Americold Realty Trust (COLD) — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited, consolidated results. Americold is a global temperature-controlled warehouse REIT operating 242 warehouses with more than 1.4 billion cubic feet of capacity.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $634.8 million | $484.1 million | +31.1% |
| Operating income | $14.2 million | $47.7 million | Down $33.5 million |
| Net income (loss) attributable to Americold | $(14.4) million | $23.5 million | $(0.06) vs. $0.12 per diluted share |
| Cash from operating activities | $46.5 million | $80.5 million | Down $34.0 million |
| Cash, cash equivalents and restricted cash | $287.7 million at March 31 | $621.1 million at December 31, 2020 | Down $333.4 million |
Revenue growth primarily reflected acquisitions, including Agro, Hall’s and Liberty Freezers, alongside contractual rate escalations and development activity. The increase did not translate into higher operating profit: depreciation and amortization rose to $77.2 million from $51.6 million, acquisition, litigation and other costs rose to $20.8 million from $1.7 million, and operating expenses grew faster than revenue.
Warehouse segment contribution (a non-GAAP operating measure) increased 15.3% to $146.2 million, while its margin declined to 30.1% from 33.3%. Same-store warehouse contribution fell 5.2% to $118.4 million; same-store revenue declined 1.8%. Same-store economic occupancy was 76.7%, down 590 basis points, and throughput declined 8.0%. Transportation revenue more than doubled, largely from acquisitions, but its contribution margin fell to 8.8% from 13.4% amid higher carrier costs and lower-margin acquired business.
Non-GAAP measures: NAREIT FFO was $38.3 million versus $56.9 million; Core FFO was $62.5 million versus $60.1 million; Adjusted FFO was $75.9 million versus $67.2 million. These measures are not substitutes for GAAP earnings or cash flow.
Debt, liquidity and capital spending
- Debt principal was $2.43 billion at March 31, 2021 ($2.42 billion net of financing costs), compared with $2.66 billion principal at December 31, 2020. The company also had $43.8 million drawn on its revolving facility; $21.8 million of letters of credit were outstanding.
- The revolving facility was expanded by $200 million to $1.0 billion of capacity. Cash and restricted cash totaled $287.7 million. Management stated it expects its funding sources to meet short- and long-term requirements.
- Interest expense was $26.0 million, up 8.7%; the reported effective interest rate on outstanding debt was 3.31%. The company repaid $200 million of term-loan principal in January and recorded a $2.9 million financing-cost write-off. All debt covenants were reported in compliance.
- Investing cash outflow was $143.7 million, including $100.5 million of property additions and $42.0 million for Liberty Freezers. Financing cash outflow was $235.5 million, including debt repayments and $55.0 million of distributions paid. Q1 distributions declared were $0.22 per share.
Material changes, outlook and risks
The March 1 acquisition of Liberty Freezers cost C$55.0 million (about $43.5 million). Results also included the first full quarter of Agro, acquired in December 2020, and acquired operations from Hall’s and other 2020 transactions. Management attributed same-store weakness to COVID-related supply-chain disruption, lower food-production holdings and throughput, and reduced food-service activity. Elevated labor, health-and-safety, property-tax and insurance costs also weighed on results. Management reported no significant operational disruption from COVID-19 during the quarter but said its future effects remain uncertain. No quantified full-year guidance is provided in the filing text.
Unusual costs included $13.5 million of acquisition and integration expense, $4.8 million of costs related to a November 2020 cyber incident, and $2.4 million of severance. The company reported a $14.4 million net loss attributable to Americold. Acquisition accounting for certain acquired businesses remained preliminary.
Contingencies include the Fenway lawsuit, which alleges damages in excess of $400 million, and the Kansas litigation; the company said a liability could not be reasonably estimated in either matter and believes neither will materially affect its financial statements. Other principal risks include pandemic effects, customer concentration (one customer provided $65.8 million of revenue, much of it expense reimbursement), labor and power costs, foreign exchange and interest-rate exposure, refinancing needs, and maintaining REIT status. A 100-basis-point rise in rates was estimated to increase annual interest expense by approximately $3.7 million.
Important facts for investors to verify
- Whether occupancy, throughput and same-store contribution recover as supply-chain and food-service activity normalizes.
- How much of reported growth and future earnings comes from acquisitions versus same-store performance, and whether integration benefits offset acquired costs.
- Cash generation, capital spending, distributions and available revolver capacity after the substantial Q1 cash decline.
- Final purchase-price allocations and potential liabilities for recent acquisitions, plus developments in the Fenway and Kansas litigation.
- Progress on cyber-incident remediation and the impact of elevated labor, carrier, insurance and property-tax costs.