Americold Realty Trust — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter filing. Americold is a REIT focused on temperature-controlled warehousing, with warehouse, third-party managed and transportation operations. At year-end it operated 238 warehouses with approximately 1.4 billion cubic feet of capacity.
Financial and operating performance
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Total revenue | $1.988 billion | $1.784 billion | +11.4% |
| Operating income | $168.5 million | $131.5 million | +28.1% |
| Net income | $24.6 million | $48.2 million | Down 49.0% |
| Diluted EPS | $0.11 | $0.26 | Lower |
| Cash from operations | $293.7 million | $236.2 million | +24.3% |
| Cash used in investing | $2.249 billion | $1.605 billion | Higher outflow |
| Cash from financing | $2.330 billion | $1.395 billion | Higher inflow |
Warehouse revenue rose 12.5% to $1.549 billion; warehouse segment contribution (NOI, a non-GAAP measure) increased 16.3% to $520.3 million, with margin improving to 33.6% from 32.5%. Same-store warehouse revenue grew 1.9% and same-store NOI grew 5.3%. Same-store economic occupancy was 80.5%, up 110 basis points, while physical occupancy declined 265 basis points to 72.7%. Management attributed performance to acquisitions, higher fixed commitments, improved commercial terms and customer mix, alongside weaker food-service activity and throughput amid COVID-19.
Third-party managed revenue increased 15.3% to $291.8 million, but segment contribution rose only 4.0% to $12.2 million and margin fell to 4.2% from 4.6%. Transportation revenue declined 1.8% to $142.2 million, while contribution rose 4.1% to $18.8 million and margin improved to 13.2%. The quarry business was sold on July 1, 2020.
Adjusted FFO, a non-GAAP REIT measure, was $267.9 million versus $214.5 million. It should be considered alongside GAAP earnings and cash flows, not as a substitute. Interest expense was $91.5 million versus $94.4 million; the effective rate on outstanding debt averaged 3.94%, down from 4.79%.
Debt, liquidity and capital allocation
At December 31, 2020, principal debt was $2.664 billion (balance-sheet debt, net of deferred financing costs, was $2.648 billion), compared with $1.708 billion of principal debt a year earlier. Cash and cash equivalents were $609.5 million; cash, cash equivalents and restricted cash totaled $621.1 million. Net debt was $2.366 billion, and net debt to pro forma Core EBITDA was 4.4x versus 4.2x. The company reported compliance with debt covenants.
Debt included $1.866 billion of senior unsecured notes, $521.3 million of variable-rate term loans and $276.7 million of mortgage debt. The $800 million revolving facility had no borrowings at year-end; $21.7 million of letters of credit were outstanding. Scheduled principal maturities include $262.3 million in 2023 and $521.3 million in 2025. In January 2021, the company expanded its revolver by $200 million and repaid $200 million of term-loan principal.
2020 investing outflows included $1.859 billion for business combinations and $376.8 million for property, buildings and equipment additions. Maintenance capital expenditures were $65.5 million. The company paid $167.1 million of distributions in 2020 and declared quarterly common-share dividends of $0.21 per share during the year; its stated annualized distribution was $0.84 per share.
Material changes, outlook and risks
- Acquisitions and expansion: Americold acquired Nova Cold, Newport, Caspers, AM-C, Hall’s and Agro in 2020, and invested in a 14.99% interest in Brazil’s SuperFrio. Agro closed on December 30 for stated consideration of $1.59 billion, including cash and 14.17 million shares; assumed financing lease and sale-leaseback obligations bring reported total transaction cost to approximately $1.7 billion. Agro’s operating contribution to 2020 results was immaterial because of the closing date. Its integration, valuation and expected benefits remain important execution considerations.
- COVID-19: Management said there had been no significant operational disruption through year-end, but the pandemic shifted demand toward grocery retail and away from food service, affected throughput and occupancy, and increased labor, sanitation and protective-equipment costs. Future effects were described as uncertain.
- Cyber incident: A November 2020 network incident generated $7.9 million of reported costs. The company said it had not materially affected results, while noting remediation costs and the possibility that future incidents could be material.
- Unusual earnings items: A $45.3 million foreign-exchange loss largely reflected a forward contract associated with the euro-denominated debt issuance. Debt extinguishment, modifications and derivative termination produced a $10.0 million expense. These items, along with acquisition and other expenses, contributed to the decline in GAAP net income despite higher operating income.
- Other exposures: The filing highlights customer concentration and short-term contracts, power and labor costs, foreign currency, acquisition integration, development execution, debt and refinancing risk, environmental and food-safety regulation, and REIT qualification. Estimated multiemployer pension withdrawal liability was as much as $726.9 million; the company estimated customer indemnification obligations of approximately $699.7 million but cautioned that recovery is not assured.
- Contingencies: The company disclosed the Fenway/PFS litigation, including a claim seeking damages in excess of $400 million, and a separate Kansas matter for which a liability could not be reasonably estimated. Management believed neither would have a material adverse impact, but outcomes remain uncertain. No formal quantitative earnings guidance was provided in the supplied filing text.
- Controls and accounting: Management and the auditor reported effective internal control over financial reporting, but 2020 assessments excluded businesses acquired during the year, which represented approximately 40% of year-end assets and 3% of annual revenue. Agro and Hall’s purchase accounting was preliminary and subject to measurement-period adjustments.
Investor verification priorities
- Track Agro and Hall’s integration, final purchase-price allocations, realized synergies and post-acquisition operating performance.
- Assess leverage, refinancing capacity, interest-rate exposure and the effect of the January 2021 term-loan repayment and revolver expansion.
- Reconcile GAAP net income with adjusted FFO and cash available after maintenance capital expenditures and distributions.
- Monitor same-store physical occupancy, economic occupancy, throughput and the balance of retail versus food-service demand.
- Review cyber-incident remediation and costs, the status of material litigation, and the potential pension withdrawal liability and enforceability of customer indemnities.
- Confirm progress, costs and expected returns for committed development projects, and the company’s continued ability to meet debt covenants and REIT requirements.