Prompt:
Human: In addition, we may include references to certain non-GAAP financial measures, such as consolidated adjusted EBITDA and distributable cash flow.
As part of our discussion of Cheniere's results, today's call may also include selected financial information and results for Cheniere Energy Partners LP, or CQP.
We do not intend to cover CQP's results separately from those of Cheniere Energy, Inc. The call agenda is shown on Slide three.
Jack will begin with operating and financial highlights, Anatol will then provide an update on the LNG market, and Zach will review our financial results and guidance.
The second quarter was an extremely productive one for us as we achieved milestones across the enterprise in origination, marketing, operations and engineering and construction, just to name a few.
Global LNG market fundamentals continue to be extremely constructive, and we have begun to see the return of long-term LNG contracts in support of the construction of new liquefaction capacity.
For the second quarter, we generated consolidated adjusted EBITDA of $1.023 billion and distributable cash flow of approximately $340 million on revenue of over $3 billion.
We generated a net loss of approximately $329 million, due primarily to the unrealized derivative accounting treatment required on our hedges and on our Integrated Production Marketing, or IPM transactions, which Zach will discuss in more detail in a few minutes.
For the third consecutive quarter, we're raising our full year 2021 financial guidance.
We now forecast 2021 consolidated adjusted EBITDA of $4.6 billion to $4.9 billion and distributable cash flow of $1.8 billion to $2.1 billion.
This increase in guidance is being driven by a number of factors.
First, the continued strengthening of the LNG market is yielding higher netbacks on open volumes.
For context, since our first quarter earnings call in May, spot margins for 2021 doubled.
And our portfolio optimization team has been able to capitalize on that with our open volumes.
In addition, we've been able to further unlock some additional production for the second half of the year, primarily through maintenance optimization, which has contributed to an upwardly revised production forecast.
And lastly, with Henry Hub moving higher over the past quarter, we made some additional lifting margin.
So our outlook for the balance of 2021 has improved again based on a very strong LNG market and our very strong operational performance.
The fundamentals present in the LNG market are as good or better than at any time since I've been at Cheniere.
Anatol will cover the market in more detail in a few minutes, but market dynamics on both the supply side and demand side continue to move in our favor and support our conviction in the long-term growth prospects for natural gas worldwide.
Just after the quarter ended, we signed our third IPM agreement in support of Corpus Christi Stage 3, this time, with Tourmaline, the largest natural gas producer in Canada.
This transaction progresses our commercialization efforts on a shovel-ready Stage three expansion project and helps validate our view of a constructive macro backdrop for long-term contracts.
In addition, it reinforces Cheniere's record of executing collaborative, innovative solutions to meet the needs of our customers.
We will continue to leverage our infrastructure platform and commercial advantages to further progress Stage three toward FID.
During the second quarter, we continue to have meaningful success under our midterm strategy, placing portfolio volumes into the market under various commercial agreements and increasing the percentage of our total volume that is contracted.
So far in 2021, we've entered into fixed fee sales agreements for portfolio volumes with multiple counterparties aggregating approximately 12 million tons of LNG volume between this year and 2032, in addition to the IPM deal with Tourmaline.
The success of this midterm strategy underscores the strength in the LNG market today and the strategic competitive advantage of our portfolio volumes.
We'll continue to place these flexible volumes in the market, tailoring solutions to meet the growing requirements of LNG customers worldwide.
On the production side, the record we set in the first quarter for LNG exports didn't stand very long as we broke that record in the second quarter with 139 cargoes of LNG exported from our two facilities.
Year-to-date, Asia is the top destination of Cheniere cargoes with approximately 45% of our cargoes exported having landed in Asia, followed by Europe with roughly 35%, and Latin America with about 20%.
South Korea and China are the top two countries importing our LNG so far this year, and those two alone account for over 1/4 of all cargo deliveries.
Our operations and maintenance teams at both Sabine Pass and Corpus Christi have done an exceptional job thus far in 2021, managing our operating plans to maximize asset availability and LNG production in our facilities, enabling us to increase our production forecast for the year, all while ramping Corpus Christi Train three to four rates and stable operations quickly and safely.
We look forward to the same performance with the addition of Sabine Pass Train six early next year.
Speaking of Train 6, a significant milestone was met last month with the introduction of fuel gas into the train, signaling the start of early commissioning activities.
At the site, 17 systems were turned over to the start-up team in June, another 12 in July.
With the project approximately 90% complete Bechtel continues to progress this project against an accelerated schedule.
Turn now to Slide six where we'll provide a brief review of Stage three and the Corpus Christi site overall as the Stage three project comes into focus with our recent commercial momentum and the constructive market we are in.
As a reminder, our Stage three project at Corpus Christi is fully permitted, and if fully constructed, would have over 10 million tons of LNG capacity per year.
Stage three enjoys brownfield project economics as it will utilize a significant amount of shared infrastructure constructed as part of trains one through three, which we believe make Stage three a very cost-competitive LNG capacity addition.
As for the path to FID, we have said this before, we will maintain our discipline to help ensure that the risk and return profile of Stage three is consistent with that of the first nine trains we've built.
To that end, our origination team is focused on commercializing additional capacity from the project, and we are working closely with Bechtel on finalizing the EPC contract.
We remain committed to our growth capital investment parameters which help ensure discipline in our capital investment decisions and the sanctioning of projects only when they meet the high standard we have set for all FIDs to date.
Our excitement around the potential investment opportunities at the Corpus Christi site doesn't end with Stage 3.
As you may recall, we have acquired approximately 500 acres adjacent to our existing site, which provides us with a platform for major future development potential.
Any future capacity developed at this site may be designed to leverage already in place to provide substantial cost advantages.
As you can see from the aerial view of the land position at Corpus Christi, the site possesses a substantial running room for growth well beyond Stage 3.
And we may develop additional infrastructure there over time, especially as Stage three moves closer to FID.
Turn now to Slide seven.
Last month, we were proud to publish our second annual corporate responsibility report entitled Built for the Challenge.
This report, the product of a deep cross-functional effort across the entire company, provides insight into key actions taken by Cheniere to ensure business resiliency in 2020 and beyond, and is the latest example of our transparency on ESG-related issues and how we are building sustainability into our business model.
Built for the Challenge is the latest milestone in our ESG journey, which has seen tremendous progress in 2021.
Highlights of achievements reached thus far through 2021 include the announcement of our cargo emission tags, the climate scenario analysis we published, our first carbon-neutral LNG cargo we announced last quarter, our participation in the first-ever study to measure methane emissions on an LNG carrier, and our collaboration with leading academic institutions and several of our upstream natural gas suppliers to implement QMRV or greenhouse gas emissions performance at natural gas production sites across several bases.
And finally, earlier today, we announced the publication of our peer-reviewed greenhouse gas life cycle assessment, or LCA, which utilizes greenhouse gas emissions data specific to our LNG supply and will be the foundational analytical tool to estimate greenhouse gas emissions to be included in our CE tags that we provide our customers.
The items highlighted on this slide are all steps on a continuous path, and we look forward to leading our industry forward in this area, helping to ensure the long-term sustainability of natural gas and helping all participants among the LNG value chain realized the full environmental benefits of our LNG.
Globally, the pace of recovery in LNG markets from the COVID-related lows has exceeded most expectations, especially when looking at demand growth in the fourth quarter of 2020 through the first quarter of '21.
This trend continued in the second quarter with not only meaningful growth over the same period in 2020, but also notably well above the five year range, supporting our constructive market views on '21 and subsequent years.
We continue to see a fundamentally tight market over the next several years breaking the trend for seasonal demand norms even with rebounding LNG supply.
As reflected by the historically high LNG prices in both Europe and Asia, markets remain tight through this past winter, with global LNG demand growing by 9% year-over-year in the second quarter, slightly surpassing the fourth quarter demand levels despite the second quarter historically being a shoulder period in the market.
Asia and Europe exited spring with sizable storage deficits as the cold winter in Asia and the colder-than-normal spring in Europe, intensified the interbasin competition for LNG supply.
Asia and Europe's robust demand caused spreads between the two regions to narrow, with European netbacks even surpassing those in Asia in order to attract imports amid insufficient LNG supply availability in Q2.
Global LNG production rebounded 8% year-over-year in Q2, primarily on U.S. volume growing 80% compared to last year when customers were exercising their cargo cancellation rights.
Through the first half of the year, U.S. LNG production is up 43% year-over-year approximately 35 million tons.
However, non-U.S. volumes have lagged more than expected during most of '21 so far and remain below 2020 levels in June.
These non-U.S. volumes were impacted by feed gas constraints in Trinidad, and maintenance and outages in North Africa and other LNG-producing regions.
Consequently, less LNG flowed to Europe year-over-year as it competed for cargoes with Asia and Latin America.
Overall, U.S. LNG flows to Asia increased over 10% in the first half of '21 to 48% of total U.S. exports compared to 38% in the first half of 2020.
Meanwhile, flows to Europe dropped over 15 percentage points from 51% to 34% year-over-year, coinciding with natural gas storage inventories again at multiyear lows.
In Europe, weather-driven demand supported the gas market well into the injection season.
High carbon prices and low wind generation in June further lifted European gas demand for power generation.
However, upstream maintenance across Northwest Europe, flat Russian gas pipeline flows and lower LNG imports, capital market tight and storage inventories at a significant deficit relative to historic norms.
LNG flows into Europe were 9% or roughly 2.1 million tons lower year-on-year in Q2 as a result of tight global LNG supply balances.
European inventories currently stand at record low levels, with a 16 BCM deficit to the five year average, which is equivalent to roughly 170 LNG cargoes.
These supply and demand dynamics were reflected in European gas prices during the second quarter, with Dutch TTF settlement averages increasing by over $6 an MMBtu to $7.82 in MMBtu and almost 350% increase year-over-year.
This average was higher than JKM as the basins competed for import volumes.
Similarly, in Asia, the continued call on LNG imports to satisfy growing natural gas demand was driven by an early start to the summer, a surge in economic recovery and industrial activity in China, along with heavy nuclear maintenance in Korea.
Jack mentioned a moment ago that Korea and China alone imported over 25% of all our LNG production year-to-date.
Asia imported 65 million tons of LNG in the second quarter, an increase of eight million tons or 14% year-on-year.
The JKT region contributed over 20% of that growth despite higher nuclear availability in Japan.
10 nuclear units have restarted in Japan as of July 21, the highest number of operating units since the Fukushima disaster over a decade ago.
Japan's nuclear availability was offset by lower nuclear output in Korea and Taiwan.
A particular note, Taiwan retired 25% of its nuclear fleet in the second quarter and has a stated goal to become nuclear-free by 2025.
So this should continue to support the LNG market in the region for years to come.
The majority of growth in Asian LNG demand, however, came from Mainland China.
Imports in China surged 22% to 20 million tons in the second quarter, making China the largest LNG importer on a global basis surpassing Japan.
LNG imports were supported by hotter-than-normal weather in South China, rising industrial gas demand, and increased power sector demand amid low hydro levels.
In addition to Asia and Europe, we saw a notable uptick in Latin American demand as Brazil's imports reached multiyear highs due to severe drought conditions and the resulting lack of hydropower.
Latin America's imports increased more than 70% year-on-year in the second quarter, with Cheniere-produced cargoes making up nearly 40% of total imports.
Flows into Latin America represented 17% of total U.S. exports, increasing over 5% from the comparable 2020 period.
Clearly, both near-term and long-term dynamics in the LNG market provide a highly constructive backdrop for us to execute on our short-, medium- and long-term LNG origination strategies.
With highly flexible portfolio volumes available today and cost-competitive brownfield incremental capacity that we are actively commercializing, we possess an ideal platform to meet the growing and evolving needs of LNG customers worldwide.
As natural gas solidifies its place as a foundational fuel in a global transition to lower carbon energy sources, LNG consumers and producers are seeking to optimize the environmental performance of LNG throughout the value chain.
Jack reviewed some of the recent steps that we at Cheniere have taken and will continue to take as part of our broader strategy focused on data and transparency through the LNG life cycle, with the ultimate goal of emissions abatement in order to maximize the climate benefits of our LNG for all.
The growing focus on environmental stewardship and performance is beginning to be reflected in pricing mechanics for energy.
In the European Union, carbon prices reached all-time highs in the second quarter, reaching over EUR55 per ton during the quarter and continuing higher to nearly EUR60 per ton, or roughly $3.50 an MMBtu equivalent in early July.
Industry commentators view the growth and increased liquidity in the emissions trading market to be an enduring trend as demand for allowances and offsets growth across the globe, driven by decarbonization efforts.
While Europe is by far the most active market for exchange-traded carbon allowances, we're seeing increased activity in other parts of the world as well, especially Asia.
China recently launched its own national emissions trading, market making it the largest carbon market in the world at its onset.
We believe other markets will follow this trend as progress on climate action will continue to buoy demand for cleaner burning fuels.
This is relevant to Cheniere and the LNG market as the appetite for carbon-neutral LNG is increasing, and carbon offsets our necessary tool in certifying cargoes as carbon-neutral.
While this market is nascent today, as of mid-July, there were 12 carbon-neutral LNG cargoes in 2021 globally.
There is significant interest in these offerings among both buyers and sellers.
Given our size, scale and progress to date, leading on data-driven environmental transparency and performance and some of the other efforts Jack highlighted, Cheniere expects to play a prominent role in this regard from our life cycle analysis and the cargo emission tags and our QMRV collaboration, we aim to offer increased environmental transparency while providing low emission solutions and competitively structured products for our buyers.
I'm pleased to be here today to review our second quarter financial results and our increased full year 2021 guidance.
Turning to Slide 13.
For the second quarter, we generated revenue of approximately $3 billion, consolidated adjusted EBITDA of approximately $1 billion and distributable cash flow of approximately $340 million and a net loss of $329 million.
As Jack mentioned, our results for the quarter were negatively impacted by the accounting treatment for our derivative instruments, which includes our IPM agreements.
As we have discussed in prior quarters, our IPM agreements, certain gas supply agreements and certain forward sales of LNG qualify as derivatives and require mark-to-market accounting, meaning that from period to period, we will experience gains and losses as movements occur in the underlying forward commodity curves.
This accounting treatment, coupled with significant volumes, long-term duration and volatility in price basis for certain contracts, most notably our IPM agreements, will result in fluctuations in fair market value from period to period.
While operationally, we seek to eliminate commodity risk by matching our natural gas purchases and LNG sales on the same pricing index, our long-term LNG SPAs do not currently qualify for mark-to-market accounting, meaning that the fair market value impact of only one side of the transaction is often recognized on our financial statements until the sale of LNG occurs.
The unfavorable pre-tax impact from changes in the fair value of our commodity and FX derivatives during second quarter 2021 was approximately $672 million, most of which was noncash, but was the primary driver of our recognized net loss for the second quarter.
For the second quarter, we recognized in income 522 TBtu of physical LNG, including 508 TBtu from our projects and 14 TBtu from third parties.
Approximately 80% of these LNG volumes recognized in income were sold under long-term SPAs or from volumes procured under our IPM agreement.
We received no cargo cancellations and had no impact to revenue recognition timing related to cargo cancellations in the second quarter.
We received $36 million related to sales of commissioning cargoes in the second quarter from LNG, which was in transit at the end of the first quarter, corresponding to six TBtu of LNG.
As a reminder, amounts received from the sale of commissioning cargoes are offset against LNG terminal construction and process, net of the costs associated with production and the delivery of those cargoes.
As you may recall, we established an initial debt reduction for 2021 to pay down at least $500 million of outstanding debt.
During the second quarter, we fully repaid the remaining outstanding borrowings under Cheniere's term loan and fully repaid Cheniere's convertible notes due May 2021, with $500 million of cash-on-hand and the remainder about $130 million from borrowings under the CEI revolver.
So as of June 30, we have already achieved our minimum full year goal of $500 million in debt reduction.
With our cash flow profile only improving in the back half of the year, we are poised to exceed that amount this year, along with broadening out our capital allocation plans.
Continuing with the balance sheet management, since our last call, we have locked in a further $200 million of long-term amortizing fixed rate notes at SPL on a private placement basis, with multiple counterparties.
Year-to-date, we have locked in approximately $347 million of such notes, which will fund on a delayed draw basis in late 2021 and will economically refinance a portion of SBL's outstanding 6.25% notes due 2022.
This continued progress on prudently managing the balance sheet through this new structure, which goes hand-in-hand with our efforts on execution and operational performance, was once again recognized by the credit rating agencies during the second quarter, as S&P Global Ratings changed the outlook on the credit ratings of both Cheniere and CQP to positive from negative, as we mentioned on the May call.
S&P cited the EBITDA and cash flow growth resulting from the successful completion of eight trains, accelerated schedule of Train 6, and the expectation of significant improvement in leverage levels over the next two years as we execute on our stated deleveraging plan.
Jack and Anatol have both discussed the success we've had so far in 2021 on marketing and origination, with 12 million tons of midterm deals done as well as the recent 15-year Tourmaline IPM transaction.
The execution of these transactions not only bring Stage three into greater focus, but also supports our long-term balance sheet management priorities by bringing significantly increased cash flow visibility out into the 2030s, given the fixed fees that have always been the bedrock of our commercial strategy.
Aggregating the midterm and IPM transactions we've completed year-to-date, we have sold approximately 25 million tons of LNG which will generate over $3 billion in fixed fees into the next decade, which clearly has derisked our cash flows further.
Turning now to Slide 14.
As previously mentioned, today, we are increasing our guidance ranges for full year 2021 consolidated adjusted EBITDA and distributable cash flow by $300 million and $200 million, respectively, bringing total increases to $700 million and $600 million, respectively, above the original ranges we provided in November of last year.
Our revised guidance ranges are $4.6 billion to $4.9 billion in consolidated adjusted EBITDA and $1.8 billion to $2.1 billion in distributable cash flow.
Today's increase in guidance is largely driven by the continued improvement in global LNG market, pricing and our ability to capture higher netbacks on our open portfolio volume.
A production forecast we have again revised upward due primarily to maintenance optimization.
And lastly, some added lifting margin due to higher Henry Hub prices.
DCF guidance isn't moving up quite as much as EBITDA guidance due to some incremental EBITDA accruing at CQP and SBL, where we have accelerated capital spend at Sabine since Train six is ahead of schedule.
So we expect to realize the benefits over time in DCF as CQP's distributions increased further in the coming years once fully operational.
When we updated guidance on the last call, one of the primary drivers was an improvement in market margins from approximately $2 in February to approximately $3 in May.
Since then, that margin has gone up by another over $3, and our production forecast has increased as well.
The incremental volume that's been added to the production forecast is all in the third and fourth quarters.
And although it's single-digit number of cargoes in terms of quantity, the impact on the financial forecast is meaningful with netbacks where they are.
We currently forecast that the dollar change in market margin would impact EBITDA by less than $25 million for the rest of the full year 2021.
As we have now sold almost all of our production for the remainder of the year, we would only provide another update if that were to change materially.
As well, given the little remaining exposure to the market we have, we are confident in our ability to deliver results within these upwardly revised guidance ranges for the full year.
While we don't guide to free cash flow for over a year now, we have described 2021 as Cheniere's free cash flow inflection point, and that is certainly materializing in the results we've generated so far this year and in our forecast for the balance of the year.
Entering 2021, we forecasted free cash flow at around $1 billion for the year.
As Bcf guidance has moved up $600 million in the subsequent six months, it's reasonable to think our FCF forecast has moved up largely in lockstep with DCF.
So over $1.5 billion.
This incremental cash flow puts us in a great position from a capital allocation perspective, especially as we work to finalize our comprehensive capital allocation strategy and framework.
With that process nearing completion, we expect to be able to provide that to you in the coming months and before the 3Q earnings call in early November, where we will provide you with the first look at 2022 guidance.
 Assistant:

Chosen response: cheniere energy second quarter earnings.


Prompt:
Human: With me on the call are Pam Kessler, Co-President and Chief Financial Officer; and Clint Malin, Co-President and Chief Investment Officer.
Not being able to quantify an impact of the delta variant on current and near future operations, what we have recently heard from our operators gives us some optimism.
We are seeing occupancy gains for the first time in a long while.
Vaccination rates among patients and residents throughout the industry are high, generally in the 80% range with gradual increases expected.
Our buildings are beginning to stabilize with in-person tours and family visits allowed once again, notwithstanding the recent introduction of the delta variant.
The transition of our senior lifestyle portfolio is virtually complete and we are seeing a nice pickup in deal flow and activity.
We are seeing a few encouraging signs throughout the industry.
According to Nick's data, communities and nursing centers are doing much better clinically than they have in some time given the high rate of vaccinations among residents and patients.
On average, especially with respect to SNF, occupancy is trending slowly upward.
Over the last 25 weeks, SNF have seen occupancy rise in each week except one, when census remained flat.
Various government stimulus programs have helped significantly in keeping skilled nursing operators a float over the course of the pandemic.
Additionally, there is about $25 billion remaining for distribution to all healthcare providers in the Provider Relief Fund.
While private pay has not been a beneficiary of adequate government relief to date, we are seeing some signs that more aid may become available soon.
This is not to say unfortunately, that all of the challenges facing our industry are slowly trending downward.
Labor continues to be a major challenge for operators and interest rates and inflation are something we're watching carefully.
Even so, I believe our industry is on more solid footing today than it has been over the last 18 months and I'm hopeful that some of the remaining pressures will begin to ease in the coming months.
That said, however, a serious surge of the COVID delta variant across the country, especially in states with lower vaccination rates among staff could result in the need to stop admissions again temporarily delaying a full recovery but hopefully, any such surge will be addressed locally rather than by a national e-debt.
Second quarter rent and mortgage interest income collections were 93.6% excluding Senior Lifestyle and Senior Care an 86.1% excluding just Senior Lifestyle, whose transition Clint will discuss in detail.
We are no longer seeing new substantial requests for rent deferrals and abatements and if new ones arise, we will review each on a case-by-case basis, keeping in mind an operator's ongoing operations, rent coverage, corporate financial health and liquidity.
We expect to continue providing some amount of relief in the form of deferrals and abatements until occupancy gains become more permanent.
I'm so very pleased to be able to report that the senior lifestyle portfolio transition is nearly complete.
19 of the buildings have been or shortly will be under new leases.
The other four properties in the portfolio have been sold.
Clint will provide more details in his comments.
With respect to Senior Care Centers, bankruptcy proceedings are continuing with the next scheduled court date on August 11.
Building on the uptick, we saw toward the end of the last quarter, deal flow continues to accelerate with several potential transactions in the pipeline that meet our investment criteria.
These opportunities are mostly shorter-term and cash flow strategic with what we believe our reduced risk profiles and strong returns.
Through the first half of the year, we have actively reviewed a host of transactions passing on most either because the properties are not performing well or the asking prices don't reflect what we believe to be market value rates.
We have no problem temporarily remaining on the sidelines for our more traditional long-term investments until we can find the right deal at the right price.
The opportunities we are currently working through include mostly structured finance transactions and span the full spectrum of care.
It bears repeating that LTC has ample access to liquidity to act on these opportunities when the timing is right.
But as a good financial steward we will not enter into a deal that does not produce accretive returns for LTC and our shareholders.
With respect to our dividend, I'd like to repeat what I said last quarter.
It has been LTC's practice to support a dividend payout ratio of approximately 80% of FAD.
As a result, of the financial support we have provided some of our operators and the significant senior lifestyle and senior care defaults our second quarter 2021 dividend payout ratio was 98%.
However, we believe our 2022 FAD will improve as we fully transition the Senior Lifestyle portfolio to more stable operators and the issues related to the Senior Care bankruptcy are resolved.
At this time, we will provide guidance for the third quarter.
We expect similar NAREIT FFO results as we reported for the just completed second quarter.
This guidance does not include recovery of any deferred rent or any rent payment from Senior Care.
With that I'll turn things over to Pam.
Total revenue increased $9.6 million compared with last year's second quarter resulting primarily from a $9.5 million increase in rental revenue, which was due to a $17.7 million write-off in last year's second quarter related to Senior Lifestyle straight-line rent and lease incentive balances.
Completed development projects and higher rent payments from Anthem also contributed to the increase.
The increase in revenue was partially offset by reduced rent from senior lifestyle net of rent received from releasing 11 properties in the portfolio defaulted Senior Care lease obligations, abated and deferred rent and a decrease in property tax revenue.
Interest income increased $113000 from the prior year due to the funding of expansion and renovation projects offset by scheduled principal pay downs.
Interest expense decreased by $686000 due to scheduled principal paydowns on our senior unsecured notes lower interest rates and a lower outstanding balance under our line of credit partially offset by lower capitalized interest in 2021.
Property tax expense decreased $311000 compared with last year's second quarter as a result of the timing of certain operators property tax escrow receipts and the payment of related taxes partially offset by completed development projects.
G&A was $757,000 greater than last year due to the timing of accrual for incentive compensation salary increases and restricted stock vesting.
Income from unconsolidated joint ventures increased $376000 due to mezzanine loan fundings.
During last year's second quarter, we recognized a loss on liquidation of unconsolidated joint ventures of $620000 related to the sale of the four properties comprising our unconsolidated real estate joint venture with an affiliate of senior lifestyle.
During the second quarter of 2021, we recognized a net gain on sale of real estate of $5.5 million related to the sale of three properties in Wisconsin and a closed property in Nebraska all previously leased to Senior Lifestyle.
We also transitioned a memory care property in Colorado, previously operated by Senior Lifestyle to an operator new to LTC.
The lease has a five-year term and provides a purchase option for $5.5 million, which is exercisable after the first year of the lease.
Cash rents starting in the second year of the lease is $150,000 increasing to $300,000 in the third year and escalating 2% annually thereafter.
Net income available to common shareholders for the second quarter of 2021, increased by $16.4 million primarily due to the senior lifestyle write-off in the prior year and the gain on sale of the three Wisconsin properties this year.
This is partially offset by the revenue declines previously detailed.
NAREIT FFO per fully diluted share increased to $0.57 from $0.31 last year's excluding nonrecurring items related to last year's second quarter.
FFO portfolio diluted share was $0.57 this quarter and $0.76 in the second quarter of 2020.
The decrease is specifically due to the non- payment of rent by Senior Lifestyle and Senior Care.
During the 2021, second quarter we paid $41 million under our unsecured revolving line of credit.
Additionally, we maintained our $0.19 per share monthly dividend by paying our shareholders $22.4 million in common dividends during the quarter.
Subsequent to the end of the second quarter we entered into lease agreements covering the remaining properties in the Senior Lifestyle portfolio which Clint, will discuss shortly and sold a skilled nursing center in Washington for $7.7 million.
We received proceeds totaling $7.2 million and expect to recognize a gain on sale of $2.6 million.
Additionally, we paid $25.2 million in regular scheduled principal payments under our senior unsecured notes and borrowed $19 million under our unsecured revolving line of credit at 1.2%.
It is important to note that we have no significant long-term debt maturities over the next five years.
At the end of the 2021 second quarter, our credit metrics remained strong with a debt-to-annualized adjusted EBITDA for real estate of 5.3 times.
In annualized adjusted fixed charge coverage ratio of 4.3 times and a debt to enterprise value of 29%.
We expect to see this 5.3 ratio come down as we receive more rent from assets formerly operated by Senior Lifestyle and eventually we expect to be able to collect rent from assets involved in the most recent senior care bankruptcy.
Next, I'll discuss rent deferrals and abatements.
As Wendy mentioned excluding Senior Care and Senior Lifestyle, we collected 93.6% of second quarter rent and mortgage interest income.
We provided $1.1 million in rent deferrals and $1.1 million in rent abatements.
As a reminder, Senior Lifestyle did not pay us rent in 2021.
With the portfolio virtually fully transitioned, we are receiving contractual rent from the operators who now lease these properties.
Additionally, during the second quarter Senior Care did not pay rent.
We applied the remaining $889,000 of the $2.1 million letter of credit to satisfy certain obligations owed under the master lease in the second quarter.
As of June 30, Senior Care's unaccrued outstanding rent balance was $3.1 million.
In July we provided rent deferrals totaling $366,000 and rent abatements of $323,000.
We have agreed to provide rent deferrals of up to $493,000 and abatements of up to $319,000 for each of August and September 2021.
As Wendy discussed, our Senior Lifestyle portfolio is now nearly fully transitioned and I'm excited to provide our final update on the transition.
I'll speak in some detail about the newest transactions, but I will start with a brief recap of the transactions completed earlier this year.
In total the Senior Lifestyle portfolio included 23 properties, 12 of which were transitioned through April of this year.
Six of those communities were transferred to Randall Residence, a current LTC operator, five to Encore Senior Living an operator new to us and one to Graceful Senior Living also new to us.
Of the remaining 11 properties, four were sold in the second quarter, three assisted living communities located in Wisconsin were sold for $35 million, which roughly approximates their combined gross book value.
We used the net proceeds of approximately $33.9 million to pay down our unsecured revolving line of credit.
In total, these properties included 263 units.
The fourth was a previously closed property sold for $900,000 for an alternative use.
The gross book value when we acquired it in 1997 was $2.5 million and the net book value was $1.1 million.
Of the remaining seven buildings in the portfolio, three have been transferred and four are awaiting licensure.
Two properties are being operated by Juniper in Pennsylvania.
One property in New Jersey also to be operated by Juniper should be receiving licensure any day.
Combined these communities include 168 units.
Juniper has been a close partner of LTCs since 2012.
The new lease has a two year term with zero cash rent for the first three months.
After that time, cash will be reset based on mutually agreed upon fair market rent.
Cash rent will be reset every three months for the first year and twice a year for the second year as cash flow in the buildings improves until we set permanent rates for the longer term.
three properties in Nebraska with a combined 119 units will be operated by Oxford Senior Living, an existing LTC partner since 2012 as soon as licensure is received which we also expect in short order.
The new lease follows the same pattern as I described for Juniper.
One property in Wisconsin is now being operated by a regional partner new to LTC.
This community includes 101 unit and will be operated under a 10-year lease with three five year renewal terms.
Cash rent under the new lease is $920,000 in the first year $1.2 million in the second year $1.3 million in the third year then escalating 2% annually thereafter.
I'll complete my remarks about the Senior Lifestyle portfolio by saying that among the properties that were transitioned in the January and February timeframe, especially in markets that did not have stringent lockdowns during that time occupancy increased under new management sometimes meaningfully.
Next, I'll provide some detail on our most recent development projects that are now operational.
Weatherly Court operated by field Senior Living in Oregon began accepting residents last September.
At June 30 occupancy was 36% up from 24% on March 31.
Ignite Medical Resort and Blue Springs located in Missouri began welcoming patients last October.
At June 30, occupancy rose nicely to 83% up from 64% on March 31.
Moving next to our portfolio numbers, please remember that with the pandemic and the challenging environment it created we don't believe coverage is a good indicator of future performance at this time and we are focused mainly on occupancy trends which I'll discuss shortly.
Q1 trailing 12 month EBITDARM and EBITDAR coverage as reported using a 5% management fee was 0.99 times and 0.8 times respectively for our assisted living portfolio.
Excluding stimulus funds received by our operators, coverage was 0.85 times and 0.67 times respectively.
Excluding Senior Lifestyle from our Assisted Living portfolio, as reported EBITDARM and EBITDAR coverages would increase to 1.03 times and 0.84 times respectively.
Excluding both senior lifestyle and stimulus funds EBITDARM and EBITDAR coverages would be 0.9 times and 0.71 times respectively.
For our skilled nursing portfolio, as reported EBITDARM and EBITDAR coverage was 1.94 times and 1.49 times respectively.
Excluding stimulus funds coverage was 1.44 times and 1.02 times respectively.
Excluding Senior care from our skilled portfolio, as reported EBITDARM and EBITDAR coverages would increase to 1.98 times and 1.5 times respectively.
Excluding both Senior Care and Stimulus Funds EBITDARM and EBITDAR coverages would be 1.52 times and 1.06 times respectively.
Now, for some occupancy trends which are as of July 15.
As a reminder, for our private pay portfolio, occupancy is as of that date specifically and for our skilled portfolio, occupancy is the average for the month.
Because our partners have given this data to us on a voluntary and expedited basis, the information we are providing includes approximately 70% of our total private pay units and approximately 73% of our skilled nursing beds.
Private pay occupancy was 74% at July 15 and June 30 and 72% at March 31.
For our skilled portfolio, which excludes Senior Care, average monthly occupancy through July 15 was 69% versus 68% in both June and March.
As Wendy mentioned, our pipeline continues to expand and is more active than it has been in some time with a diverse set of opportunities including a mix of existing operating partners and those new to LTC as well as a mix of private pay and SNFs.
In total, our near-term pipeline is valued at about $130 million with additional medium to long-term opportunities totaling about another $90 million.
Our bid activity remains healthy and we are excited to see this important part of our current investment strategy gaining steam.
While sales cycles remain elongated and pricing for some properties does not accurately reflect what we believe is their true value, we are more optimistic than we have been in some time about our ability to again begin making long-term strategic investments that will position LTC for future growth.
We have nurtured our balance sheet to provide us with adequate liquidity and flexibility and believe we can use this to our advantage as we seek to provide strong regional operators with creative financing solutions.
We are open to any transaction that meets our underwriting criteria, but also believe that in the current environment, structured finance deals including mezzanine loans and preferred equity financing still represent the best risk/reward profile at this time.
Now, I'll turn things back to Wendy for her closing remarks.
We have come a long way since the start of the pandemic.
It has not been an easy road, but I believe we are now coming up on an easier road.
This business has never been a newly paced smooth super highway with an express lane.
But with great pride, I can say our industry has learned many lessons through many cycles of significant challenge and we continue to provide what I believe is the world's most caring service to the nation's most vulnerable people.
Each day I become more and more confident in our ability to continue to proactively participate in this vital industry.
We are positioned to play offense and are seeking out opportunities to strengthen LTC now and for the future.
We will accomplish this by identifying accretive ways to enhance our portfolio, diversify our investments, serve as a growth capital partner of choice and return to a well-covered dividend for our shareholders.
 Assistant:

Chosen response: q2 ffo per share $0.57.


Prompt:
Human: I am so pleased to be able to open our comments by saying we have successfully eliminated several ongoing operator challenges, executed on $46 million in new investments and have an active and healthy pipeline.
At the same time, the industry is recuperating from the incredible strain created by the pandemic.
I have said before that our industry handled the unimaginable with grace and poise and is proving that seniors housing is a safe and necessary component of our national network of healthcare in the United States.
While there are still some challenges to overcome, I continue to believe that the industry's strength and perseverance will help us navigate the new normal.
In LTC's portfolio, occupancy gains are continuing, vaccination rates among patients and residents remain high, and the potential of the vaccine mandates among staff holds the promise of continuing to reduce the impact of COVID in our buildings.
It seems the recovery has begun and should continue into the new year.
Before I get into our LTC-specific discussion, I'd like to spend a moment discussing industry staffing.
The problem is very real, but our operators are working constantly and creatively to find viable solutions.
I have not spoken to an operator yet that has not had trouble finding and retaining qualified employees.
Operators are turning away residents and patients due to the labor shortage and the resulting staffing challenges.
We have heard from several operators that if not for the current labor constraints, they could increase occupancy.
So they are increasing wages and providing sign up and retention bonuses to help meet this demand.
Additionally, in-person school is now open, freeing parents to be able to reenter the workforce.
And COVID-19 related add-ons to unemployment insurance have expired, requiring a return to work for some to make up for that income shortfall.
However, the Child Tax Credit that most families are receiving and is proposed to be part of the Build Back Better legislation will likely continue to provide public support sufficient enough to keep some people from returning to work.
On the plus side, it has been reported recently that Texas, where we own 34 properties, passed a bill to support long-term care in the state.
The bill proposes $200 million in grants for skilled nursing and $178.3 million in grants for assisted living communities and other care-based providers to help fund staffing recruitment and retention.
We would love to see other states follow this example.
Government support for our industry is continuing.
There is about $17 billion available for distribution to healthcare providers through Phase four of the Provider Relief Fund and another $8.5 billion available for distribution to rural providers through the American Rescue Plan.
The portal for requesting aid closed a few days ago on the October 26 deadline.
So we anticipate receipt of funds by operators later this year at the earliest.
In a recent interview with Provider Magazine, Mark Parkinson, who has been a past guest on our earnings calls said, and I quote, "the Delta variant has caused a pause in the financial recovery of the sector".
Combined with increasing staff costs that we are already experiencing, we are going to need continued help from both the federal and state governments.
He believes that there is a bipartisan support stemming from the efforts made by providers throughout the pandemic, but that passing legislation in a divided Congress will make real change difficult, highlighting the need for actions that don't require congressional approval.
However, short of a new highly contagious variant or COVID surge, I truly believe that our industry is on more solid footing today than it has been since the pandemic began.
And I remain hopeful that some of the remaining pressures will continue to abate over the coming months.
Now moving to our third quarter.
Rent and mortgage interest income collections, excluding Senior Care and Senior Lifestyle were 94%.
We have received no new substantial requests for rent deferrals and abatements.
With occupancy increasing and pent up demand for needs-based care, we don't expect to see a big change in rent deferrals and abatements in the fourth quarter.
For the last several quarters the requests we've received have been from the same small subset of operators, and that has not changed.
We do expect to continue providing some amount of relief until the occupancy gains become more permanent.
The Senior Lifestyle portfolio transition is complete with the exception of one building in New Jersey that is awaiting licensure, which we are expecting at any time.
We have fully transitioned the senior care portfolio as well.
With these challenges successfully addressed, we are excited to be working with new operators and solidifying relationships with current operators who have the resources and desire to stabilize operations and further grow occupancy.
As I mentioned earlier, we recently completed 46 million in investments and have built a healthy pipeline.
We remain focused on shorter-term cash flow strategic deals that have what we believe to be reduced risk profiles and look forward to announcing additional investments over the next several months.
We have ample access to liquidity to act on these opportunities to provide accretive returns for LTC and our shareholders.
We maintained our $0.19 per share monthly dividend by paying out $22.4 million in common dividends during the quarter to our shareholders.
The payout ratio on our dividend, excluding nonrecurring items was approximately 100% for the third quarter.
If we used pro forma performance, including recently completed investments, the third quarter FAD payout ratio excluding nonrecurring items would be approximately 96%.
Although this remains well above our preferred payout ratio of approximately 80% of FAD, we expect our 2022 FAD to improve with the additional revenue from the releasing of the Senior Care and Senior Lifestyle portfolios, which will help bring the payout ratio more in line with historical levels.
With respect to guidance, for the fourth quarter we expect FFO to increase approximately $0.02 to $0.03 per share, excluding nonrecurring items from third quarter results.
Please note, this guidance does not include the recovery of any deferred rent or additional investments.
Now I'll turn things over to PAM.
Total revenue decreased $701,000 compared with the third quarter of last year, resulting principally from unpaid rent from senior care and senior life, abated and deferred rent and the sale of a property in Washington.
The decrease was partially offset by the write-off of straight-line rent receivable balances in the prior-year quarter, rent received from releasing 18 properties in the Senior Lifestyle portfolio, completed development projects and increase in property tax revenue, annual rent escalation, capital improvement funding and higher payments from Anthem.
Interest income was comparable year-over-year.
Interest expense decreased 751,000, mostly due to scheduled principal pay-downs on our senior unsecured notes and lower interest rates on our line of credit, partially offset by a higher outstanding balance on our line of credit.
Transaction cost increased four million, related mostly to our settlement with senior care and related fees.
During the 2021 third quarter, we recognized a gain on sale of real estate of $2.7 million related to the sale of a skilled nursing center in Washington.
In last year's third quarter, we recorded a $900,000 impairment charge related to a closed assisted living property in Florida, which was sold in the first quarter of 2021 and received 373,000 in insurance proceeds for damage related to a property sold in the first quarter of 2020.
Net income available to common shareholders decreased by $1.2 million, primarily due to the previously discussed revenue decline and settlement and related fees for senior care.
The decrease was partially offset by a prior-year impairment charge and a current-year gain on sale.
NAREIT FFO per diluted share was $0.45 this quarter compared with $0.58 in last year's third quarter.
Excluding non-recurring items, FFO per share was $0.55 this quarter compared with $0.71 in the third quarter of 2020.
The decrease excluding nonrecurring items with due to receiving 0 rent from Senior Care and Senior Lifestyle, abated and deferred rent and higher G&A expense.
These decreases were partially offset by higher revenues resulting from releasing 18 properties in the Senior Lifestyle portfolio, completed development projects, mezzanine loan funding and lower interest expense.
During the 2021 third quarter, we funded a $4.4 million mezzanine loan and a $1.8 million mortgage loan.
Additionally, we funded $2.8 million in capital improvement projects on properties we own.
Subsequent to the end of the quarter we funded two mortgage loans for a total of $39.5 million.
Clint will discuss our investment activities in a moment.
During the third quarter we borrowed $68.5 million under our unsecured revolving line of credit and paid $25.2 million in scheduled principal pay-downs on our senior unsecured notes.
Currently we have $5.9 million of cash on hand, $465.6 million available on our line of credit with $134.4 million outstanding and $200 million available under our ATM.
This leaves us with ample liquidity of $671.5 million.
We have no significant long-term debt maturities over the next five years.
At the end of the 2021 third quarter our credit metrics remain strong with a debt-to-annualize-adjusted EBITDA for real estate of 5.8 times, and annualized adjusted fixed charge coverage ratio of 4.3 times.
And a debt-to-enterprise value of 35.3%.
Pro forma for recently completed investments.
Annualized adjusted EBITDA for real estate was 5.7 times.
The annualized adjusted fixed charge coverage ratio was 4.3 times, and debt-to-enterprise value was 32.9%.
I'll finish my discussion with rent deferrals and abatements.
As Wendy mentioned, excluding Senior Care and Senior Lifestyle, we collected 94% of third quarter rent and mortgage interest income.
During the quarter we provided $1.3 million in rent deferrals and $970,000 in rent abatements.
As Wendy noted, these deferrals and abatements relate to the same small subset of operators that have been receiving ongoing relief from us.
As a reminder, Senior Lifestyle did not pay us rent in 2021.
With the exception of the one property Wendy discussed, the portfolio is transitioned and we are receiving contractual rent from the operators who now lease these properties.
Although Senior Care did not have rent in the third quarter, we do expect to receive rent from HMG as performance improves.
Clint will provide more detail.
In October, we provided rent deferrals totaling $438,000 and rent abatements totaling $240,000.
We have agreed to provide rent deferrals of up to $441,000 and abatements of up to $240,000 for each of November and December 2021.
I'll start today by putting a bell on our Senior Lifestyle and Senior Care portfolios.
As Wendy discussed, these portfolios have been fully transitioned but for the licensure of one property currently operated by Senior Lifestyle in New Jersey.
By and large, the properties in this portfolio have generated occupancy gains under new management.
In total, we have transitioned 18 of the Senior Lifestyle buildings with the 19th expected shortly.
For these 19 buildings, occupancy for the month of December 2020 was 71%, increasing to 75% for the month of September 2021.
I'd like to provide some additional color on the six properties in the portfolio with market-based rents.
At June 30, EBITDAR, excluding stimulus, on a trailing 12-month basis for these six properties was $870,000.
On a trailing three-month annualized basis, EBITDAR excluding stimulus was $150,000.
Occupancy for the month of December 2020 for these six buildings was 60%, growing to 65% for the month of September 2021.
With respect to the 11 properties in Senior Care portfolio, in late August we reached a settlement with Senior Care and Aubrey Health Services under which LTC made a one-time payment of $3.25 million in exchange for cooperation and assistance in facilitating an orderly transition of the portfolio.
As of October 1, the entire 11 property portfolio was leased to an affiliate of HMG Healthcare under a one-year master lease with rent based on cash flows.
When HMG commenced operation of the portfolio, it agreed to assume Senior Care's Medicare provider agreements and took on a known liability for stimulus funds received by Senior Care under the Medicare COVID-19 Accelerated And Advanced Payment Program.
This assumed liability is capped at $3.7 million.
HMG is responsible for the repayment of this liability, which it will fund from cash flow.
LTC expects to collect rent sometime in 2022 as performance improves and the liability has been repaid.
It is our intention to add the 11 properties to a master lease currently existing between LTC and HMG after establishing a stabilized rent rate during the first lease year.
We also agreed to provide HMG a $25 million secured working capital loan maturing on September 30, 2022.
Our strong balance sheet allowed us to provide this loan on an expedited basis to mitigate the timing risk of HMG using a third party lender.
This portfolio is based in Texas.
And as Wendy mentioned earlier, the state recently announced an additional $200 million in support for SNFs.
Next I'll provide an update on our most recent development projects that are now operational.
Weatherly Court in Oregon, which is operated by Fields Senior Living saw occupancy rise to 45% at September 30, up from 36% at June 30.
While Ignite Medical Resort in Blue Springs, Missouri grew occupancy to 90% at September 30, up from 83% at June 30.
Now we'll discuss our portfolio numbers with the caveat that we don't believe coverage is currently a good indicator of future performance at this time given the pandemic and the challenging environment it creates.
Before I detail our coverage numbers please note that Senior Care and Senior Lifestyle no longer qualify for our same-store portfolio, given the transitions.
So they are excluded from these numbers.
Q2 trailing 12 month EBITDARM and EBITDAR coverage as reported using a 5% management fee was 1.06 times and 0.86 times respectively for our assisted living portfolio.
Excluding stimulus funds received by operators, coverage was 0.87 times and 0.68 times respectively.
For our skilled nursing portfolio, as-reported EBITDARM and EBITDAR coverage was 2.08 times and 1.61 times respectively.
Excluding stimulus funds, coverage is 1.44 times and 0.99 times respectively.
Now for some occupancy trends which are as of September 30 and are for our same-store portfolio.
As our partners have given the data to us on a voluntary and expedited basis, the information we are providing includes approximately 98% of our total same-store, private-pay units, and approximately 90% of our same-store skilled nursing beds.
Private-pay occupancy was 77% at September 30, 75% at June 30, and 73% at March 31.
For our skilled portfolio, average monthly occupancy was 71% in September, 70% in June, and 69% in March.
As Wendy mentioned, we recently closed approximately $46 million in investments.
The first investment was a $27 million mortgage loan for the purchase of a skilled nursing center in Louisiana by a regional operator new to LTC.
The term is three years with one 12-month extension option.
The second investment was a $12.5 million mortgage loan for the purchase of an assisted living and memory care community in Florida, to be operated by a regional operator new to LTC.
The loan term is for approximately four years and includes an additional $4.2 million loan commitment to be funded at a later date subject to satisfaction of various conditions for the construction of a memory care addition to the property.
The third investment was a $1.8 million loan secured by a parcel land in Missouri for the future development of a post-acute skilled nursing center.
The loan term is for one year.
We are currently negotiating a potential real estate joint venture with Ignite for the development of this center.
The final investment was a $4.4 million mezzanine loan for the refinancing of a independent living community in Oregon operated by a regional operator new to LTC.
The loan term is for three years with two 12-month extension options.
In total, the combined weighted average term of the loans is 3.2 years and the investments are expected to generate an annual interest income of approximately $3.5 million.
Our pipeline remains healthy.
It's a nice mix of opportunities, including for private pay and skilled nursing, and with regional operating partners, both new to LTC and existing.
In total, our near-term pipeline is valued at more than 100 million.
Although sales cycles remain elongated and pricing for some properties does not accurately reflect what we believe is their true value, we remain optimistic in our ability to complete additional accretive investments.
We are keeping our focus for now on structured finance deals.
As Wendy and Pam commented, we have sufficient liquidity and flexibility to provide strong regional operators with creative financing solutions.
We continually strive to provide options to operators who are looking for long-term relationships with the ability to grow.
This has been a hallmark of only investment strategy and one that we plan to continue.
Now I'll turn things back to Wendy for some closing remarks.
And while I cannot predict exactly when we'll return to prepandemic levels of operations, we are seeing continuing signs that give us hope.
Occupancy is increasing, demand for needs-based care is growing, and we're once again making strategic investments.
It has not been easy getting to this point, but I couldn't be more proud of our industry, operators and employees for the grit they have shown since the start of the pandemic.
As our confidence continues to grow, we look forward to providing operators with the financing solutions they require to serve the nation's most vulnerable population.
We are well-positioned to take advantage of favorable industry demographics.
And we'll focus on engaging with more and more regional operators to further strengthen our portfolio for the long term.
We may be relatively small, but we are stable and secure.
We've built a balance sheet capable of seeing us through what has been a difficult period.
And now with a recovery in process, we plan to use our resources to return to growth in 2022.
Operator, we're ready to open the call to questions.
 Assistant:

Chosen response: qtrly nareit diluted ffo per common share $0.45.


Prompt:
Human: Lexington believes that these statements are based on reasonable assumptions.
Any references in these documents to adjusted company FFO refers to the adjusted company funds from operations available to all equity holders and unitholders on a fully diluted basis.
Operating performance measures of an individual investment are not intended to be viewed as presenting a numerical measure of Lexington's historical or future financial performance, financial position or cash flows.
Executive Vice Presidents, Lara Johnson and James Dudley will be available during the Q&A portion of our call.
We had a great first quarter overall and continue to make substantial progress on executing our business plan.
Adjusted company FFO was $0.22 per diluted common share in the quarter, which included $10.9 million of lease termination income primarily associated with a legacy industrial asset in Durham, New Hampshire.
During the quarter, we purchased three industrial assets for approximately $51 million and completed the fully leased development project in the Columbus market.
Overall, these investments produced average estimated stabilized GAAP and cash cap rates of 6.1% and 5.9% respectively.
Market rents across our portfolio continued to grow.
Occupancy is healthy and our industrial exposure represented over 91% of gross real estate assets at quarter-end excluding held-for-sale assets.
We continued to see the value of our industrial properties steadily increase during the quarter, and we believe the value of our office portfolio has also improved amid signs of the pandemic easing.
There are several factors continuing to drive up the overall value of our holdings.
Capitalization rates continue to be under pressure replacement cost is increasing rapidly and tenant demand is driving rents higher.
Our industrial portfolio is benefiting from all these trends with first quarter industrial base and cash base rent renewal increases of 14.6% and 5.4% respectively representing the most visible sign.
The factors driving valuations higher are also supporting a highly competitive investment landscape, and we continue to focus our time on finding the best risk-adjusted opportunities in our target markets in the Sun Belt and lower Midwest.
Industrial purchases in the quarter included two facilities in Indianapolis and one in Central Florida.
Additionally, we have approximately $206 million of assets, either under contract or with an accepted offer, which we expect to close later this quarter.
After a slow start that is typical of the first quarter, current deal flow is robust, with more than $1 billion of investments under review.
We are mindful of pricing, as there continues to be a lot of capital chasing opportunities in a competitive market.
On the development front, we are finishing the construction of our Atlanta project in Fairburn and we are committed to two other projects in our target markets of Indianapolis and Central Florida.
Development and the purchase of vacancy continue to be attractive ways for us to produce stabilized yields in excess of what is available in the purchase market for fully leased buildings.
We leased 1.5 million square feet during the quarter and at quarter-end our stabilized portfolio was 97.8% leased.
Our asset management team has done a terrific job in securing both lease extensions and new leases with increasing rents.
In addition to the three lease renewals in our single-tenant industrial portfolio, we raised occupancy at our multi-tenant industrial facility in Antioch Tennessee to nearly 100% and simultaneously increased base rental rates by approximately 16% for the two new tenants within the facility.
Subsequent to quarter-end, we executed a five-year extension at our 423,000 square foot industrial facility in Lumberton North Carolina and increased base and cash base rent by 23% and 8.6% respectively.
Our balance sheet continues to be in great shape, with net debt to adjusted EBITDA of 4.6 times at quarter-end.
Our cash balance at quarter-end was $170 million, including restricted cash and we had $94.5 million sold forward in our ATM.
Liquidity was enhanced during the quarter by $58 million of sales at GAAP and cash cap rates of 6.3% and 6.5% respectively and will be augmented by retained cash flow throughout the balance of the year.
Subsequent to the quarter, we sold our industrial facility in Laurens South Carolina for $40 million.
Currently we have assets under contract or with an accepted offer for an aggregate gross price of approximately $135 million.
Our remaining non-core sale portfolio consists of 17 properties, which generated first quarter NOI of $8.2 million.
We believe the current value of this portfolio is approximately $290 million.
Finally, we continue to make progress with our ESG efforts and have disclosed long-term environmental targets.
In addition, we distributed a tenant survey to collect data, gain feedback and identify opportunities to partner with our tenants.
We became a supporter of the task force on climate-related financial disclosures and a participant member of GRESB and we are working on reporting to the GRESB real estate assessment for the first time this year.
The two Indianapolis assets we acquired during the quarter are virtually identical buildings, each approximately 150,000 square-foot Class A facilities built in 2019, well-located in Northwest Indianapolis within one mile of I-65.
The properties are 100% leased, each with two tenants, and have a weighted average lease term of just under five years, with rental escalations of 2.5%.
The Indianapolis, central location, excellent infrastructure and its large high-quality labor pool make it very attractive to both users, particularly e-commerce distributors.
Indianapolis is one of the top five cargo airports in the country, with the second largest FedEx hub in the world and it ranks as one of the top 10 U.S. bulk distribution markets.
Our Central Florida acquisition in Lakeland is an example where we can add value through leasing up some vacancy in the facility.
Property is a brand-new 222,000 square foot Class A warehouse distribution center and is primarily leased on a long-term basis with 2.5% annual escalations to credit tenant Motion Industries a subsidiary of Genuine Parts Company.
We are currently in negotiations with a potential tenant for a portion of the remaining square footage and have multiple prospects viewing the additional space, as we work toward a stabilized cash yield forecasted to be approximately 5.3%.
Lakeland is a core sub-market on the I-4 corridor between, Tampa and Orlando, two of Florida's largest and fastest-growing MSAs.
And the property is just a short distance away, from the new Amazon Air Hub facility in Lakeland.
Our approximately 320,000 square-foot Rickenbacker project in Columbus, leased to a subsidiary of PepsiCo was completed in the first quarter.
The estimated GAAP and cash stabilized yields are 7.9% and 7.7%, respectively.
As Will mentioned, we continued to have an attractive pipeline of development projects under way.
In Atlanta, our Class A, 910,000 square-foot development project is expected to be substantially completed this quarter.
Atlanta posted record positive absorption in the first quarter of over eight million square feet.
In the airport South Atlanta submarket where the property is located, led the Metro with over five million square feet of positive absorption.
We currently estimate our development costs to be approximately $54 million.
And our stabilized cash yield is estimated to be around 5.25%, which assumes 100% occupancy and payment of our tenant of our core Promote.
The property is in a prime-location along the I-85, South sub-market of Atlanta and we've been seeing sales trade, at substantial premiums to building costs.
Today I'll touch on the two development projects that we have begun funding in Central Florida and Indianapolis.
The Central Florida project is a Class A, 1.1 million square-foot warehouse distribution center, located on a 90-acre site with frontage along I-75 and near our recently purchased Amazon facility.
The estimated development cost is approximately $81 million.
Ocala is very well-situated for statewide Florida distribution requirements, located just north of I-75 Florida turnpike's split offering access to Tampa, Orlando and the East and West Coast of Florida as well as more toward Jacksonville and Georgia.
Our Indianapolis project in Mount Comfort which we began funding subsequent to the quarter, is just 14 miles east of downtown Indianapolis with easy access to I-70.
Mount Comfort is one of Indianapolis fastest-growing modern logistics sub-markets and offers a very favorable labor profile relative to other competing submarkets.
The 1.1 million square-foot facility has an estimated cost of roughly $60 million.
Like our Atlanta development project both projects feature market-leading specs, including 40-foot clear heights, efficient site plans truck court depths, building depth and column spacing and ample trailer and car parking, to meet the demands of e-commerce and other bulk distributors.
The shell completions are anticipated late in the first and second quarters in 2022, for the Ocala and Mount Comfort projects respectively, both with stabilized cash yields in the mid-5% range.
We'll continue to provide regular updates on the progress of these projects.
We generated adjusted company FFO of approximately $64 million or $0.22 per diluted common share in the quarter and adjusted company FFO would have been approximately $0.19 per diluted common share, excluding lease termination income of $10.9 million.
Revenues during the quarter were $93 million, representing an increase compared to the same time period in 2020, mostly due to new acquisitions and the termination income I just mentioned.
Property operating expenses were roughly $11 million with approximately 88% attributable to tenant reimbursement.
First quarter G&A was $8.4 million.
And we expect our 2021 G&A range, to be $31 million to $33 million.
Overall, same-store NOI increased 0.6% and would have been approximately 1.7% excluding single-tenant vacancy with our same-store lease portfolio at 97.5%.
More specifically, industrial same-store NOI increased 1.5% and would have been 2.8% excluding single-tenant vacancy.
At quarter-end, approximately 88% of our industrial portfolio leases had escalations with an average rate of 2.3%.
On the capital markets front, we took the opportunity in the first quarter to increase our availability under our ATM program to $350 million.
Additionally, we entered into forward sales contracts for an aggregate of 3.6 million common shares, which have not yet settled.
As of March 31, we had 8.6 million common shares unsettled under forward sales contracts which had an aggregate settlement price of $94.5 million.
As Will mentioned, our balance sheet is in terrific shape with low leverage and ample cash available.
At quarter-end, we had nothing outstanding on our unsecured revolving credit facility and unencumbered NOI remains high at 91%.
In addition, our consolidated debt outstanding was approximately $1.4 billion with a weighted average interest rate of approximately 3.3% and a weighted average term of 6.7 years.
 Assistant:

Chosen response: q1 ffo per share $0.22.


Prompt:
Human: As we look back on 2020, it is clearly not the year anyone predicted, but I'm very proud of how Live Nation has dug in and focused on turning this challenge into an opportunity to improve our business.
Over the last year, leaders across all of our business lines, Concerts, Ticketing and Sponsorship, have been analyzing ways to improve their business.
Some of the key initiatives include reorganizing to become more nimble while also reducing our cost structure by $200 million; building concert streaming and direct-to-consumer businesses to expand our revenue streams; advancing our technology initiatives globally while accelerating the shift to digital tickets to meet changing needs of fans, venues and artists; and reinforcing our balance sheet to endure this period while maintaining a strong position to build our business for the future and act on opportunities as we identify them, such as our recent acquisition of the streaming platform, Veeps; and continued pipeline bolt-on acquisitions throughout the globe.
So while this past year has been challenging for the company, our employees, fans, artists and so many others globally impacted by COVID, I've never been more excited about the opportunities in front of us.
We continue to have a substantial tailwind in the live event industry as consumers, more than ever, are looking to spend on experiences.
The supply demand fundamentals of the concert business remains strong, with artists ready to get back on the road and fans eager to reconnect at events.
All our data continues to show that there is substantial pent-up demand for concerts on the consumer demand side.
The $2.4 trillion projected surplus in savings in the U.S. alone by June is a key indicator of consumer spending potential.
At the same time, surveys demonstrate the high demand for concerts globally with 95% of fans likely to attend a show when restrictions are lifted.
This is proving out in fan behavior as well with 83% of fans continuing to hold on to their tickets with rescheduled shows.
On the artist side, there's a broad desire to get back on stage, to connect with their fans and provide economic support to their bands, crew and hundreds of others employed each night putting on the show.
Given the limited touring activity in 2020 and '21, the pipeline for 2022 is much stronger than usual, with almost twice as many major touring artists on cycle in 2022 in a typical year, about 45 artists versus the usual 25.
And there remains plenty of scheduling availability at arenas, amphitheaters and stadiums to accommodate these additional tours, with over 2/3 of these venue nights unused by sporting events or major concerts in a typical year.
It appears that the timing to release the pent-up supply and demand is now approaching.
Vaccine distribution is accelerating, and declines in COVID cases throughout most of the world gives us even more confidence that a safe and meaningful return to shows will soon be possible.
For both the U.S. and U.K., projections indicate that everyone who wants a vaccine will be able to get one by May or June, and Europe and most other markets following a few months later.
Given the mass social and economic toll the lockdown has put on the public, we believe there will be strong momentum to reopen society swiftly as soon as vaccines are readily available, and we believe outdoor activity will be the first to happen.
So while the timing of return to live will continue to vary across global markets, every sign points to beginning safely in many countries sometime this summer and scaling further from there.
For the fourth quarter, all the key costs and cash numbers are in line with or better than what we forecasted last quarter.
As a result, we are confident that our actions taken to cut costs and increase liquidity will provide us with the runway we need until the time is right to bring shows back.
As part of this, we further reduced discretionary spending by another $50 million and closed 2020 with over $950 million in lower costs.
We also reduced our cash usage by $1.65 billion relative to our pre-COVID plans, $150 million more than we were projecting last quarter.
Looking at our Q4 AOI results.
Our AOI loss for the quarter was $244 million, which consisted of $290 million in operational fixed costs and $46 million of contribution margin, which included $96 million contribution from operations along with various onetime items.
As we pointed out last quarter, this contribution margin from operations includes our sponsorship business, where we've been able to maintain close to 90% of the commitments that were in place at the end of February last year.
Half of this sponsorship moved into 2021, while the portion we retained in 2020 was repurposed in other assets, including streaming concerts.
Our artist management and merchandise businesses also generated positive contribution margin in the quarter.
Looking at free cash and liquidity.
We ended the fourth quarter with $643 million in free cash, which increased to $1.1 billion in early January with our debt raise.
This, along with over $950 million of available debt capacity, gives us $2 billion in readily available liquidity.
Our total free cash usage in the quarter was $308 million or $103 million per month.
We had $97 million per month average in operational burn plus another $44 million per month of nonoperational cash costs to get us to $142 million average per month in gross burn.
And then we had $39 million per month in cash contribution margin and ended up with a total effective cash burn of $103 million per month.
The global refund rate for Live Nation concerts that are rescheduled and are in or have gone through a refund window or windows was unchanged from the prior quarter at 17% through the end of Q4.
For the tours that have gone through a second refund window, the refund levels were generally much lower for the second window as the casual fans requested their refunds during the first window.
Festivals generally canceled their 2020 events.
But for festivals where fans could retain their tickets for next year's show, 63% of fans are doing so.
On deferred revenue, at the end of the fourth quarter, deferred revenue for events in the next 12 months was $1.5 billion versus the $1.4 billion we projected at the end of Q3, higher due to $100 million in ticket sales during the quarter.
Finally, our 2021 outlook.
We won't be giving a multi-quarter outlook given the uncertainty on specific timing and likely varied timing for different markets around the world.
For Q1, we will remain focused on our cash burn rate and particularly managing our total effective burn rate to ensure cash contribution margin growth outstrips any increases in our cost structure as we start to ramp back up.
With that, let's open up the call for any questions for Michael, Kathy or me.
 Assistant:

Chosen response: live nation entertainment - believes current level of liquidity provides ability to fund operations until expected return of concerts in summer of 2021.


Prompt:
Human: Melinda will open and close the call and Bob will speak to segment performance and the financials midway through.
We'll then open the call to questions.
Although we believe these statements to be reasonable, our actual results could differ materially.
The most significant risk factors that could affect our future results are described in our annual report on Form 10-K.
We encourage you to review those risk factors as well as other key information detailed in our SEC filings.
With that I'd like to now turn over the call to Melinda Whittington, La-Z-Boy's President and Chief Executive Officer.
We are delivering on plan and controlling the controllables even in these times of significant widespread global supply chain disruption.
Across the La-Z-Boy enterprise, we delivered all-time record high sales of $576 million with sales 29% ahead of the pre-pandemic fiscal '20 second quarter.
Our business is much larger today than pre-pandemic, and we believe our momentum is sustainable.
We are poised to grow on this base of nearly $2.1 billion in trailing 12 month sales.
Also as expected, operating margins improved sequentially as our delivered sales for the quarter reflected pricing and surcharge actions taken to offset unprecedented rising raw material costs.
All in all, we are pleased with the momentum and growth we are experiencing during these challenging times.
Looking forward, demand continues to be strong across the enterprise and our backlog remains at all time highs, even as we continue to increase capacity to service our customers and consumers.
During Q2 of last year, businesses were just reopening and consumers were resuming furniture purchases.
At the time, written same-store sales for the La-Z-Boy Furniture Galleries network were unusually strong, up 34%.
Off that base, written same-store sales for the La-Z-Boy Furniture Galleries network decreased 6% in the fiscal '22 second quarter.
However, comparing this quarter to the pre-pandemic fiscal '20 second quarter written same-store sales for the La-Z-Boy Furniture Galleries network increased an impressive 26% for a compounded annual growth rate of 12% across the two years.
Similarly, while written same-store sales for our company-owned retail segment decreased 7% versus the unusual prior-year period written sales increased at a compounded annual growth rate of 12% across the last two years.
For Joybird, primarily an e-commerce business, it continued its strong growth trajectory accelerating to rate 56% more business this Q2 than in last year's second quarter and delivering an extremely impressive compounded annual growth rate of 40% across the last two years.
As we focus on addressing this strong ongoing demand and accumulated backlog, we continue to make strategic investments to increase capacity and improve capabilities and are producing more units than ever to service customers.
We're continuing to add manufacturing cells and now employ almost 40% more manufacturing personnel in pre-pandemic.
In Mexico, additional cells are coming online at our SLR facility and the first cells at our new [Indecipherable] plants are expected to begin operations in January, with that location of fully operational by fiscal year end.
And we continue to work to minimize supply chain disruptions from those associated with lack of component parts such as electronic chips to those inherent in hiring and training new workers until they reach normal productivity levels.
As we mentioned last quarter, where possible, our procurement team is significantly increasing inventory for key components to minimize disruption while also working to diversify our supply chain with multiple sources in various geographies to protect against continued supply chain volatility.
In addition, early in Q3, we acquired the Furnico upholstery manufacturing business in the UK.
Furnico has been manufacturing La-Z-Boy product for sale in the UK and Ireland since 2008.
This expansion of in-house manufacturing capability will provide greater certainty of supply to our customers in the UK and is a key step in building an integrated supply chain network for La-Z-Boy International.
Also during the quarter, we continued to return value to shareholders with a dividend payment and $15 million in share repurchases, bringing our total cash returned to shareholders in the first half of the year to $64 million across dividends and share repurchase.
And finally, we were pleased to announce last month, the expansion of our Board of Directors to 12 members with the addition of Erika Alexander, who serves as the Chief Global Officer, Global Operations for Marriott International.
Erika has held various leadership roles for several of Marriott's largest brands and will bring a wealth of operational experience perspective and expertise to La-Z-Boy.
Importantly, as we manage the current operational challenges across the business, we're also addressing the long term with our work on Century Vision, our winning strategy for growth through our Centennial anniversary in 2027 and beyond.
As I noted last quarter, Century Vision includes three key pillars.
The first is to leverage and reinvigorate the La-Z-Boy brand.
This includes leveraging the La-Z-Boy comfort message, a renewed focus on aging down the core consumer and accelerating our omnichannel offering.
To date, our marketing platform featuring Kristen Bell, has been successful in driving brand recognition including young -- including among younger consumers who say the La-Z-Boy brand is relevant to them.
Our objective is to build on this sentiment and last month we produced a new series of commercials that showcase how La-Z-Boy's range of products meet our consumers' needs.
At the same time throughout the course of Century Vision will expand the vibrant La-Z-Boy Furniture Galleries store base to approximately 400 locations across North America and will strengthen the entire network to remodels and relocations with some 30 projects on tap for this fiscal year.
While the purchase journey may start digitally, our consumers like to visit our stores to shop providing us with a great opportunity to deliver the flagship La-Z-Boy Furniture Galleries store experience.
Most importantly, our goal is to connect with consumers along their purchase journey through multiple means whether that's online or in person.
With respect to the Company-owned stores, we've become very successful running our retail business where we benefit from the integrated wholesale-retail margin.
We continue to acquire independent La-Z-Boy Furniture Gallery stores to round out our portfolio where it makes sense for us and the dealer.
We recently signed an agreement to purchase five stores in the Alabama and Tennessee markets from the retiring dealer that will be accretive as we quickly and seamlessly integrate them into our portfolio when we close the transaction later in the third quarter.
The second pillar of Century Vision relates to Joybird where we have a sustainably profitable direct-to-consumer model, an exciting and relevant brand with significant potential.
We are fueling Joybird to drive disproportionate profitable growth through an increase in digital marketing spend to drive awareness and customer acquisition, ongoing investments in technology and expansion of product assortment and additional small format urban stores in high traffic areas.
We are excited to open a new store in LA, this month and have an additional stores slated to open by the end of this fiscal year.
In markets where we have Joybird small format stores, we consistently see a geo lift in the online sales, demonstrating the appeal of an omnichannel model across all brands and retail formats.
We also recently opened a virtual store at Joybird's LA headquarters for online shoppers to chat, call and video conference into a dedicated retail environment which has proven to be very successful both in terms of consumer satisfaction and closing sales.
And the third pillar of Century Vision is to leverage and enhance our enterprise capabilities to support the growth of our consumer brands as well as enable the potential for tack-on acquisitions that can benefit from our supply chain expertise and accelerate the La-Z-Boy Incorporated growth story.
Strengthening digital capabilities across the entire La-Z-Boy enterprise and improving the agility of our supply chain, so that it can more broadly support all our customer brands will be key focus areas moving forward.
All in, as we execute Century Vision, we expect to grow the topline higher-than-industry averages and deliver double-digit operating margins.
We are proud of our near term results and excited for our future.
On a consolidated basis, fiscal '22 second quarter sales increased 25% to a record $576 million versus the prior year quarter, an increase sequentially from the fiscal '22 first quarter reflecting continued strong demand and ongoing capacity increases as well as the effects of pricing and surcharges.
Compared with the pre-pandemic fiscal '20 second quarter, sales were 29% higher for a compounded annual growth rate of about 14% over the last two years.
Consolidated GAAP operating income increased $54 million versus the prior year period and non-GAAP operating income increased to $52 million.
Consolidated GAAP operating margin was 9.4% and non-GAAP operating margin was 9% up sequentially from the first quarter.
GAAP diluted earnings per share was $0.89 for the fiscal '22 second quarter versus $0.75 in the prior year quarter.
Non-GAAP diluted earnings per share was $0.85 in the current year quarter versus $0.82 in last year's quarter.
My comments from here will focus on our non-GAAP reporting unless specifically stated otherwise.
I will now review our results by segment.
Demand for product across all businesses remains strong.
Starting with our wholesale segment, delivered sales for the quarter grew 28% to $439 million compared with the prior year period and increased 12% sequentially from Q1.
Compared with the pre-pandemic fiscal '20 second quarter, sales were 25% higher for a compounded annual growth rate of 12%.
Non-GAAP operating margin for the wholesale segment was 9.1% versus 12.2% in last year's second quarter, primarily reflecting higher raw material and freight costs, start-up costs for new facilities and labor challenges, partially offset by pricing and surcharges, fixed cost leverage on higher volume and lower marketing spend as a percentage of sales.
All in, we were pleased with the results and the progress we made sequentially from the first quarter operating margin of 4.7%.
Turning to the retail segment.
For the quarter, delivered sales increased 19% to $192 million.
Delivered same-store sales increased 17% versus the year-ago quarter.
Compared with the pre-pandemic fiscal '20 second quarter, delivered sales increased 30% for a compounded annual growth rate of 14%, again demonstrating the strength of the La-Z-Boy brand and our furniture gallery store system in this environment as well as ongoing strong execution at the store level with sales metrics positive across the board.
Non-GAAP operating margin increased to a second quarter record of 12.5% versus 9.4% in the prior year quarter, driven primarily by fixed cost leverage on the higher delivered sales volume as well as expense management.
Sales for Joybird which are reported in corporate and other increased 37% to $40 million versus the prior year quarter.
On a two-year basis, compared with a -- the pre-pandemic fiscal '20 second quarter delivered sales increased in impressive 93% for a compounded annual growth rate of 39%, reflecting the momentum Joybird is building and the direct to consumer marketplace as we continue to acquire customers and strengthen brand awareness through new digital marketing channels.
For the quarter, Joybird increased both its web and in-store traffic, conversion and average ticket.
Joybird's sustaining profitability and with a focus on accelerating disproportionate growth, we will continue to invest in Joybird marketing to drive broader brand awareness and customer acquisition.
Pulling all of this together, consolidated non-GAAP gross margin for the entire Company for the fiscal '22 second quarter decreased 500 basis points versus the prior year quarter, primarily driven by significant increases in raw material and freight costs, start-up costs associated with the expansion of our manufacturing capacity and labor challenges in our wholesale businesses.
These items were partially offset by pricing and surcharges in our wholesale business.
Consolidated non-GAAP SG&A as a percentage of sales for the quarter decreased 280 basis points, primarily reflecting fixed cost leverage on the higher sales volume, mainly in our retail segment as well as lower marketing spend as a percentage of sales.
Our effective tax rate on a GAAP basis for the fiscal '22 second quarter was 26.6% versus 26% in the second quarter of fiscal '21.
Our effective tax rate varies from the 21% federal statutory rate, primarily due to state taxes.
We expect our effective tax rate for the full fiscal '22 year to be between 25.5% and 26.5%.
Year-to-date, we generated $15 million in cash from operating activities.
We ended the period with $297 million in cash and no debt and held $31 million in investments to enhance returns on cash.
Year-to-date, we invested $59 million and higher inventory levels to protect against supply chain disruptions and support increased production and delivered sales.
We also spent $33 million in capital year-to-date, primarily related to improvements to our retail stores, plant upgrades at our manufacturing distribution facilities, new upholstery manufacturing capacity in Mexico and technology upgrades.
As a note, last month we entered into a new five-year $200 million unsecured revolving credit facility which replaced our $150 million ABL facility.
The new facility has a $100 million accordion feature, allowing us to expand our borrowing capacity to support future growth.
It also provides the option to request to extend the term beyond five years for two additional periods of one year, each.
Borrowings under the facility may be used for general corporate purposes and working capital.
As of today, we have no borrowings against the facility.
Regarding cash returned to shareholders, during the quarter, we continued to buy back shares, spending $15 million repurchasing more than 400,000 shares of stock in the open market leaving 8.6 million shares in our existing authorized share repurchase program.
Year-to-date we have returned $51 million to shareholders via share repurchase.
We also paid $6.6 million in dividends to shareholders in the second quarter.
And subsequent to quarter end, demonstrating its confidence in the Company's long-term growth prospects, the Board of Directors increased the regular quarterly dividend by 10% to $0.165 per share.
As we looked at the future, from a capital allocation perspective, over the long term, we will target to invest roughly half of operating cash flow back into the business via capex and M&A and return the remainder to shareholders via dividends and share repurchases.
Before turning the call back to Melinda, let me highlight several important items for the remainder of fiscal 2022.
As noted, demand trends were strong across the business and remain significantly higher than pre-pandemic levels with the high backlog and plants for a continued increase in capacity as new assembly cells come online, we expect a strong year of shipments.
Accordingly, we expect to continued increase in production capacity, particularly in Q4.
Raw material and freight costs remain high and global supply chain disruptions continue.
Industry experts predict it will take multiple quarters before we see resolution of the West Coast shipping backups.
Electronic chip shortages continue which impact our power furniture.
Across multiple areas, we expect to face continued supply chain disruptions with respect to having all component parts available to finished units and complete orders, particularly for our Company-owned retail segment, which tends to disproportionately sell our higher end products.
Given the COVID-related shutdown of Vietnam, we expect our case goods business to experience a significant temporary decline in sales and margin in the third quarter reflecting a delay in shipments as manufacturing facilities restart there and product gets on the water.
Finally, we will continue to monitor the escalating freight environment to determine if further pricing actions needed.
Pulling all this together, we are actively managing supply inputs and recognize that we will likely continue to experience uncertainty and disruption for the foreseeable future, particularly in the third quarter.
Quarterly trends will also be impacted by our third and fourth quarters containing 12 and 14 production weeks respectively compared to 13 production weeks in our second quarter.
Recall fiscal 2022 will include 53 weeks of results.
Taking all of these factors into consideration, we expect sales and margin in Q3 to be similar to Q2 and expect sales and margin to accelerate in the fourth quarter to enable consolidated La-Z-Boy results to finish the fiscal year with a full year non-GAAP operating margin at or near double digits.
Finally, as we make investments in the business to strengthen the Company for the future, including work related to our Century Vision strategy, we expect capital expenditures to be in the range of $75 million to $85 million for fiscal '22.
Spending will support updating our La-Z-Boy Furniture Gallery stores; updates to our plants and distribution facilities in Neosho, Missouri; new upholstery manufacturing capacity in Mexico; and investments and technology solutions across the organization.
I'm extremely proud of our organization and our business partners for delivering these strong results in very challenging times.
The team is doing a great job navigating the uncertain environment and is setting us up for strong business growth as we move forward both in the near term and as we execute our Century Vision.
The best is yet to come for La-Z-Boy Incorporated as we deliver profitable growth and long-term value for all stakeholders.
We'll begin the question-and-answer period now.
Matt, please review the instructions for getting into the queue to ask questions.
 Assistant:

Chosen response:
q2 non-gaap earnings per share $0.85.
q2 sales rose 25 percent to $576 million.
q2 gaap earnings per share $0.89.
continue to expect sales and margin momentum to accelerate, particularly in q4.
continue to expect to deliver full-year consolidated operating margin at or near double digits.
qtrly retail segment delivered same-store sales increased 17% in fiscal 2022 q2 versus year-ago period.