Americold Realty Trust — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Americold is a global temperature-controlled warehouse REIT, operating 248 warehouses across North America, Europe, Asia-Pacific and South America.
Financial and operating performance
| Metric | Q3 2021 | Nine months 2021 | Comparable 2020 |
|---|---|---|---|
| Total revenue | $708.8 million | $1,998.3 million | $497.5 million Q3; $1,464.0 million nine months |
| Operating income | $31.5 million | $68.7 million | $37.5 million Q3; $141.7 million nine months |
| Net income (loss) attributable to Americold | $5.3 million | $(22.5) million | $12.4 million Q3; $68.5 million nine months |
| Diluted earnings (loss) per share | $0.02 | $(0.09) | $0.06 Q3; $0.33 nine months |
| Cash from operating activities | Not separately presented | $164.3 million | $227.2 million nine months |
- Q3 revenue rose 42.5% year over year; nine-month revenue rose 36.5%. Growth was largely acquisition-driven, with contractual rate increases and foreign currency also contributing.
- For the quarter, warehouse segment contribution (NOI, a non-GAAP measure) increased 13.5% to $145.0 million, but its margin fell to 26.7% from 32.9%. Same-store warehouse NOI declined 5.1%; same-store economic occupancy fell to 76.5% from 78.3%, and throughput declined 1.9%.
- For the nine months, warehouse segment NOI rose 16.3% to $435.6 million, while same-store NOI declined 3.8%. Transportation revenue expanded substantially with acquisitions, but transportation margin contracted to 9.5% from 13.1% for the nine-month period.
- At September 30, cash and restricted cash were $152.8 million. Total debt principal was $2.718 billion, including $305.7 million drawn on the revolving facility; 76.9% of debt was fixed-rate. The reported effective interest rate was 3.09%. The company was in compliance with debt covenants.
- Investing cash outflow was $945.5 million, principally reflecting $616.3 million of business-combination spending and $313.2 million of property additions. Financing cash inflow was $315.3 million; distributions paid were $168.5 million.
Material changes and unusual items
- Acquisitions included Newark Facility Management for $391.4 million, ColdCo for $20.7 million, Bowman Stores for $107.1 million, KMT Brrr! for $70.8 million and Liberty Freezers for $43.5 million. Most were funded with revolver borrowings. The 2020 Agro and Hall’s acquisitions also contributed to year-over-year growth.
- Higher operating costs, particularly labor, power, insurance and transportation carrier charges, outpaced warehouse revenue growth and pressured margins. Management attributed weaker occupancy and throughput partly to COVID-related food-supply-chain disruption and constrained customer production.
- Nine-month net loss included higher depreciation and amortization, acquisition and integration costs, and a $5.1 million loss on debt extinguishment, modifications and derivative termination. Acquisition, litigation and other expenses totaled $31.0 million, including $22.9 million of acquisition-related costs and $3.5 million of cyber-incident costs.
- In November, the board terminated CEO Fred Boehler without cause and appointed George Chappelle interim CEO; the company disclosed potential disruption and uncertainty from the leadership change.
Outlook, risks and contingencies
- The filing provides no specific financial guidance. Management expected food demand to remain broadly consistent over the long term, while noting that customer production, occupancy and throughput had not recovered to pre-pandemic levels. It expected inflationary service costs to continue, partly offset by price increases.
- Management said existing funding sources were expected to meet short- and long-term needs. The $900 million 2021 ATM equity program had approximately $809.4 million of availability at quarter-end; forward shares remained to be settled. Equity issuance may dilute shareholders.
- Risks highlighted include COVID-19 and supply-chain disruption, labor shortages and inflation, energy and carrier costs, interest-rate and refinancing exposure, foreign exchange, acquisition integration, cybersecurity, and customer concentration. One customer generated more than 10% of revenue; most of its activity was reimbursed managed-service expense.
- The Comfrio joint venture’s put right was exercised; the parties dispute a value ranging from $14 million to $77 million and entered arbitration. The company also disclosed ongoing Kansas litigation for which a loss could not be reasonably estimated, and a separate PFS-related dispute that includes a claim exceeding $400 million; management said it could not reasonably estimate liability and did not expect a material adverse impact.
- Americold expected to complete the Lago Cold Stores acquisition in November 2021 for approximately A$100.8 million. Acquisition purchase-price allocations for certain prior transactions remained preliminary and could change.
Important facts for investors to verify
- Whether occupancy, throughput and same-store NOI recover as customers rebuild inventories, and whether pricing offsets rising labor, energy and insurance costs.
- How much of reported growth and future earnings depends on acquired operations, and whether integration benefits and expected synergies materialize.
- Debt, revolver availability, interest-rate sensitivity, ATM forward settlement and potential share dilution as acquisition and development spending continues.
- Developments in the Comfrio arbitration and material litigation, along with final acquisition valuations and any resulting amortization or tax effects.
- Leadership succession following the CEO’s departure and any resulting effects on strategy, operations or financial performance.