Americold Realty Trust, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Americold is a global temperature-controlled warehouse and logistics REIT. At quarter-end, it operated 242 warehouses, totaling approximately 1.5 billion refrigerated cubic feet.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $649.6M | $729.8M | $1,326.1M | $1,435.5M |
| Operating income | $20.7M | $23.7M | $53.0M | $31.7M |
| Net income (loss) | ($104.8M) | $4.0M | ($107.4M) | ($13.5M) |
| Diluted EPS | ($0.39) | $0.01 | ($0.40) | ($0.05) |
| Interest expense | $36.4M | $26.5M | $70.9M | $52.3M |
| Adjusted FFO attributable to common stockholders | $75.6M | $73.9M | $155.4M | $142.7M |
Q2 warehouse revenue rose 3.0% (4.1% constant currency) and warehouse segment contribution (NOI) increased 14.5% to $172.8M. Warehouse same-store economic occupancy was 84.8%, up 687 basis points, while throughput pallets declined 9.3%. Transportation revenue fell 29.1%; third-party managed revenue fell 87.6%, largely reflecting the prior-year comparison with a customer whose managed operations were transitioned to another provider. Q2 reported revenue also reflects Comfrio as discontinued operations.
Q2 warehouse segment margin improved to 29.7% from 26.8%; warehouse rent and storage margin rose to 64.7%. Warehouse services contribution was negative $5.2M, compared with positive $2.4M in Q2 2022. Transportation margin improved to 16.9% from 16.6%, despite lower segment contribution.
Cash, debt and liquidity
- Six-month operating cash flow was $82.8M, down from $133.2M. Investing cash outflow was $162.7M and financing cash inflow was $76.5M. Cash and restricted cash ended at $48.9M.
- Total principal indebtedness was $3.325B; including sale-leaseback and financing lease obligations, debt-like obligations totaled $3.569B. The effective interest rate was 4.21%; 80% of debt and debt-like obligations was fixed-rate or effectively hedged. Weighted-average debt maturity was approximately 5.6 years, assuming extension options.
- Revolver borrowings were $723.4M, up from $500.1M at year-end 2022. The company said it was in compliance with debt covenants. A 100-basis-point rate increase was estimated to add approximately $7.2M to annual interest expense on variable-rate debt.
- Americold stated that expected funding sources were adequate for short- and long-term needs. Its $900M ATM equity program had no sales during the first half of 2023. The company expects to continue quarterly distributions, subject to board discretion and REIT requirements.
Material changes, outlook and risks
- Cyber incident: The April 26 incident temporarily disrupted systems and operations. All locations had returned to pre-incident operating levels by June 30. Q2 incident costs, net of insurance recoveries, were $19.0M; management estimated lost warehouse revenue of approximately $15.0M and lost warehouse NOI of $9.0M for the quarter. Additional remediation costs were expected in the second half of 2023, at a diminished rate. Insurance recoveries, timing, and coverage remain uncertain.
- Comfrio: Americold acquired the remaining interest in the Brazilian joint venture on May 30 for total consideration of $56.6M and classified its 26 warehouses as held for sale and discontinued operations. The company recorded a $56.6M loss on the put option, fully impaired the remaining Comfrio loan balance ($22.0M), and recorded a $4.0M estimated disposal cost. The portfolio was being marketed for sale; acquisition accounting remained preliminary.
- Other unusual transactions and costs: Americold sold its remaining 15% LATAM JV interest for $36.9M and recorded a $0.3M gain. It also recorded a $2.5M real-estate sale gain. Project Orion technology-transformation costs and severance contributed to elevated acquisition, cyber incident and other expenses.
- Operating pressures: Interest expense increased as rates and borrowings rose. Inflation, labor and power costs, construction and development execution, foreign exchange, customer demand and throughput, and seasonality remain risks. Management cited contractual rate escalations and pricing as offsets to cost inflation. No specific full-year financial guidance is provided in the supplied filing text.
- Controls and contingencies: Management concluded disclosure controls were effective at June 30, while its review of the incident’s impact on internal controls over financial reporting remained ongoing. It added testing and manual compensating controls. The company disclosed possible unauthorized access to personal information and stated the incident’s ultimate impact could not yet be determined. A long-running PFS lawsuit remains unresolved; management said liability could not be reasonably estimated but did not expect a material adverse impact.
Important facts for investors to verify
- Progress of the cyber investigation, potential data notifications or claims, total remediation costs, business-interruption losses, and insurance coverage and collections.
- Timing, proceeds and final accounting for the planned Comfrio sale, including any changes to preliminary acquisition values or disposal estimates.
- Whether stronger warehouse occupancy and pricing can persist as throughput and warehouse services contribution remain under pressure.
- Debt and interest-rate exposure, revolver usage, covenant headroom, future capital spending, and capacity to fund distributions and development.
- Completion of the pension plan termination and the amount and timing of required cash contributions and settlement charges.