Prompt:
Human: If you do not yet have a copy, you can access them on our website.
We are providing that information as a supplement to information prepared in accordance with Generally Accepted Accounting Principles.
With us on the call today are John Arabia, President and Chief Executive Officer; Bryan Giglia, Chief Financial Officer; and Marc Hoffman, Chief Operating Officer.
I can say without hesitation, that I'm glad 2020 is behind us, and I firmly believe the better days lie ahead.
It goes without saying, that 2020 posed the most difficult challenges the hotel industry has ever faced, and we are forced to do things we never thought we would have to do.
That said, in rising to the occasion, we and others working together, also accomplished things we never thought possible.
Simply stated, we are not out of the woods yet.
We have recently witnessed evidence of a recovery in demand, including leisure, commercial and group demand.
We believe if these trends continue and a gradual recovery has started, and we are likely to resume hotel profitability sometime late in the second quarter or early in the third quarter of this year.
Today, I'll provide a recap of 2020 including our accomplishments here at Sunstone, as well as our annual and quarterly operating results.
I will then provide comments on recent operating and booking trends, followed by an update on our liquidity, and an overview of our 2021 capital projects as we continue to focus on long-term growth.
Bryan will later provide more details on our recent earnings, finance transactions, liquidity and dividends.
So let's begin with a recap of last year.
Despite the extremely challenging operating environment, we were able to navigate the pandemic and execute on several transactions that increased the quality of our portfolio, reduced our debt, and better positioned the Company for long-term growth.
During the year, we sold two hotels, the Renaissance Baltimore and the Renaissance LAX for combined gross proceeds of nearly $172 million.
These two transactions bring the number of hotels sold in the past three years to a total of nine hotels for gross proceeds of approximately $575 million.
In July, we sold the Renaissance Baltimore at a reasonable discount to pre-pandemic pricing, which we believe was a good outcome, considering the asset is lower quality, urban group-oriented hotel that was losing money and expected to lose money for some time.
In December, we are fortunate to compete the sale of the Renaissance LAX, and what we believe to be a pre-pandemic valuation.
This was a fantastic execution, and a direct result of our strong balance sheet and nimble investment team.
We did not have to sell this hotel, nor did we need the incremental liquidity, and because of this, we were able to hold the line and extract premium pricing equating to a 6.8% cap rate on 2019 actual earnings.
Additionally, during the fourth quarter, we reached a resolution with the lender of the mortgage on the Hilton Times Square, resulting in in assignment-in-lieu.
Given the operating challenges this hotel faced prior to the pandemic, which were only exacerbated by a proposed uneconomic ground rent reset, and an increase in property taxes, we expected the hotel to generate sizable cash losses for the foreseeable future.
While we are hoping for another outcome, the assignment of our interest in this hotel mitigated what we believe to be a deteriorating situation, and all things considered was the best outcome in a terrible situation.
The departure of these three hotels in 2020 further consolidates our portfolio into long-term relevant real estate, and further reduces our ground lease exposure.
It is worthwhile to note that the combined 2019 RevPAR and EBITDA per key of these three hotels, in aggregate, was approximately 19% lower and 54% lower respectively than the remainder of our portfolio.
Additionally, the dispositions leave us with only two ground lease assets in the portfolio, which we believe compares about the best across all publicly traded hotel REITs.
Despite the limitations on the incurred environment, we continue to make selective capital investments in 2020 that we believe will result in long-term value creation.
During the year, we invested $51 million into our hotel portfolio, with the largest project being the complete repositioning renovation of the Bidwell Portland, which turned out just beautifully.
As many of you know, we take a long-term view of our business, and so despite the uncertainty facing the industry in 2020, we chose to accelerate several highly disruptive projects that were on hold awaiting a quiet time to be completed.
At our Renaissance Orlando, we completed the first phase of a refresh of the hotel large atrium lobby, including replacing nearly 50,000 square feet of flooring, which would have otherwise resulted in millions of dollars of displacement.
The lobby looks amazing.
And we were able to complete this investment without any displacement or guest impact.
At our Wailea Beach Resort, we added 32 beautiful lanai decks, which has significantly increased the appeal and the revenue potential of these oceanfront rooms.
Also in Wailea, we remain on track to complete our solar project in this quarter, which will eliminate approximately 650,000 kilowatts annually of energy, and reduce not only our carbon footprint, but also our energy bill by roughly $160,000 per year.
And finally at our DC Renaissance, we have completed the refresh of our product to share and the meeting space escalator modernization, both of which have result -- would have resulted in meaningful group displacement during normal operating times.
In summary, despite very challenging times, we had a productive year at Sunstone.
Let's move on to 2020 operating results.
Of our 17 hotels, 15 were in operation at the end of the year, which represents 92% of our rooms in the portfolio, and nearly 98% of our comparable 2019 hotel EBITDA.
For the full year, comparable portfolio revenues were $233 million, and RevPAR was just over $46, which represent declines of 76% and 77% respectively, compared to 2019.
To put this into perspective, roughly 75% of our comparable revenues in the year were generated in the first quarter prior to the pandemic.
Full year comparable property-level EBITDA was a loss of $64 million, which represents a decline of 120% relative to 2019, despite a previously thought unattainable 56% decline in same-store operating expenses.
Three of our hotels, Wailea Beach Resort, Embassy Suites La Jolla and Oceans Edge achieved positive EBITDA for the year.
Moving on to the fourth quarter.
Comparable portfolio revenues were $32 million and RevPAR was $25.36, which represents a decline of 86% and 87% respectively, compared to the fourth quarter of last year.
Our fourth quarter RevPAR was challenged by the seasonal slowdown in business and the increase in both COVID cases and stay-at-home restrictions, which had a temporary impact on transient reservations.
Nevertheless, our portfolio RevPAR of just over $25 increased from the nearly $18 witnessed in the third quarter and the $3 in the second quarter, as we opened up additional hotels, and as occupancy at several hotels increased, particularly our higher-rated properties.
Demand in the fourth quarter came from a combination of leisure transient, contract business, and event-driven groups that were primarily related to either government or emergency management business.
Fourth quarter group business, which was made up of non-congregating room blocks, was generally limited to our hotels in San Diego and New Orleans.
We have also recently seen a very small, but growing number of commercial transient rooms, particularly in October and November, as workforce started to return to traditional offices and get back out on the road.
Furthermore, in December, we saw an increase in holiday travel at Oceans Edge, Wailea Beach Resort, Renaissance Orlando and both of our hotels in San Diego.
Leisure demand continues to be the primary source of business for many of our hotels.
Our drive-to hotels and resort destinations continued to outperform our City Center hotels, particularly on the weekends as people seek travel opportunities away from their homes.
Our Oceans Edge Resort in Key West ran at 53% occupancy in the fourth quarter, and a slightly higher rate than the fourth quarter of 2019 driven completely by transient leisure business.
This spacious resort with six separate pools is an ideal destination for a socially distance vacation.
Over the New Year's holiday, Oceans Edge ran nearly 90% occupancy, with an average rate that was competitive that of the prior year.
Similarly, our hotel in Wailea continues to rebound despite the flighty nature of the Hawaiian Islands, which reopened for business in mid-October, albeit with significant testing requirements and limited open amenities.
As expected, demand in Wailea has been building slowly with occupancy levels in the range of 19% to 23% per month.
As Wailea's occupancy builds, we continue to maintain our premium pricing integrity and have been disciplined in our approach to revenue management as opposed to lowering prices in hopes of creating demand.
Our November ADR at the property was 13% higher than the previous year, and our ADR from Christmas to New Year was over $725.
We continue to believe that our outstanding hotel product, and desire by travelers to vacation in Mali, will allow us to maintain our high rates, while building our occupancy, as more people feel comfortable travel.
Now let's take a look at our quarterly group performance.
Group business increased sequentially in the fourth quarter compared to the third quarter from 21,000 room nights to 32,000 room nights or about 24% of the total room nights achieved in the quarter.
Current group business continues to be composed primarily of government and emergency management-related groups, all of which tend to book with little lead time.
That said, we have also started to see a few incidences of traditional groups keeping their meetings as planned.
For example, while certain isolated events that showed up were small compared to historic events, its sports group kept our room block at our Renaissance Orlando in early January, and two medical groups recently showed up at Wailea Beach Resort.
During the fourth quarter, property-level expenses declined by 70%, which includes the benefits -- benefit of approximately $8.7 million of operational level credits and adjustments, including several real estate tax adjustments and employee tax credits.
Despite such a material decline in cost, the challenging demand environment resulted in property-level adjusted EBITDA loss of $18 million in the fourth quarter.
Now, a loss of $18 million is nothing to get excited about, but it does show continued improvement from the third quarter, which had a loss of $32 million for the comparable portfolio.
Similar to the third quarter, the fourth quarter property-level loss was several million dollars better than we had anticipated, even after accounting for the credits we received.
We continue to work with our operators, not only to reduce expenses in the short term, but also to identify efficiencies and other improvements to our operating model that are expected to generate sustained cost savings for owners as demand returns to our hotels.
We believe 2021 group business will ultimately depend on the speed and efficacy of the vaccine distribution, and the degree to which that allows us to return to normal.
In the near term, cancellations in the first quarter of '21 are trending in line with that of the fourth quarter of last year, and we would expect a limited group room nights outside select government-related groups.
Looking at the second quarter, our group cancellations have increased over the last 90 days, but at a much slower pace than what we saw in recent quarters.
Several groups remain intent on holding their events in the second quarter, including a couple of association events in San Diego, and a few small city wise in Boston.
This gives us some confidence that group room nights will begin to increase in the second quarter.
And then as the distribution of the vaccine becomes more widespread, this travel restrictions and social distance requirements ease, group trends will accelerate in mid-to-late summer.
Given the expected vaccination trajectory, meeting planners have become more confident about holding their events in the third and fourth quarter, and we've witnessed minimal group cancellations for that time period.
Based on these assumptions, we expect our portfolio will perform materially better in the second half of 2021, and specifically in the fourth quarter.
Recent pace of future group bookings also points to recovery.
Following the loosening of stay-at-home orders in the earlier part of this year, we saw a meaningful increase in bookings in group lead volume.
In January, our portfolio group lead volume was up 130% over December, and the total number of leads reached a level not seen since last March.
From a production standpoint, Hilton San Diego Bayfront had its highest January group production in the last six years, with over 17,000 room nights booked, and Boston Park Plaza booked several large pieces of business for the third and fourth quarter.
In New Orleans, Jazz Fest, French Quarter Fest and two other festivals were rescheduled for October, and now every weekend in October has the potential for market compression, which is great and something we have not seen in quite some time.
Looking further group bookings.
Since the beginning of the fourth quarter, we booked 140,000 new group room nights for all future months, excluding the rebooking of previously cancelled groups.
While a portion of these bookings relate to isolated driven event business, the remaining balance still represents an acceleration from previous months and demonstrate there is pent-up demand to hold meetings when conditions permit.
In addition to new bookings, to date we have rebooked 266,000 group rooms -- group room nights that previously cancelled or approximately 25% of all cancelled group room nights since the start of the pandemic.
We would expect that number of rebook rooms to increase as another 3% of cancelled rooms are at various stages of reworking their contracts, and an incremental 24% of cancelled room nights have expressed an interest in rebooking and are working with our sales team to potentially secure new dates.
Taken together, the new group -- groups booked, since the beginning of the fourth quarter and all rebook groups, and those in the contracting process, represent approximately $100 million of group room revenue, and approximately $125 million of total group revenue.
We are confident we would not have captured all of this business, if we did not keep sales professional on property to work with and take care of our meeting planners and group customers.
While our 2021 group room night pace is down materially compared to pre-pandemic levels, we currently have approximately 290,000 group rooms on the books for 2021, representing $62 million of group room revenue, a significant increase from the depressed 2020 levels.
In addition to the more optimistic outlook for group business, transient trends are also showing signs of improvement, particularly after the vaccine distribution began.
Looking at the historical trajectory, in mid-March 2020, net transient bookings quickly turned sharply negative, meaning reservation cancellations materially outpaced new reservations as travel came to historic standstill.
Weekly net transient reservations generally remained negative through the middle of July, and then gradually increased through mid-October as more hotels opened.
Around late October, or early November, net transient reservations remained positive but decelerated, because the weather turned cooler and COVID-19 cases spiked.
That said, I'm pleased to report the net transient reservations have rapidly improved since the vaccine distribution began.
And our weekly forward bookings, while still short of normal levels, are at the highest levels that they have been since the first week of March 2020.
Following the onset of the pandemic, the booking window grew increasingly short, with most reservations being made within a few days of arrival.
We are now starting to see a booking window extend.
For example, Oceans Edge has a significant increase in transient bookings that span over a three-month period.
Similarly, we are starting to pick up transient reservations as far out as the fourth quarter, particularly in places like Wailea.
For the second half of the year Wailea has 13% more transient rooms on the books, compared to the same time in 2019, and the outlook has been improving weekly.
While it is obvious that we still have a long way to go to get back to normal operating levels, the trend is clearly headed in the right direction, particularly as the majority of our portfolio is open and vaccine distribution continues to accelerate and show promise.
Now let's talk a bit about our improving cash burn.
On our last call, we provided an estimate of our monthly cash burn, assuming the majority of our portfolio was in operations, but would continue to run at very low occupancies.
At that time, we established that we would incur property-level cash losses of approximately $10 million to $13 million a month, and with -- and when combined with our corporate expenses, debt service and preferred dividends represented a total monthly cash burn of $16 million to $20 million before capex and extraordinary items.
Our actual cash, or excuse me, our actual hotel-level cash burn for the fourth quarter was approximately $9 million per month.
And when combined with our corporate cash requirements, equated to a monthly burn rate of $16 million on average, which was at the low end of our estimated range.
We continue to fine-tune our operating model at the prevailing occupancy levels, and remain focused on minimizing operating expenses.
We currently expect that our first quarter monthly corporate cash burn rate before capital investment will range from approximately $14 million to $17 million per month or 14% decline from the previously provided range.
Furthermore, if occupancy begins to increase, we would expect second quarter cash burn to decrease significantly, and anticipate that our portfolio could achieve monthly profitability late in the second quarter or early in the third quarter, and then our monthly corporate cash usage could achieve breakeven levels by the end of the third quarter.
So let's switch gears and talk a bit about our significant and enviable liquidity position.
We ended the year with $368 million of unrestricted cash, and full availability on our $500 million credit facility.
Our year-end cash balance included the proceeds from the sale of the Renaissance LAX, as well as the repayment of the mortgage secured by the Renaissance DC, which was paid off just prior to year end.
Repayment of the DC loan eliminates roughly $10 million of annual debt service, and will leave us with only three mortgages.
As our cash burn rate continues to decline, we are increasingly confident that a notable portion of our existing unrestricted cash balance is available for investments that we believe are likely to become available in the next several quarters.
That is, we're one of the few companies that is not dependent on credit facility draws or other borrowings to fund meaningful acquisitions.
From a capital perspective, we plan to invest approximately $70 million to $80 million into our portfolio in 2021.
Our largest projects this year will be the Renaissance Washington DC, where we have been working with Marriott on a plan to convert the hotel to the Western brand.
As part of the conversion, nearly all areas of the hotel will be reinvented, including a full renovation of all 807 guest rooms and bathrooms, conversion of a majority of bathtubs to showers, the addition of nine new keys, upgrading the fitness center, the redesign of all public spaces, meeting areas and food and beverage outlets, as well as enhancements to the exterior facade.
We believe the Western brand will elevate the hotel's positioning, allow it to be better compete for both group and transient customers, and ultimately, enhance the long-term earnings potential and value of the hotel.
Renovation work will begin later in '21, and the rebranding will occur in 2022, once the repositioning is substantially complete.
We anticipate that the total investment for the conversion to be approximately $70 million, with nearly $30 million of that spend occurring in the current year.
This investment is roughly $30 million over the cost of a cyclical renovation, but one that we believe will generate a low- to mid-teens return on incremental investment given the increased rate potential.
We are excited about this project and look forward to working with Marriott on another successful repositioning.
In addition to the conversion project in Washington DC, we have several other value-enhancing projects planned across the portfolio this year.
At the Hilton San Diego Bayfront, we're renovating the ground floor by redesigning and reconcepting our restaurant and converting a formerly leased restaurant space into meeting space.
The new meeting space will enable us to sell more group rooms and allow for the combination of indoor and outdoor waterfront meeting space that sits adjacent to our event lawn.
At our Boston Park Plaza, we are converting another former ground floor retail space into additional meeting and pre-function space.
Similar to our successful Avenue 34 meeting space, we anticipate this will also be highly sought after for social catering events, and will provide additional breakout space to attract large groups.
Finally, we are adding a second adult serenity pool at our Wailea Beach Resort to better accommodate guests, and to further enhance our overall resort experience.
To sum things up, we believe that the worst is behind us and we are now in a period of transition.
The vast majority of our portfolio is operating, and we are seeing trends that give us increased optimism and confidence that we are on the path to return to profitability in the second half of 2021.
And finally, our significant cash on hand before drawing down on our credit facility, not only provides us with stability during these uncertain times, but will also allow us to find attractive investments earlier than others who may be focused on shoring up liquidity.
As of the end of the quarter, we had approximately $416 million of total cash and cash equivalents, including $48 million of restricted cash, and then undrawn $500 million revolving credit facility.
During the quarter, we utilized proceeds from the sale of the Renaissance LAX, along with cash on hand, to repay the $108 million mortgage secured by the Renaissance Washington DC.
The repayment of this loan removes our highest cost piece of secured debt, eliminates nearly $10 million of debt service per year, and leaves us with only three secured mortgages remaining in the portfolio.
During the quarter, we also executed amendments to our unsecured debt agreements, which provide for additional covenant relief and extend the financial covenant waiver period until the first quarter of 2022.
We appreciate the ongoing support of our high-quality lending group throughout this process.
Our balance sheet remains strong with significant liquidity, and continues to position us not only to successfully navigate the current operating environment, but to also allow us to take advantage of opportunities as they may arise, as the industry recovers.
We continue to focus on managing our costs and minimizing hotel expenses, while maintaining our properties in good condition, and opportunistically investing in projects that would have resulted in material displacement.
Working with our operators, we have reduced operating expenses by approximately 60% to 70% since the start of the pandemic.
Our current projected cash burn rate is now $14 million to $17 million per month before capital expenditures, which has reduced from our previous range of $16 million to $20 million per month, and down from the actual fourth quarter burn of approximately $16 million.
Shifting to fourth quarter financial results.
Our fourth quarter performance was significantly better than third quarter.
Operations continue to reflect the most dramatic decline in hotel demand the industry has ever seen.
Fourth quarter adjusted EBITDA was a loss of $19 million, and fourth quarter adjusted FFO per diluted share was a loss of $0.16.
While we were anticipating the fourth quarter results, which showed sequential improvement, the actual results also benefited from approximately $8.7 million of operational level credits and adjustments, some of which may not repeat in the first quarter of 2021.
While we are not providing guidance at this time, let me provide a basic framework on how we are thinking about 2021.
As we've noted, we expect our near-term monthly corporate cash burn to be between $14 million and $17 million before capex.
That is, our assumption for the first quarter, which is marginally better, but generally in line with the fourth quarter of last year.
As the year progresses, we anticipate that the monthly cash burn will decline meaningfully, and we expect to reach hotel profitability by the end of the second quarter or early third quarter.
The rate of acceleration will depend on the success of vaccine distribution, the continued easing of state and local restrictions, and the return of group travel.
As John indicated, we are seeing multiple signs of demand acceleration, especially in the back half of the year.
We have suspended our common dividend, and will reach -- we have suspended our common dividend until we return to taxable income, which may or may not occur in 2021.
Separately, our Board has approved the routine quarterly distributions for both of our outstanding series of preferred securities.
And with that, we can now open the call to questions.
 Assistant:

Chosen response:
q4 adjusted ffo loss per share $0.16.17 hotel portfolio revpar decreased 86.9% to $25.36 in quarter.
to reposition and rebrand renaissance washington dc to westin washington dc.
sunstone - in 2021, expects to invest about $70 million - $80 million of capital, including about $30 million to reposition and rebrand renaissance washington dc.


Prompt:
Human: And the company undertakes no obligation to update or revise these statements.
In addition, on the call, we will discuss non-GAAP financial measures.
Investors can find both the detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company's Annual Reports quarterly reports and other forms filed or furnished with the SEC.
We have divided our call into 3 parts.
First, I will provide an overview of our recent operating performance and the strong demand trends we are seeing second Sandeep will go into more detail about our financial results and give an update on the progress of our transformation plan.
Finally, I will return to discuss why we are excited about our future over both the short and long-term.
I am pleased to be able to report that the 2021 season is off to a strong start.
Despite the significant challenges due to the pandemic, last year we were the first company able to safely reopen a theme park in North America.
This year, we had the first theme parks open in California and in many cases we have opened our parks earlier than in 2019.
We have either opened or announced firm opening dates for all of our theme parks, with the exception of Montreal this is due to the creativity adaptability of our Six Flags team who worked hard to establish the highest standards of cleanliness and safety protocols.
I'm also pleased to report that our guests are excited to return to Six Flags and we are seeing strong demand across all of our markets.
I've spent the last couple of months visiting many of our parks, which has allowed me to connect with our great team members understand reopening challenges reinforce our priorities and examine the effectiveness of our operations.
My time with our outstanding park leaders only reaffirms that we have a highly capable team a healthy industry and a resilient business.
Our full-time team members appreciate that we stood by them throughout the crisis.
The signed a strong consumer demand for our parks are very clear.
Through this past weekend our year-to-date attendance trends have accelerated at our open parks increasing to 79% of 2019 levels compared to 51% in the 4th quarter of 2020.
We are seeing strong guest spending per capita and our active pass base has surpassed prior year first quarter levels placing us solidly on track toward recovery we have center decision making squarely on our guests extending privileges for season passes and memberships while also offering high tiered benefits to our members who continue their payments and they have rewarded us with their loyalty.
Experiencing such robust demand.
At this time of year does present operational challenges however.
We have encountered difficulty, fully staffing our parks upon reopening with a shortage of labor availability due to many factors, including school COVID schedules, immigration restrictions limiting the number of international temporary worker visas, and extended unemployment benefits keeping people at home.
We expect these labor challenges to start to abate as we enter the core of our operating season at the same time, the overall operating environment remains challenging, as we balance the requirement to delivering a safe experience during the pandemic, while still delighting our guests, our safety protocols have reduced right throughput, which can result in longer the normal lines and less rides per guest.
We are continuing to require masks in our parks but we will constantly assess as policy and partnership with our industry, the CDC and local health officials.
We are also working with local health officials and eliminating constraints around park capacity and right seating as more Americans receive their vaccinations.
Our outdoor venues have a tremendous amount of open space.
Therefore our parks are naturally conducive to social distancing and all states are supportive of working with us to safely increase attendance levels our recent results in guest surveys indicate that there is extraordinary demand for outdoor entertainment options close to home and we believe that this widespread desire will help drive attendance in the coming quarters.
So while it is still early in the season.
We are pleased by recent trends and are optimistic about both the short and long-term prospects of our business.
In the first quarter, we also continue to make progress on our transformation plan, which focuses on strengthening our core business and we are on track to achieve our previously issued financial targets.
I want to start by stressing that results for the first quarter are not comparable to prior year because we closed all of our parks in mid-March last year prior to the spring break for most of our parks.
For that reason, I will provide comparisons to 2019.
Total attendance for the quarter was 1.3 million guests a 38% decline from first quarter 2019.
Revenue in the quarter was down $46 million or 36% to $82 million.
Because of our fiscal quarter change our first fiscal quarter 2021 ended on April 4 instead of March 31 as it did in 2019.
As a result, our 2021 results include four calendar days in April when many of our parks operated during which we had 293,000 of attendance and this was inclusive of the Easter holiday weekend.
In 2019, the Easter holiday, which affects the timing of spring break in many of our markets occurred in the second quarter.
So far through this past weekend year-to-date attendance had open parks is trending at 79% versus 2019.
As a reminder our second fiscal quarter in 2021 will end on July 4 and will include a majority of the July 4 holiday weekend which will shift attendance out of the 3rd quarter and into the second quarter of this year relative to calendar in 2019.
Total guest spending per capita increased 16% in the quarter versus 2019.
Since the beginning of the membership program, a portion of the membership revenue has been allocated between admissions spending and in park spending.
Beginning in October 2020 the company prospectively began allocating an incremental portion resulting in a reduction in admission spending per capita and an increase in in-park spending per capita with no change in total guest spending per capita.
Applying a pro forma allocation to 2019 admissions spending per capita increased 17% and in-park spending per capita increased 14% compared to the first quarter of 2019.
The increase in admissions spending per capita compared to 2019 was driven primarily by higher realized ticket deals for both single day tickets and the active pass base as our revenue management team focused on leveraging our pricing and product mix.
The increase in in-park spending per capita compared to 2019 reflected high consumer demand for our products.
Attendance from our active pass base in the first quarter represented 54% of total attendance versus 64% percent for the first quarter of 2019 demonstrating a more balanced approach to ticket sales.
On the cost side, cash operating and SG&A expenses versus 2019 decreased by $29 million or 20% primarily due to the following.
First, cost savings from our transformation efforts.
Second, savings and labor utilities and other costs related to the fact that several of our parks were not operating and third lower advertising costs.
Adjusted EBITDA for the quarter was a loss of $46 million compared to a loss of $42 million in the first quarter 2019.
GAAP loss per share was $1.12 compared to a loss of $0.82 in 2019, primarily due to the lower attendance in our parks.
We are pleased with the retention of our active pass base of 4.1 million pass holders, which included 1.7 million members and 2.4 million traditional season pass holders at the end of first quarter 2021.
Our active pass base is up 1% compared to first quarter 2020 and down only 9% compared to first quarter 2019.
As we reopen our parks.
We are steadily reducing the number of paused members to near zero.
The retention of these members is a testament to our unique offering and loyal following.
Looking ahead, we expect the active pass base trends to continue to improve as we have begun selling new season passes and memberships.
A very large active pass base is a tremendous asset for our company as pass holders generated more annual revenue and cash flow then single day visitors.
The utilize excess capacity as they tend to visit during off peak periods and shoulder months.
We also provide a weather hedge since they pay in advance and have the ability to visit for the entire season.
Finally, our members, provide a source of recurring revenue that smooths our cash flow and makes our earnings less seasonal.
Deferred revenue as of April 4, 2021 was $245 million, up $96 million or 65% compared to first quarter 2020 and up $67 million or 38% compared to first quarter 2019.
The increase was primarily due to the deferral of revenue from members and season pass holders whose benefits were extended through 2021 and the acceleration of season pass sales over the past few weeks of the quarter.
We expect to recognize most of this deferred revenue in 2021.
The capital expenditures for the quarter was $23 million.
We expect our full-year 2021 capital spend to be slightly lower than 2020 due to the carryover of new rights that were delivered and paid for, but not commission in 2020.
Our liquidity position, as of April 4 was $524 million this included $461 million of available revolver capacity net of $20 million of letters of credit and $63 million of cash.
This compares to a liquidity position of $618 million as of December 31, 2020.
Net cash outflow for the quarter was $95 million representing an average of $32 million per month.
This is significantly better than the projection of 53 million to $58 million per month that we gave on our last earnings call.
This improvement was driven by higher than expected attendance and season pass sales.
Based on our anticipated park schedules we expect to be cash flow positive for the balance of the year and will not be providing a quarterly outlook on cash flow going forward.
We are obligated each April to offer to purchase the outstanding partnership units from the unitholders who own the third-party interests of Six Flags over Texas, Six Flags over Georgia and Six Flags White Water Atlanta.
Less than $1 million of value in units has been put to Six Flags during the current year tender period that will end later today.
I would now like to give you an update on the progress of our transformation plan.
We expect the transformation plan to unlock $80 million to $110 million in incremental annual run rate EBITDA once fully implemented and attendance returns to 2019 levels.
In 2021, we expect to achieve $30 million to $35 million from our organizational redesign and other fixed cost reductions.
We have already realized more than $8 million through the first quarter of this year.
As part of our transformation plan, we have incurred $44 million in cost so far through the first quarter 2021 including the non-cash write-offs of $10 million that occurred in 2020.
We expect to incur the remaining $26 million in 2021 and 2022, the majority of which is related to investments in technology, including a new CRM system.
We continue to make progress with our revenue and cost initiatives as shown by the positive impact on our attendance, per capita spending and cost savings.
Our new revenue management team is up and functioning as we focus on leveraging pricing and product mix, to drive incremental unique attendance and yield higher admissions and in park spending per capita.
We launched more than 20 RFPs as part of our non-headcount cost savings initiatives and we are seeing very promising results especially in procurement savings.
We began migrating toward centralized shared services in finance, IT and human resources and we began testing our new park labor scheduling system.
In closing my own remarks the operating environment remains dynamic.
We will not be providing annual guidance at this time.
However, we are extremely encouraged by the improvements we are seeing in our attendance trends and the value creation that will come from implementing our transformation plan.
We feel we are well positioned as we enter the heart of our 2021 operating season now, I'll pass the call back over to Mike.
Sandeep innovation is in our DNA.
In 2021, we will be introducing several record breaking and first of their kind rides including the Jersey Devil Coaster at Six Flags greater venture in New Jersey, the world's tallest fastest and longest single rail coaster inspired by New Jersey folklore.
Tsunami surge at Six Flags Great American Illinois which will be the world's tallest water coaster and we are reintroducing West Coast racers at Six Flags Magic Mountain in California, the world's first racing coaster with side by side tracks, which is the parks 19th coaster.
In addition, we are rebranding our water parks in Oklahoma City, Oklahoma in Rockford, Illinois to Hurricane Harbor in creating a separate gate for our water park in Gurnee Illinois creating our 27th parks.
Finally, due to its popularity we will continue to operate our Drive-thru Safari in New Jersey as a separately gated attraction.
The parks successfully opened in March, creating the longest season in the Safari's history.
We will also be investing in our park infrastructure adding technology to help us modernize the guest experience and in specific areas like food and beverage to help us improve our overall food quality and efficiency.
In addition, to new ride and infrastructure investments we will be introducing numerous new events and festivals in our parks this year.
Some examples include roller coaster power hours and event held on Thursday and Friday evenings with unlimited number of gas can ride roller coasters non-stop while listening to a live DJ.
Our Mardi Gras Festival which continues to grow popularity, is one of our tent pole events in a bigger than ever, July 4 Fest which includes fireworks and in Park events.
I believe Six Flags is well positioned to delight our guests and to create significant value for our shareholders.
In the near term, my optimism is based on a few factors, first reopening progress.
We have approval to operate nearly all of our parks either today or in the near future.
And we have proven in several markets that we can safely operate our parks without capacity restrictions.
So we expect to gradually ramp our capacity back to normal levels while adhering the social distancing and other safety protocols.
Second, consumer demand is very strong.
Attendance at our open parks continues to accelerate as US consumers are eager to get out and have fun and Six Flags sits squarely in the middle of everything a consumer is looking for right now.
Our venues are extremely safe.
They are outdoors and provide ample room for social distancing, our safety standards and protocols have been recognized as best in class by all state, city and county officials.
In addition, the vast majority of our guests drive to our parks so we are not dependent on air travel.
Third, our active pass base continues to grow, which positions us well for the upcoming operating season with a built-in base of guest.
As I mentioned in my opening statement we are proud of our high customer retention and customer loyalty.
Customer loyalty is a very powerful competitive edge of Six Flags and one that provides a valuable recurring revenue stream.
Over the long term I'm optimistic for several reasons.
First, we have a unique value proposition.
Our combination of thrill rides and entertainment for the entire family provides a truly unique experience in an affordable form of entertainment that is resilient even in difficult economic periods.
In addition, our parks are located in each of the top 10 markets in the US, giving us access to the biggest and most lucrative markets around the country.
Second, it our transformation initiative will fundamentally improve our guest experience and our profitability.
We are already seeing the early benefits in our improved single day ticket mix, our in-park spending growth and cost savings from our leaner organizational structure in our procurement efforts, but we're just getting started and we are on track to deliver the full $80 million to $110 million of incremental EBITDA when we are back in a normalized operating environment.
Third and most importantly, we have a talented and dedicated team of people who have created a guest centric culture.
Our team members have exhibited tremendous resiliency during a very challenging period.
Our organizational design resulted in a strong balance of theme park expertise and outside industry perspectives, which will help us stay true to the past while embracing the future.
The strength of our people is truly why I'm confident that our future is bright.
We believe the strategic actions we are taking to transform our company will drive our growth and enhance shareholder value.
I look forward to updating you on our continued progress and as we ramp back up to normal operations, you can expect to hear about our progress in our three key strategic initiatives.
To modernize the guest experience through technology, to improve operational efficiency and to drive financial excellence.
Catherine, at this point.
Could you please open the call for any questions.
 Assistant:

Chosen response:
q1 revenue $82 million.
cash outflow for q1 2021 better than expectations.
company reported a decline in attendance for q1 2021 as compared to same periods in 2020 and 2019.
total attendance for q1 2021 declined 15% compared to 2020 and 38% compared to 2019.
six flags - since parks began re-opening with limited operations in june 2020, attendance trends compared to 2019 have continued to improve.
in q1 2021, attendance at company's open parks was 95% of q1 2019.
qtrly loss per share $1.12.
estimates that it will be cashflow positive for last nine months of 2021.
cashflow forecast will depend on all of company's parks remaining open and attendance levels continuing to normalize.


Prompt:
Human: I'm joined today by Mike Renna, our President and Chief Executive Officer; Steve Cocchi, our Chief Financial Officer, as well as additional members of our senior management team.
Let me remind you that throughout today's call, we will be making references to future expectations, plans and opportunities for SJI.
Reconciliations of economic earnings to the comparable GAAP measures appear in both documents.
Our CFO, Steve Cocchi, will then review our second quarter and year-to-date operational performance and financial outlook.
Mike will conclude by offering some closing remarks.
I am pleased to report that SJI, notwithstanding the challenges of COVID-19, delivered solid performance in the second quarter and through the first half of 2021.
Year-to-date, we saw economic earnings increase by roughly $25 million, up nearly 24% over the same period in 2020, reflecting strong performance in both our utility and nonutility businesses.
Consistent with our strategy, our utilities, South Jersey Gas and Elizabethtown Gas represent the majority of our earnings.
Margin growth remains strong, reflecting above average customer growth, positive rate case outcomes, infrastructure modernization programs and effective O&M management.
Natural gas remains in strong demand across New Jersey, with our utilities adding more than 11,000 new customers in the last 12 months alone.
And while we are seeing increased new construction across the state, the bulk of our growth continues to come from customers converting from heating oil and propane to clean burning low-cost natural gas.
Our infrastructure and modernization investments critical to ensuring safe and reliable service remain on track and have the added benefit of significantly reducing methane emissions.
Nonutility operations also experienced meaningful second quarter and year-to-date improvement, largely the result of new clean energy investments and restructuring of our wholesale marketing portfolio.
Both our Energy Management and Energy Production segments delivered strong results.
Performance in Energy Management reflects solid results from both our traditional wholesale marketing and our fuel management activities, while Energy Production reflects strong performance from our renewable investments, particularly our Staten Island fuel cell as well as initial contributions from our equity interest in our RNG development partner, REV LNG.
Throughout 2021, we've made significant progress in our efforts to reposition SJI at the forefront of a decarbonized energy future.
In March, we executed several financing transactions designed to strengthen our balance sheet, improve our credit ratings and significantly fund our capital plan.
In April, the BPU approved a substantial expansion of energy efficiency programs at both our utilities.
These innovative programs are a cost-effective way to reduce greenhouse gas emissions by lowering usage.
The program also allows for decoupling mechanism on Elizabethtown Gas, similar to the one we have at South Jersey Gas.
Also in April, we announced an industry-leading commitment to decarbonization, setting an aggressive goal to reduce our operational emissions of consumption 70% by 2030 and 100% by 2040.
We also announced commitments to deploy at least 25% of annual capital spend toward sustainability investments moving forward.
These targets are [Indecipherable] those established under the Murphy administration's Energy Master Plan.
We were excited to see Atlantic Shores awarded a project to develop 1,500 megawatts of clean, renewable wind energy for our state.
Our partnership with Atlantic Shores on a green hydrogen pilot project will be essential to unlocking additional decarbonization energy sources for New Jersey and diversifying our renewable energy mix.
And finally, in May, we hosted our virtual Investor Day, which afforded us the opportunity to lay out our long-term vision and the priorities and strategies that support our mission, delivering safe, reliable, affordable clean energy, entity that supports the economic prosperity and environmental goals of New Jersey.
As we look to the balance of the year, we remain focused on delivering on our commitment to clean energy and decarbonization and on successful resolution of our pending regulatory initiatives.
On the clean energy front, in June, we announced the acquisition of a 5-megawatt fuel cell project in the Bronx.
This fuel cell, which will be our 30 catamaran is similar to the two Staten Island fuel cells that were brought online in 2020.
It's eligible under New York's VDER program, which fixes 75% of revenue.
It's supported by an O&M agreement that guarantees 95% availability and long-term offtake agreements with creditworthy anchor customers.
Like our previous fuel cell investments, SJI received 92% of the ITCs, cash flows and net income.
Importantly, this project supports a substantial portion of our ITC goals for 2021.
On the regulatory front, as you know, we have requested $742 million in phase three infrastructure modernization investment at South Jersey Gas.
This critically important program targets coated steel and vintage Aldyl-A plastic pipe, supporting the Murphy administration's safety and reliability, job creation and environmental goals.
Settlement discussions are progressing toward a final resolution.
As Mike noted, our business has performed very well through the first half of 2021.
Second quarter economic earnings were $2 million compared with a loss of $900,000 for the comparable period a year ago.
Improved results reflect increased profitability from both our utility and nonutility operations, partially offset by the impact of financing activities.
Our utilities contributed second quarter earnings of $3.3 million compared to $3 million last year.
Improved results primarily reflect rate relief at South Jersey Gas, strong customer growth and base rate roll-ins related to infrastructure modernization investments under our authorized plans.
Our nonutility operations contributed second quarter economic earnings of $8.1 million compared to $5 million last year.
These improved results were driven by increased profitability at both Energy Management and Energy Production.
Energy management contributed second quarter economic earnings of $7 million compared to $6.3 million last year, primarily reflecting improved asset optimization opportunities as well as fuel management contracts that became operational over the last 12 months.
Energy production contributed to second quarter economic earnings loss of $200,000 compared to a loss of $2.4 million last year, primarily reflecting contributions from our fuel cell and solar investments over the past year.
And our midstream segment contributed second quarter earnings of $1.2 million compared to $900,000 last year, reflecting AFUDC related to our PennEast pipeline investment.
Our other segment contributed a loss in economic earnings of $9.3 million compared to a loss of $8.8 million last year, reflecting an increase in outstanding debt, partially offset by debt repayments and refinancing activity.
For the six months year-to-date, economic earnings were $130.9 million compared with $106 million last year, reflecting improved utility and nonutility profitability.
The improved utility results largely reflect SJG's base rate release, which became effective on October 1, 2020, as well as positive customer growth and the roll-in of infrastructure modernization programs.
Improved nonutility results largely reflect the same factors as previously discussed benefited second quarter results.
Our capital expenditures and clean energy investments for the year-to-date were approximately $270 million, with more than 80% of this amount allocated for regulated utility investments in support of utility infrastructure upgrades, system maintenance and customer growth.
Our balance sheet debt and credit metrics have all improved over the past year and support our growth plans.
We remain committed to a capital structure that supports our regulated focused capital spending plan while maintaining a balanced equity to total capitalization, ample liquidity and a solid investment-grade credit rating.
Our GAAP equity to total capitalization improved to approximately 37% as of June 30 compared with approximately 32% at December 31, 2020, reflecting debt and equity financing and repayment of debt using proceeds from asset sales.
Our non-GAAP equity to total cap, which adjusts for mandatory convertible units and other long-duration debt improved to approximately 45% at June 30 compared with approximately 40% at December 31, 2020.
We continue to have ample liquidity at both SJI and our utilities, with $1.18 billion in total cash, credit capacity and available through our equity forward and approximately $1.14 billion available as of June 30.
In addition, with the proactive refinancing efforts we've undertaken over the past year as well as our repayment of debt from our transactions and the remarketing of our prior mandatory convertible units, SJI has no significant debt maturities due in the near term.
Turning now to guidance.
Based on solid operational performance through the first half of the year, we are reaffirming our expectation for 2021 economic earnings of $1.55 to $1.65 per diluted share.
Our long-term economic earnings-per-share growth target remains 5% to 8%, with significant step-ups expected in 2023 and 2025, driven by timing associated with utility rate cases and clean energy investments.
We're also affirming our 5-year capital expenditures outlook through 2025 of approximately $3.5 billion and our expected 2021 investment of $740 million to $780 million, with $490 million to $510 million for utility investment and $250 million to $270 million for nonutility investment, primarily focused on decarbonization and renewables.
Q2 2021 represents the sixth consecutive period of steadily improving financial results.
Results have been achieved despite a global pandemic turmoil on trading markets, political upheaval and shifting priorities in energy policy.
Looking back, the past few years has been one of unprecedented change for our industry.
The world is moving toward a clean energy future.
SJI has invested in it.
Our strategy is centered around it, and our team is executing on it every day.
We are excited by the progress we've made so far and remain highly confident in our ability to execute on our plan to safely and reliably deliver the clean decarbonized energy of the future to a fully modernized 21st century system.
We also know that it's incumbent upon us to continue to execute effectively and consistently to reward your confidence and investment in us.
 Assistant:

Chosen response: sji reaffirms guidance.


Prompt:
Human: I will be presenting today with Eric Thornburg, Chairman of the Board, President and Chief Executive Officer; and Andy Gere, President and Chief Operating Officer of San Jose Water Company.
For those who would like to follow along, slides accompanying our remarks are available on our website at www.
These statements are based on estimates and assumptions made by the company in light of its experience, historical trends, current conditions and expected future developments as well as other factors that the company believes are appropriate under the circumstances.
I will now turn over the call to Eric.
I am Eric Thornburg, and it is my honor to serve as Chairman, President and CEO of SJW Group.
We're now more than 13 months into the COVID-19 pandemic.
There is a sense of cautious optimism that the worst is behind us, and we have begun planning for the safe return to our offices and work centers.
Over the past year, we've learned much about our teams, our culture, how we can adapt and what we can achieve through remote work.
Despite the challenges, our people have personified our mission, trusted professionals passionate about delivering life-sustaining, high-quality water and exceptional service to families and communities while protecting the environment and providing a fair return to shareholders.
Looking ahead, we are preparing for a phased return to our offices and work sites, building on our established risk-based process that has served us well during the past year.
We will adhere to the safety guidelines provided by our national, state and local health authorities.
Our goal remains the same as it has been throughout the pandemic to deliver on our public health mission as a water service provider and protect our employees, customers and communities.
I and the rest of our executive leadership team are looking forward to the day when we can express our appreciation to all employees in-person and meet the new employees, who have joined our team over the past year without having set foot in our offices.
We are committed to a safe return that seizes the benefits of remote work while providing a safe physical environment to nurture collaboration and our culture.
The extreme cold and winter weather experienced in Texas last February proved the benefits of a pure-play water and wastewater utility with national scale, geographic diversity and locally focused operations.
SJW Group was able to draw on resources from our operations on the East and West Coast to assist our Texas operation during the event.
Our communications teams from both coasts assisted with customer notifications as well as website, social media and news media updates, while our operations and safety teams provided valuable incident support.
The direct experience of the Connecticut and Maine teams dealing with cold weather events added to our response.
In California, the rainfall season is largely behind us.
We have experienced lower-than-normal precipitation for the second consecutive year, and that is impacting available surface water supplies produced from our watershed.
A very low precipitation that we have experienced in the Santa Cruz Mountains this winter has had a significant impact on our local surface water operations, both in terms of storm runoff collected at the creek intakes for immediate treatment as well as the volume of water that we've been able to impound in our Lake Elsman reservoir for release later in the year.
For the first time in my 25 years at San Jose Water, we are temporarily taking our Montevina Water Treatment Plant offline due to low supply.
We will bring the plant back into service when hydrologic conditions allow.
To provide some perspective, the chart on Slide 10 shows the historic surface water production in blue compared with the associated rainfall at Lake Elsman in red over the same period.
As you can see, there's been just one other year, 2014, where we saw such low levels of rainfall and surface water production.
Fortunately, the regional water supply picture is somewhat better, and despite the low rainfall and snowpack this winter, the total groundwater storage at the end of the first quarter remained at Stage one or normal of Valley Water's water shortage contingency plan.
Based on available recharge and the current rate of withdrawal.
Valley Water reports that it is forecasting to remain in the normal range through year-end by supplementing normal supplies with additional imported water.
That bodes well for the upcoming summer months when demands are typically highest, and we anticipate adequate supplies to serve our customers.
As a result of the water supply situation in California, we anticipate increases in our operating costs through the reliance on purchase water from our wholesaler to meet our customers' needs in 2021.
Currently, every billion gallons of purchased water has an incremental cost to the company of $4.2 million more than using our own supply sources.
As a direct result of the water supply outlook and in full transparency, we are announcing guidance of $1.85 to $2.05 per diluted share in 2021.
This assumes no additional company produced surface water in California for the remainder of 2021.
We are in the process of updating our strategic water supply plan to evaluate current and future supply reliability and resiliency.
Our current California general rate case proceeding will address the impact of surface water availability.
The prudent management of our business and financial resources continues to be fundamental to our growth and our ability to return capital to shareholders.
We are proud to have continuously paid a dividend for over 77 years and to have increased the annual dividend in each of the last 53 years, delivering value to our shareholders.
After Jim's remarks, I will address regulatory and other business matters.
Our first quarter operating results reflect new revenues authorized by our 2019 California general rate case.
Water infrastructure conservation adjustment and water infrastructure surcharges authorized in Connecticut and Maine and customer growth in Texas.
These increases were offset by a decrease in customer usage, the impact of a February ice storm in Texas and a decrease in available low-cost surface water due to the dry weather conditions in California that Eric and Andy just discussed.
First quarter revenue was $114.8 million, a 1% increase over the first quarter of 2020.
Net income for the quarter was $2.6 million or $0.09 per diluted share, an 8% increase over net income of $2.4 million or $0.08 per diluted share reported in the first quarter of 2020.
The increase in diluted earnings per share for the quarter was primarily attributable to cumulative rate increases of $0.08 per share, cumulative cost savings of $0.04 per share, a tax benefit of $0.04 per share and an increase in nonregulated income of $0.03 per share.
The diluted per share increase was partially offset by a decrease in customer usage of $0.08 per share.
Customer credits in Texas totaling $0.02 per share issued in connection with the February Ice storm, a decrease in the availability of surface water of $0.02 per share and an increase in depreciation and amortization of $0.06 per share.
Our revenue decrease was a result of $2.8 million in decreased customer usage.
In addition, customer credits in Texas reduced revenue by $700,000 and net changes in certain balancing and memorandum accounts reduced revenue by $600,000.
These decreases were partially offset by $2.8 million in cumulative rate increases and $500,000 in revenue from new customers.
Total 2021 first quarter water production costs were slightly lower when compared to the first quarter of 2020.
The minor reduction was primarily due to $800,000 in lower average per unit cost for purchased water, groundwater extraction and energy charges and lower usage, partially offset by a $700,000 increase due to the purchase of additional water supplies to supplement the lower level of surface water production we experienced during the quarter.
Other operating expenses increased $1.6 million or 2% for the quarter, primarily due to $2.1 million in higher depreciation related to utility plant additions, and $200,000 in higher maintenance expenses, partially offset by $400,000 in lower general and administrative expenses.
In addition, in the first quarter of 2020 we incurred $400,000 in merger-related expenses.
No similar expenses were incurred in 2021.
The effective consolidated income tax rates were approximately negative 52% and 15% for the quarters ended March 31, 2021 and 2020, respectively.
The lower effective tax rate for the quarter ended March 31, 2021, was primarily due to excess tax benefits relating to share-based payment awards, state tax credits and other discrete tax items.
Turning to our capital expenditure program.
We added $46.7 million in company-funded utility plant during the first quarter of 2021.
This represents 20% of our total 2021 planned capital expenditures.
From a financing perspective, first quarter 2021 cash flows from operations increased 321% over the first quarter of 2020.
This change was primarily the result of a decrease in accounts payable and accrued expenses of $8.3 million, an increase in accounts receivable collections of $2.2 million and a $1.5 million increase in net income adjusted for noncash items.
In addition, in 2020, we made an upfront payment of $5 million to the city of Cupertino in connection with our service concession agreement and refunded $8.4 million to California rate payers that were accumulated in our 2017 Tax Act Memorandum Account.
No similar payments were made in 2021.
In March 2021, SJW Group issued approximately $1.2 million -- I'm sorry, 1.2 million of new shares in an offering that raised net proceeds of approximately $66.9 million.
Proceeds from the offering were used to repay outstanding balances on the company's credit facilities and for general corporate purposes.
In addition, in April 2021, the company's California subsidiary entered into a $140 million credit agreement, and the company's Texas subsidiary entered into a $5 million credit agreement, both with JPMorgan Chase Bank.
The new credit agreement replaced the existing JPMorgan Chase credit agreements, which have been paid off and were set to mature and expire on June 1, 2021.
At the end of the first quarter, we had $138 million available on our bank lines of credit for short-term financing of utility plant additions and operating activities.
The average borrowing rate on line of credit advances during the quarter was 1.42%.
SJW Group continues to execute on our core growth strategy of investing in high-quality water systems to provide safe and reliable water service to customers and communities and earning a fair return on those investments.
As Jim just mentioned, we have already invested approximately 20% of our planned 2021 capital spending through the end of the first quarter.
We have high-quality water systems throughout our service areas and are investing to sustain them for the benefit of customers, communities and shareholders.
Other regulatory developments in the first quarter include the filing of general rate cases for both San Jose Water and Connecticut Water in January.
San Jose Water's GRC application proposes a $435 million capital program for the years 2021 through 2023, supported by our award-winning enterprise asset management system.
New rates are expected to be effective in the first quarter of 2022.
California employs a future test year, and thus, the level of capital spend is authorized during each general rate case cycle.
Connecticut, Texas and Maine, employ a historical test year, where capital investments not otherwise recoverable through surcharge mechanisms and expenses are recovered in subsequent general rate case filings after they have been incurred.
Connecticut Water's general rate case is the first since their last decision in 2010.
A primary driver of the case is the $266 million in infrastructure investments that have been completed and are providing a benefit to customers, but are not yet covered in rates.
The Connecticut Public Utilities Regulatory Authority, or PURA, is expected to issue a decision in the third quarter.
Connecticut Water rate case also includes tiered rates for residential customers that promote water conservation.
In Connecticut, PURA-regulated water utilities are able to collect their authorized revenues regardless of usage through the water revenue adjustment mechanism, which mitigates risk of such a rate design and support state policy goals for conservation.
A 1.1% increase in the Water Infrastructure and Conservation Adjustment surcharge, or WICA, was authorized by PURA earlier this year and went into effect on April 1.
This covers $8.7 million in qualified infrastructure investments that have been completed and will provide incremental annual revenue of about $1 million.
The current cumulative WICA surcharge will be rolled into base rates, and the surcharge will be reset to 0 as part of the general rate case.
Maine Water filed a general rate case application for its Biddeford Saco rate division, requesting a $6.7 million increase in annual revenues with the Maine Public Utilities Commission, or PUC, in March.
The application is driven by a $60 million replacement of the 1,884 vintage drinking water treatment plant.
Maine Water's application includes an innovative proposal that would spread the increase over three years in roughly equal amounts.
A decision on the rate smoothing mechanism to authorize a customer surcharge, starting in the third quarter of 2021 is expected in the second quarter and a decision on the requested revenue increase is expected in the second quarter of 2022, in alignment with the completion of the new water treatment facility.
These various state regulatory filings include capital investments that over the long term benefit customers, communities and shareholders as they enhance our ability to deliver safe, high-quality and reliable water service while increasing rate base, the earnings engine for the company.
We are mindful of the economic impact that COVID has had on some of our customers over the past year.
Connecticut Water is proposing a 15% discount on water bills for income-eligible customers that is similar to a program offered by San Jose Water since late 2005.
Meanwhile, San Jose Water anticipates proposing a debt forgiveness plan for its Water Rate Assistance Plan, or WRAP, or low-income -- for low-income customers.
The proposal includes tracking the forgiven amount in San Jose Water's WRAP balancing account for potential future recovery.
On April 9, SJWTX, our Texas Water and Wastewater Utility, executed the closing agreement to acquire the Clear Water Estates Water System.
This is the first acquisition completed by a regulated water utility under the state's new fair value -- fair market value regulation.
The acquisition added 230 new customers, gained additional water supplies to serve current and future customers and added rate base that reflects market value for future rate making purposes.
More importantly, the acquisition demonstrated that the fair market value process worked as envisioned.
This was the 13th acquisition completed by SJWTX, which has tripled its customer base since 2006.
The company serves two of the top four fastest-growing counties in the United States.
With a diverse portfolio of letter supplies and continued additions to customer base through organic growth and acquisitions.
We remain optimistic about the prospects for SJWTX and its increased contributions to consolidated earnings.
We are committed to investing in our culture, diversity and the environment.
Our diversity, equity and inclusion council has honestly and authentically guided our commitment to further build on our diverse and inclusive culture.
We have goals to expand our supplier diversity programs so we can extend our efforts into the broader community.
At the Board level, SJW Group is just one of 154 companies in the Russell 3000 to achieve a gender balanced board rating in 2020.
According to the 50/50 Women on Boards Gender Diversity Index.
We've set the foundation for creating a comprehensive greenhouse gas inventory across all of our operations, understanding where we are now will allow us to set meaningful reduction goals for the future and develop prudent plans that will serve as a road map to achieve those goals.
Bob has served as a Director of the company since 2006 and as Lead Independent Director since 2015.
Bob's knowledge of the water industry is second to none and his contributions to our company and stockholders are too long to list.
Moreover, you won't find a person in business with more integrity, character and a genuine commitment to serve our company, customers, employees and communities than Bob.
On behalf of the Board and all of our employees, we wish him the very best.
 Assistant:

Chosen response:
sees fy earnings per share $1.85 to $2.05.
q1 earnings per share $0.09.
q1 revenue $114.8 million.


Prompt:
Human: I will be presenting today with Eric Thornburg, chairman of the board, president and chief executive officer; and Andrew Walters, chief financial officer and treasurer.
For those who would like to follow along, slides accompanying our remarks are available on our website at www.
These statements are based on estimates and assumptions made by the company in light of its experience, historical trends, current conditions and expected future developments, as well as other factors that the company believes are appropriate under the circumstances.
I'm Eric Thornburg, and it is my honor to serve as chair, president and CEO of SJW Group.
I'm pleased to report that 2021 was a strong year for SJW Group.
Our talented and passionate employees and leaders rose to the challenges, and positioned us well for 2022 and coming years.
We were solid in the key areas of our long-term growth strategy, delivering a reliable supply of high-quality water and world-class service to customers, investing in drinking water and wastewater systems to serve customers and communities and seeking a return of and on that investment, focusing on drinking water and wastewater continuing to acquire water and wastewater utilities, maintaining constructive relationships with our stakeholders and adding shareholder value through prudent growth.
In 2021, we delivered earnings of $2.03 per share, invested more than $230 million in our water and wastewater systems, successfully processed our general rate case in Connecticut, obtained approval for a Step 1 of a multiyear rate plan for the new water treatment facility in Maine, and grew our customer base in our Texas operation by 20% through acquisitions and organic growth.
In January of 2022, we reached a constructive settlement agreement with the Public Advocates Office and our California general rate case.
Our success has its roots in our culture of teamwork and service, and the commitment to excellence in environmental, social and governance strategies.
Our teams collaborate across our national footprint and are passionate about serving customers efficiently and sustainably.
We view all aspects of our operations, planning and construction through an ESG lens.
In 2021, we had an emphasis on supporting the drive of our people who understand our social and environmental responsibilities and wanna be a positive force for good in the communities where we live, work and serve.
We intend to emphasize this even more in 2022.
Our accomplishments have been recognized with prime status by ISS ESG.
Among our U.S. water utility peers, SJW Group is tied for the lead in overall social score from ISS, and tied for second in the overall environmental score.
The company has the best overall governance score possibly.
SJW Group's 2021 corporate sustainability report, which is now available on our website, demonstrates how ESG is reflected throughout our organization, our diversity equity inclusion efforts are a good example.
SJW Group has signed on to the CEO action for diversity and inclusion.
We embrace each person's unique background traits and personality so that they will bring their true selves to our teams.
We have a commitment to supplier diversity.
Our efforts in California were recognized by the Public Utilities Commission.
Veterans Magazine honored SJW as one of the nation's top supplier diversity programs in 2020.
With California as the model, programs have been implemented, and supplier diversity goals established for our operations in other states.
SJW Group also adopted a vendor code of conduct that applies our values across the supply chain.
Likewise, we've been committed to being responsible stewards of the environment by sustainably managing and protecting water resources, which is critical to maintaining adequate supplies of high-quality water.
We know that focusing on water resources is no longer enough.
That is why we've committed to reducing greenhouse gas emissions, 50% by 2030 when compared with a 2019 baseline, a science-based target that aligns with the Paris Agreement to limit the warming of the planet.
It's the right thing to do, and we will report on our progress.
We are seeing extreme weather across our operations.
A year ago, our Texas operation experienced ice, and prolonged temperatures below freezing causing widespread power and water outages.
In Connecticut this summer, we saw tropical storms and record rainfall.
In California, we experienced extreme dry conditions into last fall and the early part of 2022.
Precipitation in California has since we saw between above average and below average.
We plan to issue 2022 guidance after the rainy season has concluded on our first quarter financial results call.
There was enough precipitation in late 2021 to bring our Montevina drinking water treatment facility back online in mid-December 2021.
we're hopeful that California's reservoirs continue to replenish through the rainy season.
Our customers are still under a mandatory conservation order that requires a 15% reduction in water usage compared with 2019.
We will continue to promote water conservation aggressively in our California operations as long as necessary.
Water Conservation Memorandum and water conservation expense memorandum accounts have been established that allow for the potential future recovery of the revenue and expense impacts of such water use reductions.
We offer and actively promote financial assistance programs to customers in need.
Our utilities work with customers experiencing onetime or ongoing financial hardships through bill forgiveness, flexible payment arrangements and in California and Connecticut through our Water Rate Assistance Programs that provides a 15% reduction on water bills for income eligible customers.
SJW Group is also committed to ensuring that our customers are aware of state and federal assistance programs such as the federally funded Low Income Household Water Assistance Program.
In California, we applied for funds on behalf of our customers in need and received a check for almost $10 million from the California Water and Wastewater Arrearage Payment Program that will provide immediate relief for our customers who have been in arrears.
We believe that customer assistance programs and innovative rate-making are at the core of water equity.
Artificially keeping rates low by deferring investment is shortsighted, and it's unsustainable and does not really serve customers who all deserve quality water and service for the long term.
Our subsidiaries will continue to make investments in infrastructure so that customers at all income levels will have access to the high-quality and reliable water service they deserve.
Through prudent planning and rate-making, such as the low income rates, the cost and rate impacts of these investments will be incurred gradually so they could be managed more easily by the utility and customers.
Building and retaining our workforce of water professionals is also critical.
We invest in the training and development of our people so they can have rewarding careers at SJW Group utilities.
They are the foundation.
Our success is built on.
We strive to provide a safe and productive work environment, support the training and development of our teams and measure employee satisfaction and engagement through independent surveys.
Earlier this month, Connecticut Water was recognized as a top workplace in the United States, one of just 1,100 companies across the country to achieve that distinction.
And after Jim's remarks, we will address regulatory and other business matters.
Our 2021 operating results benefited from authorized rate increases in each of our four operating utilities.
These increases were offset by a decrease in customer usage, most notably in our California utility as a result of the drought emergency declarations by the state governor in Valley Water, our local wholesale water agency, as well as a decrease in the availability of surface water supplies in our California surface area.
In addition, we experienced higher general and administrative expenses, due primarily to rate case activity in three of our four water utilities, and increases in other operating costs.
Also, in the fourth quarter of 2021, we benefited from property sales in California and recorded a long-lived asset impairment in Texas that together provided a net benefit to our reported results.
Diversification, coupled with our strong local operations, and supported by our national framework, enable us to provide high-quality water and reliable water service to our customers and communities, protect our employees and deliver solid results for our shareholders.
Fourth quarter revenue was $139.7 million, a $4 million increase over reported fourth quarter 2020 revenue.
Net income for the quarter was $18 million or $0.60 per diluted share.
This compares with net income of $13.3 million or $0.46 per diluted share for the fourth quarter of 2020.
Diluted earnings per share for the quarter was primarily driven by cumulative rate increases of $0.34 per share, decreased production cost due to lower customer usage of $0.30 per share, the sale of nonutility property of $0.29 per share, and recognition of the impact of our California Water Conservation Memorandum Account, or our WCMA, of $0.12 per share.
These increases were offset by a decrease in customer usage of $0.40 per share, an increase in per unit production cost of $0.20 per share and the impairment of a long-lived asset of $0.09 per share.
In addition, in the fourth quarter of 2020, we recorded a tax benefit of $0.14 per share related to flow-through items and the impact of such items on lower fourth quarter pre-tax earnings.
No similar rate impact occurred in 2021 due to higher fourth quarter pre-tax income.
Turning to our comparative analysis for the quarter.
The $4 million increase in revenue was primarily due to $10 million in cumulative rate increases and $3.4 million in the recognition of balancing and memorandum accounts in California, which includes $3.2 million attributable to the WCMA.
These increases were partially offset by a $10.5 million decrease in customer usage.
The cumulative rate increases include the impact of final decisions on our general rate case and reconsideration proceeding in Connecticut, which we received at the end of July and November of 2021, respectively.
While these decisions occurred later in the year than we anticipated, when coupled with our WICA, or our WICA filing, that was approved by PURA in December of 2021.
Our Connecticut utility will benefit from an increase in our annual revenue requirement by approximately $9.9 million beginning January of 2022.
Water production expense decreased $1.8 million compared to the fourth quarter of 2020.
The decrease included $7.8 million due to lower customer usage partially offset by $5.3 million in higher average per unit water production cost.
Other operating expenses decreased $1.5 million during the quarter, primarily due to a gain on the sale of nonutility property of $7.5 million, partially offset by increased general and administrative expenses of $1.6 million and the recognition of an impairment on a long-lived asset of $2.2 million.
The increase in general and administrative expenses was primarily due to the cost of rate case proceedings in the three of our four operating utilities, as well as higher compensation, consulting and insurance costs.
The effective income tax rate for the fourth quarter was 15%, compared to net negative 7% for the fourth quarter of 2020.
The higher effective tax rate in 2021 was primarily due to the impact of flow-through items on the change in profit before income taxes as compared to 2020.
On November 17, 2021, SJW Group entered into an equity distribution agreement whereby the company may offer the sale of shares of its common stock from time-to-time in at-the-market offerings.
SJW Group sold and issued approximately 355,000 shares of common stock with a weighted average price of $70.4 per share, and received approximately $24 million in net proceeds under the agreement in 2021.
Proceeds from the sale of the shares were used to finance the acquisitions of Kendall West and Bandera East Water utilities in Texas, which closed on December 17, 2021.
On December 1, 2021, San Jose Water Company issued $50 million in its Series O senior notes.
The notes are unsecured, accrue interest at 3% and mature 30 years from the issue date.
In addition, on December 1, Connecticut Water Company issued $50 million of its Series 2021 Senior B notes.
These notes are also unsecured, accrue interest at 3.10%, and mature 30 years from the issue date.
Turning to our annual results.
2021 revenue was $573.7 million, a $9.2 million increase over the prior year.
Net income in 2021 was $60.5 million or $2.03 per diluted share, compared to $61.5 million or $2.14 per diluted share in 2020.
The change in diluted earnings per share for the year was due to many of the same factors noted for the quarter.
Cumulative rate increases contributed $0.86 per share, decreased production costs due to lower customer usage added $0.51 per share, and the sale of nonutility property contributed $0.28 per share.
In addition, various regulatory mechanisms and balancing and memorandum accounts added $0.21 per share, and the recognition of the California WCMA contributed $0.12 per share.
These increases were offset by a decrease in customer usage of $0.93 per share, a production cost price increase of $0.44 per share, and an increase in administrative and general expenses of $0.25 per share.
In addition, depreciation expense increased $0.20 per share.
California surface water production resulted in a decrease of $0.15 per share and the long-lived asset impairment in Texas decreased earnings by $0.08 per share.
The 2021 increase in revenue was primarily due to $25.2 million in cumulative rate increases, $2.5 million in the net recognition of certain regulatory mechanisms in Connecticut and Maine, and $3.9 million in the recognition of balancing and memorandum accounts in California, including $3.2 million attributable to the WCMA, and $2.9 million in revenue from new customers.
These increases were partially offset by $24.7 million in decreased customer usage.
Water production expenses increased $3.3 million in 2021.
The increase was primarily due to $11 million -- $11.6 million in higher average per unit water production cost, $3.9 million due to a decrease in surface water supply production, and a $1.3 million increase in California cost recovery balancing and memorandum accounts.
These increases were partially offset by $13.5 million in lower customer water usage.
Other operating expenses increased $12.4 million in 2021, primarily due to $7.6 million in higher general and administrative expenses, $5.1 million in increased depreciation and amortization expenses, and $3.9 million in higher maintenance costs.
As noted earlier, in the fourth quarter of 2021, we recognized an impairment on a long-lived asset of $2.2 million and a gain on the sale of nonutility property of $7.5 million.
The change in other income and expense for the year was primarily the result of the $3 million TWA holdback amount, which I discussed during our second quarter earnings call.
Turning to our capital expenditure program.
We added approximately $64.1 million in company-funded utility plant in the fourth quarter of 2021, bringing total company-funded additions to $233.9 million for the year.
Our 2021 cash flow from operations increased approximately $26 million over the same period in 2020.
The increase was primarily due to an increase in collections of previously billed and accrued receivables of $13 million, an increase in general working capital and net income adjusted for noncash items of $6.8 million and a $5.2 million decrease in the payment of amounts previously invoiced and accrued due to lower fourth quarter activity.
In addition, in 2020, we made a $5 million upfront service payment related to a concession agreement amendment that did not recur in 2021.
These increases were partially offset by an increase in the crude water production costs of $4 million.
At the end of 2021, we had $197 million available on our bank lines of credit for short-term financing of utility plant additions and operating activities.
The average borrowing rate on our 2021 line of credit advances was approximately 1.32%.
SJW Group continues to deliver on our core growth strategy of investing in high-quality water systems to provide high-quality water and reliable service to customers and communities and earn a fair return on those investments.
In 2022, SJW Group's subsidiaries plan to invest $223 million in infrastructure improvements to serve our customers in California, Connecticut, Maine and Texas, more than $1.3 billion in infrastructure investments as planned across the organization over the next five years.
Connecticut Water's 2021 GRC concluded in the fourth quarter in San Jose Water and the California Public Advocates Office have reached a settlement agreement that was filed with the California Public Utilities Commission last month.
Andrew Walters will discuss the results of the Connecticut case, the highlights of the settlement agreement in California and rate cases in Maine and our Texas growth story and provide an update on our California water supply.
Our board has authorized a $223 million capital spending plan for 2022.
Nearly half of it is allocated to pipeline replacement projects.
The plan includes budgeted investments of $115.1 million in California, $61.4 million in Connecticut, $21.8 million in Maine and $24.5 million in Texas.
San Jose Water Company's 2021 GRC application for new rates in 2022 through 2024 is pending before the CPUC.
The application seeks an increase of nearly $88 million in the revenue requirement over the three-year period, authorization of a $435 million capital budget over the three years, and recovery of $18.5 million from balancing and memorandum accounts.
SJWC filed for interim rates to be effective on January 1, 2022.
The settlement recognizes the need for continued investments in the water system to deliver high-quality and reliable service for customers and communities served.
Additionally, it further aligns authorized and capital -- authorized and actual consumption, particularly for business customers, addresses our water supply mix challenge and provides greater revenue recovery in the fixed charge.
A final decision is anticipated in the second quarter of 2022.
The 2022 through 2024 cost of capital proceeding for all Class A utilities is pending before the CPUC.
The application requests an increase in revenue to support a return on equity of 10.3%, an adjustment on the proposed capital structure of 54.55% equity and 45.45% debt, partially offset by a decrease in the cost of debt to 5.48%.
The decision is expected in the third quarter of 2022.
San Jose Water's advanced metering infrastructure application is pending before the CPUC, An all-party settlement agreement was submitted to the CPUC for adoption that would authorize infrastructure investment of $100 million over four years, outside of the capital budget requested in the GRC to deployment of AMI.
A final decision is anticipated in the second quarter of 2022.
In Connecticut, the Connecticut Public Utility Regulatory Authority issued a final decision in November of Connecticut Water Company's request for reconsideration, which was the last outstanding piece of the company's 2021 GRC.
The final decision allows CWC to increase annual revenues by an additional $2.1 million above the $5.2 million originally authorized in the July 28, 2021 GRC decision for a total of $7.3 million authorized through the GRC.
PURA also authorized a WICA of 2.44% effective on January 1, 2022.
The increase was for more than 2020 -- was more than $22 million in completed WICA projects, many of which were not considered by PURA in the GRC because of the deadline and the GRC proceeding for pro forma capital additions.
The new WICA is expected to generate $2.6 million in additional revenue.
Between July 2021 and January 22, the authorized revenue for CWC increased to $9.9 million through the GRC, request for reconsideration and the WICA filings.
Maine Water Company's previously received approval from the Maine Public Utilities Commission for an innovative REITs moving mechanism that provides a more gradual ramp to new rates, driven by the $60 million project to replace a 138-year-old treatment plant in the Biddeford/Saco division.
A supplemental rate application for $6.9 million is pending with the MPUC, which would be the second step in a multiyear rate plan for the project.
MWC has entered settlement discussions with the Office of Public Advocates on this application, and a decision is expected in the second quarter of 2022.
A third step filing associated with the new treatment facility is expected in the second half of 2022 following the completion of a new Saco River drinking water treatment facility.
Maine Water received MPUC approval for a 3% increase in WISC, effective January 1, 2022, for a $1.9 million infrastructure project in the Skowhegan division.
The company also expects that by March 1, 2022, it will have filed rate case applications in four of its divisions as required as a condition of settlement agreements for the 2019 Tax Cuts and Jobs Act order.
We continue to see a pipeline of growth opportunities at SJWTX, our Texas Water and Wastewater Utility.
In the fourth quarter, SJWTX closed on the acquisition of Kendall West and Bandera East Water and Wastewater Utilities.
The company also closed on the acquisition of Texas Country Water in January of 2022.
Combined, these completed acquisitions added nearly 1,800 service connections and expanded SJWTX's service area.
Overall, the company serves more than 24,000 service connections between Austin and San Antonio, and three of the five fastest-growing counties in the United States, which include Comal, Hays and Kendall Counties.
SJWTX has more than tripled its customer base over the past 15 years, providing service to about 70,000 people today.
With a diverse portfolio of water supplies, a growing wastewater business and continued additions to the customer base through organic growth and acquisitions, we remain optimistic about the prospects for SJWTX and its increased contributions to consolidated earnings.
Surface water supply in California improved in the fourth quarter.
As shown on the chart, we have experienced a significant increase in levels at our Elsman reservoir in the Santa Cruz Mountains due to higher-than-average rainfall in October and December, which allowed San Jose Water to put Montevina Water Treatment Plant back online in mid-December, as Eric mentioned earlier.
The current level at Elsman will support approximately 1.3 billion to 1.4 billion gallons in production during the balance of 2022.
For production year to date, water produced from San Jose Water Company's surface water supplies was approximately 350 million gallons, which was generally from runoff until recently supplemented by releases from Elsman.
While there has not been significant rainfall since December, the traditional rainy season continues through the end of March, which could positively impact the runoff and storage in 2022.
The prudent management of our business and financial resources continues to be fundamental with growth and our ability to return capital to shareholders, demonstrating the company's strong commitment to our shareholders.
In January of 2022, the board authorized a 5.9% increase in SJW Group's 2022 dividend to $1.44 per share as compared with the total dividends paid in 2021.
We are proud to have continuously paid a dividend for over 78 years, and have increased the annual dividend in each of the last 54 years, delivering value to our shareholders.
We look forward to working with the new commissioners and their staff to address the water-related issues facing California's regulated water utilities.
She has an impressive background of service and extensive experience with water and utilities.
Becky is the principal of an energy and water consulting company in Austin and past chair of the Public Utilities Commission of Texas.
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Chosen response:
q4 revenue $139.7 million versus $135.7 million.
qtrly diluted earnings per share $0.60.