Americold Realty Trust — Q3 2022 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three and nine months ended September 30, 2022, compared with the corresponding 2021 periods. Americold operates temperature-controlled warehouses and related managed and transportation services. At quarter-end, it reported 249 warehouses across North America, Europe, Asia-Pacific and South America. Amounts below are in U.S. dollars; financial figures are rounded.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $757.8 million | $708.8 million | $2,193.2 million | $1,998.3 million |
| Operating income | $23.2 million | $31.6 million | $54.8 million | $68.7 million |
| Net income (loss) | $(8.9) million | $5.3 million | $(22.4) million | $(22.3) million |
| Diluted EPS | $(0.03) | $0.02 | $(0.08) | $(0.09) |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $182.9 million | $164.3 million |
- Q3 revenue increased 6.9%; nine-month revenue increased 9.7%. Growth reflected pricing and contractual escalators, better economic occupancy, acquisitions and expansion projects. Stronger U.S. dollar reduced reported revenue.
- Q3 operating income declined despite revenue growth, reflecting higher operating costs, depreciation and amortization, SG&A, impairments and a $5.7 million real estate sale loss. Nine-month operating income also declined.
- Warehouse segment NOI was up 14.9% in Q3 and 6.5% for the first nine months. Nine-month warehouse services contribution fell 50.7%, and its margin fell to 2.3% from 5.1%, as costs outpaced service-revenue growth. Transportation NOI rose 73.3% in Q3 and 48.4% for nine months, with improved margins following rate increases and exit from less-profitable operations.
- Cash, cash equivalents and restricted cash were $45.7 million at September 30, down from $83.0 million at year-end 2021. Nine-month investing cash outflow was $288.0 million, including $254.1 million of property and equipment additions; financing cash inflow was $74.5 million. Maintenance capital expenditures were $58.8 million, excluding $21.3 million of deferred acquisition maintenance spending.
- Principal indebtedness was $2.97 billion; debt and debt-like obligations, including lease and sale-leaseback obligations, totaled $3.23 billion. The effective interest rate was 3.95%, and management reported 80% fixed-rate and 20% variable-rate debt-like obligations. The company was compliant with debt covenants.
- Total assets were $8.00 billion and total equity was $3.82 billion at quarter-end. Common-stock distributions paid in the first nine months totaled $179.6 million.
Material changes versus prior comparable periods
- Same-store economic occupancy rose to 80.7% in Q3 from 76.3% a year earlier; physical occupancy rose to 75.2% from 69.6%. Nine-month same-store economic occupancy increased 249 basis points to 78.7%.
- Same-store throughput declined 1.3% in Q3 and 1.1% for nine months, while revenue per occupied pallet and service pricing increased. Management attributed occupancy improvement partly to customers’ recovering food production.
- Inflation and labor-related costs pressured margins. For nine months, warehouse cost of operations grew 15.7% on a constant-currency basis, faster than warehouse revenue growth of 13.6%.
- Interest expense rose 20.2% in Q3 and 6.3% for nine months, mainly reflecting higher rates on credit-facility borrowings. In August, Americold extended and increased its senior unsecured credit facilities from $1.5 billion to approximately $2.0 billion and entered into interest-rate swaps.
- Investing outflow was substantially lower than in 2021, when acquisitions consumed $616.3 million. In 2022, the company acquired De Bruyn Cold Storage in Australia for about $16.0 million and bought out two previously leased facilities.
Outlook, commentary, risks and unusual items
- No specific earnings or financial guidance is provided in the supplied filing text. Management expects long-term end-consumer food demand to remain consistent, but says occupancy and throughput remain below pre-pandemic levels until customers restore production and inventory.
- Management cited COVID-related disruption, food-production and supply-chain constraints, labor availability, inflation in labor and power costs, and foreign-exchange movements. Contractual delays—up to 60 days in some cases—may limit how quickly cost increases can be passed through; there is no assurance pricing or efficiencies will offset all inflation.
- A customer representing more than 10% of revenue is transitioning its managed warehouses to another provider, with Americold’s operations expected to cease in Q4 2022. The business generated approximately $8.0 million of annual NOI.
- Impairments totaled $6.6 million, including $3.2 million of goodwill associated with winding down business with a major managed-segment customer, $2.2 million for a development project no longer pursued, and $1.2 million related to leased facilities expected to be exited. A separate $5.7 million loss arose from a facility sale.
- Other notable items included a $4.1 million loss on deconsolidating Chile when Americold contributed the business to a new Latin American joint venture and retained 15%; the partner committed approximately $209 million for an 85% interest. A $3.4 million gain came from extinguishing New Markets Tax Credit arrangements.
- Additional risks include foreign currency exposure, rising rates, development and acquisition execution, customer concentration and contract renewals, environmental and ammonia-related hazards, and litigation. Management said disclosure controls were effective and identified no material control changes during the quarter. The filing describes pending Kansas and Preferred Freezer Services litigation; management said the PFS liability could not be reasonably estimated but did not expect a material adverse impact.
Important facts for investors to verify
- Whether pricing and occupancy gains can keep pace with labor, power and other cost inflation, particularly in warehouse services.
- The timing and financial effect of the major managed-customer exit in Q4 2022, including any further impairment or transition costs.
- Debt refinancing and rate exposure: the filing says a delayed-draw $270 million term loan was expected to fund November 1, 2022 to repay 2013 mortgage loans; confirm completion and resulting interest costs.
- Liquidity after capital spending and distributions, including actual undrawn credit availability and upcoming debt maturities.
- Progress and returns from development projects, plus the Latin American joint venture’s partner contributions and Americold’s retained investment value.
- Reported GAAP losses alongside non-GAAP FFO, Core FFO and Adjusted FFO: these supplemental measures exclude selected costs and do not replace cash flow or maintenance-capital requirements.