Americold Realty Trust, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Americold is a global temperature-controlled warehouse and logistics REIT. At quarter-end it operated 243 warehouses with approximately 1.5 billion cubic feet of capacity.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Total revenue | $676.5 million | $705.7 million | Down 4.1% |
| Operating income | $32.3 million | $8.0 million | Up $24.4 million |
| Net loss | $2.6 million | $17.4 million | Loss narrowed |
| Net loss per share | $0.01 | $0.06 | Improved |
| Operating cash flow | $41.5 million | $15.6 million | Up $25.9 million |
| Cash used in investing | $87.6 million | $94.2 million | Lower use |
Warehouse revenue increased 10.0% to $595.1 million; warehouse segment contribution (NOI) increased 19.5% to $174.8 million, with margin rising to 29.4% from 27.0%. Same-store warehouse NOI increased 24.6% (26.1% on a constant-currency basis); economic occupancy rose to 84.6% from 77.1%. Transportation revenue fell 13.7% to $68.1 million, but segment contribution rose 36.7% to $11.7 million and margin improved to 17.1%. Third-party managed revenue fell 84.4% to $13.4 million, mainly following the exit of its largest customer’s operations.
Interest expense rose 33.6% to $34.4 million, reflecting higher rates and greater borrowings. Adjusted FFO was $79.9 million, compared with $68.9 million; Core FFO was $60.8 million, compared with $46.3 million. These are non-GAAP measures and should be considered alongside GAAP results.
Balance sheet, debt and liquidity
- At March 31, total assets were $8.07 billion, cash and restricted cash were $47.2 million, and total liabilities were $4.35 billion.
- Principal indebtedness was $3.20 billion; debt and debt-like obligations, including sale-leaseback and financing lease obligations, totaled $3.45 billion. The reported effective interest rate was 4.08%, and weighted-average debt maturity was approximately 5.9 years, assuming extension options.
- Variable-rate, unhedged debt was $610.5 million. Management estimated a 100-basis-point rate increase would raise annual interest expense by approximately $6.1 million. The company reported compliance with debt covenants.
- Operating cash flow of $41.5 million was below property and equipment additions of $69.3 million and distributions paid of $60.1 million. Net revolving-credit borrowings contributed $110.1 million to financing cash flow.
- Quarter-end revolving-credit borrowings were $610.5 million. The filing does not provide a clear value for remaining facility availability in the text presented.
Material changes and management commentary
- Growth in warehouse revenue and NOI reflected pricing initiatives, contractual rate escalations and improved economic occupancy; throughput declined slightly. Inflation raised labor, power and facility costs.
- Transportation demand softened amid broader economic conditions. Lower carrier costs and higher rates improved segment margin.
- The largest managed-customer transition, completed in Q4 2022, drove the steep year-over-year decline in third-party managed revenue and costs.
- Americold acquired a 49% interest in the RSA joint venture, which operates a Dubai warehouse, for $4.0 million. It also provided a loan to the Comfrio joint venture.
- The company established a $900 million at-the-market equity program in March 2023; there were no sales under it in Q1.
- Management said food supply-chain and production conditions had improved toward pre-pandemic levels, while inflationary pressures persisted. It cited contractual escalations and the ability to pass through certain cost increases. No numerical earnings guidance is provided in the supplied filing text.
- The company plans to terminate its defined-benefit retirement plan. It expects cash contributions to fully fund the plan on a liquidation basis and non-cash settlement charges in 2023; amounts and timing depend on participant settlements, interest rates and market conditions.
Risks, contingencies and unusual items
- Cybersecurity incident after quarter-end: On April 26, 2023, Americold identified a cyber incident, took systems offline and reported operational disruption, including facilities temporarily unable to receive or deliver products. Its initial review found unauthorized access to personal information. The investigation was ongoing, and the company said it could not yet determine the financial impact.
- Other principal risks include inflation and interest rates, labor and power costs, supply-chain disruptions, development and acquisition execution, customer contract renewals or defaults, foreign exchange, cybersecurity and ERP implementation, and environmental or severe-weather events.
- The company described the PFS litigation, denied the allegations and said a liability could not be reasonably estimated; management did not expect a material adverse impact. It reported nominal environmental liabilities and no material unrecorded contingent liabilities.
- Q1 included $7.1 million of acquisition, litigation and other costs, including $3.4 million of severance, $1.9 million of Project Orion costs and $1.8 million of acquisition and integration costs.
Important facts for investors to verify
- How the April 2023 cyber incident affected facility operations, customer relationships, personal information and financial results, including any related costs or claims.
- Whether higher warehouse pricing and occupancy can continue to offset inflation, and whether throughput weakness worsens.
- Revolving-credit availability, future borrowing needs, interest-rate exposure and compliance with debt covenants.
- Capital spending, distributions and funding needs relative to operating cash generation; whether the ATM program is used and any resulting dilution.
- The cash funding requirement and settlement charges arising from retirement-plan termination.