financing for the first year, creating substantial near-term cash savings and providing us additional runway during this period of recovery.
This capital does not prohibit supplementary junior capital and allows us additional unsecured debt as long as we maintain compliance with certain incurrence test.
These unsecured notes do not place any further restrictions on our ability to operate the business or enter into strategic ventures that may be available to us.
Last week, we also highlighted that we went under contract to sell two additional hotels, bringing our year-to-date total asset value of disposition to $178.5 million.
The successful closing closing of these sales in addition to the Sheraton Wilmington, which closed in December and the Duane Street Hotel, which is expected to close during the second quarter will generate total proceeds of $216 million, and following the repayment of the $25 million mortgage loan on the Capitol Hill Hotel net proceeds from these dispositions will amount to approximately $191 million, which we will utilize in tandem with the proceeds from our unsecured notes to pay off our 2021 term loan and reduce our overall debt by approximately $150 million.
With the resulting reduction of overall leverage and the payment in current feature of our unsecured notes we estimate that our cash interest expense will decrease by approximately $4 million in 2021, and that our total interest expense including the deferred interest from the notes will remain similar to our 2020 interest expense.
We completed these asset sales and closed on the unsecured notes placement contemporaneously with the amendment of our revolving credit facility, and we're very pleased with the continued support from our consortium of over 15 Bank group members.
The amendment eliminates all term loan maturities until August of 2022 and extends our covenant-waiver holiday with our next financial covenant test occurring on June 30th of 2022.
The first test will be applied to the annualized second quarter performance with the third quarter test annualizing the second and third quarter results and so on.
The amendment allows us to pay off the accrual of our preferred dividends and maintain quarterly preferred dividend distributions moving forward.
At this time, we anticipate clearing our accrual on the preferred dividends by the end of the first quarter.
The completion of these capital transactions allows us to continue to focus on our operational performance, and accretive opportunity that may emerge in the recovery.
Results at our properties of incrementally improved over the past 6 weeks and ultimately led to the validation of our breakeven forecast during January, in what is seasonally the slowest month of the year our properties generated positive property-level cash flow during the month of January on 40% occupancy with RevPAR levels 60% below January of 2020.
In January, 20 of our 36 operational hotels broke even on the GOP line with 14 achieving EBITDA breakeven level.
These results represent a 75% increase and 40% increase in properties that broke even on the EBITDA line compared to November and December respectively.
Based on January's results and our forecast for the first quarter, we are comfortable with our previous estimates that the entire portfolio breaks even at property level with GOP with a 60% RevPAR decline.
At the corporate level, our RevPAR breakeven occurs at a 40% decline.
Our franchise operating strategy allows us to run our hotels in very lean labor models until improved demand warrants additional staffing.
Applying various cost cutting strategies such as cross-utilizing management personnel and outsourcing and job-sharing within the hotel and across our clusters lowers our overall cost.
The model affords flexibility to continue to operate in current staffing levels at our breakeven occupancies approximating 30% up to 55% to 60% at some of the hotels.
As occupancies increased at our hotels we are seeing flow throughs as high as 70% on the GOP line, and as we push both rate and occupancy we anticipate maintaining them for the remainder of the year.
The flexibility of the model and the resulting cost efficiencies economically justified continuing operations at our urban independent resort destinations throughout the pandemic mitigating cash burn over the course of 2020.
Our total property-level cash burn for the fourth quarter was $5.9 million and in January the property generated property-level cash flow for the first time since March of last year.
Corporate cash burn of $4.3 million in January represents a 60% reduction compared to April of 2020 at the depths of the crisis.
We expect our February performance to be in line with January with March operating results projected to surpass that of January and February as the pace of vaccination distribution, using government restrictions, spring break travel and warm weather along the Northeast should yield increased bookings across the portfolio.
Before I close with comments regarding our balance sheet, a quick update on Hersha's relationship with our New York City joint venture partner Cindat Capital Management.
As you may recall, following our 2016 transaction where we sold a majority of this portfolio and in which we netted a gain of $213 million, we retained a subordinated minority interest in the portfolio, which was junior to thin debt to equity position.
Earlier this month, the equity interest of that portfolio were transferred and we have no remaining equity interests or economic or legal commitments to the joint venture.
We removed these 7 hotels from our portfolio count and they will no longer be part of our operating results after the first quarter.
We ended the 4th quarter with $23.6 million in cash and cash equivalents and deposits.
During the quarter we received $8.1 million dollars in business interruption proceeds from Hurricane Irma's impact on our South Florida portfolio, and these receivables had a positive impact on our AFFO performance in the quarter.
We spent $4.3 million on capital projects last quarter, bringing our 2020 spend to $26 million, approximately $15 million below our forecast at the beginning of the year.
Our 2021 capex load will be primarily focused on maintenance capex and life safety renovation, and we anticipate it will be roughly 35% below our 2020 spent.
As we have very minimal capex moving forward after the $200 million we have spent on capital projects since 2017 and the recent disposition of lower growth, higher cost hotels our portfolio will experience very little disruption or capital spend for the coming years.
The unsecured note facility from Goldman Sachs Merchant Bank combined with the announced asset sale will be utilized to reduce our leverage, provide liquidity and pay off the accrual on our preferred dividends.
These actions increased our weighted average debt maturity to 3.6 years and resulted more than 88% of our debt being either fixed or swapped.
Over the past year, we've taken aggressive and swift action to minimize our operational losses.
We successfully zero-based budgeting our hotels allowing for margin improvement well into the recovery.
We reopened all of our wholly owned hotels and we incrementally reduced our cash burn rate to the lowest it has been since the onset of the pandemic, all are a testament to our aggressive asset management and nimble franchise operating model.
Following the strategic transactions announced last week we have right-sized the balance sheet and turned our focus to operational performance of the portfolio as demand reemerges and accretive opportunities become available across the recovery.
This concludes my portion of the call.
We can now proceed to Q&A, where we are happy to address any questions that you may have.
 Assistant:

Chosen response:
will forego providing full-year 2021 guidance at this time.
completed full year and q4 2020 with approximately $23.6 million of cash & cash equivalents and deposits.


Prompt:
Human: The slides that accompany today's call are also available on our website.
We'll refer to those slides by number throughout the call today.
This cautionary note is also included in more detail for your review in our filings with the Securities and Exchange Commission.
We also have other company representatives available for a Q&A session after Lisa and Steve provide updates.
slide four shows our quarterly financial results.
IDACORP's 2021 second quarter earnings per diluted share were $1.38, an increase of $0.19 per share from last year's second quarter.
Earnings per diluted share over the first six months of 2021 were $2.27, which were $0.33 above the same period last year.
Both the second quarter and year-to-date earnings are the highest in the history of the company.
Today, we also increased our full year 2021 IDACORP earnings guidance estimate to be in the range of $4.70 to $4.90 per diluted share, with our expectation that Idaho Power will not need to utilize in 2021, any of the additional tax credits that are available to support earnings under its Idaho of regulatory settlement stipulation.
These are our estimates as of today, and they assume normal weather conditions over the last six months of the year and assume a continued return to more normal economic conditions over the balance of 2021.
I'd like to begin my remarks by highlighting the continued robust customer growth we are experiencing across Idaho Power service area.
You'll see on Slide five that the growth remained strong in the second quarter, increasing 2.9% since June 2020.
The influx of businesses and residential customers continues to benefit our company, while we believe the reliable, affordable, clean energy we provide remains one of the drivers for attracting new customers to Idaho.
It has been remarkable to see this trend not only sustain but accelerate over the past several years.
We are also seeing a return-to-normal operations for many of our commercial and industrial customers as our service area rebounds from the impact of the COVID-19 pandemic.
As of the end of June, unemployment in our service area was 3.5% compared with 6% in June 2020 and the current mark of 5.9% nationally.
Total employment in our service area has increased 6% over the past 12 months.
Moody's forecasted GDP calls for very strong economic growth of 7.6% in 2021 and 6.9% in 2022.
As we speak, like many employers in our area, Idaho Power is in the midst of the return-to-workplace process for many of our office employees.
I'm happy to see more people at our offices and thrilled that safely bringing our employees back reflects a significant step forward to our new normal that is taking place across our service area.
Idaho Power service area continues to experience significant interest from commercial and industrial projects in food processing, manufacturing and distribution.
Multiple developers, both local and national, are moving forward with the construction of commercial sized pac-shelf facilities, to better accommodate the speed to market of prospective projects.
Idaho Power is also -- has also been actively working with Gervan Mining, which announced in early July, it will proceed with final construction of its Idaho Cobalt operations mine in Central Idaho.
And just this past week, Lamb Weston announced a $415 million investment in the planned construction of a new French fries processing line at its existing facility in American Fall with expected capacity to produce more than 350 million pounds of frozen French fries and other potato products annually by mid-2023.
This expansion is expected to add approximately 130 jobs.
In addition to serving more customers than ever, we've experienced very hot dry weather during the second quarter with our service area experiencing several very high temperature days in late June and July.
slide six shows the recent outlook of precipitation and weather from the National Oceanic and Atmospheric Administration.
Current weather projections for August through October shows 50% to 60% chance of above-normal temperatures and a 33% to 50% chance of below-normal precipitation in Idaho Power service area.
If the warm and dry weather continues, we expect to see continued strong sales during the third quarter, particularly for residential and irrigation customers.
At the same time, dry conditions and overall lower reservoir storage levels have decreased our forecasted hydro generation for the remainder of the year, which Steve will address later on.
But it continues to appear, irrigators in most parts of our service area should have enough water to get them through the current growing season.
The combination of customer growth and hot dry conditions has created high demand for energy across our regions, as noted on slide seven.
Idaho Power hit a new all-time peak load of 3,751 megawatts on June 30, and we have exceeded the previous 2017 peak demand of 3,422 megawatts, more than 60 separate hours on 12 different days so far this summer.
The recent heat wave has once again demonstrated the skill and dedication of our employees and the resilience of both our employees and our system.
The Jackpot Solar 120-megawatt project in Southern Idaho is scheduled to come online by the end of next year.
And our company also recently issued a request for proposal to add another 80 megawatts of a capacity resource to meet peak energy needs by summer 2023.
Separately, early modeling in the 2021 IRP suggests that, subject to the timing of coal unit exits, additional capacity may be needed in future years.
The recent spike in energy use and prices also emphasizes the importance of the Boardman to Hemingway transmission line, or B2H, which we plan to bring online as soon as 2026.
B2H will allow Idaho Power to import up to 500 megawatts, which will help meet customers' peak summer demand and increased reliability for our system as well as the region.
Record heat waves don't last forever, but we believe periods of higher demand in the summer months are here to stay.
Idaho Power continues to evaluate its options regarding BPA's interest.
I have a couple of notable Idaho regulatory updates to share.
The first is a recent filing Idaho Power made to accelerate the recovery of depreciation expenses at the Jim Bridger coal-fired plant, which is noted on slide eight.
Our Idaho rates currently reflect a recovery time line through 2034, but preliminary analysis indicate the potential exit of all four units at the plant sooner than the current time line.
If our filing with the Idaho Commission is approved as filed, rates would increase $30.8 million in December of this year.
This would result in a near-term rate increase for our customers but our study shows the potential for customer savings in the long term.
Exiting the Jim Bridger plant early also aligns with our goal to provide 100% clean energy by 2045.
Secondly, as seen on slide nine, the Idaho Commission recently approved Idaho Power's request to defer incremental costs associated with our enhanced wildfire mitigation plan.
This positive regulatory outcome will allow us to defer associated incremental costs to be included in a future rate proceeding.
Our company is working hard to strengthen our grid and keep our customers safe during wildfire events.
On our last earnings call, I stated Idaho Power did not plan to make -- do not plan to file a general rate case in Idaho or Oregon in the next 12 months.
That remains true today.
Steady customer growth, constructive regulatory outcomes, effective cost management and economic conditions, all play significant roles as we look at the need and timing of a future general rate case.
I also commend them for their resilience over the past 17 months as we navigate the challenges of the pandemic together.
Let's now move to slide 10, where you'll see our second quarter 2021 financial results as compared to the same period in 2020.
Overall, we have experienced a very solid first half of the year, with strong customer growth, positive impacts from transmission services and higher revenues resulting from the heat wave that affected much of the Western U.S. Because of these factors, IDACORP's second quarter net income was substantially higher than last year.
On the table of quarter-over-quarter changes, you'll see our continuing customer growth added $3.9 million to operating income.
Also, increased usage per customer drove operating income higher by $22.9 million.
Cooling degree days were nearly double last year's second quarter and the hot and dry conditions led to significantly higher usage across all customer classes.
Irrigation and residential per customer usage increased 25% and 10%, respectively.
A return to more normal economic conditions combined with the hot weather also drove a respective 12% and 8% increase in usage per customer in the commercial and industrial classes.
Continuing down the table, the higher usage for residential and small general service customers was partially offset by $5.1 million lower revenues from the PCA -- or the FCA mechanism.
The FCA mechanism has tempered the effect of the higher usage for these customer classes and could do so again in the third quarter if customer usage continues strong.
Next, you'll see a decrease in operating income of $6.8 million that relates to the change in the per megawatt hour revenue, net of power supply costs and power cost adjustment impacts quarter-to-quarter.
The primary driver of this decrease relates to the amount of net power supply expenses that were not deferred to Idaho Power's power cost adjustment mechanisms.
Recall that Idaho customers generally bear 95% of power supply cost fluctuations.
And those costs were higher as the heatwave impacted wholesale energy prices at a time of increased energy usage by our customers.
The heatwave also affected transmission wheeling-related revenues, which increased operating income by $3.9 million.
Wheeling volumes increased as utilities work to serve high demand by moving energy across our system throughout the region during the quarter.
In addition, wheeling customers paid 10% more for Idaho Power's open access transmission tariff rate that increased last October to reflect higher transmission costs.
Next on the table, other operating and maintenance expenses increased by $5.3 million.
This was primarily due to last year's temporary deferral of certain maintenance projects at Idaho Power's jointly owned thermal generation plant as well as higher accruals of performance-based incentives.
We continue to see decreases in employee travel and training costs related to COVID-19, while our allowance for bad debt remains above historic levels and it's taking longer to collect.
Our net COVID-19 recovery deferral impact, however, continue to remain nominal.
Finally, our higher pre-tax earnings led to an increase in income tax expense of $4.2 million this quarter.
The changes collectively resulted in a net increase to Idaho Power's net income of $9.6 million, or $0.19 per share.
IDACORP and Idaho Power continue to maintain strong balance sheets, including investment-grade credit ratings and sound liquidity, which enable us to fund ongoing capital expenditures and distribute dividends to share owners.
IDACORP's operating cash flows, along with our liquidity positions as of the end of June 2021 are included on slide 11.
Cash flows from operations were about $39 million higher than the first six months of last year.
The increase was mostly related to working capital fluctuations and the timing of net collections of regulatory assets and liabilities.
The liquidity available under IDACORP's and Idaho Power's credit facilities is shown on the middle of slide 11.
At this time, we still do not anticipate raising any equity capital in 2021.
Our combined liquidity, along with expected regulatory support from our annual adjustment mechanisms, is a substantial backstop to our expected capital and operating needs.
slide 12 shows our raised full year earnings guidance and our current key financial and operating metrics estimates.
We now expect IDACORP's 2021 earnings to be in the range of $4.70 to $4.90 per diluted share.
This guidance assumes normal weather and operating conditions for the second half of the year, and assumes economic impacts from the pandemic will continue to normalize.
Our guidance still assumes Idaho Power will use no additional tax credits in 2021.
While we do not currently expect to record sharing of excess revenues with Idaho customers this year, the upper end of our range approaches that level and the final jurisdictional allocation can adjust on that through year-end.
Recall that above a 10% return on equity in the Idaho jurisdiction, Idaho customers would receive 80% of any excess earnings.
Our expected full year O&M expense guidance remains in the range of $345 million to $355 million.
It's fair to say this goal to keep O&M relatively flat for the ninth straight year is being challenged by the amount of customer and load growth we are experiencing.
We also reaffirm our capex forecast for this year in the range of $320 million to $300 million -- $330 million, excuse me.
Our expectation of hydropower generation has decreased somewhat given the weather conditions least represented and is now expected to be in the tightened range of five million to six million-megawatt hours.
 Assistant:

Chosen response:
idacorp qtrly earnings per share $1.38.
idacorp inc increases fy earnings per share view $4.70 to $4.90.
q2 earnings per share $1.38.
sees 2021 idacorp earnings guidance (per share) $ 4.70 – $4.90.