Americold Realty Trust — Q1 2019 Form 10-Q
Business context and reporting period
Quarter ended March 31, 2019; comparison is with Q1 2018. Americold is a REIT focused on temperature-controlled warehouses and related logistics services. Its operating partnership conducts substantially all operations and holds the debt; the parent guarantees certain obligations. At quarter-end, the filing describes a network of 155 warehouses and a 49% interest in a China joint venture.
Key financial metrics
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $393.1 million | $391.1 million; up 0.5% |
| Operating income and margin | $16.4 million; 4.2% | $35.9 million; 9.2% |
| Net loss | $4.6 million; loss per share $0.03 | $8.6 million; loss per share $0.08 |
| Operating cash flow | $53.0 million | $50.2 million |
| Cash used in investing | $58.7 million | $27.9 million |
| Cash used in financing | $29.1 million | Cash provided: $121.2 million |
| Cash and restricted cash | $179.7 million | At March 31, 2019 |
| Debt principal | $1.363 billion | Net carrying amount $1.350 billion |
| Total liabilities / assets | $1.907 billion / $2.588 billion | At March 31, 2019 |
Warehouse segment NOI was $90.8 million, up 1.4% reported and 2.7% in constant currency; its margin was 31.4%. Transportation NOI rose 21.2% to $4.4 million, with margin improving to 11.7%. Third-party managed NOI fell 13.7% to $3.3 million. Same-store physical occupancy declined to 74.3% from 76.8%; economic occupancy was 78.6%.
Material changes versus Q1 2018
- Revenue grew modestly, but operating income declined substantially, reflecting $12.6 million of long-lived asset impairments, higher acquisition/litigation/other costs ($8.5 million versus $3.8 million), and increased SG&A. The prior-year period had no impairment charge.
- Net loss narrowed partly because Q1 2018 included a $21.4 million debt-extinguishment and modification loss. Interest expense declined 11.9% to $21.6 million following debt refinancing and repayment activity in 2018.
- Constant-currency warehouse revenue grew 3.4%, while reported growth was 1.1%; foreign exchange reduced revenue by approximately $6.5 million.
- Operating cash flow increased 5.5%, while investing outflows rose, including $35.9 million for the PortFresh asset acquisition. Cash declined by $34.8 million during the quarter.
- Common distributions declared were $0.2024 per share for the quarter, compared with $0.1504 in Q1 2018.
Outlook, risks, contingencies, and unusual items
- The filing gives no quantified full-year earnings or revenue guidance. Management said existing cash, operating cash flow, the revolving facility, and potential debt or equity financing were expected to support working capital, capital spending, debt service, distributions, development, and acquisitions.
- After quarter-end, Americold raised approximately $1.21 billion net in an April follow-on share offering; the forward purchaser also sold 8.25 million borrowed shares under a forward sale arrangement. In May, the company acquired Cloverleaf Cold Storage for approximately $1.26 billion and Lanier Cold Storage for $82 million. A May 7 debt placement issued $350 million of 4.10% notes, with proceeds expected partly to repay acquisition-related revolver borrowings. Integration, financing, and execution risks are material.
- Q1 impairments comprised $9.6 million tied to planned demolition of an unused portion of an Atlanta-area warehouse and $2.9 million on an idle domestic warehouse in anticipation of a possible sale. PortFresh was acquired for $35.9 million.
- Variable-rate debt was $475 million, of which $100 million was hedged. Management estimated a 100-basis-point rate increase would raise annual interest expense by about $3.8 million. The company reported compliance with debt covenants at March 31.
- Preferred Freezer Services refiled claims in federal court alleging breach of confidentiality and trade-secret violations and seeking injunctive relief and damages. The company disputes the claims; it said a liability could not then be reasonably estimated and did not expect a material adverse outcome. The Kansas settlement litigation also remained ongoing; management said it did not expect a material adverse impact.
- Other risks include customer concentration (one customer accounted for more than 10% of revenue, largely pass-through managed-service reimbursements), labor and power costs, occupancy and customer renewals, foreign exchange, environmental and ammonia-related exposures, and acquisition integration. Approximately 58% of employees were covered by collective bargaining agreements.
Important facts for investors to verify
- Confirm the impact of the May acquisitions, follow-on equity issuance, forward sale shares, and $350 million notes on post-quarter leverage, share count, interest costs, and liquidity.
- Track Cloverleaf and Lanier integration, customer retention, expected synergies, and acquisition-related costs against management’s expectations.
- Assess the quality and durability of operating cash flow and distributions, particularly alongside capital spending and the REIT’s distribution requirements.
- Monitor warehouse occupancy and throughput: same-store occupancy fell, while revenue per occupied pallet and value-added service pricing increased.
- Check the filing’s portfolio-count disclosure: it states 155 warehouses, but the listed country counts appear inconsistent with that total; the filing text does not provide a clear reconciled count.
- Review developments in the PFS and Kansas litigation, and any subsequent change in the company’s assessment of potential exposure.