Market Overview

Americold Realty Trust Announces Second Quarter 2018 Results

Share:

- Global Warehouse Segment Revenue Growth of 2.1% and Contribution
(NOI) Growth of 7.1% -

- Global Warehouse Segment Contribution (NOI) Margin Expands 150
Basis Points -

- Net Income of $29.4 Million, Including $8.4 Million Gain From Sale
of Real Estate -

- Core FFO of $0.29 and AFFO of $0.27 Per Diluted Common Share -

Americold Realty Trust (NYSE:COLD) (the "Company"), the world's largest
owner and operator of temperature-controlled warehouses, today announced
financial and operating results for the second quarter ended June 30,
2018.

"We are very pleased with our second quarter results, which demonstrate
our ability to deliver consistent growth, with our Global Warehouse
segment same store revenue and contribution (NOI) increases of 2.8% and
8.1%, respectively. We continue to benefit from a favorable customer mix
as well as our work to increase our fixed commitment contracts and drive
productivity improvements. From an external growth perspective, we
recently achieved stabilization at our Clearfield, Utah facility and
expect to deliver our Middleboro, MA build-to-suit facility by the end
of the third quarter, both of which we expect will contribute positively
to future earnings. As the only publicly traded REIT in the
temperature-controlled infrastructure and supply chain industry, we
believe that the combination of our size and scale, deep industry
knowledge, longstanding customer relationships, and the attractive,
stable industry fundamentals positions us to create meaningful
shareholder value over the long-term" stated Fred Boehler, President and
Chief Executive Officer of Americold Realty Trust.

Second Quarter 2018 Highlights

  • Total revenue was $394.7 million, a 4.0% increase over the same
    quarter last year; Global Warehouse segment revenue was $287.7
    million, a 2.1% increase over the same quarter last year
  • Total contribution (NOI) was $98.2 million, a 9.2% increase over the
    same quarter last year; Global Warehouse segment contribution (NOI)
    was $90.8 million, a 7.1% increase over the same quarter last year
  • Net income of $29.4 million, or $0.20 per diluted common share,
    compared to a net loss of $8.4 million from the same quarter last
    year; excluding $8.4 million in gains on the sale of the Company's
    Thomasville, GA facility, net income for the quarter would have been
    $21.0 million or $0.14 per diluted common share
  • Core EBITDA of $73.6 million, a 5.6% increase over the same quarter
    last year
  • Core Funds from Operations ("Core FFO") of $43.1 million, or $0.29 per
    diluted common share
  • Adjusted Funds from Operations ("AFFO") of $39.8 million, or $0.27 per
    diluted common share
  • Global Warehouse segment same store revenue grew 2.8% to $281.4
    million, with segment contribution (NOI) improving 8.1% to $90.5
    million, both over the same quarter last year

Second Quarter 2018 Total Company Financial
Results

Total revenue for the second quarter ended June 30, 2018 was $394.7
million, a 4.0% increase from the same quarter of the prior year. This
growth was largely driven by a more favorable customer mix, net new
business, improvements in our commercial terms and contractual rate
escalations within the Global Warehouse segment.

For the second quarter of 2018, the Company reported a net income of
$29.4 million, or $0.20 per diluted share, compared to a net loss of
$8.4 million for the same quarter of the prior year.

Total contribution (NOI) for the second quarter ended June 30, 2018
increased 9.2% to $98.2 million, compared to $89.9 million for the same
quarter of the prior year.

Core EBITDA was $73.6 million for the second quarter of 2018, compared
to $69.8 million for the same quarter of the prior year. This reflects a
5.6% increase over prior year while absorbing approximately $1.1 million
of additional recurring public company expenses incurred in the second
quarter of 2018.

For the second quarter of 2018, Core FFO was $43.1 million, or $0.29 per
diluted share, compared to $25.0 million for same quarter of the prior
year.

For the second quarter of 2018, AFFO was $39.8 million, or $0.27 per
diluted share, compared to $19.7 million for same quarter of the prior
year. AFFO excludes certain expenses and income items that do not
represent core expenses and income streams.

Please see the Company's supplemental financial information for the
definitions and reconciliations of non-GAAP financial measures to the
most comparable GAAP financial measures.

Second Quarter 2018 Global Warehouse Segment
Results

For the second quarter of 2018, Global Warehouse segment revenues were
$287.7 million, an increase of $6.0 million, or 2.1%, compared to $281.7
million for the second quarter of 2017. This growth was primarily driven
by a more favorable customer mix, a shift to a greater number of fixed
commitment storage contracts, and contractual rate escalations.

Warehouse segment contribution (NOI) was $90.8 million, or 31.6% of
segment revenue for the second quarter of 2018, compared to $84.8
million, or 30.1% of revenue, for the prior year. This represents a 7.1%
improvement in segment profitability over the second quarter of 2017 and
an expansion of 150 basis points in segment margin period-over-period.
The year-over-year profit growth was driven primarily by a more
favorable customer mix, net new business, a shift to a greater number of
fixed commitment storage contracts, continued leveraging of fixed
expenses, and labor and other productivity improvements. The Company
continues to generate productivity improvements with its ongoing focus
on continuous improvement initiatives driven in part by further
progression of its Americold Operating System ("AOS").

The Company ended the second quarter of 2018 with 144 total facilities
in its Global Warehouse segment portfolio. Of the 144 total facilities,
137 meet the Company's definition of facilities with at least 24 months
of consecutive "normalized operations" and are reported as "same store."
The remaining seven facilities are in various stages of operations and
are classified as "non-same store."

The following tables summarize the second quarter 2018 Global Warehouse
full segment and same store metrics compared to the same period a year
ago:

               
Global Warehouse - Total Three Months Ended June 30, Change Six Months Ended June 30, Change
Dollars in thousands 2018       2017   2018       2017  
Global Warehouse revenues:
Rent and storage $ 125,333 $ 122,423 2.4 % $ 251,060 $ 242,090 3.7 %
Warehouse services 162,379   159,240   2.0 % 323,169   315,381   2.5 %
Total Warehouse revenues $ 287,712 $ 281,663 2.1 % $ 574,229 $ 557,471 3.0 %
Global Warehouse contribution (NOI) $ 90,835 $ 84,804 7.1 % $ 180,405 $ 168,325 7.2 %
Global Warehouse margin 31.6 % 30.1 % 150 bps 31.4 % 30.2 % 120 bps
 
Units in thousands except per pallet data
Global Warehouse rent and storage:
Occupancy
Average occupied pallets 2,382 2,448 (2.7 )% 2,414 2,458 (1.8 )%
Average physical pallet positions 3,211 3,239 (0.9 )% 3,212 3,211 %
Occupancy percentage 74.2 % 75.6 % -140 bps 75.2 % 76.6 % -140 bps
Total rent and storage revenues per occupied pallet $ 52.62 $ 50.02 5.2 % $ 103.99 $ 98.48 5.6 %
Global Warehouse services:
Throughput pallets 6,612 6,910 (4.3 )% 13,257 13,709 (3.3 )%
Total warehouse services revenues per throughput pallet $ 24.56 $ 23.04 6.6 % $ 24.38 $ 23.00 6.0 %
 
               
Global Warehouse - Same Store Three Months Ended June 30, Change Six Months Ended June 30, Change
Dollars in thousands 2018       2017   2018       2017  
Global Warehouse same store revenues:
Rent and storage $ 122,492 $ 118,308 3.5 % $ 245,236 $ 234,737 4.5 %
Warehouse services 158,937   155,538   2.2 % 316,208   308,394   2.5 %
Total same store revenues $ 281,429 $ 273,846 2.8 % $ 561,444 $ 543,131 3.4 %
Global Warehouse same store contribution (NOI) $ 90,532 $ 83,780 8.1 % $ 179,580 $ 167,478 7.2 %
Global Warehouse same store margin 32.2 % 30.6 % 160 bps 32.0 % 30.8 % 120 bps
 
Units in thousands except per pallet data
Global Warehouse same store rent and storage:
Occupancy
Average occupied pallets 2,312 2,354 (1.8 )% 2,341 2,382 (1.7 )%
Average physical pallet positions 3,089 3,091 (0.1 )% 3,088 3,081 0.2 %
Occupancy percentage 74.8 % 76.2 % -140 bps 75.8 % 77.3 % -150 bps
Same store rent and storage revenues per occupied pallet $ 52.99 $ 50.27 5.4 % $ 104.75 $ 98.56 6.3 %
Global Warehouse same store services:
Throughput pallets 6,445 6,740 (4.4 )% 12,935 13,391 (3.4 )%
Same store warehouse services revenues per throughput pallet $ 24.66 $ 23.08 6.8 % $ 24.45 $ 23.03 6.2 %
 

Fixed Commitment Rent and Storage Revenue

Annualized committed rent and storage revenue was $202.6 million, which
represented 39.7% of total Warehouse segment rent and storage
revenue for the quarter ended June 30, 2018 on a trailing twelve-month
basis. On an absolute dollar basis, fixed commitment rent and storage
revenue increased $4.9 million from the first quarter 2018.

Real Estate Portfolio

During the second quarter of 2018, the Company sold its 5.6 million
cubic foot facility located in Thomasville, GA for $18.0 million and
recorded a gain on the sale of $8.4 million. The Company also exited its
4.3 million cubic foot leased facility located in Vernon, CA.

Balance Sheet Activity and Liquidity

At June 30, 2018, the Company had total liquidity of approximately
$569.6 million, including cash and capacity on its revolving credit
facility. Total debt outstanding was $1.56 billion (including $159.2
million of capital leases/sale leasebacks), with a weighted average term
of 4.2 years. The Company has no material debt maturities during the
remainder of 2018 and all of 2019. At June 30, 2018, 64% of the
Company's total debt outstanding was at a fixed rate and on a trailing
twelve-month basis, its net debt to Core EBITDA was approximately 4.8x.
The Company's weighted average effective interest rate on outstanding
indebtedness was 5.43%.

Dividend

On June 8, 2018, the Company's Board of Trustees declared a dividend of
$0.1875 per share for the second quarter of 2018, which was paid on July
16, 2018 to common shareholders of record on June 29, 2018.

Investor Webcast and Conference Call

The Company will hold a webcast and conference call on Thursday, August
9, 2018 at 5:00 p.m. Eastern Time to discuss second quarter 2018
results. A live webcast of the call will be available via the Investors
section of Americold Realty Trust's website at www.americold.com.
To listen to the live webcast, please go to the site at least five
minutes prior to the scheduled start time in order to register, download
and install any necessary audio software. Shortly after the call, a
replay of the webcast will be available for 90 days on the Company's
website.

The conference call can also be accessed by dialing 1-877-407-4018 or
1-201-689-8471. The telephone replay can be accessed by dialing
1-844-512-2921 or 1-412-317-6671 and providing the conference ID#
13681436. The telephone replay will be available starting shortly after
the call until August 23, 2018.

The Company's supplemental package will be available prior to the
conference call in the Investor Relations section of the Company's
website at http://ir.americold.com.

About the Company

Americold is the world's largest owner and operator of
temperature-controlled warehouses. Based in Atlanta, Georgia, Americold
owns and operates 156 temperature-controlled warehouses, with
approximately 924 million refrigerated cubic feet of storage, in the
United States, Australia, New Zealand, Canada, and Argentina.
Americold's facilities are an integral component of the supply chain
connecting food producers, processors, distributors and retailers to
consumers. Americold serves approximately 2,400 customers and employs
approximately 11,000 associates worldwide.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures, including FFO,
core FFO, AFFO, EBITDAre, Core EBITDA and same store segment revenue and
contribution. A reconciliation from U.S. GAAP net income available to
common stockholders to FFO, a reconciliation from FFO to core FFO and
AFFO, and definitions of FFO, and core FFO are included within the
supplemental. A reconciliation from U.S. GAAP net income available to
common stockholders to EBITDAre and Core EBITDA, a definition of Core
EBITDA and definitions of net debt to Core EBITDA are included within
the supplemental.

Forward-Looking Statements

This document contains statements about future events and expectations
that constitute forward-looking statements. Forward-looking statements
are based on our beliefs, assumptions and expectations of our future
financial and operating performance and growth plans, taking into
account the information currently available to us. These statements are
not statements of historical fact. Forward-looking statements involve
risks and uncertainties that may cause our actual results to differ
materially from the expectations of future results we express or imply
in any forward-looking statements, and you should not place undue
reliance on such statements. Factors that could contribute to these
differences include adverse economic or real estate developments in our
geographic markets or the temperature-controlled warehouse industry;
general economic conditions; risks associated with the ownership of real
estate and temperature-controlled warehouses in particular; defaults or
non-renewals of contracts with customers; potential bankruptcy or
insolvency of our customers; uncertainty of revenues, given the nature
of our customer contracts; increased interest rates and operating costs;
our failure to obtain necessary outside financing; risks related to, or
restrictions contained in, our debt financing; decreased storage rates
or increased vacancy rates; difficulties in identifying properties to be
acquired and completing acquisitions; risks related to expansions of
existing properties and developments of new properties, including
failure to meet budgeted or stabilized returns in respect thereof;
acquisition risks, including the failure of such acquisitions to perform
in accordance with projections; difficulties in expanding our operations
into new markets, including international markets; our failure to
maintain our status as a REIT; uncertainties and risks related to
natural disasters and global climate change; possible environmental
liabilities, including costs, fines or penalties that may be incurred
due to necessary remediation of contamination of properties presently or
previously owned by us; financial market fluctuations; actions by our
competitors and their increasing ability to compete with us; labor and
power costs; changes in real estate and zoning laws and increases in
real property tax rates; the competitive environment in which we
operate; our relationship with our employees, including the occurrence
of any work stoppages or any disputes under our collective bargaining
agreements; liabilities as a result of our participation in
multi-employer pension plans; the cost and time requirements as a result
of our operation as a publicly traded REIT; the concentration of
ownership by funds affiliated with The Yucaipa Companies, The Goldman
Sachs Group, Inc., and Fortress Investment Group, LLC; changes in
foreign currency exchange rates; and the impact of anti-takeover
provisions in our constituent documents and under Maryland law, which
could make an acquisition of us more difficult, limit attempts by our
shareholders to replace our trustees and affect the price of our common
shares.

Words such as "anticipates," "believes," "continues," "estimates,"
"expects," "goal," "objectives," "intends," "may," "opportunity,"
"plans," "potential," "near-term," "long-term," "projections,"
"assumptions," "projects," "guidance," "forecasts," "outlook," "target,"
"trends," "should," "could," "would," "will" and similar expressions are
intended to identify such forward-looking statements. Examples of
forward-looking statements included in this documents include, among
others, statements about our expected expansion and development pipeline
and our targeted return on invested capital on expansion and development
opportunities. We qualify any forward-looking statements entirely by
these cautionary factors. Other risks, uncertainties and factors,
including those discussed under "Risk Factors" in our Annual Report on
Form 10-K for the year ended December 31, 2017 and our other reports
filed with the Securities and Exchange Commission, could cause our
actual results to differ materially from those projected in any
forward-looking statements we make. We assume no obligation to update or
revise these forward-looking statements for any reason, or to update the
reasons actual results could differ materially from those anticipated in
these forward-looking statements, even if new information becomes
available in the future.

 
Condensed Consolidated Balance Sheets
(In thousands, except shares and per share amounts)
    June 30, 2018     December 31, 2017
Unaudited    
Assets
Property, plant, and equipment:
Land $ 385,713 $ 389,443
Buildings and improvements 1,894,824 1,865,727
Machinery and equipment 549,083   555,453  
2,829,620 2,810,623
Accumulated depreciation and depletion (1,044,371 ) (1,010,903 )
Property, plant, and equipment – net 1,785,249 1,799,720
Capitalized leases:
Buildings and improvements 16,827 16,827
Machinery and equipment 63,832   59,389  
80,659 76,216
Accumulated depreciation (44,181 ) (41,051 )
Capitalized leases – net 36,478 35,165
Cash and cash equivalents 153,200 48,873
Restricted cash 37,575 21,090
Accounts receivable – net of allowance of $5,505 and $5,309 at June
30, 2018 and December 31, 2017, respectively
182,517 200,006
Identifiable intangible assets – net 25,839 26,645
Goodwill 186,890 188,169
Investments in partially owned entities 16,289 15,942
Other assets 51,438   59,287  
Total assets $ 2,475,475   $ 2,394,897  
Liabilities, Series B Preferred Shares and shareholders' equity
(deficit)
Liabilities:
Borrowings under revolving line of credit $ $
Accounts payable and accrued expenses 224,749 241,259
Construction loan - net of deferred financing costs of $179 at
December 31, 2017
19,492
Mortgage notes and term loans - net of unamortized discount and
deferred financing costs of $14,704 and $31,997, in the aggregate,
at June 30, 2018 and December 31, 2017, respectively
1,385,682 1,721,958
Sale-leaseback financing obligations 120,289 121,516
Capitalized lease obligations 38,890 38,124
Unearned revenue 20,145 18,848
Pension and postretirement benefits 15,392 16,756
Deferred tax liability - net 18,474 21,940
Multi-Employer pension plan withdrawal liability 9,037   9,134  
Total liabilities 1,832,658 2,209,027
Commitments and Contingencies
Preferred shares of beneficial interest, $0.01 par value –
authorized 375,000 Series B Cumulative Convertible Voting and
Participating Preferred Shares; aggregate liquidation preference of
$375,000; zero and 375,000 shares issued and outstanding at June 30,
2018 and December 31, 2017, respectively
372,794
Shareholders' equity (deficit):
Preferred shares of beneficial interest, $0.01 par value –
authorized 1,000 Series A Cumulative Non-Voting Preferred Shares;
aggregate liquidation preference of $125; zero and 125 shares issued
and outstanding at June 30, 2018 and December 31, 2017, respectively
Common shares of beneficial interest, $0.01 par value – authorized
250,000,000 shares; 143,459,052 and 69,370,609 shares issued and
outstanding at June 30, 2018 and December 31, 2017, respectively
1,435 694
Paid-in capital 1,257,779 394,082
Accumulated deficit and distributions in excess of net earnings (611,208 ) (581,470 )
Accumulated other comprehensive loss (5,189 ) (230 )
Total shareholders' equity (deficit) 642,817   (186,924 )
Total liabilities, Series B Preferred Shares and shareholders'
equity (deficit)
$ 2,475,475   $ 2,394,897  
 
 
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)
    Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
Revenues:
Rent, storage, and warehouse services revenues $ 287,712 $ 281,663 $ 574,229 $ 557,471
Third-party managed services 65,755 59,638 129,632 118,005
Transportation services 38,889 35,796 77,234 71,977
Other revenues 2,311   2,354   4,714   4,913  
Total revenues 394,667 379,451 785,809 752,366
Operating expenses:
Rent, storage, and warehouse services cost of operations 196,877 196,859 393,824 389,146
Third-party managed services cost of operations 61,896 56,155 121,995 111,534
Transportation services cost of operations 35,303 32,707 70,054 65,335
Cost of operations related to other revenues 2,391 3,790 4,448 5,445
Depreciation, depletion, and amortization 29,051 28,913 58,459 58,320
Selling, general and administrative 27,482 23,546 59,431 48,303
Impairment of long-lived assets 747   8,773   747   8,773  
Total operating expenses 353,747   350,743   708,958   686,856  
 
Operating income 40,920 28,708 76,851 65,510
 
Other income (expense):
Income (loss) from investments in partially owned entities 252 (1,324 ) 112 (1,351 )
Impairment of investments in partially owned entities (6,496 ) (6,496 )
Interest expense (22,929 ) (28,288 ) (47,424 ) (56,015 )
Interest income 1,109 310 1,733 567
Loss on debt extinguishment and modification (430 ) (21,385 ) (600 )
Foreign currency exchange gain (loss) 1,511 (52 ) 2,191 (2,825 )
Other income (expense), net 33   (728 ) 89   (1,212 )
Income (loss) before income tax and gain from sale of real estate,
net of tax
20,896 (8,300 ) 12,167 (2,422 )
Income tax benefit (expense):
Current (1,323 ) (3,368 ) (2,390 ) (5,610 )
Deferred 1,449   3,283   2,605   4,031  
Total income tax benefit (expense) 126 (85 ) 215 (1,579 )
Gain from sale of real estate, net of tax 8,384     8,384    
Net income (loss) $ 29,406   $ (8,385 ) $ 20,766   $ (4,001 )
Less distributions on preferred shares of beneficial interest -
Series A
(8 ) (1 ) (8 )
Less distributions on preferred shares of beneficial interest -
Series B
(7,108 ) (1,817 ) (14,218 )
Less accretion on preferred shares of beneficial interest - Series B   (218 )   (438 )
Net income (loss) attributable to common shares of beneficial
interest
$ 29,406   $ (15,719 ) $ 18,948   $ (18,665 )
 
Weighted average common shares outstanding – basic 143,499   70,049   133,965   69,990  
Weighted average common shares outstanding – diluted 146,474   70,049   136,737   69,990  
 
Net income (loss) per common share of beneficial interest - basic $ 0.20   $ (0.22 ) $ 0.13   $ (0.27 )
Net income (loss) per common share of beneficial interest - diluted $ 0.20   $ (0.22 ) $ 0.14   $ (0.27 )
 
Distributions declared per common share of beneficial interest $ 0.19   $ 0.07   $ 0.36   $ 0.14  
 
 
Reconciliation of Net Earnings to NAREIT FFO, Core FFO, and AFFO
(In thousands)
    Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
Net income (loss) $ 29,406 $ (8,385 ) $ 20,766 $ (4,001 )
Adjustments:
Real estate related depreciation and depletion 21,764 21,474 43,938 42,907
Net gain on sale of depreciable real estate (8,384 ) (8,384 )
Impairment charges on certain real estate assets 747 8,773 747 8,773
Real estate depreciation on China JV 242   288   511   555  
NAREIT Funds from operations 43,775 22,150 57,578 48,234
Less distributions on preferred shares of beneficial interest   (7,117 ) (1,818 ) (14,226 )
NAREIT Funds from operations attributable to common shareholders $ 43,775   $ 15,033   $ 55,760   $ 34,008  
Adjustments:
Net gain on sale of non-real estate assets (387 ) (96 ) (535 ) (192 )
Non-offering related IPO expenses (a) 1,242
Non-recurring public company implementation costs (b) 162 162
Acquisition, diligence and other pursuit costs 48 51
Stock-based compensation expense, IPO grants 965 1,930
Impairment of investments in partially owned entities (c) 6,496 6,496
Severance and reduction in workforce costs 11
Terminated site operations costs 66 121 66 118
Strategic alternative costs (d) 902 1,744
Loss on debt extinguishment and modification 430 21,385 600
Inventory asset impairment 2,108 2,108
Foreign currency exchange (gain) loss (1,511 ) 52   (2,191 ) 2,825  
Core FFO applicable to common shareholders $ 43,118   $ 25,046   $ 77,881   $ 47,707  
Adjustments:
Amortization of deferred financing costs and debt discount 1,556 2,163 3,230 4,186
Amortization of below/above market leases 38 38 76 76
Straight-line net rent (26 ) 77 (31 ) 65
Deferred income taxes benefit (1,449 ) (3,283 ) (2,605 ) (4,031 )
Stock-based compensation expense, excluding IPO grants 701 587 4,254 1,173
Non-real estate depreciation and amortization 7,287 7,439 14,520 15,414
Non-real estate depreciation and amortization on China JV 143 147 299 298
Recurring maintenance capital expenditures (e) (11,563 ) (12,467 ) (17,946 ) (18,372 )
Adjusted FFO applicable to common shareholders $ 39,805   $ 19,747   $ 79,678   $ 46,516  
 
Reconciliation of weighted average and fully diluted shares:
Weighted average basic shares for net income calculation 143,499 n/a 133,965 n/a
Dilutive stock options and unvested restricted stock units 2,975   n/a 2,772   n/a
Weighted average dilutive shares for net income calculation 146,474 n/a 136,737 n/a
Common shares equivalents (f) 1,032   n/a 10,769   n/a
Fully diluted common shares outstanding at quarter-end (g) 147,506   n/a 147,506   n/a
 
NAREIT FFO - basic per share $ 0.31 n/a $ 0.43 n/a
NAREIT FFO - diluted per share $ 0.30 n/a $ 0.42 n/a
NAREIT FFO - fully diluted per share at quarter end (g) $ 0.30 n/a $ 0.39 n/a
 
Core FFO - basic per share $ 0.30 n/a $ 0.58 n/a
Core FFO - diluted per share $ 0.29 n/a $ 0.57 n/a
Core FFO - fully diluted per share at quarter end (g) $ 0.29 n/a $ 0.53 n/a
 
Adjusted FFO - basic per share $ 0.28 n/a $ 0.59 n/a
Adjusted FFO - diluted per share $ 0.27 n/a $ 0.58 n/a
Adjusted FFO - fully diluted per share at quarter end (g) $ 0.27 n/a $ 0.54 n/a
 
(a)   Represents one-time costs and professional fees associated with
becoming a public company.
(b) Represents one-time costs associated with the implementation of
financial reporting systems and processes needed to convert the
organization to a public company.
(c) Represents an impairment charge related to our investment in the
China JV based on a determination that the recorded investment was
no longer recoverable from the projected future cash distributions
we expect to receive from the China JV. We did not receive any cash
distributions from the China JV since the formation of the joint
venture.
(d) Represents one-time operating costs associated with our review of
strategic alternatives prior to the IPO.
(e) Recurring maintenance capital expenditures include capital
expenditures made to extend the life of, and provide future economic
benefit from, our existing temperature-controlled warehouse network
and its existing supporting personal property and information
technology.
(f) Fully diluted common share equivalents outstanding at June 30, 2018.
(g) Assumes i) all post-IPO commons shares were outstanding for the
entire interim period, and ii) the exercise of all outstanding stock
options and conversion of all outstanding restricted stock units at
the beginning of the interim period.
 
 
Reconciliation of Net Earnings to NAREIT EBITDAre and Core EBITDA
(In thousands)
    Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
Net income (loss) $ 29,406 $ (8,385 ) $ 20,766 $ (4,001 )
Adjustments:
Depreciation, depletion and amortization 29,051 28,913 58,459 58,320
Interest expense 22,929 28,288 47,424 56,015
Income tax expense (126 ) 85 (215 ) 1,579
Gain on disposal of depreciated property (8,384 ) (8,384 )
Adjustment to reflect share of EBITDAre of partially owned entities
(a)
592   625   1,149   1,196  
NAREIT EBITDAre $ 73,468   $ 49,526   $ 119,199   $ 113,109  
Adjustments:
Severance and reduction in workforce costs 11
Terminated site operations cost 66 121 66 118
Non-offering related IPO expenses 1,242
Non-recurring public company implementation costs 162 162
Acquisition, diligence, and other pursuit costs 48 51
Strategic alternative costs 902 1,744
(Income) loss from investments in partially owned entities (252 ) 1,324 (112 ) 1,351
Non-recurring impairment of investments in partially owned entities 6,496 6,496
Impairment of inventory and long-lived assets 747 10,881 747 10,881
(Gain) loss on foreign currency exchange (1,511 ) 52 (2,191 ) 2,825
Stock-based compensation expense 1,666 587 6,184 1,173
Loss on debt extinguishment and modification 430 21,385 600
(Gain) loss on other asset disposals (170 ) 58 (307 ) (43 )
Reduction In EBITDAre from partially owned entities (592 ) (625 ) (1,149 ) (1,196 )
Core EBITDA $ 73,632   $ 69,752   $ 145,288   $ 137,058  
 
(a)   Refers to EBITDA for Real Estate in accordance with the standards
established by the Board of Governors of NAREIT adopted in the first
quarter of 2018.
 
 
Revenue and Contribution by Segment (Unaudited)
(In thousands)
    Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
Segment revenues:
Warehouse $ 287,712 $ 281,663 $ 574,229 $ 557,471
Third-Party Managed 65,755 59,638 129,632 118,005
Transportation 38,889 35,796 77,234 71,977
Quarry 2,311   2,354   4,714   4,913  
Total revenues 394,667 379,451 785,809 752,366
 
Segment contribution:
Warehouse 90,835 84,804 180,405 168,325
Third-Party Managed 3,859 3,483 7,637 6,471
Transportation 3,586 3,089 7,180 6,642
Quarry (80 ) (1,436 ) 266   (532 )
Total segment contribution 98,200 89,940 195,488 180,906
 
Reconciling items:
Depreciation, depletion, and amortization (29,051 ) (28,913 ) (58,459 ) (58,320 )
Selling, general and administrative (27,482 ) (23,546 ) (59,431 ) (48,303 )
Impairment of long-lived assets (747 ) (8,773 ) (747 ) (8,773 )
Income (loss) from investments in partially owned entities 252 (1,324 ) 112 (1,351 )
Impairment of investments in partially owned entities (6,496 ) (6,496 )
Interest expense (22,929 ) (28,288 ) (47,424 ) (56,015 )
Interest income 1,109 310 1,733 567
Loss on debt extinguishment and modification (430 ) (21,385 ) (600 )
Foreign currency exchange gain (loss) 1,511 (52 ) 2,191 (2,825 )
Other income (expense), net 33   (728 ) 89   (1,212 )
Income (loss) before income tax and gain from sale of real
estate, net of tax
$ 20,896   $ (8,300 ) $ 12,167   $ (2,422 )
 

We view and manage our business through three primary business
segments—warehouse, third-party managed and transportation. Our core
business is our warehouse segment, where we provide
temperature-controlled warehouse storage and related handling and other
warehouse services. In our warehouse segment, we collect rent and
storage fees from customers to store their frozen and perishable food
and other products within our real estate portfolio. We also provide our
customers with handling and other warehouse services related to the
products stored in our buildings that are designed to optimize their
movement through the cold chain, such as the placement of food products
for storage and preservation, the retrieval of products from storage
upon customer request, blast freezing, case-picking, kitting and
repackaging and other recurring handling services.

Under our third-party managed segment, we manage warehouses on behalf of
third parties and provide warehouse management services to several
leading food retailers and manufacturers in customer-owned facilities,
including some of our largest and longest-standing customers. We believe
using our third-party management services allows our customers to
increase efficiency, reduce costs, reduce supply-chain risks and focus
on their core businesses. We also believe that providing third-party
management services to many of our key customers underscores our ability
to offer a complete and integrated suite of services across the cold
chain.

In our transportation segment, we broker and manage transportation of
frozen and perishable food and other products for our customers. Our
transportation services include consolidation services (i.e.,
consolidating a customer's products with those of other customers for
more efficient shipment), freight under management services (i.e.,
arranging for and overseeing transportation of customer inventory) and
dedicated transportation services, each designed to improve efficiency
and reduce transportation and logistics costs to our customers. We
provide these transportation services at cost plus a service fee or, in
the case of our consolidation services, we charge a fixed fee.

We also operate a limestone quarry on the land we own around our
Carthage, Missouri warehouse, which contains substantial limestone
deposits. We do not view the operation of the quarry as an integral part
of our business.

Notes and Definitions

We calculate funds from operations, or FFO, in accordance with the
standards established by the Board of Governors of the National
Association of Real Estate Investment Trusts, or NAREIT. NAREIT defines
FFO as net income or loss determined in accordance with U.S. GAAP,
excluding extraordinary items as defined under U.S. GAAP and gains or
losses from sales of previously depreciated operating real estate
assets, plus specified non-cash items, such as real estate asset
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. We believe that FFO is helpful to
investors as a supplemental performance measure because it excludes the
effect of depreciation, amortization and gains or losses from sales of
real estate, all of which are based on historical costs, which
implicitly assumes that the value of real estate diminishes predictably
over time. Since real estate values instead have historically risen or
fallen with market conditions, FFO can facilitate comparisons of
operating performance between periods and among other equity REITs.

We calculate core funds from operations, or Core FFO, as FFO adjusted
for the effects of gain or loss on the sale of non-real estate assets,
non-offering related IPO expenses, stock-based compensation expense for
the IPO retention grants, severance and reduction in workforce costs,
acquisition, diligence and other pursuit costs, loss on debt
extinguishment and modification, and foreign currency exchange gain or
loss. We believe that Core FFO is helpful to investors as a supplemental
performance measure because it excludes the effects of certain items
which can create significant earnings volatility, but which do not
directly relate to our core business operations. We believe Core FFO can
facilitate comparisons of operating performance between periods, while
also providing a more meaningful predictor of future earnings potential.

However, because FFO and Core FFO add back real estate depreciation and
amortization and do not capture the level of recurring maintenance
capital expenditures necessary to maintain the operating performance of
our properties, both of which have material economic impacts on our
results from operations, we believe the utility of FFO and Core FFO as a
measure of our performance may be limited.

We calculate adjusted funds from operations, or Adjusted FFO, as Core
FFO adjusted for the effects of amortization of loan costs, debt
discounts and above or below market leases, straight-line rent,
provision or benefit from deferred income taxes, stock-based
compensation expense from grants of stock options and restricted stock
units under our equity incentive plans, non-real estate depreciation,
depletion or amortization (including in respect of the China JV), and
recurring maintenance capital expenditures. We believe that Adjusted FFO
is helpful to investors as a meaningful supplemental comparative
performance measure of our ability to make incremental capital
investments in our business and to assess our ability to fund
distribution requirements from our operating activities.

FFO, Core FFO and Adjusted FFO are used by management, investors and
industry analysts as supplemental measures of operating performance of
equity REITs. FFO, Core FFO and Adjusted FFO should be evaluated along
with U.S. GAAP net income and net income per diluted share (the most
directly comparable U.S. GAAP measures) in evaluating our operating
performance. FFO, Core FFO and Adjusted FFO do not represent net income
or cash flows from operating activities in accordance with U.S. GAAP and
are not indicative of our results of operations or cash flows from
operating activities as disclosed in our consolidated statements of
operations included in our quarterly report on Form 10-Q. FFO, Core FFO
and Adjusted FFO should be considered as supplements, but not
alternatives, to our net income or cash flows from operating activities
as indicators of our operating performance. Moreover, other REITs may
not calculate FFO in accordance with the NAREIT definition or may
interpret the NAREIT definition differently than we do. Accordingly, our
FFO may not be comparable to FFO as calculated by other REITs. In
addition, there is no industry definition of Core FFO or Adjusted FFO
and, as a result, other REITs may also calculate Core FFO or Adjusted
FFO, or other similarly-captioned metrics, in a manner different than we
do. The table above reconciles FFO, Core FFO and Adjusted FFO to net
income, which is the most directly comparable financial measure
calculated in accordance with U.S. GAAP.

We calculate EBITDA for Real Estate, or EBITDAre, in accordance with the
standards established by the Board of Governors of NAREIT, defined as,
earnings before interest expense, taxes, depreciation, depletion and
amortization, gains or losses on disposition of depreciated property,
including gains or losses on change of control, impairment write-downs
of depreciated property and of investments in unconsolidated affiliates
caused by a decrease in value of depreciated property in the affiliate,
and adjustment to reflect share of EBITDAre of unconsolidated
affiliates. EBITDAre is a measure commonly used in our industry, and we
present EBITDAre to enhance investor understanding of our operating
performance. We believe that EBITDAre provides investors and analysts
with a measure of operating results unaffected by differences in capital
structures, capital investment cycles and useful life of related assets
among otherwise comparable companies.

We also calculate our Core EBITDA as EBITDAre further adjusted for
impairment charges on intangible and long-lived assets, gain or loss on
depreciable real property asset disposals, severance and reduction in
workforce costs, non-offering related IPO expenses, loss on debt
extinguishment and modification, stock-based compensation expense,
foreign currency exchange gain or loss, loss on partially owned
entities, and reduction in EBITDAre from partially owned entities. We
believe that the presentation of Core EBITDA provides a measurement of
our operations that is meaningful to investors because it excludes the
effects of certain items that are otherwise included in EBITDAre but
which we do not believe are indicative of our core business operations.
EBITDAre and Core EBITDA are not measurements of financial performance
under U.S. GAAP, and our EBITDAre and Core EBITDA may not be comparable
to similarly titled measures of other companies. You should not consider
our EBITDAre and Core EBITDA as alternatives to net income or cash flows
from operating activities determined in accordance with U.S. GAAP. Our
calculations of EBITDAre and Core EBITDA have limitations as analytical
tools, including:

  • these measures do not reflect our historical or future cash
    requirements for recurring maintenance capital expenditures or growth
    and expansion capital expenditures;
  • these measures do not reflect changes in, or cash requirements for,
    our working capital needs;
  • these measures do not reflect the interest expense, or the cash
    requirements necessary to service interest or principal payments, on
    our indebtedness;
  • these measures do not reflect our tax expense or the cash requirements
    to pay our taxes; and
  • although depreciation, depletion and amortization are non-cash
    charges, the assets being depreciated, depleted and amortized will
    often have to be replaced in the future and these measures do not
    reflect any cash requirements for such replacements.

We use EBITDAre and Core EBITDA as measures of our operating performance
and not as measures of liquidity.

View Comments and Join the Discussion!