Americold Realty Trust(COLD) - 2022 Q1 - Quarterly Report

FORM 10-Q Filing Information This section details the administrative filing information for the Form 10-Q report Filing Details This section provides the administrative details of the Form 10-Q filing for Americold Realty Trust for the quarterly period ended March 31, 2022, including its status as a large accelerated filer and registered securities - The registrant, Americold Realty Trust, is filing a Quarterly Report on Form 10-Q for the period ended March 31, 2022[2] - The company is classified as a 'Large accelerated filer'[4] Securities Registered | Title of each class | Trading symbol(s) | Name of each exchange on which registered | | :---------------------------------------- | :---------------- | :---------------------------------------- | | Common Shares of Beneficial Interest, $0.01 par value per share | COLD | New York Stock Exchange (NYSE) | Common Stock Outstanding as of May 3, 2022 | Class | Outstanding at May 3, 2022 | | :------------------------------------- | :------------------------- | | Common Stock, $0.01 par value per share | 269,275,929 | Table of Contents This section provides an organized list of all chapters and sections within the report Cautionary Statement Regarding Forward-Looking Statements This section outlines the inherent risks and uncertainties associated with forward-looking statements in the report Forward-Looking Statements Disclaimer This section provides a cautionary statement regarding forward-looking statements within the report, highlighting various risks and uncertainties that could cause actual results to differ materially from expectations - Forward-looking statements are based on beliefs, assumptions, and expectations of future financial and operating performance and growth plans, but involve risks and uncertainties[9] - Key factors that could cause actual results to differ include supply chain disruptions, COVID-19 pandemic impacts, adverse economic conditions, rising interest rates and inflation, labor shortages, acquisition risks, IT system failures, and geopolitical conflicts (e.g., Russia-Ukraine)[9][11] - The company assumes no obligation to update or revise these forward-looking statements[12] PART I - FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of Americold Realty Trust, including the balance sheets, statements of operations, comprehensive income, equity, and cash flows, along with detailed notes explaining significant accounting policies, business combinations, debt, share-based compensation, commitments, segment information, and revenue recognition Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :---------------------------------------- | :------------- | :---------------- | | Assets | | | | Property, buildings and equipment – net | $5,140,900 | $5,127,901 | | Total assets | $8,207,869 | $8,216,197 | | Liabilities | | | | Total liabilities | $4,236,630 | $4,187,121 | | Equity | | | | Total shareholders' equity | $3,961,380 | $4,021,007 | | Total equity | $3,971,239 | $4,029,076 | - Total assets decreased slightly from $8,216,197 thousand at December 31, 2021, to $8,207,869 thousand at March 31, 2022[15] - Total liabilities increased from $4,187,121 thousand to $4,236,630 thousand, while total equity decreased from $4,029,076 thousand to $3,971,239 thousand[15] Condensed Consolidated Statements of Operations This section outlines the company's revenues, expenses, and net loss for the reporting periods Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | | Total revenues | $705,695 | $634,795 | | Total operating expenses | $697,704 | $620,543 | | Operating income | $7,991 | $14,252 | | Net loss | $(17,445) | $(14,236) | | Net loss attributable to Americold Realty Trust | $(17,407) | $(14,414) | | Net loss per common share - basic | $(0.06) | $(0.06) | | Net loss per common share - diluted | $(0.06) | $(0.06) | - Total revenues increased by $70.9 million (11.2%) from $634,795 thousand in Q1 2021 to $705,695 thousand in Q1 2022[19] - Operating income decreased significantly from $14,252 thousand in Q1 2021 to $7,991 thousand in Q1 2022, a 43.9% decline[19] - Net loss attributable to Americold Realty Trust widened from $(14,414) thousand in Q1 2021 to $(17,407) thousand in Q1 2022[19] Condensed Consolidated Statements of Comprehensive Income This section details the components of comprehensive income, including net loss and other comprehensive income items Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss | $(17,445) | $(14,236) | | Other comprehensive income (loss) - net of tax attributable to Americold Realty Trust | $11,404 | $(9,280) | | Total comprehensive loss | $(6,018) | $(23,528) | - Total comprehensive loss significantly improved from $(23,528) thousand in Q1 2021 to $(6,018) thousand in Q1 2022, primarily due to a positive change in unrealized net gain on foreign currency[21] Condensed Consolidated Statements of Equity This section presents changes in the company's equity, reflecting contributions, distributions, and comprehensive income Condensed Consolidated Statements of Equity (in thousands) | Metric | Balance - December 31, 2021 | Balance - March 31, 2022 | | :------------------------------------------------------------------ | :-------------------------- | :----------------------- | | Common Shares of Beneficial Interest Par Value | $2,683 | $2,687 | | Paid-in Capital | $5,171,690 | $5,177,642 | | Accumulated Deficit and Distributions in Excess of Net Earnings | $(1,157,888) | $(1,234,875) | | Accumulated Other Comprehensive Income | $4,522 | $15,926 | | Noncontrolling Interests in Operating Partnership | $8,069 | $9,859 | | Total Equity | $4,029,076 | $3,971,239 | - Total equity decreased from $4,029,076 thousand at December 31, 2021, to $3,971,239 thousand at March 31, 2022, driven by net loss and distributions, partially offset by other comprehensive income and share-based compensation[24] Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $15,586 | $46,531 | | Net cash used in investing activities | $(94,244) | $(143,737) | | Net cash provided by financing activities | $46,256 | $(235,530) | | Net decrease in cash, cash equivalents and restricted cash | $(32,402) | $(332,736) | | Cash, cash equivalents and restricted cash: End of period | $50,965 | $287,691 | - Net cash provided by operating activities decreased significantly from $46,531 thousand in Q1 2021 to $15,586 thousand in Q1 2022[27] - Net cash used in investing activities decreased from $(143,737) thousand in Q1 2021 to $(94,244) thousand in Q1 2022, primarily due to lower business combination outlays[27] - Net cash provided by financing activities was $46,256 thousand in Q1 2022, a substantial improvement from net cash used of $(235,530) thousand in Q1 2021, driven by proceeds from the revolving line of credit[27] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. General This note provides an overview of Americold Realty Trust and the basis of financial statement preparation - Americold Realty Trust is the world's largest publicly traded REIT focused on temperature-controlled warehouses[28] - The company's financial statements are prepared in accordance with GAAP for interim information and SEC rules, and should be read with the 2021 Annual Report on Form 10-K[29] - The COVID-19 pandemic continued to negatively impact the business in Q1 2022 due to disruptions in the food supply chain, customer production, labor market (availability and cost), and overall inflation, leading to lower occupancy and throughput[36] 2. Business Combinations This note details the accounting for business acquisitions, including finalized and preliminary allocations - No businesses were acquired during the three months ended March 31, 2022[39] - Acquisition accounting for Liberty Freezers (acquired Q1 2021 for C$56.8 million or $44.9 million) was finalized in Q1 2022, with no material adjustments[39] - Acquisition accounting for other 2021 acquisitions (KMT Brrr!, Bowman Stores, ColdCo, Newark Facility Management, Lago Cold Stores) remained preliminary as of March 31, 2022[39] 3. Acquisition, Litigation and Other, net This note outlines expenses related to acquisitions, litigation, severance, and cyber incidents Acquisition, Litigation and Other, net (in thousands) | Component | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Acquisition and integration related costs | $6,285 | $13,475 | | Litigation | $1,200 | $0 | | Severance costs | $2,564 | $2,446 | | Cyber incident related costs, net of insurance recoveries | $26 | $4,771 | | Total acquisition, litigation and other, net | $10,075 | $20,751 | - Total acquisition, litigation and other, net expenses decreased by $10.7 million (51.5%) from $20,751 thousand in Q1 2021 to $10,075 thousand in Q1 2022, primarily due to lower acquisition and integration costs and significantly reduced cyber incident related costs[40] 4. Debt This note provides details on the company's outstanding indebtedness, including principal amounts and compliance with covenants Outstanding Indebtedness (in thousands) | Indebtedness Type | March 31, 2022 Carrying Amount | December 31, 2021 Carrying Amount | | :------------------------------------ | :----------------------------- | :-------------------------------- | | Total principal amount of indebtedness | $2,946,886 | $2,854,170 | | Less: unamortized deferred financing costs | $(10,492) | $(11,050) | | Total indebtedness, net | $2,936,394 | $2,843,120 | - Total principal amount of indebtedness increased by $92.7 million (3.3%) from $2,854,170 thousand at December 31, 2021, to $2,946,886 thousand at March 31, 2022[46] - The company was in compliance with all debt covenants as of March 31, 2022[49] - Loss on debt extinguishment, modifications and termination of derivative instruments decreased significantly from $3,499 thousand in Q1 2021 to $616 thousand in Q1 2022, primarily due to the early repayment of $200 million principal on the Senior Unsecured Term Loan A Facility in Q1 2021[50] 5. Fair Value Measurements This note describes the categorization and estimation of fair values for financial assets and liabilities - The company categorizes assets and liabilities recorded at fair value into Level 1 (quoted market prices), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[51] - Mortgage notes, senior unsecured notes, and term loans are estimated using Level 2 and Level 3 inputs[54] Fair Value Measurements (in thousands) | Metric | Hierarchy | March 31, 2022 | December 31, 2021 | | :-------------------------------------- | :-------- | :------------- | :---------------- | | Cross-currency swap asset | Level 2 | $191 | $2,015 | | Cross-currency swap liability | Level 2 | $2,502 | $0 | | Mortgage notes, senior unsecured notes and term loans (disclosed) | Level 3 | $2,865,874 | $2,939,237 | 6. Share-Based Compensation This note details the company's share-based compensation plans, including expense recognition and unit grants - Aggregate share-based compensation charges increased from $5.0 million in Q1 2021 to $8.3 million in Q1 2022[62] - As of March 31, 2022, there was $44.1 million of unrecognized share-based compensation expense, to be recognized over a weighted-average period of 2.0 years[62] Restricted Stock Unit Grants (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Number of Restricted Stock Units Granted | 481,099 | 296,610 | | Grant Date Fair Value | $12,857 | $9,885 | OP Unit Grants (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Number of OP Units Granted | 342,980 | 258,479 | | Grant Date Fair Value (in thousands) | $9,001 | $8,434 | 7. Commitments and Contingencies This note discloses the company's legal proceedings, environmental obligations, and other contingent liabilities - The company is involved in legal proceedings, including the Kansas Breach of Settlement Agreement Litigation and Preferred Freezer Services, LLC Litigation, but management believes the ultimate outcome will not have a material adverse impact on financial statements[80][88][93] - The company is subject to environmental laws and OSHA regulations, with accruals recorded for probable liabilities, and believes it is in substantial compliance[94][96] - Most warehouses use ammonia as a refrigerant, which is a hazardous chemical regulated by the EPA, posing risks of injuries, loss of life, and property damage in case of a significant release[95] 8. Accumulated Other Comprehensive Loss This note details the components and changes in accumulated other comprehensive loss, including foreign currency translation Activity in Accumulated Other Comprehensive Loss (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | | Total pension and other postretirement benefits, net of tax | $67 | $381 | | Total foreign currency translation gain (loss) | $11,186 | $(10,682) | | Total unrealized gains on derivative contracts | $151 | $1,021 | | Total change in other comprehensive income (loss) | $11,404 | $(9,280) | - Total change in other comprehensive income (loss) shifted from a loss of $(9,280) thousand in Q1 2021 to an income of $11,404 thousand in Q1 2022, primarily driven by a significant foreign currency translation gain[98] 9. Segment Information This note provides financial data for the company's Warehouse, Third-party managed, and Transportation segments - The company operates in three reportable segments: Warehouse, Third-party managed, and Transportation[99] - Segment contribution (NOI) is used to evaluate segment performance, calculated as revenues less cost of operations, excluding depreciation, amortization, SG&A, and acquisition/litigation/other, net[101][102] Segment Revenues and Contribution (in thousands) | Segment | Three Months Ended March 31, 2022 Revenues | Three Months Ended March 31, 2021 Revenues | Three Months Ended March 31, 2022 Contribution | Three Months Ended March 31, 2021 Contribution | | :-------------------- | :----------------------------------------- | :----------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Warehouse | $540,925 | $485,451 | $146,258 | $146,181 | | Third-party managed | $85,860 | $73,072 | $3,501 | $4,382 | | Transportation | $78,910 | $76,272 | $8,529 | $6,703 | | Total | $705,695 | $634,795 | $158,288 | $157,266 | - Total segment revenues increased by 11.2% YoY, while total segment contribution increased by 0.6% YoY[103] 10. Loss per Common Share This note details the calculation of basic and diluted loss per common share, including antidilutive effects Weighted Average Common Shares Outstanding (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | | Weighted average common shares outstanding – basic | 269,164 | 252,938 | | Weighted average common shares outstanding – diluted | 269,164 | 252,938 | - Basic and diluted weighted-average common shares outstanding increased by 6.4% YoY[109] - Potential common shares were antidilutive for both periods due to net loss, resulting in no adjustments between basic and diluted loss per share[109] Antidilutive Potential Common Shares (in thousands) | Type | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--------------------------- | :-------------------------------- | :-------------------------------- | | Employee stock options | 202 | 413 | | Restricted stock units | 1,295 | 964 | | OP units | 494 | 358 | | Equity forward contracts | 0 | 9,665 | | Total Antidilutive Shares | 1,991 | 11,400 | 11. Revenue from Contracts with Customers This note disaggregates revenue by segment and geographic region, and details remaining performance obligations Disaggregated Revenue by Segment and Geographic Region (in thousands) | Segment/Region | Q1 2022 North America | Q1 2022 Europe | Q1 2022 Asia-Pacific | Q1 2022 South America | Q1 2022 Total | Q1 2021 North America | Q1 2021 Europe | Q1 2021 Asia-Pacific | Q1 2021 South America | Q1 2021 Total | | :------------- | :-------------------- | :------------- | :------------------- | :-------------------- | :------------ | :-------------------- | :------------- | :------------------- | :-------------------- | :------------ | | Warehouse rent and storage | $181,939 | $17,355 | $16,721 | $2,950 | $218,965 | $164,246 | $17,252 | $15,176 | $2,425 | $199,099 | | Warehouse services | $238,169 | $32,197 | $39,202 | $1,600 | $311,168 | $210,846 | $25,336 | $42,469 | $1,524 | $280,175 | | Third-party managed | $80,820 | $0 | $5,040 | $0 | $85,860 | $67,697 | $0 | $5,375 | $0 | $73,072 | | Transportation | $37,493 | $34,106 | $6,860 | $451 | $78,910 | $40,315 | $30,612 | $4,973 | $372 | $76,272 | | Lease revenue | $9,313 | $1,479 | $0 | $0 | $10,792 | $6,177 | $0 | $0 | $0 | $6,177 | | Total revenues | $547,734 | $85,137 | $67,823 | $5,001 | $705,695 | $489,281 | $73,200 | $67,993 | $4,321 | $634,795 | - Total revenues from contracts with customers increased by $70.9 million (11.2%) YoY, with North America showing the largest absolute increase[112] - As of March 31, 2022, the company had $703.7 million of remaining unsatisfied performance obligations from non-cancellable contracts, with 24% expected to be recognized in 2022 and the remainder over a weighted average of 12.6 years through 2038[117] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, detailing business segments, key factors affecting performance, how performance is assessed, a comparison of Q1 2022 and Q1 2021 results, non-GAAP financial measures, and liquidity and capital resources Management's Overview This section provides a high-level overview of Americold Realty Trust's global operations and strategic positioning - Americold Realty Trust is the world's largest publicly traded REIT specializing in temperature-controlled warehouses[123] - As of March 31, 2022, the company operated a global network of 249 temperature-controlled warehouses (1.5 billion cubic feet) across North America (201), Europe (27), Asia-Pacific (18), and South America (3)[123] - The company also holds minority interests in two Brazilian joint ventures, SuperFrio (33 warehouses) and Comfrio (27 warehouses)[123] Components of Our Results of Operations This section details the primary revenue sources and operating expense categories that constitute the company's financial results - The primary revenue sources are rent, storage, and warehouse services fees (Warehouse segment), third-party managed services (reimbursement of expenses plus management/incentive fees), and transportation services (transportation fees, fuel/capacity surcharges)[124][128][129] - Warehouse segment costs include power, other facilities costs, labor (largest component), and other service costs, all impacted by inflation and COVID-19 related inefficiencies[125][127] - Other consolidated operating expenses include depreciation and amortization (primarily from warehouses and intangible assets), corporate-level selling, general and administrative expenses (wages, benefits, equity incentive plans), and corporate-level acquisition, litigation and other, net expenses (transaction costs, litigation, severance, cyber incident costs)[130][131][132][133][134] Key Factors Affecting Our Business and Financial Results This section identifies critical internal and external factors, including macroeconomic conditions and geopolitical events, influencing the company's performance - Business and financial results were negatively impacted by COVID-19 related disruptions in the food supply chain, customer production/transportation, labor market (availability and cost), and macroeconomic inflation[135] - Occupancy and throughput volumes remain lower than pre-COVID-19 levels due to food production and transportation challenges, exacerbated by labor availability and the Omicron variant[137][138] - The company initiated out-of-cycle rate increases in customer contracts during H2 2021 and expects to continue monitoring pricing in 2022 to mitigate inflationary pressures[139] - Geopolitical conflicts, such as the Russia-Ukraine war, create uncertainty and risks including increased inflation, commodity price volatility, supply chain disruptions, and foreign currency fluctuations, potentially impacting European operations[140][282][283] - Seasonality impacts physical occupancy (lowest in May-June, peaks Sept-Dec) and power expense (highest in Q3), but is mitigated by fixed commitment contracts and diverse customer industries/geographies (Southern Hemisphere operations)[143][146] - Foreign currency translation causes variations in consolidated revenues and expenses, with fluctuations potentially material to results of operations[147] Focus on Our Operational Effectiveness and Cost Structure This section outlines the company's initiatives to enhance efficiency, integrate acquisitions, and manage costs through strategic investments and portfolio adjustments - The company focuses on streamlining business processes, integrating acquired assets, standardizing operations, and implementing new IT tools[152] - Cost reduction initiatives include investments in energy efficiency projects (LED lighting, thermal energy storage, motion-sensor technology) and participation in Power Demand Response programs[152] - Active portfolio management involves evaluating and exiting less strategic/profitable markets or business lines, such as selling warehouse assets or exiting leased facilities[153] Strategic Shift within Our Transportation Segment This section describes the company's strategic reorientation of its transportation segment towards higher-margin, value-added services - The transportation segment is undergoing a strategic shift to exit commoditized, non-scalable, or low-margin services[154] - The focus is on more profitable, value-added programs like regional, national, truckload, and retailer-specific multi-vendor consolidation services[154] - This strategy aims to improve efficiency, reduce customer transportation costs, drive client retention, and maintain high occupancy in temperature-controlled warehouses, including adding dedicated fleet services through acquisitions[154] Historically Significant Customer This section discusses the financial impact and nature of business with a major customer, primarily within the third-party managed segment - One customer accounted for over 10% of total revenues for the three months ended March 31, 2022 ($78.1 million) and 2021 ($65.8 million)[155] - The substantial majority of this customer's business relates to the third-party managed segment, where the company is reimbursed for most expenses[155] - Reimbursements from this customer were $75.2 million in Q1 2022 and $61.3 million in Q1 2021, offset by matching expenses[155] Economic Occupancy of our Warehouses This section defines and explains the importance of economic occupancy as a key driver of warehouse segment financial performance - Average economic occupancy is defined as physically occupied pallets plus contractually committed pallets[157] - The company actively seeks fixed commitment contracts to mitigate seasonality and other factors impacting physical occupancy, ensuring customers have necessary space[157] - Economic occupancy is considered an important driver of financial results[157] Throughput at our Warehouses This section describes how the volume of goods movement in warehouses impacts service revenues and is influenced by production and demand - Throughput, the volume of pallets entering and exiting warehouses, significantly impacts warehouse services revenues[158] - Higher throughput drives revenues as customers are typically billed based on the level of goods movement[158] - Throughput can be influenced by food manufacturers' production levels (responding to market conditions, labor, supply chain, consumer preferences) and changes in inventory turnover due to demand shifts[158] How We Assess the Performance of Our Business This section details the key metrics and analytical approaches, including Segment Contribution and Same Store Analysis, used to evaluate business performance - Segment Contribution (NOI) is used to evaluate primary business segments, calculated as segment revenues less cost of operations (excluding certain corporate-level expenses)[159] - Same Store Analysis includes properties owned or leased for the entirety of two comparable periods with at least twelve months of normalized operations, adjusted for acquisitions, sales, or developments[164][165] - Constant Currency Metrics are used to assess underlying business performance by translating current period results at prior period average foreign exchange rates, excluding the impact of currency fluctuations[173] Comparison of Results for the Three Months Ended March 31, 2022 and 2021 This section provides a detailed comparative analysis of the company's financial and operational performance between the first quarters of 2022 and 2021 Warehouse Segment This section analyzes the revenue, cost of operations, and contribution of the company's core warehouse segment Warehouse Segment Operating Results (in thousands) | Metric | Q1 2022 Actual | Q1 2022 Constant Currency | Q1 2021 Actual | Change Actual (%) | Change Constant Currency (%) | | :------------------------------------ | :------------- | :------------------------ | :------------- | :---------------- | :--------------------------- | | Total warehouse segment revenues | $540,925 | $548,722 | $485,451 | 11.4% | 13.0% | | Total warehouse segment cost of operations | $394,667 | $400,764 | $339,270 | 16.3% | 18.1% | | Warehouse segment contribution (NOI) | $146,258 | $147,958 | $146,181 | 0.1% | 1.2% | | Total warehouse segment margin | 27.0% | 27.0% | 30.1% | -307 bps | -315 bps | - Warehouse segment revenues increased by 11.4% (13.0% on a constant currency basis) YoY, driven by 2021 acquisitions, contractual/market-driven rate escalations, and recently completed developments[177] - Warehouse segment cost of operations increased by 16.3% (18.1% on a constant currency basis) YoY, due to additional acquired facilities and elevated inflation impacting power, labor, and other costs[180] - Warehouse segment contribution (NOI) increased marginally by 0.1% (1.2% on a constant currency basis) YoY, with margin decreasing by 307 basis points, reflecting higher costs and lower throughput[176][181] Same Store and Non-Same Store Analysis This section evaluates the performance of comparable properties, highlighting changes in occupancy, revenues, and throughput Same Store Performance Metrics | Metric | Q1 2022 | Q1 2021 | Change | | :---------------------------------------------------- | :------ | :------ | :----- | | Number of same store sites | 215 | 215 | n/a | | Economic occupancy percentage | 77.6% | 77.4% | 22 bps | | Same store rent and storage revenues per economic occupied pallet | $53.80 | $51.55 | 4.4% | | Throughput pallets (in thousands) | 8,893 | 8,947 | (0.6)% | | Same store warehouse services revenues per throughput pallet | $31.38 | $30.02 | 4.5% | - Same store economic occupancy increased by 22 basis points to 77.6%, while physical occupancy remained stable at 70.7%[193] - Same store rent and storage revenues per economic occupied pallet increased by 4.4% (5.6% constant currency), driven by commercial terms and rate escalations[193] - Same store throughput pallets decreased by 0.6% due to Easter holiday timing and ongoing COVID-19 related supply chain and labor disruptions[194] - Same store warehouse services revenues per throughput pallet increased by 4.5% (6.3% constant currency) due to rate escalations and higher-priced value-added services[194] Third-Party Managed Segment This section reviews the financial performance of the third-party managed segment, including revenue and contribution trends Third-Party Managed Segment Operating Results (in thousands) | Metric | Q1 2022 Actual | Q1 2022 Constant Currency | Q1 2021 Actual | Change Actual (%) | Change Constant Currency (%) | | :--------------------------------------- | :------------- | :------------------------ | :------------- | :---------------- | :--------------------------- | | Third-party managed revenues | $85,860 | $86,199 | $73,072 | 17.5% | 18.0% | | Third-party managed cost of operations | $82,359 | $82,631 | $68,690 | 19.9% | 20.3% | | Third-party managed segment contribution | $3,501 | $3,568 | $4,382 | (20.1)% | (18.6)% | | Third-party managed margin | 4.1% | 4.1% | 6.0% | -192 bps | -186 bps | - Third-party managed revenues increased by 17.5% (18.0% constant currency) YoY, driven by higher business volume in domestic managed operations and increased pass-through costs (labor, inflation)[198] - Third-party managed cost of operations increased by 19.9% (20.3% constant currency) YoY, mirroring revenue trends[199] - Third-party managed segment contribution decreased by 20.1% (18.6% constant currency) YoY, with margin declining by 192 basis points[200] Transportation Segment This section examines the revenue, costs, and contribution of the transportation segment, reflecting strategic shifts and market dynamics Transportation Segment Operating Results (in thousands) | Metric | Q1 2022 Actual | Q1 2022 Constant Currency | Q1 2021 Actual | Change Actual (%) | Change Constant Currency (%) | | :---------------------------------------- | :------------- | :------------------------ | :------------- | :---------------- | :--------------------------- | | Transportation revenues | $78,910 | $80,952 | $76,272 | 3.5% | 6.1% | | Total transportation cost of operations | $70,381 | $72,238 | $69,569 | 1.2% | 3.8% | | Transportation segment contribution (NOI) | $8,529 | $8,714 | $6,703 | 27.2% | 30.0% | | Transportation margin | 10.8% | 10.8% | 8.8% | 202 bps | 198 bps | - Transportation revenues increased by 3.5% (6.1% constant currency) YoY, driven by higher rates in consolidation business, acquisitions (KMT Brrr!), and increased brokered transportation costs/surcharges[204] - Transportation cost of operations increased by 1.2% (3.8% constant currency) YoY, due to capacity constraints, higher carrier fees, and increased wage/fuel costs[205] - Transportation segment contribution increased by 27.2% (30.0% constant currency) YoY, with margin improving by 202 basis points due to rate increases[206] Other Consolidated Operating Expenses This section details changes in depreciation, amortization, SG&A, and acquisition/litigation-related expenses - Depreciation and amortization expense increased by 7.0% to $82.6 million in Q1 2022, primarily due to 2021 acquisitions and recently completed developments[207] - Corporate-level selling, general and administrative expenses increased by 27.9% to $57.6 million in Q1 2022, driven by higher third-party legal/professional fees, resumption of performance-based compensation, and higher share-based compensation[209] - Corporate-level acquisition, litigation and other, net expenses decreased by $10.7 million to $10.1 million in Q1 2022, mainly due to lower acquisition/integration costs and cyber incident related costs compared to Q1 2021[210] Other Expense and Income This section reports on non-operating financial items, including interest expense and gains/losses from debt extinguishment Other (Expense) Income (in thousands) | Metric | Q1 2022 | Q1 2021 | Change (%) | | :------------------------------------------------------------------ | :------ | :------ | :--------- | | Interest expense | $(25,773) | $(25,956) | (0.7)% | | Loss on debt extinguishment, modifications and termination of derivative instruments | $(616) | $(3,499) | (82.4)% | | Other, net | $245 | $176 | 39.2% | - Interest expense decreased slightly by 0.7% due to a lower effective interest rate (3.06% in Q1 2022 vs. 3.31% in Q1 2021), despite an increase in outstanding principal[212] - Loss on debt extinguishment, modifications, and termination of derivative instruments decreased by 82.4%, primarily due to the early repayment of $200 million principal on the Senior Unsecured Term Loan A Facility in Q1 2021[213] Income Tax Benefit This section discusses the income tax benefit recognized and its components for the reporting periods - Income tax benefit for Q1 2022 was $0.7 million, a slight decrease of $0.1 million compared to $0.8 million in Q1 2021[215] - Current tax expense and deferred income tax benefit remained consistent due to comparable operating results in both periods[215] Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures such as FFO, Core FFO, Adjusted FFO, EBITDAre, and Core EBITDA - The company uses FFO, Core FFO, Adjusted FFO, EBITDAre, and Core EBITDA as supplemental performance measures[217] - FFO is calculated per NAREIT standards, excluding depreciation, amortization, and gains/losses from real estate sales[218] - Core FFO adjusts FFO for items like non-real estate asset sales, acquisition/litigation costs, share-based compensation for IPO grants, debt extinguishment losses, and foreign currency exchange loss[218] - Adjusted FFO further adjusts Core FFO for amortization of deferred financing costs, above/below market leases, straight-line net rent, deferred income taxes, share-based compensation (excluding IPO grants), non-real estate depreciation/amortization, and maintenance capital expenditures[218] - EBITDAre is calculated per NAREIT standards, and Core EBITDA further adjusts EBITDAre for non-core operating items[220] Reconciliation of Net Loss to FFO, Core FFO, and Adjusted FFO (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(17,445) | $(14,236) | | NAREIT Funds from operations | $35,851 | $38,271 | | Core FFO applicable to common shareholders | $46,329 | $62,546 | | Adjusted FFO applicable to common shareholders | $68,854 | $75,921 | Reconciliation of Net Loss to EBITDAre and Core EBITDA (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------ | :-------------------------------- | :-------------------------------- | | Net loss | $(17,445) | $(14,236) | | NAREIT EBITDAre | $93,438 | $88,789 | | Core EBITDA | $110,895 | $117,789 | Liquidity and Capital Resources This section assesses the company's ability to meet its financial obligations and fund operations through cash flows, credit facilities, and capital markets - Principal funding sources include current cash balances, cash flows from operations, the 2020 Senior Unsecured Revolving Credit Facility, ATM Equity Programs, and other debt/equity offerings[227] - These sources are expected to be adequate for short-term and long-term liquidity requirements, including working capital, capital expenditures, debt service, and shareholder distributions[228][229] - As of March 31, 2022, approximately $809.4 million remained available under the 2021 ATM Equity Program, with no activity during Q1 2022[233] - The company maintains warehouseman's liens on customer products to secure payments and has historically been successful in collecting accounts receivable during customer bankruptcies[234] - Bad debt expense was $1.3 million in Q1 2022, with allowances of $20.7 million as of March 31, 2022[235] - Approximately 37% of the labor force is covered by collective bargaining agreements, with less than 8% set to expire in the remaining nine months of 2022[236] - As a REIT, the company is required to distribute 90% of its taxable income annually and intends to make regular quarterly distributions, funded by cash flows or borrowings if necessary[237][238] Debt Summary as of March 31, 2022 (in thousands) | Debt Type | Amount | Percent of Total | | :--------------------------------------------------------------------- | :---------- | :--------------- | | Fixed rate | $2,058,187 | 72% | | Variable rate - unhedged | $888,699 | 28% | | Total mortgage notes, senior unsecured notes, term loans and borrowings under revolving line of credit | $2,946,886 | | | Sale-leaseback financing obligations | $177,305 | | | Financing lease obligations | $91,436 | | | Total debt and debt-like obligations | $3,215,627 | | - The effective interest rate as of March 31, 2022, was 3.06%, with a weighted average term to initial maturity of approximately 5.8 years[242][243] - The company holds investment-grade credit ratings: BBB (Fitch, stable outlook), BBB (DBRS Morningstar, Positive Trends outlook), and Baa3 (Moody's, stable outlook)[245] Maintenance Capital Expenditures (in thousands) | Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------- | :-------------------------------- | :-------------------------------- | | Real estate | $13,864 | $12,928 | | Personal property | $974 | $1,782 | | Information technology | $1,268 | $1,021 | | Total | $16,106 | $15,731 | | Per cubic foot | $0.011 | $0.011 | Repair and Maintenance Expenses (in thousands) | Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------- | :-------------------------------- | :-------------------------------- | | Real estate | $8,843 | $8,376 | | Personal property | $14,446 | $11,454 | | Total | $23,289 | $19,830 | | Per cubic foot | $0.016 | $0.014 | Growth and Expansion Capital Expenditures (in thousands) | Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------- | :-------------------------------- | :-------------------------------- | | Acquisitions, net of cash acquired and adjustments | $(603) | $41,956 | | Expansion and development initiatives | $58,521 | $83,268 | | Information technology | $741 | $1,528 | | Total Growth and Expansion Capital Expenditures | $58,659 | $126,752 | - Expansion and development expenditures in Q1 2022 were primarily for automated development sites in Connecticut and Pennsylvania ($17.6 million), Spearwood, Australia expansion ($8.1 million), and Dunkirk, NY development ($7.8 million)[255] Historical Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $15,586 | $46,531 | | Net cash used in investing activities | $(94,244) | $(143,737) | | Net cash provided by (used in) financing activities | $46,256 | $(235,530) | - Net cash provided by operating activities decreased by $30.9 million YoY, mainly due to increased accounts receivable and higher SG&A expenses[262] - Net cash used in investing activities decreased by $49.5 million YoY, reflecting lower cash used for business combinations[263][264] - Net cash provided by financing activities was $46.3 million in Q1 2022, a significant improvement from cash used of $235.5 million in Q1 2021, primarily due to proceeds from the revolving line of credit[265][266] SIGNIFICANT ACCOUNTING POLICIES UPDATE This section refers to the detailed disclosures on significant accounting policies within the financial statements - Refer to Note 1 to the condensed consolidated financial statements for significant accounting policies[267] NEW ACCOUNTING PRONOUNCEMENTS This section refers to the detailed disclosures on new accounting pronouncements within the financial statements - Refer to Note 1 to the condensed consolidated financial statements for new accounting pronouncements[269] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, specifically interest rate risk and foreign currency risk, and how these could impact future income and cash flows - As of March 31, 2022, the company had $174.9 million in USD-denominated variable-rate debt and $250 million in CAD-denominated variable-rate debt[272] - A 100 basis point increase in market interest rates would increase annual interest expense by approximately $8.9 million, while a 100 basis point decrease would reduce it by $5.2 million[272] - Foreign currency risk exposure at March 31, 2022, was not materially different from what was disclosed in the 2021 Annual Report on Form 10-K[273] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures and internal control over financial reporting, concluding on their effectiveness and reporting on any changes - Management, with CEO and CFO participation, concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[274] - No changes in internal control over financial reporting were identified during Q1 2022 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[277] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other miscellaneous disclosures Item 1. Legal Proceedings This section states that the company is not a party to any material litigation or legal proceedings that would have a material impact on its business, financial condition, liquidity, results of operations, and prospects, referring to Note 7 for further details - The company is not a party to any material litigation or legal proceedings that would have a material impact on its business, financial condition, liquidity, results of operations, and prospects[279] - Further information regarding material legal proceedings is provided in Note 7 to the Condensed Consolidated Financial Statements[280] Item 1A. Risk Factors This section highlights that investing in the company's common shares involves risks and uncertainties, referencing the 2021 Annual Report on Form 10-K and specifically discussing the adverse effects of geopolitical conflicts, such as the Russia-Ukraine conflict, on global operations - Investing in the company's common shares involves risks and uncertainties, as detailed in the 2021 Annual Report on Form 10-K[281] - Geopolitical conflicts, specifically the Russia-Ukraine conflict, may adversely affect the business and results of operations, particularly European operations, through increased inflation, commodity price volatility, supply chain disruptions, and foreign currency fluctuations[282][283] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports that there were no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities and use of proceeds[286] Item 3. Defaults Upon Senior Securities This section confirms that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[287] Item 4. Mine Safety Disclosures This section indicates that there are no mine safety disclosures to report - There are no mine safety disclosures[288] Item 5. Other Information This section states that there is no other information to report - There is no other information to report[289] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including offer letters, severance plans, equity award agreements, certifications, and XBRL financial statements - The exhibits include various management contracts, compensatory plans, certifications (CEO, CFO), and XBRL financial statements[291] SIGNATURES This section contains the official signatures for the Form 10-Q filing, confirming its submission on behalf of Americold Realty Trust Filing Signatures This section contains the official signatures for the Form 10-Q filing, confirming its submission on behalf of Americold Realty Trust - The report was signed by Marc J. Smernoff, Chief Financial Officer and Executive Vice President, on May 6, 2022[295]