UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number: 001-34723
AMERICOLD REALTY TRUST
AMERICOLD REALTY OPERATING PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)
Maryland (Americold Realty Trust)
Delaware (Americold Realty Operating Partnership, L.P.)
93-0295215
01-0958815
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification Number)
10 Glenlake Parkway, Suite 600, South Tower
Atlanta, Georgia
(Address of principal executive offices)
30328
(Zip Code)
(678) 441-1400
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Americold Realty Trust:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Shares of Beneficial Interest, $0.01 par value per share
COLD
New York Stock Exchange (NYSE)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Americold Realty Trust
Yes x No ¨
Americold Realty Operating Partnership, L.P.
Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Americold Realty Trust
Yes ¨ No x
Americold Realty Operating Partnership, L.P.
Yes x No ¨
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Americold Realty Trust
Yes x No ¨
Americold Realty Operating Partnership, L.P.
Yes ¨ No x
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter periods that the registrant was required to submit such files).
x
Americold Realty Trust
Yes x No ¨
Americold Realty Operating Partnership, L.P.
Yes
No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Americold Realty Trust:
Large accelerated filer
x
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
¨
¨
☐☐
☐☐
Americold Realty Operating Partnership, L.P.:
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
¨
x
¨
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Americold Realty Trust
Yes ¨ No ¨
Americold Realty Operating Partnership, L.P.
Yes ¨ No ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934)
Americold Realty Trust
Yes ☐ No x
Americold Realty Operating Partnership, L.P.
Yes ☐ No x
As of June 28, 2019, the aggregate market value of the voting common shares owned by non-affiliates of Americold Realty Trust was $5.3 billion, computed by
reference to the closing price of the common shares of Americold Realty Trust on the New York Stock Exchange on such date. Such value excludes common
shares held by executive officers, directors, and 10% or greater shareholders as of June 28, 2019. The identification of 10% or greater shareholders is based on
Schedule 13G and amended 13G reports publicly filed before June 28, 2019. This calculation does not reflect a determination that such parties are affiliates for any
other purposes. The number of Americold Realty Trust’s common shares outstanding at February 26, 2020, was approximately 200,164,155.
There is no public trading market for the partnership units of Americold Realty Operating Partnership, L.P. As a result, the aggregate market value of the
partnership units held by non-affiliates of Americold Realty Operating Partnership, L.P. cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference portions of Americold Realty Trust’s Proxy Statement for its 2020 Annual Meeting of Shareholders, which the registrants
anticipate will be filed no later than 120 days after the end of its fiscal year pursuant to Regulation 14A.
EXPLANATORY NOTE
This report combines the annual reports on Form 10-K for the year ended December 31, 2019 of Americold Realty Trust and
Americold Realty Operating Partnership, L.P. As used in this report, unless the context otherwise requires, references to “we,” “us,” “our,”
“our Company” and “the Company” refer to Americold Realty Trust, a Maryland real estate investment trust, and its consolidated
subsidiaries, including Americold Realty Operating Partnership, L.P., a Delaware limited partnership and the subsidiary through which we
conduct our business, which we refer to as “our Operating Partnership” or “the Operating Partnership.”
The Operating Partnership is voluntarily co-filing its annual report with the Company because the Operating Partnership anticipates
that it may register one or more classes of securities in the future and will thus become subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, or the Exchange Act.
As of December 31, 2019 and for each of the years ended December 31, 2019, 2018 and 2017, the sole general partner, Americold
Realty Trust, held approximately 99% of the partnership interests of our Operating Partnership, and the limited partner, Americold Realty
Operations, Inc., a wholly-owned subsidiary of Americold Realty Trust, held 1% of the partnership units of our Operating Partnership. The
Operating Partnership has also granted Operating Partnership Profit Units (OP Units) to certain members of the Board of Trustees during
2019 and certain members of executive management of Americold Realty Trust during 2020. Upon vesting, these OP Units will represent
partnership units in the Operating Partnership that are not owned by Americold Realty Trust.
We believe combining the annual reports on Form 10-K of Americold Realty Trust and Americold Realty Operating Partnership,
L.P., into this single report results in the following benefits:
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enhancing investors’ understanding of our Company and our Operating Partnership by enabling investors to view the
business as a whole in the same manner as management views and operates the business;
eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of
the disclosure applies to both our Company and our Operating Partnership; and
creating time and cost efficiencies through the preparation of one combined report instead of two separate reports.
There are a few differences between our Company and our Operating Partnership, which are reflected in the disclosures in this report.
We believe it is important to understand the differences between our Company and our Operating Partnership in the context of how we
operate as an interrelated consolidated company. Americold Realty Trust is a real estate investment trust, or REIT, whose only material asset
is its ownership of partnership interests of Americold Realty Operating Partnership, L.P. As a result, Americold Realty Trust does not
conduct business itself, other than acting as the sole general partner and substantial-majority indirect limited partner of Americold Realty
Operating Partnership, L.P., issuing public equity from time to time and guaranteeing certain unsecured debt of Americold Realty Operating
Partnership, L.P. and certain of its subsidiaries. Americold Realty Trust itself does not issue any indebtedness but guarantees certain of the
debt of Americold Realty Operating Partnership, L.P. and certain of its subsidiaries and affiliates, as disclosed in this report. Americold
Realty Operating Partnership, L.P. holds substantially all the assets of the Company. Americold Realty Operating Partnership, L.P. conducts
the operations of the business and is structured as a limited partnership with no publicly traded equity. Except for net proceeds from public
equity issuances by Americold Realty Trust, which are generally contributed to Americold Realty Operating Partnership, L.P. in exchange for
partnership interests, Americold Realty Operating Partnership, L.P. generates the capital required by the Company’s business through
Americold Realty Operating Partnership, L.P.’s operations, or by Americold Realty Operating Partnership L.P.’s direct or indirect incurrence
of indebtedness.
To help investors understand the significant differences between our Company and our Operating Partnership, this report presents the
following separate sections for each of our Company and our Operating Partnership:
•
•
consolidated financial statements;
the following notes to the consolidated financial statements:
◦ Debt of the Company and Debt of the Operating Partnership;
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Partners’ Capital; and
Selected Quarterly Financial Information
• Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities;
•
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Selected Financial Data; and
Liquidity and Capital Resources in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This report also includes separate Item 9A. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of
the Company and the Operating Partnership in order to establish that the Chief Executive Officer and Chief Financial Officer of each entity
have made the requisite certification and that the Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of
the Exchange Act and 18 U.S.C. §1350.
In order to highlight the differences between the Company and the Operating Partnership, the separate sections in this report for the
Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine
disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the
Company. Although the Operating Partnership is generally the entity that enters into contracts and joint ventures and holds assets and debt,
reference to the Company is appropriate because the business is one enterprise and the Company operates the business through the Operating
Partnership.
As general and limited partner with control of the Operating Partnership, Americold Realty Trust consolidates the Operating
Partnership for financial reporting purposes, and it does not have significant assets other than its investment in the Operating Partnership.
Therefore, the assets and liabilities of Americold Realty Trust and Americold Realty Operating Partnership, L.P. are the same on their
respective consolidated financial statements. The separate discussions of Americold Realty Trust and Americold Realty Operating
Partnership, L.P. in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis
and how management operates the Company.
In addition, unless otherwise stated herein, when we refer to “cubic feet” in one of our temperature-controlled facilities, we refer to
refrigerated cubic feet (as opposed to total cubic feet, refrigerated and otherwise) therein.
Item
Page
TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Holders
Sales of Unregistered Securities
Securities Authorized for Issuance Under Equity Compensation Plans
Use of Proceeds
Other Shareholder Matters
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
Management’s Overview
Results of Operations
Liquidity and Capital Resources
Contractual Obligations
Critical Accounting Policies
New Accounting Pronouncements
7A. Quantitative and Qualitative Disclosures About Market Risk
8.
9.
9A.
9B.
10.
11.
12.
13.
14.
15.
16.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
PART III
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART IV
Exhibits, Financial Statements and Schedules
Form 10-K Summary
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CAUTIONARY STATEMENT REGADING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K 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 the following:
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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;
risks related to current and potential international operations and properties;
our failure to realize the intended benefits from our recent acquisitions including synergies, or disruptions to our plans and
operations or unknown or contingent liabilities related to our recent acquisitions;
our failure to successfully integrate and operate acquired properties or businesses, including but not limited to: Cloverleaf Cold
Storage, Lanier Cold Storage, MHW Group Inc., Nova Cold Logistics, Newport Cold Storage and PortFresh Holdings, LLC;
acquisition risks, including the failure of such acquisitions to perform in accordance with projections;
risks related to expansions of existing properties and developments of new properties, including failure to meet budgeted or stabilized
returns within expected time frames in respect thereof;
difficulties in expanding our operations into new markets, including international markets;
our failure to maintain our status as a REIT;
our Operating Partnership’s failure to qualify as a partnership for federal income tax purposes;
uncertainties and risks related to natural disasters, global climate change and public health crisis;
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, including employment related litigation;
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;
losses in excess of our insurance coverage;
the cost and time requirements as a result of our operation as a publicly traded REIT;
changes in foreign currency exchange rates;
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
1
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affect the price of our common shares of beneficial interest, $0.01 par value per share, or our common shares;
the potential dilutive effect of our common share offerings; and
risks related to our forward sale agreement entered into with Bank of America, N.A. in September 2018, as amended, or the 2018
forward sale agreement, including substantial dilution to our earnings per share or substantial cash payment obligations.
The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance,
including factors and risks included in other sections of this Annual Report on Form 10-K, including under Part I, Item 1A, Risk Factors.
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 Annual Report on Form 10-K 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,” 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.
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PART I
ITEM 1. Business
The Company
We are the world’s largest publicly traded REIT focused on the ownership, operation, acquisition and development of temperature-
controlled warehouses. We are organized as a self-administered and self-managed REIT with proven operating, development and acquisition
expertise. As of December 31, 2019, we operated a global network of 178 temperature-controlled warehouses encompassing over one billion
cubic feet, with 160 warehouses in the United States, six warehouses in Australia, seven warehouses in New Zealand, two warehouses in
Argentina and three warehouses in Canada. We view and manage our business through three primary business segments: warehouse, third-
party managed and transportation.
We consider our temperature-controlled warehouses to be “mission-critical” real estate in the markets we serve from “farm to fork”
and an integral component of the temperature-controlled food infrastructure supply chain, which we refer to as the “cold chain.” The cold
chain is vital for maintaining the quality of food producers’, distributors’, retailers’ and e-tailers’ temperature-sensitive products, protecting
brand reputation and ensuring consumer safety and satisfaction. Our customers depend upon the location, high-quality, integration and scale
of our portfolio to ensure the integrity and efficient distribution of their products. Many of our warehouses are located in key logistics
corridors in the countries in which we operate, including strategically critical U.S. and international metropolitan statistical areas, or MSAs,
while others are connected or immediately adjacent to customers’ production facilities. We believe our strategic locations and the extensive
geographic presence of our integrated warehouse network are fundamental to our customers’ ability to optimize their distribution networks
while reducing their capital expenditures, operating costs and supply-chain risks. Many of the warehouses in our real estate portfolio have
been modernized to reduce our power costs and increase their competitive position through reliable temperature-control systems and
processes.
We consider ownership of our temperature-controlled warehouses to be fundamental to our business, our ability to attract and retain
customers and our ability to achieve our targeted return on invested capital. We believe that the ownership of our real estate provides us with
cost of capital and balance sheet advantages, stemming from the attractive financing options available to real estate owners and the tax
advantages of being a REIT. We also believe that consolidation of the ownership and operation of our portfolio significantly enhances the
value of our business by allowing us to provide customers with our complementary suite of value-added services across one integrated and
reliable cold chain network. Ownership of our integrated cold chain network enhances our ability to efficiently reposition customers and
undertake capital improvements or other modifications on their behalf without the need to obtain third-party approvals. Our decision to own,
rather than lease, a significant majority of our warehouses provides us with better control over the specialized nature of our assets and greater
influence over our warehouse locations on a long-term basis, which is crucial to meeting our customers’ “mission-critical” cold chain needs.
Recent Acquisitions
On February 1, 2019, we completed the acquisition of PortFresh Holdings LLC (“PortFresh”) for a purchase price of approximately
$35.2 million, (the “PortFresh Acquisition”) net of cash acquired. On May 1, 2019, we completed the acquisition of Cloverleaf Cold Storage
LLC (“Cloverleaf”) for a purchase price of approximately $1.24 billion (the “Cloverleaf Acquisition”), net of cash acquired. Also, on May 1,
2019, we completed the acquisition of Lanier Cold Storage (“Lanier”) for approximately $81.9 million (the “Lanier Acquisition), net of cash
acquired. On November 19, 2019, the Company acquired MHW Group Inc. (“MHW”)
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for approximately $50.1 million (the “MHW Acquisition”), net of cash acquired, with an option to purchase land accompanying the
warehouse for $4.1 million, which we exercised on January 24, 2020. Additionally, on this date the Company announced the acquisition of
Nova Cold Logistics (“Nova Cold”) which closed on January 2, 2020 for CAD $336.8 million (the “Nova Cold Acquisition”). Refer to Item 7
- Management’s Discussion and Analysis and Notes 2 and 3 of the Consolidated Financial Statements in this Annual Report on Form 10-K
for further details of each of the 2019 acquisitions, and Note 30 of the Consolidated Financial Statements in this Annual Report on Form 10-
K for further details of each of the 2020 acquisitions.
Initial Public Offering and Follow-on Offerings
On January 23, 2018, we completed an initial public offering of our common shares, in which we issued and sold 33,350,000 of our
common shares, including 4,350,000 common shares pursuant to the exercise in full of the underwriters’ option to purchase additional
common shares (the “IPO”). The offering generated net proceeds of approximately $493.6 million to us, after deducting underwriting fees
and other offering costs of approximately $40.0 million. Subsequent to our IPO, we have completed multiple follow-on offerings, which are
described in further detail in Item 5 of this Annual Report on Form 10-K.
Our Information
Our principal executive office is located at 10 Glenlake Parkway, South Tower, Suite 600, Atlanta, Georgia 30328, and our telephone
number is (678) 441-1400. Our website address is www.americold.com. The information found on, or otherwise accessible through, our
website is not incorporated into, and does not form a part of, this Annual Report on Form 10-K or any other report or document we file with
or furnish to the Securities and Exchange Commission (the “SEC”). Our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, Proxy Statement and all amendments to those reports are available free of charge on our website as soon as
reasonably practicable after such material is electronically filed with, or furnished to, the SEC. In addition, all reports we file with the SEC
are available via EDGAR through the SEC website at www.sec.gov. Copies of our annual report will be made available, free of charge, on
written request. Our Code of Business Conduct and Ethics is also made available through our website under “Investors - Governance
Documents” or via EthicsPoint Hotline.
BUSINESS STRATEGY AND OPERATING SEGMENTS
We were formed as a Maryland REIT on December 27, 2002. Our Operating Partnership was formed as a Delaware limited
partnership on April 5, 2010. Our operations are conducted through our Operating Partnership and its subsidiaries.
Our primary business objective is to increase shareholder value by serving our customers, growing our market share, enhancing our
operating and financial results and increasing cash flows from operations. We also believe that our ability to execute on our business and
growth strategies will enhance the overall value of our real estate. The strategies we intend to execute to achieve these objectives include the
following:
Enhancing Our Operating and Financial Results Through Proactive Asset Management
We seek to enhance our operating and financial results by supporting our customers’ growth initiatives in the cold chain, optimizing
occupancy, underwriting and deploying yield management initiatives and executing operational optimization and cost containment strategies.
We believe that the combination of our ability to execute these and other initiatives and the significant investments we have made in our
business over the last several years will continue to drive our financial results and position us to expand our warehouse portfolio, grow our
customer base, enhance our market share and create value for our shareholders.
4
Continue to Increase Committed Revenue in Our Warehouse Segment
Historically, providers of temperature-controlled warehouse space have offered storage services to customers on an as-utilized, on-
demand basis. We actively seek to enter into contracts that implement our commercial business rules which contemplate, among other things,
fixed storage commitments in connection with establishing new customer relationships or renewing agreements with existing customers,
particularly with our largest customers, and variable rates for the value-added services we provide. Over the last several years, we have
transitioned a significant portion of our rent and storage revenues generated on an as-utilized, on-demand basis to a fixed storage commitment
basis. We believe the scope and breadth of our network position us favorably to continue to increase our fixed storage commitments as we
believe this structure offers commercial advantages to both our customers and us.
Focused and Disciplined Strategy to Expand Our Portfolio of Temperature-Controlled Warehouses
We believe our operating systems, scalable information technology platform and economies of scale provide us with a significant
advantage over our competitors with respect to expansion, development and acquisition opportunities. Being the first publicly-traded REIT
focused on the temperature-controlled warehouse industry provides us greater access to the capital markets than our competitors, which we
believe better positions us to strategically enter new locations, fill gaps in existing distribution networks and effectively compete for
expansion, development and acquisition opportunities.
Capitalize on Increased Outsourcing by Leading Global Food Producers, Distributors, Retailers and E-Tailers
Over the last 35 years, frozen food producers, distributors, retailers and e-tailers have increasingly outsourced their temperature-
controlled warehousing needs to increase efficiency, reduce costs and redeploy capital into core businesses. We anticipate that cold chain
participants will continue to make certain of their “in-house” temperature-controlled warehouses available for sale in the future and,
accordingly, will continue to look to third-party providers to meet their temperature-controlled warehouse storage and service needs in related
geographic markets. We believe that our ability to offer one of the most extensive and integrated network of high-quality temperature-
controlled warehouses globally with value-added services and our long-standing relationships with leading cold chain participants will enable
us to capitalize on this trend.
Well Positioned to Benefit from E-Commerce Growth
Our warehouse portfolio serves as a fundamental bridge between food producers and fulfillment centers - whether for online e-tailers
or traditional brick and mortar retailers. We believe our ability to design, build and operate warehouses across the cold chain makes us an
attractive storage solution for existing retailers and the growing e-tailer segment and positions us well to generate new relationships, drive
growth and capture market share by increasing our presence in the e-commerce channel.
Expand Our Presence by Increasing Market Share for Other Temperature-Sensitive Product Types
Although we focus on providing temperature-controlled warehouse space to the food industry, we also store other forms of
temperature-sensitive products, including pharmaceutical, floral and chemical products. As the rapid growth in e-commerce continues to
increase the flow of products through the global distribution network, we believe our ability to provide comprehensive and consistent quality
warehousing and value-added services at all points in the cold chain put us in a strong position to develop new relationships, drive growth and
enhance market share with producers, distributors, retailers and e-tailers in other temperature-sensitive products. Additionally, we have the
flexibility to store non-temperature-sensitive “dry” goods in our warehouses to the extent desirable.
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Investments in Our Warehouses
We employ a strategic investment approach to maintain a high-quality portfolio of temperature-controlled warehouses to ensure that
our warehouses meet the “mission-critical” role they serve in the cold chain. We have successfully modernized many of our warehouses to
reduce our power costs and increase their competitive position through reliable temperature-control systems that can implement distinct
temperature zones within the same warehouse. In addition, we use LED lighting, thermal energy storage, motion-sensor technology, variable
frequency drives for our fans and compressors, third-party efficiency reviews and real-time monitoring of energy consumption, high speed
doors and alternative-power generation technologies to improve the energy efficiency of our warehouses. We believe that our warehouses are
well-maintained and in good operating condition.
Our Business Segments
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, case-picking, blast freezing, kitting and
repackaging and other recurring handling services. We refer to these handling and other services as our value-added services.
Under our third-party managed segment, we manage warehouses on behalf of third parties and provide warehouse management
services to 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.
Additionally, in connection with the Cloverleaf Acquisition, we acquired trucks and employees that support legacy Cloverleaf customers.
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.
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Customers
Our global footprint enables us to efficiently serve approximately 2,500 customers consisting primarily of producers, distributors,
retailers and e-tailers of frozen and perishable food products, such as fruits, vegetables, meats, seafood, novelties, dairy and packaged foods.
We believe the creditworthiness and geographic diversity of our customer base provide us with stable cash flows and a strong platform for
growth. The weighted average length of our relationship with our 25 largest customers in our warehouse segment exceeds 34 years. The total
warehouse segment revenues generated by our 25 largest customers in our warehouse segment have been steady over the last three years,
representing 60%, 63% and 61% of our total warehouse segment revenues for the years ended December 31, 2019, 2018 and 2017,
respectively. For the year ended December 31, 2019, this disclosure is calculated on a proforma basis as if the Company had completed all
2019 acquisitions as of the beginning of the year. As a result of the 2019 acquisitions, there was no material change to the composition of our
top 25 customers. Each of these 25 largest customers has been in our network for the entirety of these periods.
The following table presents summary information concerning our 25 largest customers in our warehouse segment, based on
warehouse segment revenues for the year ended December 31, 2019:
% of Warehouse
Revenue (1)
# of Sites
Credit Rating
(Moody’s/S&P)(2)
Multi
Location
Dedicated
Sites
Value Added
Services
Transportation
Consolidation
Technology
Integration
Committed
Contract or
Lease (3)
Network Utilization
Retailer
Producer
Producer
Producer
Producer
Producer
Retailer
Producer
Producer
Retailer
Producer
Retailer
Producer
Producer
Producer
Retailer
Retailer
Producer
Producer
Producer
Producer
Producer
Retailer
Retailer
Retailer
Total
7.7%
5.6%
5.1%
4.6%
4.5%
4.2%
3.2%
2.5%
2.3%
1.9%
1.9%
1.9%
1.7%
1.6%
1.5%
1.4%
1.3%
1.3%
1.3%
1.2%
0.9%
0.8%
0.7%
0.6%
0.6%
60.3%
12
35
25
36
47
30
20
2
36
9
16
2
5
6
5
26
21
24
11
16
10
18
5
16
6
Baa2/BBB
Baa3/BBB-
NR/NR
Ba1/BBB-
Baa2/BBB
Baa3/BBB-
Ba1/BB+
NR/NR
Ba2/BB
NR/NR
Baa1/BBB+
B2/NR
Aa2/AA
Baa1/BBB+
A1/A+
NR/NR
NR/NR
NR/NR
Baa2/BBB
A1/A
NR/BBB-
Aa3/AA-
B3/NR
NR/NR
Baa1/BBB
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
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ü
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ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
7
(1) Based on warehouse revenues for the last twelve months ended December 31, 2019. Presented on a pro forma basis as if the Company had completed all 2019
acquisitions as of the beginning of the year.
(2) Represents long-term issuer ratings as published in January 2020.
(3) A check mark indicates that the customer had at least one fixed commitment contract or lease with us as of December 31, 2019.
Seasonality
We are involved in providing services to food producers, distributors, retailers and e-tailers whose businesses, in some cases, are
seasonal or cyclical. On a portfolio-wide basis, physical occupancy rates and warehouse revenues are generally the lowest during May and
June. Physical occupancy rates and warehouse revenues typically exhibit a gradual increase thereafter as a result of annual harvests and our
customers building inventories in connection with end-of-year holidays and generally peak between mid-September and early December as a
result thereof. In each year since 2015, we have generated higher than average revenues and our warehouses have experienced the highest
occupancy levels in October or November. The involvement of our customers in a cross-section of the food industry mitigates, in part, the
impact of seasonality as peak demand for various products occurs at different times of the year (for example, demand for ice cream is
typically highest in the summer while demand for frozen turkeys usually peaks in the late fall). Our southern hemisphere operations in
Australia, New Zealand and Argentina also help balance the impact of seasonality in our global operations, as their growing and harvesting
cycles are complementary to North America. Each of our warehouses sets its own operating hours based on demand, which is heavily driven
by growing seasons and seasonal consumer demand for certain products.
Competition
In our industry, the principal competitive factors are warehouse location, warehouse size, breadth and interconnectivity of warehouse
networks, quality, type of service and price. For refrigerated food customers, transportation costs are typically significantly greater than
warehousing costs and, accordingly, location and transportation capabilities are major competitive factors. The size of a warehouse is
important in part because large customers generally prefer to have all of their products needed to serve a given market in a single location and
to have the flexibility to increase storage at that single location during seasonal peaks. In areas with direct local competition, customers
generally will select a temperature-controlled warehouse based upon service level, price and the quality of the warehouse. In addition, some
food producers and distributors attend to their own warehousing and distribution needs by either building or leasing warehouses, creating a
private warehousing market which may compete with the public warehouse industry. Many customers, including those for whom private
warehousing is a viable option, will select distribution services based upon service level and price, provided that an appropriate network of
related storage facilities is available. The ability to provide a wide breadth of high-quality integrated logistics management services is an
increasingly important competitive advantage in the marketplace. In addition, we compete for the business of customers and potential
customers who may choose to provide temperature-controlled warehousing in-house.
United States
Outside the five largest owners of temperature-controlled warehouses, the United States temperature-controlled warehouse industry is
highly fragmented among numerous owners and operators. We believe our main competitors include Lineage Logistics, LLC, United States
Cold Storage, Inc. (an affiliate of John Swire & Sons), AGRO Merchants Group, Interstate Warehousing, Burris Logistics, NewCold
Advanced Cold Logistics, Henningsen Cold Storage Co., Hanson Logistics and Seafrigo Logistics, in addition to numerous other local,
regional and national temperature-controlled warehouse owners and operators.
8
Australia
Our main competitors in Australia include Emergent Cold Storage (acquisition by Lineage Logistics announced during November
2019, expected to close in 2020) and NewCold Advanced Cold Logistics, which operate warehouses and service many of the Australian
markets. Generally, our other competitors operate in only one region and do not compete in the retail market that comprises the majority of
our revenues.
New Zealand
Our main competitors in New Zealand are Emergent Cold Storage (acquisition by Lineage Logistics announced during November
2019, expected to close in 2020) and Halls Transport. Emergent Cold operates an estimated seven warehouses and is the largest public
warehouse operator in New Zealand. Emergent Cold specializes in bulk storage and focuses on the commodity market with warehouses
located near New Zealand’s ports. Halls Transport is primarily a transporter that also operates a network of 3 warehouses. Generally, our
other competitors also service the commodity market and operate in only one region.
Argentina
We have several competitors in the Buenos Aires market, which in the past tended to be smaller single-site operations or fragmented
networks. While we are aware some operators are considering consolidating public warehouse facilities in Argentina, the greatest sources of
competition in Argentina are the disproportionate number of producers (compared to the United States) that continue to in-source their
temperature-controlled storage needs.
Employees
As of December 31, 2019, worldwide we employed approximately 12,600 people, approximately 49% of which were represented by
various local labor unions and associations, and 84 of our 178 warehouses have unionized associates that are governed by 74 different
collective bargaining agreements. We are currently in negotiations for one new agreement. Since January 1, 2016, we have successfully
negotiated 76 collective bargaining agreements without any work stoppages. During 2019, we have successfully negotiated and renewed 21
agreements with two awaiting ratification.
During 2020, we expect to engage in negotiations for an additional 19 agreements covering all or parts of 26 operating locations
worldwide. We do not anticipate any workplace disruptions during this renewal process.
REGULATORY MATTERS
Many laws and governmental regulations are applicable to our properties and changes in these laws and regulations, or
interpretation of such laws and regulations by agencies and the courts, occur frequently.
9
Environmental Matters
Our operations are subject to a wide range of environmental laws and regulations in each of the locations in which we operate, and
compliance with these requirements involves significant capital and operating costs. Failure to comply with these environmental requirements
can result in civil or criminal fines or sanctions, claims for environmental damages, remediation obligations, revocation of environmental
permits or restrictions on our operations. Future changes in environmental laws or in the interpretation of those laws, including stricter
requirements affecting our operations, could result in increased capital and operating costs, which could materially and adversely affect our
business, financial condition, liquidity, results of operations and, consequently, amounts available for distribution to our shareholders.
Food Safety Regulations
Most of our warehouses are subject to compliance with federal regulations regarding food safety. Under the Public Health Security
and Bioterrorism Preparedness and Response Act of 2002, the United States Food and Drug Administration, or the FDA, requires us to
register all warehouses in which food is stored and further requires us to maintain records of sources and recipients of food for purposes of
food recalls.
The Food Safety Modernization Act, or FSMA significantly expanded the FDA’s authority over food safety, providing the FDA with
new tools to proactively ensure the safety of the entire food system, including new hazard analysis and preventive controls requirements, food
safety planning, requirements for sanitary transportation of food, and increased inspections and mandatory food recalls under certain
circumstances. The most significant rule under the FSMA which impacts our business is the Current Good Manufacturing Practice and
Hazard Analysis and Risk-Based Preventive Controls for Human Food rule. This rule requires a food facility to establish a food safety system
that includes an analysis of hazards and the implementation of risk-based preventive controls, among other steps. This is in addition to
requirements that we satisfy existing Good Manufacturing Practices with respect to the holding of foods, as set forth in FDA regulations. The
USDA also grants to some of our warehouses “ID status,” which entitles us to handle products of the USDA. As a result of the regulatory
framework from the FDA, the USDA and other local regulatory requirements, we subject our warehouses to periodic food safety audits
which are for the most part carried out by ASI Food Safety Consultants, a third-party provider of such audits. In addition to meeting any
applicable food safety, food facility registration and record-keeping requirements, our customers often require us to perform food safety
audits.
To the extent we fail to comply with existing food safety regulations or contractual obligations, or are required to comply with new
regulations or obligations in the future, it could adversely affect our business, financial condition, liquidity, results of operations and
prospects, as well as the amount of funds available for distribution to our shareholders.
Occupational Safety and Health Act, or OSHA
Our properties are subject to regulation under OSHA, which requires employers to provide employees with an environment free from
hazards, such as exposure to toxic chemicals, excessive noise levels, mechanical dangers, heat or cold stress and unsanitary conditions. In
addition, due to the amount of ammonia stored at some of our facilities, we are also subject to compliance with OSHA’s Process Safety
Management of Highly Hazardous Chemicals standard and OSHA’s ongoing National Emphasis Program related to potential releases of
highly hazardous chemicals. The cost of complying with OSHA and similar laws enacted by states and other jurisdictions in which we
operate can be substantial, and any failure to comply with these regulations could expose us to substantial penalties and potentially to
liabilities to employees who may be injured at our warehouses.
10
International Regulations
Our international facilities are subject to a number of local laws and regulations which govern a wide range of matters, including
building, environmental, health and safety, hazardous substances and new organisms, waste minimization, as well as specific requirements
for the storage of meat, dairy products, fish, poultry, agricultural and other products. Any products destined for export must also satisfy the
applicable export requirements. A failure to comply with, or the cost of complying with, these laws and regulations could materially
adversely affect our business, financial condition, liquidity, results of operations and prospects and, consequently the amounts available for
distribution to our shareholders.
INSURANCE COVERAGE
We carry comprehensive general liability, fire, extended coverage, business interruption and umbrella liability coverage on all of our
properties with limits of liability which we deem adequate. Similarly, we are insured against the risk of direct physical damage in amounts we
believe to be adequate to reimburse us on a replacement basis for costs incurred to repair or rebuild each property, including loss of business
profits during the reconstruction period. We also carry coverage for customers’ products in our warehouses that are damaged due to our
negligence. The cost of all such insurance is passed through to customers as part of their regular rates for storage and handling.
We are self-insured for workers’ compensation and health insurance under a large-deductible program, meaning that we have accrued
liabilities in amounts that we consider appropriate to cover losses in these areas. In addition, we maintain excess loss coverage to insure
against losses in excess of the reserves that we have established for these claims in amounts that we consider appropriate.
We will not carry insurance for generally uninsured losses such as loss from riots or war; however, we do include coverage for risks
across all programs for acts of terrorism. We carry earthquake insurance on our properties in areas known to be seismically active and flood
insurance on our properties in areas known to be flood zones, in an amount and with deductibles which we believe are commercially
reasonable. We also carry insurance coverage relating to cybersecurity incidents.
11
ITEM 1A. Risk Factors
Set forth below are certain risk factors that could harm our business, results of operations and financial condition. You should carefully
read the following risk factors, together with the financial statements, related notes and other information contained in this Annual Report on
Form 10-K. Our business, financial condition and operating results may suffer if any of the following risks are realized. If any of these risks
or uncertainties occur, the trading price of our common shares could decline and you might lose all or part of your investment. This Annual
Report on Form 10-K contains forward-looking statements that contain risks and uncertainties. Please refer to the discussion of “Cautionary
Statement Regarding Forward-Looking Statements.”
Risks Related to our Business and Operations
Our investments are concentrated in the temperature-controlled warehouse industry, and our business would be materially and adversely
affected by an economic downturn in that industry or the markets for our customers’ products.
Our investments in real estate assets are concentrated in the industrial real estate industry, specifically in temperature-controlled
warehouses. This concentration exposes us to the risk of economic downturns in this industry to a greater extent than if our business activities
included a more significant portion of other sectors of the real estate market. We are also exposed to fluctuations in the markets for the
commodities and finished products that we store in our warehouses. For example, the demand for poultry and poultry products directly
impacts the need for temperature-controlled warehouse space to store poultry and poultry products for our customers. Although our
customers store a diverse product mix in our temperature-controlled warehouses, declines in demand for their products could cause our
customers to reduce their inventory levels at our warehouses, which could reduce the storage and other fees payable to us and materially and
adversely affect us.
Our temperature-controlled warehouses are concentrated in certain geographic areas, some of which are particularly susceptible to
adverse local conditions.
Although we own or hold leasehold interests in warehouses across the United States and globally, many of these warehouses are
concentrated in a few geographic areas. For example, approximately 42.9% of our owned or leased warehouses are located in six states; with
approximately 9.1% in Pennsylvania, 8.4% in Georgia, 6.9% in California, 6.9% in Arizona, 6.1% in Texas, and 5.7% in Wisconsin (in each
case, on a refrigerated cubic-foot basis based on information as of December 31, 2019). We could be materially and adversely affected if
conditions in any of the markets in which we have a concentration of properties become less favorable. Such conditions may include natural
disasters, periods of economic slowdown or recession, localized oversupply in warehousing space or reductions in demand for warehousing
space, adverse agricultural events, disruptions in logistics systems, such as transportation and tracking systems for our customers’ inventory,
and power outages. Adverse agricultural events include, but are not limited to, the cost of commodity inputs, drought and disease. In addition,
adverse weather patterns may affect local harvests, which could have an adverse effect on our customers and cause them to reduce their
inventory levels at our warehouses, which could in turn materially and adversely affect us.
We are exposed to risks associated with expansion and development, which could result in disappointing returns and unforeseen costs
and liabilities.
We have engaged, and expect to continue to engage, in expansion and development activities with respect to certain of our legacy or
newly acquired properties. Expansion and development activities subject us to certain risks not present in the acquisition of existing
properties (the risks of which are described below), including, without limitation, the following:
12
•
•
•
•
our pipeline of expansion and development opportunities are at various stages of discussion and consideration and, based on
historical experiences, many of them may not be pursued or completed as contemplated or at all;
the availability and timing of financing on favorable terms or at all;
the availability and timely receipt of zoning and regulatory approvals, which could result in increased costs and could require us to
abandon our activities entirely with respect to the warehouse for which we are unable to obtain permits or authorizations;
the cost and timely completion within budget of construction due to increased land, materials, labor or other costs (including risks
beyond our control, such as weather or labor conditions, or material shortages), which could make completion of the warehouse or
the expansion thereof uneconomical, and we may not be able to increase revenues to compensate for the increase in construction
costs;
• we may be unable to complete construction of a warehouse or the expansion thereof on schedule, resulting in increased debt
•
•
service expense and construction costs;
the potential that we may expend funds on and devote management time and attention to projects which we do not complete;
a completed expansion project or a newly-developed warehouse may fail to achieve, or take longer than anticipated to achieve,
expected occupancy rates, and may fail to perform as expected; and
• we may not be able to achieve targeted returns and budgeted stabilized returns on invested capital on our expansion and
development opportunities due to the risks described above, and an expansion or development may not be profitable and could
lose money.
These risks could create substantial unanticipated delays and expenses and, in certain circumstances, prevent the initiation or
completion of expansion or development as contemplated or at all, any of which could materially and adversely affect us.
In addition, we have grown rapidly over prior years, including by expanding our internal resources, making acquisitions, and entering
new markets. Our growth will place a strain on our management, operational, financial and information systems, and procedures and controls
to expand, train and control our employee base. Our need for working capital will increase as our operations grow. We can provide no
assurance that we will be able to adapt our portfolio management, administrative, accounting, information technology and operational
systems to support any growth we may experience. Failure to oversee our current portfolio of properties and manage our growth effectively,
or to obtain necessary working capital and funds for capital improvements, could have a material adverse effect on our business, results of
operations, cash flow, financial condition and stock price.
A portion of our future growth depends upon acquisitions and we may be unable to identify, complete and successfully integrate
acquisitions of suitable properties, which may impede our growth, and our future acquisitions may not yield the returns we expect.
Our ability to expand through acquisitions requires us to identify and complete acquisitions that are compatible with our growth
strategy and to successfully integrate and operate these newly-acquired properties. We continually evaluate acquisition opportunities, but
cannot guarantee that suitable opportunities currently exist or will exist in the future. Our ability to identify and acquire suitable properties on
favorable terms and to successfully integrate and operate them may be constrained by the following risks:
• we face competition from other real estate investors with significant capital, including REITs and institutional investment funds,
which may be able to accept more risk than we can prudently manage, including risks associated with paying higher acquisition
prices;
13
• we face competition from other potential acquirers that may significantly increase the purchase price for a property we acquire,
which could reduce our growth prospects or returns;
• we may incur significant costs and divert management’s attention in connection with evaluating and negotiating potential
acquisitions, including ones that we are subsequently unable to complete;
• we may acquire properties that are not accretive to our operating and financial results upon acquisition, and we may be
•
unsuccessful in integrating and operating such properties in accordance with our expectations;
our cash flow from an acquired property may be insufficient to meet our required principal and interest payments with respect to
any debt used to finance the acquisition of such property;
• we may discover unexpected items, such as unknown liabilities, during our due diligence investigation of a potential acquisition or
other customary closing conditions may not be satisfied, causing us to abandon an acquisition opportunity after incurring expenses
related thereto;
• we may face opposition from governmental authorities or third parties alleging that potential acquisition transactions are anti-
competitive, and as a result, we may have to spend a significant amount of time and expense to respond to related inquiries, or
governmental authorities may prohibit the transaction or impose terms or conditions that are unacceptable to us;
• we may fail to obtain financing for an acquisition on favorable terms or at all;
• we may be unable to make, or may spend more than budgeted amounts to make, necessary improvements or renovations to
acquired properties;
• we may spend more than budgeted amounts to meet customer specifications on a newly-acquired warehouse;
• market conditions may result in higher than expected vacancy rates and lower than expected storage charges, rent or fees; or
• we may, without any recourse, or with only limited recourse, acquire properties subject to liabilities, such as liabilities for clean-
up of undisclosed environmental contamination, claims by customers, vendors or other persons dealing with the former owners of
the properties, liabilities incurred in the ordinary course of business and claims for indemnification by general partners, directors,
officers and others indemnified by the former owners of the properties.
Our inability to identify and complete suitable property acquisitions on favorable terms or at all, or to integrate and operate newly-
acquired properties to meet our financial, operational and strategic expectations, could have a material adverse effect on us.
Competition in our markets may increase over time if our competitors open new warehouses.
We compete with other owners and operators of temperature-controlled warehouses (including our customers or potential customers
who may choose to provide temperature-controlled warehousing in-house), some of which own properties similar to ours in similar
geographic locations. In recent years, our competitors, including Lineage Logistics, LLC, United States Cold Storage, Inc. (an affiliate of
John Swire & Sons), AGRO Merchants Group, Interstate Warehousing, Burris Logistics, NewCold Advanced Cold Logistics, Henningsen
Cold Storage Co., Hanson Logistics and Seafrigo Logistics have added, through construction, development and acquisition, temperature-
controlled warehouses in certain of our markets. In addition, our customers or potential customers may choose to develop new temperature-
controlled warehouses, expand their existing temperature-controlled warehouses or upgrade their equipment. Many of our warehouses are
older, and as our warehouses and equipment age and newer warehouses and equipment come onto the market, we may lose existing or
potential customers, and we may be pressured to reduce our rent and storage and other fees below those we currently charge in order to retain
customers. If we lose one or more customers, we cannot assure you that we would be
14
able to replace those customers on attractive terms or at all. We also may be forced to invest in new construction or reposition existing
warehouses at significant costs in order to remain competitive. Increased capital expenditures or the loss of warehouse segment revenues
resulting from lower occupancy or storage rates could have a material adverse effect on us.
We may be unable to successfully expand our operations into new markets.
If the opportunity arises, we may acquire or develop properties in new markets. In particular, we have determined to strategically
grow our warehouse portfolio in attractive international markets. In addition to the risks described above under “—A portion of our future
growth depends upon acquisitions and we may be unable to identify and complete acquisitions of suitable properties, which may impede our
growth, and our future acquisitions may not yield the returns we expect” and “—We are exposed to risks associated with expansion and
development, which could result in disappointing returns and unforeseen costs and liabilities,” the acquisition or development of properties in
new markets will subject us to the risks associated with a lack of understanding of the related economy and unfamiliarity with government
and permitting procedures. We will also not possess the same level of familiarity with the dynamics and market conditions of any new market
that we may enter, which could adversely affect our ability to successfully expand and operate in such market. We may be unable to build a
significant market share or achieve a desired return on our investments in new markets. If we are unsuccessful in expanding and operating in
new, high-growth markets, it could have a material adverse effect on us.
We depend on certain customers for a substantial amount of our warehouse segment revenues.
During the year ended December 31, 2019 and 2018, our 25 largest customers in our warehouse segment contributed approximately
60% and 63%, respectively, of our pro-forma warehouse segment revenues assuming all acquisitions occurred at the beginning of the year.
As of December 31, 2019, we had one customer that accounted for 7.7% of our warehouse segment revenues and nine customers that each
accounted for at least 2% of our warehouse segment revenues, also on a pro-forma basis. In addition, as of December 31, 2019, 47 of our
warehouses were predominantly single-customer warehouses. If any of our most significant customers were to discontinue or otherwise
reduce their use of our warehouses or other services, which they are generally free to do at any time unless they are party to a contract that
includes a fixed storage commitment, we would be materially and adversely affected. While we have contracts with stated terms with certain
of our customers, most of our contracts do not obligate our customers to use our warehouses or provide for fixed storage commitments.
Moreover, a decrease in demand for certain commodities or products produced by our significant customers and stored in our temperature-
controlled warehouses would lower our physical occupancy rates and use of our services, without lowering our fixed costs, which could have
a material adverse effect on us. In addition, while some of our warehouses are located in primary markets, others are located in secondary and
tertiary markets that are specifically suited to the particular needs of the customer utilizing these warehouses. For example, our production
advantaged warehouses typically serve one or a small number of customers. These warehouses are also generally located adjacent to or
otherwise in close proximity to customer processing or production facilities and were often build-to-suit at the time of their construction. If
customers who utilize this type of warehouse, which may be located in remote areas, relocate their processing or production plants, default or
otherwise cease to use our warehouses, then we may be unable to find replacement customers for these warehouses on favorable terms or at
all or, if we find replacement customers, we may have to incur significant costs to reposition these warehouses for the replacement
customers’ needs, any of which could have a material adverse effect on us.
15
Our customers could experience bankruptcy, insolvency or financial deterioration.
Our customers could experience a downturn in their businesses, which may weaken their financial condition and liquidity and result
in their failure to make timely payments to us or otherwise default under their contracts or a decrease in their inventory levels with us and use
of our services, without lowering our fixed costs, which could materially and adversely affect us.
If our customers are unable to comply with the terms of their contracts with us, we may be forced to modify these contracts on terms
that are not favorable to us. Alternatively, customers may seek to cancel their contracts. Termination provisions in our contracts vary, but
generally permit either party to terminate the contract upon a material breach by the counterparty and otherwise are specifically determined
for each customer based on several factors. These include the volume of business involved, the readiness and quality of available capacity
elsewhere and the customer’s internal constraints affecting its ability to move product. Cancellation of, or the failure of a customer to perform
under, a contract could require us to seek replacement customers. There can be no assurance that we would be able to find suitable
replacements on favorable terms in a timely manner or at all or reposition the warehouses without incurring significant costs.
A bankruptcy filing by or relating to any of our customers could prevent or delay us from collecting pre-bankruptcy obligations. In
addition, to the extent that our customers have continuing obligations under any warehouse contract, the bankruptcy court might authorize the
customer to reject and terminate its warehouse contract with us, or the bankruptcy trustee might pursue preferential payments made to us
prior to a bankruptcy. In such instances, our claim for unpaid charges would likely not be paid in full, even if we have secured
warehouseman’s liens on our customer’s assets. Additionally, any such lien may attach to products that are perishable or otherwise not
readily saleable by us. Although we have in the past been deemed to have “critical vendor” status in certain bankruptcy filings, which resulted
in our customer being able to pay us pre-bankruptcy obligations, there is no guarantee that we will be granted any such status in the future.
The bankruptcy, insolvency or financial deterioration of our customers, particularly our significant customers, could materially and
adversely affect us.
The short-term nature and lack of fixed storage commitments of many of our customer contracts exposes us to certain risks that could
have a material adverse effect on us.
On a combined pro forma basis assuming all 2019 acquisitions occurred as of the beginning of the year, 46.2% of our warehouse
segment revenues were generated from contracts with a fixed storage commitment or leases with customers as of December 31, 2019. On a
combined pro forma basis, 40.6% of rent and storage revenue were generated from fixed commitment storage contracts for the year ended
December 31, 2019.
Our customer contracts that do not contain fixed storage commitments typically do not require our customers to utilize a minimum
number of pallet positions or provide for guaranteed fixed payment obligations from any customers to us. As a result, most of our customers
may discontinue or otherwise reduce their use of our warehouses or other services in their discretion at any time, without lowering our fixed
costs, which could have a material adverse effect on us. Additionally, we have discrete pricing for our customers based upon their unique
profiles. Therefore, a shift in the mix of business types or customers could negatively impact our financial results.
The storage and other fees we generate from customers with month-to-month warehouse rate agreements may be adversely affected
by declines in market storage and other fee rates more quickly than with respect to our contracts that contain stated terms. There also can be
no assurance that we will be able to retain any customers upon the expiration of their contracts (whether month-to-month warehouse rate
agreements or contracts) or leases. If we cannot retain our customers, or if our customers that are not party to contracts with
16
fixed storage commitments elect not to store goods in our warehouses, we may be unable to find replacement customers on favorable terms or
at all or on a timely basis and we may incur significant expenses in obtaining replacement customers and repositioning warehouses to meet
their needs. Any of the foregoing could materially and adversely affect us.
We depend on key personnel and specialty personnel, and the loss of key personnel and limited availability of skilled personnel in our
labor markets could harm our business and operating and financial results.
Our success depends to a significant degree upon the continued contributions of certain key personnel, each of whom would be
difficult to replace. If any of our key personnel were to cease employment with us, our operating and financial results could suffer. Further,
such a loss could be negatively perceived in the capital markets. We have not obtained and do not expect to obtain key man life insurance on
any of our key personnel. Our ability to retain our management group or to attract suitable replacements should any members of our
management team leave is dependent on the competitive nature of the employment market. The loss of services from key members of our
management team or a limitation of their availability could materially and adversely affect us.
We also believe that our future success, particularly in international markets, will depend in large part upon our ability to hire and
retain highly skilled managerial, investment, financing, operational and marketing personnel. The customer service, marketing skills and
knowledge of local market demand and competitive dynamics of our employees are contributing factors to our ability to maximize our
income and to achieve the highest sustainable storage levels at each of our warehouses. We may be unsuccessful in attracting and retaining
such skilled personnel. In addition, our temperature-controlled warehouse business depends on the continued availability of skilled personnel
with engineering expertise and experience. Competition for such personnel is intense, and we may be unable to hire and retain such
personnel.
Wage increases driven by applicable legislation and competitive pressures on employee wages and benefits could negatively affect our
operating margins and our ability to attract qualified personnel.
Our hourly employees in the U.S. and internationally are typically paid wage rates above the applicable minimum wage. However,
increases in the minimum wage will increase our labor costs if we are to continue paying our hourly employees above the applicable
minimum wage. If we are unable to continue paying our hourly employees above the applicable minimum wage, we may be unable to hire
and retain qualified personnel. The U.S. federal minimum wage has been $7.25 per hour since July 24, 2009. From time to time, various
U.S. federal, state and local legislators have proposed or enacted significant changes to the minimum wage requirements. For example,
certain local or regional governments in places such as Chicago, Los Angeles, Seattle, San Francisco, Portland and New York have approved
phased-in increases that eventually will take their minimum wage to as high as $16.00 per hour. If similar increases were to occur in
additional markets in which we operate, our operating margins would be negatively affected unless we are able to increase our rent, storage
fees and handling fees in order to pass increased labor costs on to our customers. Our standard contract forms include rate protection for
uncontrollable costs such as labor, however, despite such provisions, we may not be able to fully pass through these increased costs.
Competitive pressures may also require that we enhance our pay and benefits package to compete effectively for such personnel
(including costs associated with health insurance coverage or workers’ compensation insurance). If we fail to attract and retain qualified and
skilled personnel, we could be materially and adversely affected.
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We may be subject to work stoppages, which could increase our operating costs and disrupt our operations.
Certain portions of our operations are subject to collective bargaining agreements. As of December 31, 2019, worldwide, we
employed approximately 12,600 people, approximately 49% of which were represented by various local labor unions, and 84 of our 178
warehouses have unionized associates that are governed by 74 different collective bargaining agreements. Unlike owners of industrial
warehouses, we hire our own workforce to handle and store items for our customers. Strikes, slowdowns, lockouts or other industrial disputes
could cause us to experience a significant disruption in our operations, as well as increase our operating costs, which could materially and
adversely affect us. If a greater percentage of our work force becomes unionized, we could be materially and adversely affected. Since
January 1, 2016, we have successfully negotiated 76 collective bargaining agreements without any work stoppages. During the calendar year
2019 we successfully negotiated and renewed 21 agreements with two awaiting ratification. If we fail to re-negotiate our expired or expiring
collective bargaining agreements on favorable terms in a timely manner or at all, we could be materially and adversely affected.
We are subject to additional risks with respect to our current and potential international operations and properties.
As of December 31, 2019, we owned or had a leasehold interest in 14 temperature-controlled warehouses outside the United States,
and we managed four warehouses outside the United States on behalf of third parties. We also intend to strategically grow our portfolio
globally through acquisitions of temperature-controlled warehouses in attractive international markets to service demonstrable customer
demand where we believe the anticipated risk-adjusted returns are consistent with our investment objectives. However, there is no assurance
that our existing customer relationships will support our international operations in any meaningful way or at all. Our international operations
and properties could be affected by factors peculiar to the laws and business practices of the jurisdictions in which our warehouses are
located. These laws and business practices expose us to risks that are different than or in addition to those commonly found in the United
States. Risks relating to our international operations and properties include:
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changing governmental rules and policies, including changes in land use and zoning laws;
enactment of laws relating to the international ownership of real property or mortgages and laws restricting the ability to remove
profits earned from activities within a particular country to a person’s or company’s country of origin;
variations in currency exchange rates;
adverse market conditions caused by terrorism, civil unrest, natural disasters, infectious disease and changes in international,
national or local governmental or economic conditions;
business disruptions arising from public health crises and outbreaks of communicable diseases, including the recent coronavirus
outbreak;
the willingness of U.S. or international lenders to make mortgage loans in certain countries and changes in the availability, cost
and terms of secured and unsecured debt resulting from varying governmental economic policies;
the imposition of unique tax structures and changes in real estate and other tax rates and other operating expenses in particular
countries;
general political and economic instability;
potential liability under the Foreign Corrupt Practices Act of 1977, as amended, which generally prohibits U.S. companies and
their intermediaries from bribing or making other prohibited payments to non-U.S. officials for the purpose of obtaining or
retaining business or other benefits;
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our limited experience and expertise in foreign countries relative to our experience and expertise in the United States;
provisions of the Tax Cuts and Jobs Act, or TCJA, that require the United States parent to include income from certain
international operations into U.S. taxable income, and adverse tax consequences in the applicable jurisdictions; and
potential liability under, and costs of complying with, more stringent environmental laws or changes in the requirements or
interpretation of existing laws, or environmental consequences of less stringent environmental management practices in foreign
countries relative to the United States.
If any of the foregoing risks were to materialize, they could materially and adversely affect us.
Our warehouse business outside the United States exposes us to losses resulting from currency fluctuations.
Our warehouse business outside the United States exposes us to losses resulting from currency fluctuations, as the revenues
associated with our international operations and properties are generated in the local currency of each of the countries in which the properties
are located. Fluctuations in exchange rates between these currencies and the U.S. dollar will therefore give rise to non-U.S. currency
exposure, which could materially and adversely affect us. We naturally hedge this exposure by incurring operating costs in the same currency
as the revenue generated by the related property. We may attempt to mitigate any such effects by entering into currency exchange rate
hedging arrangements where it is practical to do so and where such hedging arrangements are available. These hedging arrangements may
bear substantial costs, however, and may not eliminate all related risks. We cannot assure you that our efforts will successfully mitigate our
currency risks. Moreover, if we do engage in currency exchange rate hedging activities, any income recognized with respect to these hedges
(as well as any foreign currency gain recognized with respect to changes in exchange rates) may not qualify under the 75% gross income test
or the 95% gross income test that we must satisfy annually in order to qualify as a REIT under the Internal Revenue Code of 1986, as
amended, or the Code.
The Argentine foreign exchange market is subject to controls, which may adversely affect our ability to repatriate the earnings we derive
from our Argentine operations.
Different Argentine government administrations have established and implemented various restrictions on foreign currency transfers,
including certain restrictions on the ability to repatriate earnings from Argentina, and requirements that corporations obtain authorization to
buy any foreign currency that is not for international trade. Companies must also repatriate earnings from foreign sales within five business
days.
The impact that these current measures will have on the Argentine economy and on us is still uncertain. We cannot assure you that
the current regulations will not be amended, or that no new regulations will be enacted in the future imposing other limitations on funds
flowing into and out of the Argentine foreign exchange market. Any such new measures, as well as any additional regulations and/or
restrictions, could materially and adversely affect our ability to repatriate the earnings we derive from our Argentine operations or transfer
funds abroad.
In the future, we cannot rule out a less favorable international economic environment, continued lack of stability and competitiveness
of the Argentine currency against other foreign currencies, a lower level of confidence among consumers and foreign and domestic investors,
continued higher inflation rate or future political uncertainties, among other factors. In case any such circumstances occur, it could materially
and adversely affect the results of our operations in Argentina and, consequently, our business.
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We may incur liabilities or harm our reputation as a result of quality-control issues associated with our warehouse storage and other
services.
We store frozen and perishable food and other products and provide food processing, repackaging and other services. Product
contamination, spoilage, other adulteration, product tampering or other quality control issues could occur at any of our facilities or during the
transportation of these products, which could cause our customers to lose all or a portion of their inventory. We could be liable for the costs
incurred by our customers as a result of the lost inventory, and we also may be subject to liability, which could be material, if any of the
frozen and perishable food products we stored, processed, repackaged or transported caused injury, illness or death. The occurrence of any of
the foregoing may negatively impact our brand and reputation and otherwise have a material adverse effect on us.
Our temperature-controlled warehouse infrastructure may become obsolete or unmarketable and we may not be able to upgrade our
equipment cost-effectively or at all.
The infrastructure at our temperature-controlled warehouses may become obsolete or unmarketable due to the development of, or
demand for, more advanced equipment or enhanced technologies, including increased automation of our warehouses. Increased automation
may entail significant start-up costs and time and may not perform as expected. In addition, our information technology platform pursuant to
which we provide inventory management and other services to our customers may become outdated. When customers demand new
equipment or technologies, the cost could be significant and we may not be able to upgrade our warehouses on a cost-effective basis in a
timely manner, or at all, due to, among other things, increased expenses to us that cannot be passed on to customers or insufficient resources
to fund the necessary capital expenditures. The obsolescence of our infrastructure or our inability to upgrade our warehouses would likely
reduce warehouse segment revenues, which could have a material adverse effect on us.
A failure of our information technology systems, cybersecurity attacks or a breach of our information security systems, networks or
processes could cause loss of confidential information and other business disruptions and may materially adversely affect our business.
We rely extensively on our computer systems to process transactions and operate and manage our business. Despite efforts to avoid
or mitigate such risks, external and internal risks, such as malware, insecure coding, data leakage and human error pose direct threats to the
stability and effectiveness of our information technology systems. The failure of our information technology systems to perform as
anticipated could adversely affect our business through transaction errors, billing and invoicing errors, processing inefficiencies or errors and
loss of sales, receivables, collections and customers, in each case, which could result in reputational damage and have an ongoing adverse
effect on our business, results of operation and financial condition.
We may also be subject to cybersecurity attacks and other intentional hacking. These attacks could include attempts to gain
unauthorized access to our data and computer systems. We employ a number of measures to prevent, detect and mitigate these threats, which
include password protection, frequent password changes, firewall detection systems, frequent backups, a redundant data system for core
applications and annual penetration testing; however, there is no guarantee such efforts will be successful in preventing a cybersecurity
attack. A cybersecurity attack or breach could compromise the confidential information of our employees, customers and vendors. A
successful attack could result in service interruptions, operational difficulties, loss of revenue or market share, liability to our customers or
others, diversion of corporate resources and injury to our reputation and increased costs. Addressing such issues could prove difficult or
impossible and be very costly. Responding to claims or liability could similarly involve substantial costs. Recently, there has been heightened
interest and enforcement focus on data protection regulations and standards both in the United States and abroad. Failure to
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comply with applicable data protection regulations or standards may expose us to litigation, fines, sanctions or other penalties, which could
damage our reputation and adversely impact our business, results of operation and financial condition. In addition, our customers rely
extensively on computer systems to process transactions and manage their business and thus their businesses are also at risk from, and may be
impacted by, cybersecurity attacks. An interruption in the business operations of our customers or a deterioration in their reputation resulting
from a cybersecurity attack could indirectly impact our business operations. As of December 31, 2019, we have not had a significant cyber
breach or attack that had an adverse material impact on our business, financial condition, liquidity or results of operations.
We primarily depend on third-party trucking service providers to provide transportation services to our customers, and any delays or
disruptions in providing these transportation services, or damages caused to products during transportation, could have a material
adverse effect on us.
While we do provide transportation services directly and have some transportation assets, the transportation services we offer to our
customers are done primarily on a brokerage basis. We depend on third-party trucking service providers to provide refrigerated transportation
services to our customers. We do not have an exclusive or long-term contractual relationship with any of these third-party trucking service
providers, and we can provide no assurance that our customers will have uninterrupted or unlimited access to their transportation assets or
services. Any delays or disruptions in providing these transportation services to our customers could reduce the confidence our customers
have in our ability to provide transportation services and could impair our ability to retain existing customers or attract new customers.
Moreover, in connection with any such delays or disruptions, or if customers’ products are damaged or destroyed during transport, we could
incur financial obligations or be subject to lawsuits by our customers. Any of these risks could have a material adverse effect on us.
We participate in multiemployer pension plans administered by labor unions. To the extent we or other employers withdraw from
participation in any of these plans, we could face additional liability from our participation therein.
As of December 31, 2019, we participated in seven multiemployer pension plans under the terms of collective bargaining agreements
with labor unions representing the Company’s associates. Approximately 26% of our employees were participants in such multiemployer
pension plans as of December 31, 2019. We make periodic contributions to these plans pursuant to the terms of our collective bargaining
agreements to allow the plans to meet their pension benefit obligations.
In the event that we withdraw from participation in any of the multiemployer pension plans in which we participate or should any of
the pension plans in which we participate fail, the documents governing the applicable plan and applicable law could require us to make an
additional contribution to the applicable plan in the amount of the unfunded vested benefits allocable to our participation in the plan, and we
would have to reflect that as an expense on our Consolidated Statement of Operations and as a liability on our Consolidated Balance Sheet.
Our liability for any multiemployer pension plan would depend on the extent of the plan’s funding of vested benefits as of the year in which
the withdrawal or failure occurs, and may vary depending on the funded status of the applicable multiemployer pension plan, whether there is
a mass withdrawal of all participating employers and whether any other participating employer in the applicable plan withdraws from the plan
and is not able to contribute an amount sufficient to fund the unfunded liabilities associated with its participants in the plan. Based on the
latest information available from plan administrators, we estimate our share of the aggregate withdrawal liability for the multiemployer
pension plans in which we participate could have been as much as $566.7 million as of December 31, 2019, of which we estimate that certain
of our customers are contractually obligated to make indemnification payments to us for approximately $533.7 million. However, there is no
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guarantee that, to the extent we incurred any such withdrawal liability, we would be successful in obtaining any indemnification payments
therefor.
In the ordinary course of our renegotiation of collective bargaining agreements with labor unions that maintain these plans, we could
agree to discontinue participation in one or more plans, and in that event we could face a withdrawal liability. Additionally, we could be
treated as withdrawing from a plan if the number of our employees participating in the plan is reduced to a certain degree over certain periods
of time.
Some multiemployer pension plans, including ones in which we participate, are reported to have significant underfunded liabilities.
Such underfunding could increase the size of our potential withdrawal liability. Additionally, changes to multiemployer pension plan laws
and regulations could increase our potential cost of withdrawing from one or more multiemployer pension plans.
Power costs may increase or be subject to volatility, which could result in increased costs that we may be unable to recover.
Power is a major operating cost for temperature-controlled warehouses, and the price of power varies substantially between the
markets in which we operate, depending on the power source and supply and demand factors. For the years ended December 31, 2019 and
2018, power costs in our warehouse segment accounted for 8.9% and 9.0%, respectively, of the segment’s operating expenses. We have
implemented programs across our warehouses to reduce overall consumption and to reduce consumption at peak demand periods, when
power prices are typically highest. However, there can be no assurance that these programs will be effective in reducing our power
consumption.
We have entered into, or may in the future enter into, fixed price power purchase agreements in certain deregulated markets whereby
we contract for the right to purchase an amount of electric capacity at a fixed rate per kilowatt. These contracts do not obligate us to purchase
any minimum amounts but would require negotiation if our capacity requirements were to materially differ from historical usage or exceed
the thresholds agreed upon. For example, exceeding these thresholds could have an adverse impact on our incremental power purchase costs
if we were to be unable to obtain favorable rates on the incremental purchases.
If the cost of electric power to operate our warehouses increases dramatically or fluctuates widely and we are unable to pass such
costs through to customers, we could be materially and adversely affected.
We could experience power outages or breakdowns of our refrigeration equipment.
Our warehouses are subject to electrical power outages and breakdowns of our refrigeration equipment. We attempt to limit exposure
to such occasions by conducting regular maintenance and upgrades to our refrigeration equipment, and using backup generators and power
supplies, generally at a significantly higher operating cost than we would pay for an equivalent amount of power from a local utility.
However, we may not be able to limit our exposure entirely even with these protections in place. Power outages that last beyond our backup
and alternative power arrangements and refrigeration equipment breakdowns would harm our customers and our business. During power
outages and refrigeration equipment breakdowns, changes in humidity and temperature could spoil or otherwise contaminate the frozen and
perishable food and other products stored by our customers. We could incur financial obligations to, or be subject to lawsuits by, our
customers in connection with these occurrences, which may not be covered by insurance. Any loss of services or product damage could
reduce the confidence of our customers in our services and could consequently impair our ability to attract and retain customers. Additionally,
in the event of the complete failure of our refrigeration equipment, we would incur significant costs in repairing or replacing our refrigeration
equipment, which may not be covered by insurance. Any of the foregoing could have a material adverse effect on us. As of December 31,
2019, we have not had a
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significant power outage or breakdown of our refrigeration equipment.
We hold leasehold interests in 26 of our warehouses, and we may be forced to vacate our warehouses if we default on our obligations
thereunder and we will be forced to vacate our warehouses if we are unable to renew such leases upon their expiration.
As of December 31, 2019, we held leasehold interests in 26 of our warehouses. These leases expire (taking into account our extension
options) from June 2020 to October 2050, and have a weighted-average remaining term of 25 years. If we default on any of these leases, we
may be liable for damages and could lose our leasehold interest in the applicable property, including all improvements. We would incur
significant costs if we were forced to vacate any of these leased warehouses due to, among other matters, the high costs of relocating the
equipment in our warehouses. If we were forced to vacate any of these leased warehouses, we could lose customers that chose our storage or
other services based on our location, which could have a material adverse effect on us. Our landlords could attempt to evict us for reasons
beyond our control. Further, we may be unable to maintain good working relationships with our landlords, which could adversely affect our
relationship with our customers and could result in the loss of customers. In addition, we cannot assure you that we will be able to renew
these leases prior to their expiration dates on favorable terms or at all. If we are unable to renew our lease agreements, we will lose our right
to operate these warehouses and be unable to derive revenues from these warehouses and, in the case of ground leases, we forfeit all
improvements on the land. We could also lose the customers using these warehouses who are unwilling to relocate to another one of our
warehouses, which could have a material adverse effect on us. Furthermore, unless we purchase the underlying fee interests in these
properties, as to which no assurance can be given, we will not share in any increase in value of the land or improvements beyond the term of
such lease, notwithstanding any capital we have invested in the applicable warehouse, especially warehouses subject to ground leases. Even if
we are able to renew these leases, the terms and other costs of renewal may be less favorable than our existing lease arrangements. Failure to
sufficiently increase revenues from customers at these warehouses to offset these projected higher costs could have a material adverse effect
on us.
Charges for impairment of goodwill or other long-lived assets could adversely affect our financial condition and results of operations.
We regularly monitor the recoverability of our long-lived assets, such as buildings and improvements and machinery and equipment,
and evaluate their carrying value for impairment. whenever events or changes in circumstances indicate that the carrying amount of such
assets may not be fully recoverable. We review goodwill on an annual basis to determine if impairment has occurred and review the
recoverability of fixed assets, generally on a quarterly basis and whenever events or changes in circumstances indicate that impairment may
have occurred or the value of such assets may not be fully recoverable. If such reviews indicate that impairment has occurred, we are required
to record a non-cash impairment charge for the difference between the carrying value and fair value of the long-lived assets in the period the
determination is made. The testing of long-lived assets and goodwill for impairment requires the use of estimates based on significant
assumptions about our future revenue, profitability, cash flows, fair value of assets and liabilities, weighted average cost of capital, as well as
other assumptions. Changes in these estimates, or changes in actual performance compared with these estimates, may affect the fair value of
long-lived assets, which could result in an impairment charge.
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General Risks Related to the Real Estate Industry
Our performance and value are subject to economic conditions affecting the real estate market, temperature-controlled warehouses in
particular, as well as the broader economy.
Our performance and value depend on the amount of revenues earned, as well as the expenses incurred, in connection with operating
our warehouses. If our temperature-controlled warehouses do not generate revenues and operating cash flows sufficient to meet our operating
expenses, including debt service and capital expenditures, we could be materially and adversely affected. In addition, there are significant
expenditures associated with our real estate (such as real estate taxes, maintenance costs and mortgage payments) that generally do not
decline when circumstances reduce the revenues from our warehouses. Accordingly, our expenditures may stay constant, or increase, even if
our revenues decline. The real estate market is affected by many factors that are beyond our control, and revenues from, and the value of, our
properties may be materially and adversely affected by:
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changes in the national, international or local economic climate;
availability, cost and terms of financing;
technological changes, such as expansion of e-commerce, reconfiguration of supply chains, automation, robotics or other
technologies;
the attractiveness of our properties to potential customers;
inability to collect storage charges, rent and other fees from customers;
the ongoing need for, and significant expense of, capital improvements and addressing obsolescence in a timely manner,
particularly in older structures;
changes in supply of, or demand for, similar or competing properties in an area;
customer retention and turnover;
excess supply in the market area;
financial difficulties, defaults or bankruptcies by our customers;
changes in operating costs and expenses and our ability to control rates;
changes in or increased costs of compliance with governmental rules, regulations and fiscal policies, including changes in tax, real
estate, environmental and zoning laws, and our potential liability thereunder;
our ability to provide adequate maintenance and insurance;
changes in the cost or availability of insurance, including coverage for mold or asbestos;
unanticipated changes in costs associated with known adverse environmental conditions, newly discovered environmental
conditions and retained liabilities for such conditions;
changes in interest rates or other changes in monetary policy;
disruptions in the global supply-chain caused by political, regulatory or other factors such as terrorism, political instability and
public health crises; and
civil unrest, acts of war, terrorist attacks and natural disasters, including, but not limited to, earthquakes and floods, which may
result in uninsured and under-insured losses.
In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or the public
perception that any of these events may occur, would result in a general decrease in rates or an increased occurrence of defaults under
existing contracts, which could materially and adversely affect us. For these and other reasons, we cannot assure you that we will be able to
achieve our business objectives.
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We could incur significant costs under environmental laws relating to the presence and management of asbestos, ammonia and other
chemicals and underground storage tanks.
Environmental laws in the United States require that owners or operators of buildings containing asbestos properly manage asbestos,
adequately inform or train those who may come into contact with asbestos and undertake special precautions, including removal or other
abatement, in the event that asbestos is damaged, is decayed, poses a health risk or is disturbed during building renovation or demolition.
These laws impose fines and penalties on building owners or operators who fail to comply with these requirements and may allow third
parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos and other toxic or hazardous
substances. Some of our properties may contain asbestos or asbestos-containing building materials.
Most of our warehouses utilize ammonia as a refrigerant. Ammonia is classified as a hazardous chemical regulated by the
U.S. Environmental Protection Agency, or the EPA. Releases of ammonia occur at our warehouses from time to time, and any number of
unplanned events, including severe storms, fires, earthquakes, vandalism, equipment failure, operational errors, accidents, deliberate acts of
employees or third parties, and terrorist acts could result in a significant release of ammonia that could result in injuries, loss of life, property
damage and a significant interruption at affected facilities. For example, in 2018, we identified and reported ammonia releases across
refrigeration systems in three of our facilities. These releases resulted in no significant property damage or injury. In 2019, we identified, and
reported, ammonia releases across refrigeration systems in three of our facilities. These releases resulted in no significant property damage or
injury. Although our warehouses have risk management programs required by the Occupational Safety and Health Act of 1970, as amended,
or OSHA, the EPA and other regulatory agencies in place, we could incur significant liability in the event of an unanticipated release of
ammonia from one of our refrigeration systems. Releases could occur at locations or at times when trained personnel may not be available to
respond quickly, increasing the risk of injury, loss of life or property damage. Some of our warehouses are not staffed 24 hours a day and, as
a result, we may not respond to intentional or accidental events during closed hours as quickly as we could during open hours, which could
exacerbate any injuries, loss of life or property damage. We also could incur liability in the event we fail to report such ammonia releases in a
timely fashion.
Environmental laws and regulations subject us and our customers to liability in connection with the storage, handling and use of
ammonia and other hazardous substances utilized in our operations. Our warehouses also may have under-floor heating systems, some of
which utilize ethylene glycol, petroleum compounds, or other hazardous substances; releases from these systems could potentially
contaminate soil and groundwater.
In addition, some of our properties have been operated for decades and have known or potential environmental impacts. Other than in
connection with financings, we have not historically performed regular environmental assessments on our properties, and we may not do so in
the future. Many of our properties contain, or may in the past have contained, features that pose environmental risks including underground
tanks for the storage of petroleum products and other hazardous substances as well as floor drains and wastewater collection and discharge
systems, hazardous materials storage areas and septic systems. All of these features create a potential for the release of petroleum products or
other hazardous substances. Some of our properties are adjacent to or near properties that have known environmental impacts or have in the
past stored or handled petroleum products or other hazardous substances that could have resulted in environmental impacts to soils or
groundwater that could affect our properties. In addition, former owners, our customers, or third parties outside our control (such as
independent transporters) have engaged, or may in the future engage, in activities that have released or may release petroleum products or
other hazardous substances on our properties. Any of these activities or circumstances could materially and adversely affect us.
We could incur significant costs related to environmental conditions and liabilities.
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Our operations are subject to a wide range of environmental laws and regulations in each of the locations in which we operate, and
compliance with these requirements involves significant capital and operating costs. Failure to comply with these environmental requirements
can result in civil or criminal fines or sanctions, claims for environmental damages, remediation obligations, the revocation of environmental
permits or restrictions on our operations. Future changes in environmental laws, or in the interpretation of those laws, including potential
future climate change regulations, such as those affecting electric power providers or regulations related to the control of greenhouse gas
emissions, or stricter requirements affecting our operations could result in increased capital and operating costs, which could materially and
adversely affect us.
Under various U.S. federal, state and local environmental laws, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, commonly known as CERCLA, or the Superfund law, a current or previous owner or
operator of real property may be liable for the entire cost of investigating, removing or remediating hazardous or toxic substances on such
property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the contamination. Even if
more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held
responsible for the entire cleanup cost. We may also be subject to environmental liabilities under the regulatory regimes in place in the other
countries in which we operate.
The presence of hazardous or toxic substances on our properties, or the failure to properly remediate contaminated properties, could
give rise to liens in favor of the government for failure to address the contamination, or otherwise adversely affect our ability to sell or lease
properties or borrow using our properties as collateral. Environmental laws also may impose restrictions on the manner in which property
may be used or our businesses may be operated.
Under environmental laws, a property owner or operator is subject to compliance obligations, potential government sanctions for
violations or natural resource damages, claims from private parties for cleanup contribution or other environmental damages and investigation
and remediation costs. In connection with the acquisition, ownership or operation of our properties, we may be exposed to such costs. The
cost of resolving environmental, property damage or personal injury claims, of compliance with environmental regulatory requirements, of
paying fines, or meeting new or stricter environmental requirements or of remediating contaminated properties could materially and adversely
affect us.
Nearly all of our properties have been the subject of environmental assessments conducted by environmental consultants at some
point in the past. Most of these assessments have not included soil sampling or subsurface investigations. Some of our older properties have
not had asbestos surveys. In many instances, we have not conducted further investigations of environmental conditions disclosed in these
environmental assessments nor can we be assured that these environmental assessments have identified all potential environmental liabilities
associated with our properties. Material environmental conditions, liabilities or compliance concerns may have arisen or may arise after the
date of the environmental assessments on our properties. Moreover, there can be no assurance that (i) future laws, ordinances or regulations
will not impose new material environmental obligations or costs, including the potential effects of climate change or new climate change
regulations, (ii) we will not incur material liabilities in connection with both known and undiscovered environmental conditions arising out of
past activities on our properties or (iii) our properties will not be materially and adversely affected by the operations of customers, by
environmental impacts or operations on neighboring properties (such as releases from underground storage tanks), or by the actions of parties
unrelated to us.
In the future, our customers may demand lower indirect emissions associated with the storage and transportation of frozen and
perishable foods, which could lead customers to seek temperature-controlled storage
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from our competitors. Further, such demand could require us to implement various processes to reduce emissions from our operations in
order to remain competitive, which could materially and adversely affect us.
Our insurance coverage may be insufficient to cover potential environmental liabilities.
We maintain a portfolio environmental insurance policy that provides coverage for sudden and accidental environmental liabilities,
subject to the policy’s coverage conditions, deductibles and limits, for most of our properties. There is no assurance that future environmental
claims will be covered under these policies or that, if covered, the loss will not exceed policy limits. From time to time, we may acquire
properties, or interests in properties, with known adverse environmental conditions where we believe that the environmental liabilities
associated with these conditions are quantifiable and that the acquisition will yield an attractive risk-adjusted return. In such an instance, we
factor the estimated costs of environmental investigation, cleanup and monitoring into the net cost. Further, in connection with property
dispositions, we may agree to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on
the properties. A failure to accurately estimate these costs, or uninsured environmental liabilities, could materially and adversely affect us.
Our properties may contain or develop harmful molds or have other air quality issues, which could lead to financial liability for adverse
health effects to our employees or third parties, and costs of remediating the problem.
Our properties may contain or develop harmful molds or suffer from other air quality issues, which could lead to liability for adverse
health effects and costs of remediating the problem. When excessive moisture accumulates in buildings or on building materials, mold growth
may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds produce airborne
toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, poor equipment maintenance, chemical contamination
from indoor or outdoor sources and other biological contaminants, such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or
irritants present above certain levels can cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a
result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly
remediation program to contain or remove the mold or other airborne contaminants from the affected property, to reduce indoor moisture
levels, or to upgrade ventilation systems to improve indoor air quality. In addition, the presence of significant mold or other airborne
contaminants could expose us to liability from our employees, our customers, employees of our customers and others if property damage or
health concerns arise.
Illiquidity of real estate investments, particularly our specialized temperature-controlled warehouses, could significantly impede our
ability to respond to adverse changes in the performance of our business and properties.
Real estate investments are relatively illiquid, and given that our properties are highly specialized temperature-controlled warehouses,
our properties may be more illiquid than other real estate investments. This illiquidity is driven by a number of factors, including the
specialized and often customer-specific design of our warehouses, the relatively small number of potential purchasers of temperature-
controlled warehouses, the difficulty and expense of repurposing our warehouses and the location of many of our warehouses in secondary or
tertiary markets. As a result, we may be unable to complete an exit strategy or quickly sell properties in our portfolio in response to adverse
changes in the performance of our properties or in our business generally. We cannot predict whether we will be able to sell any property for
the price or on the terms set by us or whether any price or other terms offered by a prospective buyer would be acceptable to us. We also
cannot predict the length of time it would take to complete the sale of any such property. Such sales might also require us to expend funds to
mitigate or correct defects to the property or make changes or improvements to the property prior to its sale. The
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ability to sell assets in our portfolio may also be restricted by certain covenants in our mortgage loan agreements and other credit agreements.
Code requirements relating to our status as a REIT may also limit our ability to vary our portfolio promptly in response to changes in
economic or other conditions.
We could experience uninsured or under-insured losses relating to our warehouses and other assets, including our real property.
We carry insurance coverage on all of our properties in an amount that we believe adequately covers any potential casualty losses.
However, there are certain losses, including losses from floods, earthquakes, acts of war or riots, that we are not generally insured against or
that we are not generally fully insured against because it is not deemed economically feasible or prudent to do so. In addition, changes in the
cost or availability of insurance could expose us to uninsured casualty losses. In the event that any of our properties incurs a casualty loss that
is not covered by insurance (in part or at all), the value of our assets will be reduced by the amount of any such uninsured loss, and we could
experience a significant loss of capital invested and potential revenues in these properties. Any such losses could materially and adversely
affect us. In addition, we may have no source of funding to repair or reconstruct the damaged property, and we cannot assure you that any
such sources of funding will be available to us for such purposes in the future on favorable terms or at all.
In the event of a fire, flood or other occurrence involving the loss of or damage to stored products held by us but belonging to others,
we may be liable for such loss or damage. Although we have an insurance program in effect, there can be no assurance that such potential
liability will not exceed the applicable coverage limits under our insurance policies. A number of our properties are located in areas that are
known to be subject to earthquake activity, such as California, Washington, Oregon and New Zealand, or in flood zones, such as Appleton,
Wisconsin and Roanoke, Virginia, in each case exposing them to increased risk of casualty.
If we or one or more of our customers experiences a loss for which we are liable and that loss is uninsured or exceeds policy limits,
we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. In addition, if
the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties
were irreparably damaged.
We are self-insured for workers’ compensation and health insurance under a large deductible program, meaning that we have accrued
liabilities in amounts that we consider appropriate to cover losses in these areas. In addition, we maintain excess loss coverage to insure
against losses in excess of the reserves that we have established for these claims in amounts that we consider appropriate. However, in the
event that our loss experience exceeds our reserves and the limits of our excess loss policies, we could be materially and adversely affected.
We may not be reimbursed for increases in operating expenses and other real estate costs.
We may be limited in our ability to obtain reimbursement from customers under existing warehouse contracts for any increases in
operating expenses such as labor, electricity charges, maintenance costs, taxes, including real estate and income taxes, or other real estate-
related costs. Unless we are able to offset any unexpected costs with sufficient revenues through new warehouse contracts or customers,
increases in these costs would lower our operating margins and could materially and adversely affect us.
Costs of complying with governmental laws and regulations could adversely affect us and our customers.
Our business is highly regulated at the federal, state and local level. The food industry in all jurisdictions in which we operate is
subject to numerous government standards and regulations. While we believe that we are
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currently in compliance with all applicable government standards and regulations, there can be no assurance that all of our warehouses or our
customers’ operations are currently in compliance with, or will be able to comply in the future with, all applicable standards and regulations
or that the costs of compliance will not increase in the future.
All real property and the operations conducted on real property are subject to governmental laws and regulations relating to
environmental protection and human health and safety. In addition, our warehouses are subject to regulation and inspection by the United
States Food and Drug Administration and the United States Department of Agriculture and our domestic trucking operations are subject to
regulation by the U.S. Department of Transportation and the Federal Highway Administration. Our ability to operate and to satisfy our
contractual obligations may be affected by permitting and compliance obligations arising under such laws and regulations. Some of these
laws and regulations could increase our operating costs, result in fines or impose joint and several liability on customers, owners or operators
for the costs to investigate or remediate contamination, regardless of fault or whether the acts causing the contamination were legal.
Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards in the
future. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require that we or our
customers incur material expenditures. In addition, there are various governmental, environmental, fire, health, safety and similar regulations
with which we and our customers may be required to comply and which may subject us and our customers to liability in the form of fines or
damages for noncompliance. Any material expenditures, fines or damages imposed on our customers or us could directly or indirectly have a
material adverse effect on us. In addition, changes in these governmental laws and regulations, or their interpretation by agencies and courts,
could occur.
The Americans with Disabilities Act of 1990, as amended, or the ADA, generally requires that public buildings, including portions of
our warehouses, be made accessible to disabled persons. Noncompliance could result in the imposition of fines by the federal government or
the award of damages to private litigants. If, under the ADA, we are required to make substantial alterations and capital expenditures in one
or more of our warehouses, including the removal of access barriers, it could materially and adversely affect us.
Our properties are subject to regulation under OSHA, which requires employers to protect employees against many workplace
hazards, such as exposure to harmful levels of toxic chemicals, excessive noise levels, mechanical dangers, heat or cold stress and unsanitary
conditions. The cost of complying with OSHA and similar laws enacted by other jurisdictions in which we operate is substantial and any
failure to comply with these regulations could expose us to penalties and potentially to liabilities to employees who may be injured at our
warehouses, any of which could be material. Furthermore, any fines or violations that we face under OSHA could expose us to reputational
risk.
We face ongoing litigation risks which could result in material liabilities and harm to our business regardless of whether we prevail in
any particular matter.
We are a large company operating in multiple U.S. and international jurisdictions, with thousands of employees and business
counterparts. As such, there is an ongoing risk that we may become involved in legal disputes or litigation with these parties or others. The
costs and liabilities with respect to such legal disputes may be material and may exceed our amounts accrued, if any, for such liabilities and
costs. In addition, our defense of legal disputes or resulting litigation could result in the diversion of our management’s time and attention
from the operation of our business, each of which could impede our ability to achieve our business objectives. Some or all of the amounts we
may be required to pay to defend or to satisfy a judgment or settlement of any or all of our disputes and litigation may not be covered by
insurance.
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We may invest in joint ventures in the future and, in the event we do so, could face risks stemming from our partial ownership interests in
such properties which could materially and adversely affect the value of any such joint venture investments.
In the future, we may make additional investments through joint venture investment vehicles. These investments involve risks not
present in investments where a third party is not involved, including the possibility that:
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•
•
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• we and a co-venturer or partner may reach an impasse on a major decision that requires the approval of both parties;
• we may not have exclusive control over the development, financing, management and other aspects of the property or joint
venture, which may prevent us from taking actions that are in our best interest but opposed by a co-venturer or partner;
a co-venturer or partner may at any time have economic or business interests or goals that are or may become inconsistent with
ours;
a co-venturer or partner may encounter liquidity or insolvency issues or may become bankrupt, which may mean that we and any
other remaining co-venturers or partners generally would remain liable for the joint venture’s liabilities;
a co-venturer or partner may take action contrary to our instructions, requests, policies or investment objectives, including our
current policy with respect to maintaining our qualification as a REIT under the Code;
a co-venturer or partner may take actions that subject us to liabilities in excess of, or other than, those contemplated;
in certain circumstances, we may be liable for actions of our co-venturer or partner, and the activities of a co-venturer or partner
could adversely affect our ability to qualify as a REIT, even if we do not control the joint venture;
our joint venture agreements may restrict the transfer of a co-venturer’s or partner’s interest or otherwise restrict our ability to sell
the interest when we desire or on advantageous terms;
our joint venture agreements may contain buy-sell provisions pursuant to which one co-venturer or partner may initiate procedures
requiring the other co-venturer or partner to choose between buying the other co-venturer’s or partner’s interest or selling its
interest to that co-venturer or partner;
if a joint venture agreement is terminated or dissolved, we may not continue to own or operate the interests or investments
underlying the joint venture relationship or may need to purchase such interests or investments at a premium to the market price to
continue ownership; or
disputes between us and a co-venturer or partner may result in litigation or arbitration that could increase our expenses and
prevent our management from focusing their time and attention on our business.
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Any of the above could materially and adversely affect the value of our current joint venture investment or any future joint venture
investments and potentially have a material adverse effect on us.
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Risks Related to Our Debt Financings
We have a substantial amount of indebtedness that may limit our financial and operating activities.
As of December 31, 2019, we had approximately $1.7 billion of total consolidated indebtedness outstanding and borrowing capacity
under our 2018 Senior Unsecured Credit Facilities of $800.0 million less approximately $23.0 million for certain outstanding letters of credit.
Our organizational documents contain no limitations regarding the maximum level of indebtedness that we may incur or keep outstanding.
Payments of principal and interest on indebtedness may leave us with insufficient cash resources to operate our properties or to pay
distributions to our shareholders at expected levels. Our substantial outstanding indebtedness could have other material and adverse
consequences, including, without limitation, the following:
our cash flows may be insufficient to meet our required principal and interest payments;
•
• we may use a substantial portion of our cash flows to make principal and interest payments and we may be unable to obtain
additional financing as needed or on favorable terms, which could, among other things, have a material adverse effect on our
ability to invest in acquisition opportunities, fund capital improvements or meet operational needs;
• we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our
original indebtedness;
• we may be forced to dispose of one or more of our properties, possibly on disadvantageous terms or in violation of certain
covenants to which we may be subject;
• we may default on our indebtedness by failing to make required payments or violating covenants, which would entitle holders of
such indebtedness and other indebtedness with a cross-default provision to accelerate the maturity of their indebtedness and, if
such indebtedness is secured, to foreclose on our properties that secure their loans;
• we may be unable to effectively hedge floating rate debt with respect to our 2018 Senior Unsecured Credit Facilities or any
successor facilities thereto;
• we are required to maintain certain debt and coverage and other financial ratios at specified levels, thereby reducing our operating
and financial flexibility;
our vulnerability to general adverse economic and industry conditions may be increased; and
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• we may be subject to greater exposure to increases in interest rates for our variable-rate debt and to higher interest expense upon
refinancing of existing debt or the issuance of future fixed rate debt.
If any one of these events were to occur, we could be materially and adversely affected. In addition, any foreclosure on our properties
could create taxable income without accompanying cash proceeds, which could materially and adversely affect our ability to meet the REIT
distribution requirements imposed by the Code.
We are dependent on external sources of capital, the continuing availability of which is uncertain.
In order to qualify as a REIT, we are required each year to distribute to our shareholders at least 90% of our REIT taxable income
(determined without regard to the dividends paid deduction and by excluding capital gains). In addition, we will be subject to income tax at
regular corporate rates to the extent that we distribute less than 100% of our REIT taxable income, including any net capital gains. Because of
these distribution requirements, we may not be able to fund all of our future capital needs, including capital for acquisitions, development
activities and recurring and non-recurring capital improvements, from operating cash flows. Consequently, we intend to rely on third-party
sources of capital to fund a substantial amount of our future capital needs. We may not be able to obtain additional financing on favorable
terms or at all when needed. Any additional debt we incur will increase our leverage, expose us to the risk of default and impose operating
and financial restrictions on us. In addition, any equity financing could be materially dilutive to the equity interests held by our
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shareholders. Our access to third-party sources of capital depends, in part, on general market conditions, the market’s perception of our
growth potential, our leverage, our current and anticipated results of operations, liquidity, financial condition and cash distributions to
shareholders and the market price of our common shares. If we cannot obtain sufficient capital on favorable terms when needed, we may not
be able to execute our business and growth strategies, satisfy our debt service obligations, make the cash distributions to our shareholders
necessary for us to qualify as a REIT (which would expose us to significant penalties and corporate-level taxation), or fund our other business
needs, which could have a material adverse effect on us.
Adverse changes in our credit ratings could negatively impact our financing activity.
Our credit ratings are based on our operating performance, liquidity and leverage ratios, overall financial condition and other factors
utilized by rating agencies in their analysis. Our credit ratings can affect the amount of capital that we can access, as well as the terms and
pricing of any future debt. We can provide no assurance that we will be able to maintain our current credit ratings, and a downgrade of our
credit ratings would likely cause us to incur higher borrowing costs and make additional financing more difficult to obtain. In addition, a
downgrade could trigger higher costs under our existing credit facilities and may have other negative consequences. Adverse changes in our
credit ratings could negatively impact our business, particularly our refinancing and other capital market activities, our future growth,
development and acquisition activity.
At December 31, 2019, our credit ratings were “BBB” from both Fitch Ratings, Inc. and DBRS Morningstar, Inc., and “Baa3” from
Moody’s, all with stable outlooks. A securities rating is not a recommendation to buy, sell or hold securities and is subject to revision or
withdrawal at any time by the rating organization.
Increases in interest rates could increase the amount of our debt payments.
As of December 31, 2019, $475.0 million of our outstanding consolidated indebtedness is variable-rate debt, and we may continue
to incur variable-rate debt in the future. $325.0 million of this debt’s principal has been hedged using pay-fixed, receive-variable interest rate
swaps, which are designed to mitigate the impacts of changes in variable interest rates. These interest rate swaps extend through the maturity
of the variable interest rate debt. Increases in interest rates on such debt would raise our interest costs, reduce our cash flows and reduce our
ability to make distributions to our shareholders. Increases in interest rates would also increase our interest expense on future fixed rate
borrowings and have the same collateral effects. In addition, if we need to repay existing debt during periods of rising interest rates, we could
be required to liquidate one or more of our investments in properties at times which may not permit realization of the maximum return on
such investments.
Elimination of LIBOR may impact our financial statements
In July 2017, the Financial Conduct Authority (“FCA”) that regulates LIBOR announced it intends to stop compelling banks to
submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York
organized the Alternative Reference Rates Committee ("ARRC") which identified the Secured Overnight Financing Rate ("SOFR") as its
preferred alternative to USD-LIBOR in derivatives and other financial contracts. The Company is not able to predict when LIBOR will cease
to be available or when there will be sufficient liquidity in the SOFR markets. Any changes adopted by FCA or other governing bodies in the
method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our
interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or
payments that are higher or lower than if LIBOR were to remain available in its current form.
The Company has contracts that are indexed to LIBOR and is monitoring and evaluating the related risks, which include interest on
loans, amounts paid on securities, and amounts received and paid on derivative
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instruments. These risks arise in connection with transitioning contracts to a new alternative rate, including any resulting value transfer that
may occur. The value of loans, securities, or derivative instruments tied to LIBOR could also be impacted if LIBOR is limited or
discontinued. For some instruments, the method of transitioning to an alternative rate may be challenging, as they may require negotiation
with the respective counterparty.
If LIBOR is discontinued, the impact of such change on our contracts that are not transitioned to an alternative rate is uncertain and is
likely to vary by contract. If LIBOR is discontinued or if the methods of calculating LIBOR change from their current form, interest rates on
our current or future indebtedness may be adversely affected.
While we expect LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become
unavailable prior to that point. This could result, for example, if sufficient banks decline to make submissions to the LIBOR administrator. In
that case, the risks associated with the transition to an alternative reference rate will be accelerated and magnified.
Our existing indebtedness contains, and any future indebtedness is likely to contain, covenants that restrict our ability to engage in
certain activities.
Our outstanding indebtedness requires, and our future indebtedness is likely to require, us to comply with a number of financial
covenants and operational covenants. The financial covenants under our 2018 Senior Unsecured Credit Facility and Series A, Series B and
Series C Senior Unsecured Notes include a maximum leverage ratio, a minimum borrowing base coverage ratio, a minimum fixed charge
coverage ratio, a minimum borrowing base debt service coverage ratio, a minimum tangible net worth requirement, a maximum secured
leverage ratio, a maximum recourse secured debt ratio and a maximum unsecured indebtedness to assets ratio. These covenants may limit our
ability to engage in certain transactions that may be in our best interests. In order to be able to make distributions to our shareholders (other
than minimum distributions required to maintain our status as a REIT), there may not be an event of default under such indebtedness. Our
failure to meet the covenants could result in an event of default under the applicable indebtedness, which could result in the acceleration of
the applicable indebtedness and other indebtedness with a cross-default provision as well as foreclosure, in the case of secured indebtedness,
upon any of our assets that secure such indebtedness. If we are unable to refinance our indebtedness at maturity or meet our payment
obligations, we would be materially and adversely affected.
As of December 31, 2019, a total of 15 of our warehouses were financed under mortgage loans grouped into a single pool. Certain
covenants in the mortgage loan agreement place limits on our use of the cash flows associated with the pool, and place other restrictions on
our use of the assets included within the pool. In particular, if our subsidiaries that are borrowers under the mortgage loan agreement fail to
maintain certain cash flow minimums or a debt service coverage ratio, the cash generated by those subsidiaries will be restricted and
unavailable for us to use, which we refer to as a “cash trap event.” If the pool under our mortgage loan agreement were to fail to maintain the
applicable cash flow minimum or debt service coverage ratio, our ability to make capital expenditures and distributions to our shareholders
could be limited. In addition, as a holder of equity interests in the borrowers under the pool, our claim to the assets contained in the pool is
subordinate to the claims of the holders of the indebtedness under the mortgage loan agreement.
Secured indebtedness exposes us to the possibility of foreclosure, which could result in the loss of our investment in certain of our
subsidiaries or in a property or group of properties or other assets subject to indebtedness.
We have granted certain of our lenders security interests in approximately 12% of our assets, including equity interests in certain of
our subsidiaries and in certain of our real property. Incurring secured indebtedness, including mortgage indebtedness, increases our risk of
asset and property losses because defaults on indebtedness
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secured by our assets, including equity interests in certain of our subsidiaries and in certain of our real property, may result in foreclosure
actions initiated by lenders and ultimately our loss of the property or other assets securing any loans for which we are in default. Any
foreclosure on a mortgaged property or group of properties could have a material adverse effect on the overall value of our portfolio of
properties and more generally on us. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a
purchase price equal to the outstanding balance of the indebtedness secured by the mortgage. If the outstanding balance of the indebtedness
secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any
cash proceeds, which could materially and adversely affect us.
Foreign exchange rates and other hedging activity exposes us to risks, including the risks that a counterparty will not perform and that
the hedge will not yield the economic benefits we anticipate.
As of December 31, 2019, we were a party to cross currency swaps on our intercompany loans. We also entered into two interest rate
swaps during the year ended December 31, 2019 to mitigate the impact of variable interest rates on our outstanding variable rate debt. We
also entered into foreign currency forward contracts to hedge the cash flows of a future acquisition that will be denominated in foreign
currency. In addition, we have entered into certain forward contracts and other hedging arrangements in order to fix power costs for
anticipated electricity requirements. These hedging transactions expose us to certain risks, such as the risk that counterparties may fail to
honor their obligations under these arrangements, and that these arrangements may not be effective in reducing our exposure to foreign
exchange rate, interest rate, and power cost changes. Moreover, there can be no assurance that our hedging arrangements will qualify for
hedge accounting or that our hedging activities will have the desired beneficial impact on our results of operations or cash flows. Should we
desire to terminate a hedging agreement, there could be significant costs and cash requirements involved to fulfill our obligation under the
hedging agreement. Failure to hedge effectively against foreign exchange rates, interest rates, and power cost changes could have a material
adverse effect on us.
While we have no current mortgage agreements requiring hedging agreements, when a hedging agreement is required under the terms
of a mortgage loan, it is often a condition that the hedge counterparty maintains a specified credit rating. With the current volatility in the
financial markets, there is an increased risk that hedge counterparties could have their credit ratings downgraded to a level that would not be
acceptable under the loan provisions. If we were unable to renegotiate the credit rating condition with the lender or find an alternative
counterparty with an acceptable credit rating, we could be in default under the loan and the lender could seize that property through
foreclosure, which could have a material adverse effect on us.
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Risks Related to our Organization and Structure
Provisions of Maryland law may limit the ability of a third party to acquire control of our company.
Under the Maryland General Corporation Law, or the MGCL, as applicable to Maryland real estate investment trusts, certain
“business combinations” (including a merger, consolidation, share exchange or, in certain circumstances specified under the statute, an asset
transfer or issuance or reclassification of equity securities) between a Maryland real estate investment trust and any person who beneficially
owns, directly or indirectly, 10% or more of the voting power of the trust’s then outstanding voting shares or an affiliate or associate of the
trust who, at any time within the two-year period before the date in question, was the beneficial owner, directly or indirectly, of 10% or more
of the voting power of the trust’s then outstanding shares, which we refer to as an “interested shareholder,” or an affiliate thereof, are
prohibited for five years after the most recent date on which the interested shareholder becomes an interested shareholder. Thereafter, any
such business combination must be approved by two super-majority shareholder votes unless, among other conditions, the trust’s common
shareholders receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form
as previously paid by the interested shareholder for its voting shares. Until December 2018, affiliates of the Goldman Sachs Group, Inc. (the
“GS Entities”) owned more than 10% of our voting shares, and therefore are subject to the business combination provisions of the MGCL
through December 2020. However, pursuant to the statute, our board of trustees, by resolution, elected to opt out of the business combination
provisions of the MGCL. This resolution may not be modified or repealed by our board of trustees without the approval of our shareholders
by the affirmative vote of a majority of the votes cast on the matter. Accordingly, the five-year prohibition and the super-majority vote
requirements described above do not apply to a business combination between us and any other person, including the GS Entities. As a result,
any person may be able to enter into business combinations with us, which may not be in your best interest as a shareholder, within five years
of becoming an interested shareholder and without compliance by us with the super-majority vote requirements and other provisions of the
MGCL.
The “control share” provisions of the MGCL provide that “control shares” of a Maryland real estate investment trust (defined as
shares which, when aggregated with other shares controlled by the shareholder (except solely by virtue of a revocable proxy), entitle the
shareholder to exercise one of three increasing ranges of voting power in electing trustees) acquired in a “control share acquisition” (defined
as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by the
trust’s shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to
be cast by the acquiror of control shares, the trust’s officers and the trust’s employees who are also the trust’s trustees. Our amended and
restated bylaws, or our bylaws, contain a provision exempting from the control share acquisition provisions of the MGCL any and all
acquisitions by any person of our shares. This provision may not be amended by our board of trustees without the affirmative vote at a duly
called meeting of shareholders of at least a majority of the votes cast on the matter by shareholders entitled to vote generally in the election of
trustees.
Subtitle 8 of Title 3 of the MGCL, or Subtitle 8, would permit our board of trustees, without shareholder approval, to implement
certain takeover defenses (some of which, such as a classified board, we do not have), if we have a class of equity securities registered under
the Exchange Act and at least three independent trustees. We have elected not to be subject to Subtitle 8 unless approved by the affirmative
vote of at least a majority of the votes cast on the matter by shareholders entitled to vote generally in the election of trustees.
Any of the MGCL provisions, if then applicable to us, may have the effect of inhibiting a third party from making an acquisition
proposal for us or of delaying, deferring or preventing a transaction or change in control
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which might involve a premium price for our common shares or otherwise be in the best interests of our shareholders.
Our board of trustees can take many actions even if you and other shareholders disagree with such actions or if they are otherwise not in
your best interest as a shareholder.
Our board of trustees has overall authority to oversee our operations and determine our major policies. This authority includes
significant flexibility to take certain actions without shareholder approval. For example, our board of trustees can do the following without
shareholder approval:
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•
•
•
issue additional shares, which could dilute your ownership;
amend our declaration of trust to increase or decrease the aggregate number of shares or the number of shares of any class or
series that we have authority to issue;
classify or reclassify any unissued shares and set the preferences, rights and other terms of such classified or reclassified shares,
which preferences, rights and terms could delay, defer or prevent a transaction or change in control which might involve a
premium price for our common shares or otherwise be in your best interest as a shareholder;
employ and compensate affiliates;
change major policies, including policies relating to investments, financing, growth and capitalization;
enter into new lines of business or new markets; and
determine that it is no longer in our best interests to attempt to continue to qualify as a REIT.
Any of these actions without shareholder approval could increase our operating expenses, impact our ability to make distributions to
our shareholders, reduce the market value of our real estate assets, negatively impact our share price, or otherwise not be in your best interest
as a shareholder.
Our declaration of trust contains provisions that make removal of our trustees difficult, which could make it difficult for our shareholders
to effect changes to our management.
Our declaration of trust provides that, subject to the rights of holders of one or more classes or series of preferred shares to elect or
remove one or more trustees, a trustee may be removed only for “cause” (as defined in our declaration of trust), and then only by the
affirmative vote of shareholders entitled to cast two-thirds of the votes entitled to be cast generally in the election of trustees. The foregoing
provision of our declaration of trust, when coupled with the power of our board of trustees to fill vacant trusteeships, will preclude
shareholders from removing incumbent trustees except for cause and by a substantial affirmative vote and filling the vacancies created by
such removal with their own nominees. These requirements make it more difficult to change our management by removing and replacing
trustees and may prevent a change in control that is in the best interests of our shareholders.
The REIT ownership limit rules and the related restrictions on ownership and transfer contained in our declaration of trust have an anti-
takeover effect.
In order for us to maintain our qualification as a REIT under the Code, not more than 50% in value of our outstanding shares of
beneficial interest may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) at any
time during the last half of each taxable year (other than the first taxable year for which the election to be treated as a REIT was made). To
ensure that we will not fail to qualify as a REIT under this and other tests under the Code, our declaration of trust, subject to certain
exceptions, authorizes our board of trustees to take such actions as are necessary and desirable to preserve our qualification as a REIT and
does not permit individuals (including certain entities treated as individuals), other than excepted holders approved in accordance with our
declaration of trust, to own, directly or indirectly, more than 9.8% (in
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value) of our outstanding shares. In addition, our declaration of trust prohibits: (a) any person from beneficially or constructively owning our
shares of beneficial interest that would result in our company being “closely held” under Section 856(h) of the Code or otherwise cause us to
fail to qualify as a REIT; (b) any person from transferring our shares of beneficial interest of our company if such transfer would result in our
shares of beneficial interest being beneficially owned by fewer than 100 persons; and (c) any person from beneficially owning our shares of
beneficial interest to the extent such ownership would result in our failing to qualify as a “domestically controlled qualified investment
entity” within the meaning of Section 897(h) of the Code (after taking into account for such purpose the statutory presumptions set forth in
Section 897(h)(4)(E) of the Code). Our board of trustees is required to exempt a person (prospectively or retrospectively) from the percentage
ownership limit described above (but not the other restrictions) if the person seeking a waiver demonstrates that the waiver would not
jeopardize our status as a REIT or violate the other conditions described above.
These ownership limitations are intended to provide added assurance of compliance with the tax law requirements and to minimize
administrative burdens. Although our declaration of trust requires our board of trustees to grant a waiver of the percentage ownership limit
described above if the person seeking a waiver demonstrates that such ownership would not jeopardize our status as a REIT or violate the
other conditions described above, these limitations might still delay, defer or prevent a transaction or change in control which might involve a
premium price for our common shares or otherwise not be in your best interest as a shareholder or result in the transfer of shares acquired in
excess of the ownership limits to a trust for the benefit of a charitable beneficiary and, as a result, the forfeiture by the acquirer of the benefits
of owning the additional shares.
Our rights and the rights of our shareholders to take action against our trustees and officers are limited.
Our declaration of trust eliminates our trustees’ and officers’ liability to us and our shareholders for money damages except for
liability resulting from actual receipt of an improper benefit or profit in money, property or services or active and deliberate dishonesty
established by a final judgment and which is material to the cause of action. Our declaration of trust and our bylaws require us to indemnify
our trustees and officers to our board of trustees to the maximum extent permitted by Maryland law for liability actually incurred in
connection with any proceeding to which they may be made, or threatened to be made, a party, except to the extent that the act or omission of
the trustee, officer or observer was material to the matter giving rise to the proceeding and was either committed in bad faith or the result of
active and deliberate dishonesty, the trustee, officer or observer actually received an improper personal benefit in money, property or
services, or, in the case of any criminal proceeding, the trustee, officer or observer had reasonable cause to believe that the act or omission
was unlawful. As a result, we and our shareholders may have more limited rights against our trustees and officers and any observer to our
board of trustees than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by our
trustees and officers and any observer to our board of trustees.
We have fiduciary duties as general partner to our Operating Partnership, which may result in conflicts of interests in representing your
interests as shareholders of our company.
Conflicts of interest could arise in the future as a result of the relationships between us and our affiliates, and between us and our
Operating Partnership or any partner thereof. Our trustees and officers have duties to our company under applicable Maryland law in
connection with their management of our company. Additionally, we
have fiduciary duties as the general partner to our Operating Partnership and to its limited partners under Delaware law in connection with the
management of our Operating Partnership. Our duties as a general partner to our Operating Partnership and any unaffiliated limited partners
may come into conflict with the duties of our trustees and officers to our company and may be resolved in a manner that is not in your best
interest as a shareholder.
37
Risks Related to our Common Shares
Our cash available for distribution to shareholders may not be sufficient to pay distributions at expected levels, or at all, and we may need
to increase our borrowings or otherwise raise capital in order to make such distributions; consequently, we may not be able to make such
distributions in full.
Our current annualized distributions to our shareholders are $0.80 per share. If cash available for distribution generated by our assets
decreases in future periods is less than our estimate or if such cash available for distribution decreases in future periods, we may be unable to
make distributions to our shareholders at expected levels, or at all, or we may need to increase our borrowings or otherwise raise capital in
order to do so, and there can be no assurance that such capital will be available on attractive terms in sufficient amounts, or at all. Any of the
foregoing could result in a decrease in the market price of our common shares. Any distributions made to our shareholders by us will be
authorized and determined by our board of trustees in its sole discretion out of funds legally available therefore and will be dependent upon a
number of factors, including our actual or anticipated financial condition, results of operations, cash flows and capital requirements, debt
service requirements, financing covenants, restrictions under applicable law and other factors.
Any future debt, which would rank senior to our common shares upon liquidation, or equity securities, which could dilute our existing
shareholders and may be senior to our common shares for the purposes of distributions, may adversely affect the market price of our
common shares.
In the future, we may attempt to increase our capital resources by incurring additional debt, including term loans, borrowings under
credit facilities, mortgage loans, commercial paper, senior or subordinated notes and secured notes, and making additional offerings of equity
and equity-related securities, including preferred and common shares and convertible or exchangeable securities.
Upon our liquidation, holders of our debt securities and preferred shares and lenders with respect to other borrowings would receive a
distribution of our available assets prior to the holders of our common shares. Additional offerings of common shares would dilute the
holdings of our existing shareholders or may reduce the market price of our common shares or both. Additionally, any preferred shares or
convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our
common shares and may result in dilution to holders of our common shares. Because our decision to incur debt or issue equity or equity-
related securities in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the
amount, timing, nature or success of our future capital raising. Thus, our shareholders bear the risk that our future capital raising will
materially and adversely affect the market price of our common shares and dilute the value of their holdings in us.
Common shares eligible for future sale may have adverse effects on the market price of our common shares.
The market price of our common shares could decline as a result of sales or resales of a large number of our common shares in the
market, or the perception that such sales or resales could occur. These sales or resales, or the possibility that these sales or resales may occur,
also might make it more difficult for us to sell our common shares in the future at a desired time and at an attractive price. On August 26,
2019, we entered into a distribution agreement with a syndicate of banks through which we may sell from time to time up to an aggregate of
$500.0 million of our common shares in an at the market equity program (the “ATM Offering”). There were no common shares sold under
the ATM Equity Program during 2019. As of December 31, 2019, 191,799,909 common shares are issued and outstanding, and no Series A
preferred shares, Series B preferred shares or Series C preferred shares are issued and outstanding.
38
As of December 31, 2019, the 507,073 common shares beneficially owned by our trustees, executive officers and other affiliates were
“restricted securities” within the meaning of Rule 144 under the Securities Act and cannot be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including the exemptions contained in Rule 144.
In addition, we have filed with the SEC a registration statement on Form S-8 covering common shares issuable pursuant to options
and restricted stock units issued under our outstanding equity incentive plans.
We cannot predict the effect, if any, of future issuances, sales or resales of our common shares, or the availability of common shares
for future issuances, sales or resales, on the market price of our common shares. Issuances, sales or resales of substantial amounts of common
shares, or the perception that such issuances, sales or resales could occur, may materially and adversely affect the then prevailing market
price for our common shares.
If securities analysts do not publish research or reports about our company, or if they issue unfavorable commentary about us, our
industry or the real estate industry generally or downgrade the outlook of our common shares, the market price of our common shares
could decline.
The trading market for our common shares will depend in part on the research and reports that third-party securities analysts publish
about our company, our industry and the real estate industry generally. One or more analysts could downgrade the outlook for our common
shares or issue other negative commentary about our company, our industry or the real estate industry generally. Furthermore, if one or more
of these analysts cease coverage of our company, we could lose visibility in the market. As a result of one or more of these factors, the market
price of our common shares could decline and cause you to lose all or a portion of your investment.
39
REIT and Tax Related Risks
Failure to qualify as a REIT for U.S. federal income tax purposes would have a material adverse effect on us.
We have elected to be taxed as a REIT under the Code. Our qualification as a REIT requires us to satisfy numerous requirements,
some on an annual and quarterly basis, established under highly technical and complex Code provisions for which there are only limited
judicial or administrative interpretations, and which involve the determination of various factual matters and circumstances not entirely
within our control. We expect that our current organization and methods of operation will enable us to continue to qualify as a REIT, but we
may not so qualify or we may not be able to remain so qualified in the future. In addition, U.S. federal income tax laws governing REITs and
other corporations and the administrative interpretations of those laws may be amended at any time, potentially with retroactive effect. The
Protecting Americans from Tax Hikes Act, or PATH Act, was enacted in December 2015, and included numerous changes in the U.S. federal
income tax laws applicable to REITs, and comprehensive tax legislation passed on December 22, 2017, which is commonly known as the Tax
Cuts and Jobs Act, or TCJA and, which is fully described in Note 18 to the consolidated financial statements included in this Annual Report
on Form 10-K, made fundamental changes to the individual and corporate tax laws that will materially impact us and our shareholders. In
addition, future legislation, new regulations, administrative interpretations or court decisions could materially and adversely affect our ability
to qualify as a REIT or materially and adversely affect our company and shareholders.
If we fail to qualify as a REIT in any taxable year, we would be subject to U.S. federal income tax on our REIT taxable income at
regular corporate rates, and would not be allowed to deduct dividends paid to our shareholders in computing our REIT taxable income. Also,
unless the Internal Revenue Service, or the IRS, granted us relief under certain statutory provisions, we could not re-elect REIT status until
the fifth calendar year after the year in which we first failed to qualify as a REIT. The additional tax liability from the failure to qualify as a
REIT would reduce or eliminate the amount of cash available for investment or distribution to our shareholders. This would materially and
adversely affect us. In addition, we would no longer be required to make distributions to our shareholders. Even if we continue to qualify as a
REIT, we will continue to be subject to certain U.S. federal, state and local taxes on our income and property.
To qualify as a REIT, we must meet annual distribution requirements, which could result in material harm to our company if
they are not met.
To obtain the favorable tax treatment accorded to REITs, among other requirements, we normally will be required each year to
distribute to our shareholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and by
excluding net capital gains. We will be subject to U.S. federal income tax on our undistributed REIT taxable income and net capital gains. In
addition, if we fail to distribute to our shareholders during each calendar year at least the sum of (a) 85% of our ordinary income for such
year; (b) 95% of our capital gain net income for such year; and (c) any undistributed REIT taxable income from prior periods, we will be
subject to a 4% excise tax on the excess of the required distribution over the sum of (i) the amounts actually distributed by us and (ii) retained
amounts on which we pay U.S. federal income tax at the corporate level. We intend to make distributions to our shareholders to comply with
the requirements of the Code for REITs and to minimize or eliminate our U.S. federal income tax obligation. However, differences between
the recognition of REIT taxable income and the actual receipt of cash could require us to sell assets or raise capital on a short-term or long-
term basis to meet the distribution requirements of the Code. Certain types of assets generate substantial mismatches between REIT taxable
income and available cash. Such assets include rental real estate that has been financed through financing structures which require some or all
of available cash flows to be used to service borrowings. Further, under amendments to the Code made by TCJA, income must be accrued for
U.S. federal income tax purposes no later than when such income is taken into account as revenue in
40
our financial statements, subject to certain exceptions, which could also create mismatches between REIT taxable income and the receipt of
cash attributable to such income. As a result, the requirement to distribute a substantial portion of our REIT taxable income could cause us to:
(1) sell assets in adverse market conditions; (2) raise capital on unfavorable terms; or (3) distribute amounts that would otherwise be invested
in future acquisitions, expansions or developments, capital expenditures or repayment of debt, in order to comply with REIT requirements.
Further, amounts distributed will not be available to fund our operations. Under certain circumstances, covenants and provisions in our
existing and future debt instruments may prevent us from making distributions that we deem necessary to comply with REIT requirements.
Our inability to make required distributions as a result of such covenants could threaten our status as a REIT and could result in material
adverse tax consequences for our company and shareholders.
We conduct a portion of our business through TRSs, which are subject to certain tax risks.
We have established taxable REIT subsidiaries, or TRSs, and may establish others in the future. Despite our qualification as a REIT,
our TRSs must pay income tax on their taxable income. As a result of the enactment of the TCJA, effective for taxable years beginning on or
after January 1, 2018, our domestic TRSs are subject to U.S. federal income tax on their taxable income at a flat rate of 21% (as well as
applicable state and local income tax), but net operating loss, or NOL, carryforwards of TRS losses arising in taxable years beginning after
December 31, 2017, may be deducted only to the extent of 80% of TRS taxable income in the carryforward year (computed without regard to
the NOL deduction or our dividends paid deduction). In contrast to prior law, which permitted unused NOL carryforwards to be carried back
two years and forward 20 years, TCJA provides that losses arising in taxable years ending after December 31, 2017, can no longer be carried
back but can be carried forward indefinitely. In addition, we must comply with various tests to continue to qualify as a REIT for U.S. federal
income tax purposes, and our income from, and investments in, our TRSs generally do not constitute permissible income and investments for
certain of these tests. No more than 20% of the value of a REIT’s assets may consist of securities of one or more TRSs. Because TRS
securities do not qualify for purposes of the 75% asset test described herein, and because we own other assets that do not, or may not, qualify
for the 75% asset test, the 75% asset test may effectively limit the value of our TRS securities to less than 20% of our total assets. Our
dealings with our TRSs may materially and adversely affect our REIT qualification. Furthermore, we may be subject to a 100% penalty tax,
or our TRSs may be denied deductions, to the extent our dealings with our TRSs are determined not to be arm’s length in nature or are
otherwise not permitted under the Code.
Complying with REIT requirements may cause us to forgo otherwise attractive opportunities or liquidate certain of our investments.
To qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, among other things, the
sources of our income, the nature and diversification of our assets, the amounts we distribute to our shareholders and the ownership of our
shares. We may be required to make distributions to our shareholders at disadvantageous times or when we do not have funds readily
available for distribution. Thus, compliance with the REIT requirements may, for instance, hinder our ability to make certain otherwise
attractive investments or undertake other activities that might otherwise be beneficial to us and our shareholders, or may require us to raise
capital or liquidate investments in unfavorable market conditions and, therefore, may hinder our performance.
As a REIT, at the end of each quarter, at least 75% of the value of our assets must consist of cash, cash items, government securities
and qualified real estate assets. The remainder of our investments in securities (other than cash, cash items, government securities, securities
issued by a TRS and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one
issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the
value of our
41
total assets (other than cash, cash items, government securities, securities issued by a TRS and qualified real estate assets) can consist of the
securities of any one issuer, and no more than 20% of the value of our total securities can be represented by securities of one or more TRSs. If
we fail to comply with these requirements at the end of any quarter, we must correct the failure within 30 days after the end of the quarter or
qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering material adverse tax consequences. The
need to comply with the 75% asset test and 20% TRS securities test on an ongoing basis potentially could require us in the future to limit the
future acquisition of, or to dispose of, nonqualifying assets, limit the future expansion of our TRSs’ assets and operations or dispose of or
curtail TRS assets and operations, which could adversely affect our business and could have the effect of reducing our income and amounts
available for distribution to our shareholders.
Future changes to the U.S. federal income tax laws could have an adverse impact on our business and financial results.
Changes to the U.S. federal income tax laws are proposed regularly. Additionally, the REIT rules are constantly under review by
persons involved in the legislative process and by the IRS and the U.S. Department of the Treasury, which may result in revisions to
regulations and interpretations in addition to statutory changes. If enacted, certain such changes could have an adverse impact on our business
and financial results.
Other legislative proposals could be enacted in the future that could affect REITs and their shareholders. Prospective investors are
urged to consult their tax advisor regarding the effect of any potential tax law changes on an investment in our common shares.
Distributions payable by REITs generally do not qualify for the reduced tax rates that apply to certain other corporate distributions,
potentially making an investment in our company less advantageous for certain persons than an investment in an entity with different tax
attributes.
The maximum federal income tax rate applicable to “qualified dividend income” payable by non-REIT corporations to certain non-
corporate U.S. stockholders is generally 20%, and a 3.8% Medicare tax may also apply. Dividends paid by REITs, however, generally are not
eligible for the reduced rates applicable to qualified dividend income. Commencing with taxable years beginning on or after January 1, 2018
and continuing through 2025, TCJA temporarily reduces the effective tax rate on ordinary REIT dividends (i.e., dividends other than capital
gain dividends and dividends attributable to certain qualified dividend income received by us) for U.S. holders of our common shares that are
individuals, estates or trusts by permitting such holders to claim a deduction in determining their taxable income equal to 20% of any such
dividends they receive. Taking into account TCJA’s reduction in the maximum individual federal income tax rate from 39.6% to 37%, this
results in a maximum effective rate of regular income tax on ordinary REIT dividends of 29.6% through 2025 (as compared to the 20%
maximum federal income tax rate applicable to qualified dividend income received from a non-REIT corporation). Under final regulations
recently issued by the IRS, in order to qualify for this deduction with respect to a dividend on our common shares, a shareholder must hold
such shares for more than 45 days during the 91-day period beginning on the date which is 45 days before the date on which such shares
become ex-dividend with respect to such dividend (taking into account certain special holding period rules that may, among other
consequences, reduce a shareholder’s holding period during any period in which the shareholder has diminished its risk of loss with respect to
the shares). Shareholders are urged to consult their tax advisors as to their ability to claim this deduction. The more favorable rates applicable
to regular corporate distributions could cause investors who are individuals to perceive investments in REITs to be relatively less attractive
than investments in the stocks of non-REIT corporations that pay distributions. This could materially and adversely affect the value of the
stock of REITs, including our common shares.
42
In certain circumstances, we may be subject to U.S. federal, state, local or foreign taxes, which would reduce our funds available for
distribution to our shareholders.
Even if we qualify and maintain our status as a REIT, we may be subject to certain U.S. federal, state, local or foreign taxes. For
example, net income from a “prohibited transaction,” including sales or other dispositions of property, other than foreclosure property, held
primarily for sale in the ordinary course of business, will be subject to a 100% tax. While we do not intend to hold properties that would be
characterized as held for sale in the ordinary course of business, unless a sale or disposition qualifies under statutory safe harbors, there can
be no assurance that the IRS would agree with our characterization of our properties or that we will be able to make use of available safe
harbors. In addition, we may not be able to make sufficient distributions to avoid income and excise taxes. We may also be subject to state,
local, or foreign taxes on our income or property, either directly or at the level of our Operating Partnership or the other companies through
which we indirectly own our assets. Any taxes we pay will reduce our funds available for distribution to our shareholders.
We may also decide to retain certain gains from the sale or other disposition of our property and pay income tax directly on such
gains. In that event, our shareholders would be required to include such gains in income and would receive a corresponding credit for their
share of taxes paid by us. Any net taxable income earned directly by a TRS will be subject to U.S. federal and state corporate income tax.
Furthermore, even though we qualify for taxation as a REIT, if we acquire any asset from a corporation which is or has been a C-corporation
in a transaction in which the basis of the asset in our hands is less than the fair market value of the asset determined at the time we acquired
the asset, and we subsequently recognize a gain on the disposition of the asset during the five-year period beginning on the date on which we
acquired the asset, then we will be required to pay tax at the highest regular corporate tax rate on this gain to the extent of the excess of (a) the
fair market value of the asset over (b) our adjusted basis in the asset, in each case determined as of the date on which we acquired the asset.
These requirements could limit, delay or impede future sales of our properties. We currently do not expect to sell any asset if the sale would
result in the imposition of a material tax liability. We cannot, however, assure you that we will not change our plans in this regard.
Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.
The REIT provisions of the Code limit our ability to hedge our liabilities. Generally, income from a hedging transaction we enter into
either to manage risk of interest rate changes with respect to borrowings incurred or to be incurred to acquire or carry real estate assets, or to
manage the risk of currency fluctuations with respect to any item of income or gain (or any property which generates such income or gain)
that constitutes “qualifying income” for purposes of the 75% or 95% gross income tests applicable to REITs, does not constitute “gross
income” for purposes of the 75% or 95% gross income tests, provided that we properly identify the hedging transaction pursuant to the
applicable sections of the Code and Treasury Regulations. To the extent that we enter into other types of hedging transactions, the income
from those transactions is likely to be treated as non-qualifying income for purposes of both gross income tests. As a result of these rules, we
may need to limit our use of otherwise advantageous hedging techniques or implement those hedges through a TRS. The use of a TRS could
increase the cost of our hedging activities (because our TRS would be subject to tax on income or gain resulting from hedges entered into by
it) or expose us to greater risks than we would otherwise want to bear. In addition, net losses in any of our TRSs will generally not provide
any tax benefit except for being carried forward for use against future taxable income of the TRS.
43
If our Operating Partnership fails to qualify as a partnership for U.S. federal income tax purposes, we would fail to qualify as a REIT.
As a partnership, our Operating Partnership is not be subject to U.S. federal income tax on its income. For all tax periods during
which the Operating Partnership is treated as a partnership, each of its partners, including us, will be allocated that partner’s share of the
Operating Partnership’s income. Following the admission of additional limited partners, no assurance can be provided, however, that the IRS
will not challenge the status of our Operating Partnership as a partnership for U.S. federal income tax purposes, or that a court would not
sustain such a challenge. If the IRS were successful in treating our Operating Partnership as an association taxable as a corporation for
U.S. federal income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and,
accordingly, would cease to qualify as a REIT, which would have a material adverse effect on us and our shareholders. Also, our Operating
Partnership would then be subject to U.S. federal corporate income tax, which would reduce significantly the amount of its funds available
for debt service and for distribution to its partners, including us.
44
ITEM 1B. Unresolved Staff Comments
None.
45
ITEM 2. Properties
General
In addition to the information in this Item 2, certain information regarding our portfolio is contained in Schedule III (Financial
Statement Schedule) under Part IV, Item 15(a) (2) and which is included in Part II, Item 8.
Our Warehouse Portfolio
As of December 31, 2019, we operated a global network of 178 warehouses that contained over one billion cubic feet and
approximately 3.6 million pallet positions. We believe that the volume of cubic feet in our warehouses and the number of pallets contained
therein provide a more meaningful measure of our storage space than warehouse surface area expressed in square feet as customers generally
contract for storage on a pallet-by-pallet basis, not on a square footage basis. Our warehouses feature customized racking systems that allow
for the storage of products on pallets in horizontal rows across vertically stacked levels. Our racking systems can accommodate a wide array
of different customer storage needs.
The following table provides summary information regarding the warehouses in our portfolio that we owned, leased or managed as of
December 31, 2019.
46
Country /
Region
Owned /
Leased (5)
United States
Central
East
Southeast
West
United States
Total /
Average
International
Australia
New
Zealand
Argentina
International
Total /
Average
Owned /
Leased Total /
Average
Third-Party
Managed
United States
Australia (6)
Canada
Third-Party
Managed
Total /
Average
Portfolio
Total /
Average
# of
warehouses
Cubic feet
(in millions)
% of
total
cubic
feet
Pallet
positions
(in thousands)
Average
economic
occupancy (1)
Average
physical
occupancy (1)
Revenues (2)
(in millions)
Applicable
segment
contribution
(NOI) (2)(3)
(in millions)
Total
customers (4)
41
28
47
37
256.1
216.0
245.6
230.0
25%
21%
24%
22%
1,011.3
670.8
707.0
981.9
80%
77%
82%
77%
77% $
314.5 $
73%
78%
72%
284.5
300.8
278.8
117.7
84.7
91.5
106.6
851
816
822
678
153
947.7
92%
3,371.0
79%
75% $
1,178.6 $
400.5
2,432
5
7
2
47.6
20.4
9.7
5%
2%
1%
138.8
83%
81% $
161.2 $
37.2
72.4
21.6
93%
79%
89%
79%
29.6
7.8
8.5
1.4
60
64
48
14
77.7
8%
232.8
86%
83% $
198.6 $
47.1
173
167
1,025.4
100%
3,603.8
80%
76% $
1,377.2 $
447.6
2,601
7
1
3
38.5
—
14.3
73%
—%
27%
—
—
—
11
52.8
100%
—
—
—
—
—
—
—
—
$
220.2 $
14.9
17.9
8.0
2.3
1.5
—
$
253.0 $
11.8
4
1
2
7
178
1,078.2
100%
3,603.8
80%
76% $
1,630.2 $
459.4
2,602
47
(1) We define average economic occupancy as the aggregate number of physically occupied pallets and any additional pallets otherwise contractually committed for a given
period, without duplication. We estimate the number of contractually committed pallet positions by taking into account actual pallet commitments specified in each
customer’s contract, and subtracting the physical pallet positions.
We define average physical occupancy as the average number of occupied pallets divided by the estimated number of average physical pallet positions in our warehouses
for the year ended December 31, 2019. We estimate the number of physical pallet positions by taking into account actual racked space and by estimating unracked space on
an as-if racked basis. We base this estimate on the total cubic feet of each room within the warehouse that is unracked divided by the volume of an assumed rack space that
is consistent with the characteristics of the relevant warehouse. On a warehouse by warehouse basis, rack space generally ranges from three to four feet depending upon the
type of facility and the nature of the customer goods stored therein. The number of our pallet positions is reviewed and updated quarterly, taking into account changes in
racking configurations and room utilization.
(2) Year ended December 31, 2019.
(3) We use the term “segment contribution (NOI)” to mean a segment’s revenues less its cost of operations (excluding any depreciation, depletion and amortization,
impairment charges and corporate-level selling, general and administrative expenses). The applicable segment contribution (NOI) from our owned and leased warehouses
and our third-party managed warehouses is included in our warehouse segment contribution (NOI) and third-party managed segment contribution (NOI), respectively. See
Item 6. Selected Financial Data for more information.
(4) We serve some of our customers in multiple geographic regions and in multiple facilities within geographic regions. As a result, the total number of customers that we serve
is less than the total number of customers reflected in the table above that we serve in each geographic region.
(5) As of December 31, 2019, we owned 133 of our U.S. warehouses and ten of our international warehouses, and we leased 20 of our U.S. warehouses and four of our
international warehouses. As of December 31, 2019, seven of our owned facilities were located on land that we lease pursuant to long-term ground leases.
(6) Constitutes non-refrigerated, or “ambient,” warehouse space. This facility contains 330,527 square feet of ambient space.
We own, develop and manage multiple types of temperature-controlled warehouses, which allows us to service our customers’ needs
across our network. Our warehouse portfolio consists of five distinct property types:
•
•
• Distribution. As of December 31, 2019, we owned or leased 61 distribution centers with approximately 495.2 million cubic feet of
temperature-controlled capacity and 1.5 million pallet positions. Distribution centers typically house a wide variety of customers’
finished products until future shipment to end users. Each distribution center is located in a key distribution hub that services a
distinct surrounding population center in a major market.
Public. As of December 31, 2019, we owned or leased 65 public warehouses with approximately 313.1 million cubic feet of
temperature-controlled capacity and 1.2 million pallet positions. Public warehouses generally store multiple types of inventory and
cater to small and medium-sized businesses by primarily serving the needs of local and regional customers.
Production Advantaged. As of December 31, 2019, we owned or leased 36 production advantaged warehouses with approximately
197.2 million cubic feet of temperature-controlled capacity and 0.9 million pallet positions. Production advantaged warehouses are
temperature-controlled warehouses that are typically dedicated to one or a small number of customers. Production advantaged
warehouses are generally located adjacent to or otherwise in close proximity to customer processing or production facilities and were
often build-to-suit at the time of their construction.
Facility Leased. As of December 31, 2019, we had five facility leased warehouses with approximately 19.9 million cubic feet of
temperature-controlled capacity. We charge our customers that are party to these leases rent based on the square footage leased in our
warehouses. Our facility leased warehouses are facilities that are leased to third parties, such as retailers, e-tailers, distributors,
transportation companies and food producers, that desire to manage their own temperature-controlled warehousing or carry on
processing operations generally in warehouses adjacent, or in close proximity, to their retail stores or production facilities. The
majority of our facility leased warehouses are leased to third parties under “triple net lease” arrangements.
Third-Party Managed. As of December 31, 2019, we managed 11 warehouses on behalf of third parties with approximately 52.8
million cubic feet of temperature-controlled capacity. We manage warehouses on behalf of third parties and provide warehouse
management services to several leading food retailers and
•
•
48
manufacturers in customer-owned facilities, including some of our largest and longest-standing customers. Our third-party managed
segment provides a complete outsourcing solution by managing all aspects of the distribution of our customers’ products, including
order management, reverse logistics, inventory control and, in some instances, dedicated transportation services for temperature-
controlled and ambient (i.e., non-refrigerated) customers.
ITEM 3. Legal Proceedings
From time to time, we may be party to a variety of legal proceedings arising in the ordinary course of our business. We are not a party
to, nor is any of our property a subject of, any material litigation or legal proceedings or, to the best of our knowledge, any threatened
litigation or legal proceedings which, in the opinion of management, individually or in the aggregate, would have a material impact on our
business, financial condition, liquidity, results of operations and prospects.
ITEM 4. Mine Safety Disclosures
Information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this Annual
Report on Form 10-K.
49
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Americold Realty Trust
Americold Realty Trust’s common shares are listed on the NYSE under the trading symbol “COLD”. Our common shares have been
publicly traded since January 19, 2018. Prior to that time, there was no public market for our common stock.
On February 26, 2020, we had approximately 200,164,155 common shares outstanding. This figure includes the 8,250,000 common
shares that were issued on January 2, 2020 upon settlement of our April 2019 forward sale agreement. This figure does not include the
6,000,000 common shares that may be issued if we elect to physically settle our September 2018 forward sale agreement with Bank of
America, N.A., as forward purchaser. The number of holders of record of our common shares on February 26, 2020 was two. This figure
does not represent the actual number of beneficial owners of our common shares because our common shares are frequently held in “street
name” by securities dealers and others for the benefit of beneficial owners who may vote the shares.
Our future common shares dividends, if and as declared, may vary and will be determined by our Board of Trustees upon the
circumstances prevailing at the time, including our financial condition, operating results, estimated taxable income and REIT distribution
requirements. These dividends, if and as declared, may be adjusted at the discretion of our board of trustees during the year. Refer to Item 7 -
Management’s Discussion & Analysis in this Annual Report on Form 10-K for further details on dividends declared.
Subject to the distribution requirements applicable to REITs under the Code, Americold Realty Trust intends, to the extent
practicable, to invest substantially all of the proceeds from sales and refinancing of its assets in real estate-related assets and other assets.
Americold Realty Trust may, however, under certain circumstances, make a dividend of capital or of assets. Such dividends, if any, will be
made at the discretion of Americold Realty Trust’s board of trustees.
Americold Realty Operating Partnership, L.P.
There is no established trading market for Americold Realty Operating Partnership, L.P.’s partnership units. As of February 26, 2020,
the only holders of record of partnership interests are Americold Realty Operating Partnership, L.P.’s general partner, Americold Realty
Trust, and Americold Realty Operating Partnership, L.P.’s sole limited partner bearing a 1% interest, Americold Realty Operations, Inc., a
wholly-owned subsidiary of the REIT. The Operating Partnership has also granted OP Units to certain members of the Board of Trustees
during 2019 and certain members of executive management of Americold Realty Trust during 2020. Upon vesting, these OP Units will
represent partnership units in the Operating Partnership that are not owned by Americold Realty Trust.
50
Stock Performance Graph
The following graph compares the change in the cumulative total stockholder return on Americold Realty Trust common stock during
the period from January 19, 2018 (the date of our IPO) through December 31, 2019, with the cumulative total returns on the MSCI US REIT
Index (RMZ) and the S&P 500 Market Index. The comparison assumes that $100 was invested on January 19, 2018 in Americold Realty
Trust common stock and in each of these indices and assumes reinvestment of dividends, if any.
Comparison of Cumulative Total Returns
Among Americold Realty Trust, S&P 500, and RMZ Index
Assumes $100 invested on January 19, 2018
Assumes dividends reinvested
To fiscal year ended December 31, 2019
51
Pricing Date
COLD ($)
S&P 500($)
RMZ($)
1/19/2018
3/29/2018
6/29/2018
9/28/2018
12/31/2018
3/29/2019
6/28/2019
9/30/2019
12/31/2019
100.00
109.00
127.97
147.59
151.79
188.35
202.61
234.25
224.06
100.00
94.22
97.57
105.03
90.82
103.00
107.35
109.24
119.05
100.00
95.84
104.38
104.43
96.30
113.59
113.93
121.52
119.34
•
•
•
This graph and the accompanying text are not “soliciting material,” are not deemed filed with the SEC and are not to be incorporated by reference in any
filing by us under the Securities Act of 1933, as amended, or the Security Exchange Act of 1934, as amended, whether made before or after the date
hereof and irrespective of any general incorporation language in any such filing.
The stock price performance shown on the graph is not necessarily indicative of future price performance.
The hypothetical investment in Americold Realty Trust’s common stock presented in the stock performance graph above is based on the closing price of
the common stock on January 19, 2018.
Sales of Unregistered Securities
None.
Purchases of Equity Securities
None.
Securities Authorized For Issuance Under Equity Compensation Plans
Information relating to compensation plans under which our common shares are authorized for issuance is set forth under Part III,
Item 12 of this Annual Report on Form 10-K and such information is incorporated by reference herein.
Use of Proceeds
On September 18, 2018, we completed a follow-on public offering of 4,000,000 common shares at a public offering price of $24.50
per share, which generated net proceeds of approximately $92.5 million after deducting the underwriting discount and estimated offering
expenses payable by us, and an additional 6,000,000 common shares that are subject to the 2018 forward sale agreement, which is currently
expected to be settled on or before September 2020. The term of the 2018 forward sale agreement was extended from its original settlement
date of September 2019. We did not initially receive any proceeds from the sale of the common shares subject to the 2018 forward sale
agreement that were sold by the forward purchaser or its affiliate. As of December 31, 2019, we have not settled any portion of the 2018
forward sale agreement. We expect to use the funds received upon settlement to support announced or potential future development,
expansion and acquisition opportunities.
52
In March 2019, we completed a secondary public offering in which certain funds affiliated with YF ART Holdings and the GS
entities sold their remaining interest in the Company, which consisted of 38,422,583 and 8,061,228 common shares, respectively, at $27.75
per share, which included 6,063,105 shares purchased by the underwriters upon the exercise in full of their option to purchase additional
shares. The selling shareholders received proceeds from the offering, which, net of underwriting fees, totaled $1.1 billion. We received no
proceeds and incurred fees of $1.5 million related to this offering.
On April 22, 2019, we completed a follow-on public offering of 42,062,000 common shares, including 6,562,000 common shares
pursuant to the exercise in full of the underwriters’ option to purchase additional common shares, at a public offering price of $29.75 per
share, which generated net proceeds of approximately $1.21 billion after deducting the underwriting discount and estimated offering expenses
payable by us, and an additional 8,250,000 common shares pursuant to the 2019 forward sale agreement. We did not initially receive any
proceeds from the sale of the common shares subject to the 2019 forward sale agreement that were sold by the forward purchaser or its
affiliate. The proceeds of the follow-on public offering were used to fund a portion of the Cloverleaf Acquisition. We used the cash proceeds
that we received upon settlement of the 2019 forward sale agreement on January 2, 2020 to fund the Nova Cold Acquisition.
On August 26, 2019, we entered into an equity distribution agreement pursuant to which we may sell, from time to time, up to an
aggregate sales price of $500.0 million of our common shares through “at the market” offerings (the “ATM Equity Program”). Sales of our
common shares made pursuant to the ATM Equity Program may be made in negotiated transactions or transactions that are deemed to be “at
the market” offerings as defined in Rule 415 under the Securities Act, including sales made directly on the NYSE, or sales made to or through
a market maker other than on an exchange, or as otherwise agreed between the applicable agent and us. Sales may also be made on a forward
basis pursuant to separate forward sale agreements. We intend to use the net proceeds from sales of our common shares pursuant to the ATM
Equity Program for general corporate purposes, which may include funding acquisitions and development projects. There were no common
shares sold under the ATM Equity Program during 2019.
Other Shareholder Matters
None.
53
ITEM 6. Selected Financial Data
Selected Company Financial and Other Data (Americold Realty Trust)
The following tables show our selected consolidated financial data for Americold Realty Trust and the Operating Partnership and
their respective subsidiaries for the periods indicated. This information should be read together with the audited financial statements and
notes thereto of Americold Realty Trust and its subsidiaries and the Operating Partnership and its subsidiaries and with “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report. Certain prior year
amounts have been reclassified to conform to the current year presentation. The select financial data below for 2019 includes the results of
the PortFresh Acquisition on February 1, 2019, the Cloverleaf Acquisition and Lanier Acquisition on May 1, 2019 and the MHW Acquisition
on November 19, 2019.
Consolidated Statements of Operations Data:
Warehouse segment revenues
Total revenues
Operating income
Net income (loss) attributable to Americold Realty Trust
Total warehouse segment contribution (NOI) (1)
Total segment contribution (NOI) (1)
Consolidated Statement of Cash Flows Data:
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Per Share Data:
Net income (loss) attributable to common shareholders per common
share
Basic
Diluted
Common share dividends paid
Dividends paid per common share
Weighted average common shares outstanding:
Basic
Diluted
Selected Other Data:
EBITDA (2)
Core EBITDA (2)
Funds from operations (3)
Core funds from operations (3)
Adjusted funds from operations (3)
2019
2018
2017
2016
2015
Year ended December 31,
(In thousands)
$
1,377,217 $
1,176,912 $
1,145,662 $
1,080,867 $
1,783,705
1,603,635
1,543,587
1,489,999
131,466
48,162
447,591
478,257
179,960
47,985
374,534
405,649
136,989
(608)
348,328
374,105
132,124
4,932
314,045
345,645
1,057,124
1,481,385
112,502
(21,176)
307,749
337,020
$
$
$
$
$
$
236,189 $
188,171
$
163,327
$
118,781
$
106,521
(1,604,934)
1,395,371
(125,703)
84,942
(138,831)
(18,604)
(41,653)
(95,322)
26,626 $
147,410 $
5,892 $
(18,194) $
(51,532)
(28,120)
26,869
Year ended December 31,
2019
2018
2017
2016
2015
(In thousands, except per share data)
0.26 $
0.26 $
135,443 $
0.75 $
0.31 $
0.31 $
76,523 $
0.54 $
(0.43) $
(0.43) $
20,214 $
0.29 $
(0.35) $
(0.35) $
20,214 $
0.29 $
179,598
183,950
141,415
144,338
70,022
70,022
69,890
69,890
255,331
306,777
130,644
174,993
170,433
240,424
287,145
96,483
106,093
94,616
248,934
261,362
90,561
69,207
71,125
300,761
367,128
176,899
219,721
214,530
54
(0.73)
(0.73)
20,214
0.29
69,758
69,758
230,891
253,638
75,065
55,697
59,754
Consolidated Balance Sheet Data:
Cash and cash equivalents
Total assets
Total debt
Total shareholders’ equity (deficit)
Ratio Data:
Net debt to Core EBITDA (4)
As of December 31,
2019
2018
2017
(In thousands)
$
234,303 $
208,078 $
4,170,683
1,869,376
1,833,018
2,532,428
1,510,721
706,755
48,873
2,394,897
1,901,090
(186,924)
As of December 31,
2019
2018
2017
4.2x
4.3x
6.6x
(1) We evaluate the performance of our business segments based on their contribution (NOI) to our overall results of operations. We use the term “segment contribution
(NOI)” to mean a segment’s revenues less its cost of operations (excluding any depreciation, depletion and amortization, impairment, corporate-level selling, general and
administrative, corporate-level acquisition, litigation and other and gains or losses on sale of real estate). We use segment contribution (NOI) to evaluate our segments
for purposes of making operating decisions and assessing performance in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards
Codification, or ASC, Topic 280, Segment Reporting.
We also calculate our total segment contribution (NOI) as the sum of the segment contribution (NOI) for each of our business segments. We believe our total segment
contribution (NOI) is helpful to investors because it gives a picture of our business’s profitability before differences in capital structures, capital investment cycles,
useful life of related assets among otherwise comparable companies and corporate-level overhead which is not immediately and fully correlated with the provision of
services by our business.
The following table reconciles same store contribution (NOI) to operating income, which is the most directly comparable financial measure calculated in accordance
with U.S. GAAP.
Warehouse segment contribution (NOI)
Third-party managed segment contribution (NOI)
Transportation segment contribution (NOI)
Other segment contribution (NOI)
Total segment contribution (NOI)
Depreciation, depletion and amortization
Selling, general and administrative
Acquisition, litigation and other
Impairment of long-lived assets
(Loss) gain from sale of real estate, net
U.S. GAAP operating income
Year ended December 31,
2019
2018
2017
2016
2015
(In thousands)
$
$
447,591 $
374,534 — $
348,328 — $
314,045 $— $
307,749
11,761
18,067
838
14,760
15,735
620
12,825
12,950
2
14,814
14,418
2,368
478,257 $
405,649
$
374,105
$
345,645
$
(163,348)
(129,310)
(40,614)
(13,485)
(34)
(117,653)
(110,825)
(3,935)
(747)
7,471
(116,741)
(99,616)
(11,329)
(9,473)
43
(118,571)
(91,067)
(5,661)
(9,820)
11,598
12,581
14,305
2,385
337,020
(125,720)
(87,204)
(1,582)
(9,415)
(597)
$
131,466 $
179,960
$
136,989
$
132,124
$
112,502
(2) We calculate EBITDA as earnings before interest expense, taxes, depreciation, depletion and amortization. EBITDA is a measure commonly used in our industry, and we
present EBITDA to enhance investor understanding of our operating performance. We believe that EBITDA 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 EBITDA adjusted for asset impairment charges, gain or loss on depreciable real property and other asset disposals, acquisition,
litigation and other expenses, bridge loan commitment fees, loss on debt extinguishment and modifications, share-based compensation expense, foreign currency exchange
gain or loss, loss on partially owned entities, gain on sale of partially owned entities, impairment of partially owned entities, and multi-employer pension plan withdrawal
expense. 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 EBITDA but which we do not believe are indicative of our core business operations. EBITDA and Core EBITDA are not
measurements of financial performance under U.S. GAAP, and our EBITDA and Core EBITDA may not be comparable to similarly titled measures of other companies.
You should not consider our EBITDA and Core EBITDA as alternatives to net income or cash flows from operating activities determined in accordance with U.S. GAAP.
Our calculations of EBITDA and Core EBITDA have limitations as analytical tools, including:
55
•
•
•
•
•
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 EBITDA and Core EBITDA as measures of our operating performance and not as measures of liquidity. The following table reconciles EBITDA and Core
EBITDA to net income, which is the most directly comparable financial measure calculated in accordance with U.S. GAAP.
Net income (loss) attributable to Americold Realty Trust
Adjustments:
Depreciation, depletion and amortization
Interest expense
Income tax (benefit) expense
EBITDA
Adjustments:
$
$
Acquisition, litigation and other, excluding 2018 RSU modification
expense(a)
Bridge loan commitment fees
Loss from partially owned entities
Gain from sale of partially owned entities
Impairment of partially owned entities (b)
Asset impairment
Foreign currency exchange (gain) loss, net
Share-based compensation expense
Loss on debt extinguishment, modifications and termination of
derivative instruments
Loss (gain) on real estate and other asset disposals
Multi-employer pension plan withdrawal expense
Year ended December 31,
2019
2018
2017
2016
2015
48,162
$
47,985
$
(608)
$
4,932
$
(21,176)
(In thousands)
163,348
94,408
(5,157)
117,653
93,312
(3,619)
116,741
114,898
9,393
118,571
119,552
5,879
300,761 $
255,331 $
240,424 $
248,934 $
125,720
116,710
9,637
230,891
40,614
2,665
111
(4,297)
—
13,485
(10)
12,895
—
904
—
1,893
—
1,069
—
—
747
(2,882)
10,683
47,559
(7,623)
—
11,329
—
1,363
—
6,496
11,581
3,591
2,358
986
(150)
9,167
5,661
—
128
—
—
9,820
(464)
6,436
1,437
(10,590)
—
1,582
—
3,538
—
—
9,415
3,470
3,108
503
1,131
—
Core EBITDA
$
367,128 $
306,777 $
287,145 $
261,362 $
253,638
(a) Refer to Note 8 of the Consolidated Financial Statements for further details. The 2018 total excludes the $2.1 million RSU modification charge that is included within
“Acquisition, litigation and other” on the Consolidated Statement of Operations, thus amounts do not tie in total. Refer to Note 17 of the Consolidated Financial
Statements for further details regarding the $2.1 million charge for historical RSU grants to receive dividend equivalents, consistent with treatment of RSU grants post-
IPO.
(b) 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 expected to receive from the China JV. Prior to the ultimate sale, we had not received any cash distributions from the China JV
since the formation of the joint venture.
56
(3) 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, real estate asset impairment 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-real estate asset
impairment, acquisition, litigation and other expenses, excluding 2018 RSU modification expense, share-based compensation, IPO grants, bridge loan commitment fees,
impairment of partially owned entities, bridge loan commitment fees, loss on debt extinguishment and modifications and termination of derivative instruments, inventory
asset impairment charges, foreign currency exchange gain or loss, gain from sale of partially owned entities, excise tax settlement, Tax Cuts and Jobs Act benefit, and
multi-employer pension plan withdrawal expense. 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, share-based compensation expense from grants of stock options and restricted stock
units under our equity incentive plans, non-real estate depreciation and 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 elsewhere in this Annual Report on Form 10-K. 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 following table 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.
57
Net income (loss) attributable to Americold Realty Trust
$
48,162
$
47,985
(In thousands)
(608)
$
$
4,932
$
(21,176)
2019
2018
2017
2016
2015
Year ended December 31,
Adjustments:
Real estate related depreciation
Net loss (gain) on sale of depreciable real estate
Net loss (gain) on asset disposals
Impairment charges on certain real estate assets
Real estate depreciation on China JV
Funds from operations
Less distributions on preferred shares of beneficial interest
114,976
34
382
12,555
790
88,246
(7,471)
(65)
747
1,202
86,478
(43)
—
9,473
1,183
176,899
130,644
—
(1,817)
96,483
(28,452)
85,645
(11,104)
—
9,820
1,268
90,561
(28,452)
Funds from operations attributable to common shareholders
$
176,899 $
128,827 $
68,031 $
62,109 $
Adjustments:
Net loss (gain) on sale of non-real estate assets
Non-real estate asset impairment
Acquisition, litigation and other expenses, excluding 2018 RSU
modification expense (a)
Share-based compensation expense, IPO grants
Impairment of partially owned entities (b)
Bridge loan commitment fees
Loss on debt extinguishment, modifications and termination of derivative
instruments
Inventory asset impairment charges
Foreign currency exchange (gain) loss, net
Gain from sale of partially owned entities
Alternative minimum tax receivable from TCJA
Excise tax settlement
Multi-employer pension plan withdrawal expense
Core FFO applicable to common shareholders
Adjustments:
Amortization of loan costs and debt discounts
Amortization of below/above market leases
Straight-line net rent
Deferred income taxes benefit
Share-based compensation expense
Non-real estate depreciation and amortization
Non-real estate depreciation and amortization on China JV
Recurring maintenance capital expenditures (c)
488
930
40,614
2,432
—
2,665
—
—
(10)
(739)
—
1,893
4,208
—
—
47,559
—
(2,882)
(4,297)
—
—
—
—
(3,745)
(128)
—
(599)
—
464
—
11,329
5,661
1,582
—
6,496
—
986
2,108
3,591
—
—
4,984
9,167
—
—
—
1,437
—
(464)
—
—
—
—
—
—
—
503
3,704
3,470
—
—
—
—
$
219,721 $
174,993 $
106,093 $
69,207 $
55,697
6,028
151
(521)
(10,701)
10,463
48,372
317
6,176
151
(179)
(3,152)
6,474
29,407
538
(59,300)
(43,975)
8,604
151
101
(3,658)
2,358
30,263
610
(49,906)
7,193
196
(564)
(586)
6,436
32,926
762
(44,445)
88,717
597
—
5,711
1,216
75,065
(28,452)
46,613
(175)
—
6,672
520
(516)
(2,292)
3,108
37,003
1,247
(41,685)
59,754
Adjusted FFO applicable to common shareholders
$
214,530 $
170,433 $
94,616 $
71,125 $
(a) Refer to Note 8 of the Consolidated Financial Statements for further details. The 2018 total excludes the $2.1 million RSU modification charge that is included within
“Acquisition, litigation and other” on the Consolidated Statement of Operations, thus amounts do not tie in total. Refer to Note 17 of the Consolidated Financial
Statements for further details regarding the $2.1 million charge for historical RSU grants to receive dividend equivalents, consistent with treatment of RSU grants post-
IPO.
(b) 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.
(c) 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. For additional information regarding these
expenditures, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recurring Maintenance Capital Expenditures and
Repair and Maintenance Expenses” in Item 7 of this Annual Report on Form 10-K.
58
(4)
Net debt to Core EBITDA represents (i) our gross debt (defined as total debt plus discount and deferred financing costs) less cash and cash equivalents divided by
(ii) Core EBITDA. Core EBITDA for 2019 for purposes of this calculation assumes ownership of our acquisitions for the full twelve months of the year. Our
management believes that this ratio is useful because it provides investors with information regarding gross debt less cash and cash equivalents, which could be used to
repay debt, compared to our performance as measured using Core EBITDA.
The following table reconciles net debt to total debt, which is the most directly comparable financial measure calculated in accordance with U.S. GAAP:
Total debt
Deferred financing costs
Gross debt
Adjustments:
Less: cash and cash equivalents
Net debt
As of December 31,
2019
2018
(In thousands)
$
1,869,376 $
1,510,721
12,996
1,882,372
13,943
1,524,664
234,303
208,078
$
1,648,069 $
1,316,586
Selected Company Financial and Other Data (Americold Realty Operating Partnership, L.P.)
The following tables summarize selected financial data related to our historical financial condition and results of operations for our Operating
Partnership:
Consolidated Statements of Operations Data:
Net income (loss) attributable to the Partnership
Per Share Data:
General partners’ interest in net income (loss) attributable to
unitholders
Limited partners’ interest in net income (loss) attributable to
unitholders
General partners’ net income (loss) per unit
Limited partners’ net income (loss) per unit
Distributions paid
General partners’ distributions paid per unit
Limited partners’ distributions paid per unit
$
$
$
Year ended December 31,
2019
2018
2017
2016
2015
(In thousands, except per unit data)
48,162 $
47,985 $
(608) $
4,932 $
(21,176)
47,680 $
47,505 $
(602) $
4,883 $
(20,964)
482
0.27
0.27
480
0.34
0.34
(6)
(0.01)
(0.01)
49
0.07
0.07
135,443
86,679
48,666
48,666
0.76
0.76 $
0.62
0.62 $
0.70
0.70 $
0.70
0.70 $
(212)
(0.31)
(0.31)
48,666
0.70
0.70
68,677
694
General partners’ weighted average units outstanding
Limited partners’ weighted average units outstanding
177,180
1,790
139,394
1,408
68,677
694
68,677
694
Consolidated Balance Sheet Data:
Cash and cash equivalents
Total assets
Total debt
General partners’ capital
Limited partners’ capital
As of December 31,
2019
2018
2017
(In thousands)
$
234,303 $
208,078 $
4,170,683
1,869,376
1,828,673
18,471
2,532,428
1,510,721
712,078
7,192
48,873
2,394,897
1,901,090
184,240
1,860
All other selected financial and other data is the same for Americold Realty Trust and Americold Realty Operating Partnership, L.P. except
amounts attributable to common shareholders and unitholders.
59
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our
consolidated financial statements included in this Annual Report on Form 10-K. In addition, the following discussion contains forward-
looking statements, such as statements regarding our expectation for future performance, liquidity and capital resources, that involve risks,
uncertainties and assumptions that could cause actual results to differ materially from our expectations. Our actual results may differ
materially from those contained in or implied by any forward-looking statements. Factors that could cause such differences include those
identified below and those described under Item 1A of this Annual Report on Form 10-K.
Management’s Overview
We are the world’s largest publicly traded REIT focused on the ownership, operation, acquisition and development of temperature-
controlled warehouses. We are organized as a self-administered and self-managed REIT with proven operating, development and acquisition
expertise. As of December 31, 2019, we operated a global network of 178 temperature-controlled warehouses encompassing over one billion
cubic feet, with 160 warehouses in the United States, six warehouses in Australia, seven warehouses in New Zealand, two warehouses in
Argentina and three warehouses in Canada. We view and manage our business through three primary business segments: warehouse, third–
party managed and transportation. We also own and operate a limestone quarry through a separate business segment.
Components of Our Results of Operations
Warehouse. Our primary source of revenues consists of rent, storage and warehouse services fees. Our rent, storage and warehouse
services revenues are the key drivers of our financial performance. Rent and storage revenues consist of recurring, periodic charges related to
the storage of frozen and perishable food and other products in our warehouses by our customers. We also provide these customers with a
wide array of handling and other warehouse services, such as (1) receipt, handling and placement of products into our warehouses for storage
and preservation, (2) retrieval of products from storage upon customer request, (3) blast freezing, which involves the rapid freezing of non-
frozen products, including individual quick freezing for agricultural produce and seafood, (4) case-picking, which involves selecting product
cases to build customized pallets, (5) kitting and repackaging, which involves assembling custom product packages for delivery to retailers
and consumers, and labeling services, (6) order assembly and load consolidation, (7) exporting and importing support services, (8) container
handling, (9) cross-docking, which involves transferring inbound products to outbound trucks utilizing our warehouse docks without storing
them in our warehouses, and (10) government-approved temperature-controlled storage and inspection services. We refer to these handling
and other warehouse services as our value-added services.
Cost of operations for our warehouse segment consists of power, other facilities costs, labor, and other costs. Labor, the largest
component of the cost of operations from our warehouse segment, consists primarily of employee wages, benefits, and workers’
compensation. Trends in our labor expense are influenced by changes in headcount and compensation levels, changes in customer
requirements, workforce productivity, variability in costs associated with medical insurance and the impact of workplace safety programs,
inclusive of the number and severity of workers’ compensation claims. Our second largest cost of operations from our warehouse segment is
power utilized in the operation of our temperature-controlled warehouses. As a result, trends in the price for power in the regions where we
operate may have a significant effect on our financial results. We may from time to time hedge our exposure to changes in power prices
through fixed rate agreements or, to the extent possible and appropriate, through rate escalations or power surcharge provisions within our
customer contracts. Additionally,
60
business mix impacts power expense depending on the type of freezing required. Other facilities costs include utilities other than power,
property insurance, property taxes, sanitation, repairs and maintenance on real estate, rent under real property operating leases, where
applicable, and other related facilities costs. Other services costs include equipment costs, warehouse consumables (e.g., shrink-wrap and
uniforms), warehouse administration and other related services costs.
Third-Party Managed. We receive a reimbursement of substantially all expenses for warehouses that we manage on behalf of third-
party owners, with all reimbursements recognized as revenues under the relevant accounting guidance. We also earn management fees,
incentive fees upon achieving negotiated performance and cost-savings results, or an applicable mark-up on costs. Cost of operations for our
third-party managed segment is reimbursed on a pass-through basis (typically within two weeks).
Transportation. We charge transportation fees, including fuel surcharges, to our customers for whom we arrange the transportation of
their products. Cost of operations for our transportation segment consists primarily of third-party carrier charges, which are impacted by
factors affecting those carriers. Additionally, in connection with the Cloverleaf Acquisition, we acquired trucks and employees that support
certain customers within the Cloverleaf network.
Other. In addition to our primary business segments, we own and operate a limestone quarry in Carthage, Missouri. Revenues are
generated from the sale of limestone mined at our quarry. Cost of operations for our quarry consists primarily of labor, equipment, fuel and
explosives. We have referred to this segment as Quarry within our Management’s Discussion and Analysis.
Other Consolidated Operating Expenses. We also incur depreciation, depletion and amortization expenses, corporate-level selling,
general and administrative expenses and corporate-level acquisition, litigation and other expenses.
Our depreciation, depletion and amortization charges result primarily from the capital-intensive nature of our business. The principal
components of depreciation relate to our warehouses, including buildings and improvements, refrigeration equipment, racking, leasehold
improvements, material handling equipment, furniture and fixtures, and our computer hardware and software. Depletion relates to the
reduction of mineral resources resulting from the operation of our limestone quarry. Amortization relates primarily to intangible assets for
customer relationships.
Our corporate-level selling, general and administrative expenses consist primarily of wages and benefits for management,
administrative, business development, account management, marketing, engineering, supply-chain solutions, human resources and
information technology personnel, as well as expenses related to equity incentive plans, communications and data processing, travel,
professional fees and public company costs, bad debt, training, office equipment and supplies. Trends in corporate-level selling, general and
administrative expenses are influenced by changes in headcount and compensation levels, achievement of incentive compensation targets,
and variability in costs associated with pension obligations. To position ourselves to meet the challenges of the current business environment,
we have implemented a shared services support structure to better manage costs and enhance the efficiency of our operations.
Our corporate-level acquisition, litigation and other expenses consist of costs that we view outside of selling, general and
administrative expenses with a high level of variability from period-to-period, and include the following:
• Acquisition related costs include costs associated with transactions, whether consummated or not, such as advisory, legal,
accounting, valuation and other professional or consulting fees. We also include integration costs pre- and post-acquisition
that reflect work being performed to facilitate
61
•
•
•
merger and acquisition integration, such as employee retention expense and work associated with information systems and
other projects including spending to support future acquisitions, which primarily consist of professional services.
Litigation costs incurred in order to defend the Company from litigation charges outside of the normal course of business and
related settlement costs.
Severance costs representing certain contractual and negotiated severance and separation costs from exited former executives,
reduction in headcount due to synergies achieved through acquisitions or operational efficiencies, and reduction in workforce
costs associated with exiting or selling non-strategic warehouses.
Equity acceleration costs representing the unrecognized expense for share-based awards that vest and convert to common
shares in advance of the original negotiated vesting date and any other equity award changes resulting in accounting for the
award as a modification.
• Non-offering related equity issuance expenses whether incurred through our initial public offering, follow-on offerings or
secondary offerings.
• Non-recurring public company implementation costs associated with the implementation of financial reporting systems and
•
processes needed to convert the organization to a public reporting company.
Terminated site operations costs represent expenses incurred to repair expenses incurred to return leased sites to their original
physical state at lease inception in connection with the termination of the applicable underlying lease. These terminations
were part of our strategic efforts to exit or sell non-strategic warehouses as opposed to ordinary course lease expirations.
Repair and maintenance expenses associated with our ordinary course operations are reflected as operating expenses on our
consolidated statement of operations.
Key Factors Affecting Our Business and Financial Results
Acquisitions
On February 1, 2019, we completed the PortFresh Acquisition for a purchase price of approximately $35.9 million, utilizing available
cash on hand. PortFresh consisted of one facility operating near the port of Savannah, Georgia and adjacent land upon which we have begun
to construct a newly developed facility. Since the date of acquisition, we have reported the results of the acquired facility within our
Warehouse segment.
On May 1, 2019, we completed the Cloverleaf Acquisition for a purchase price of approximately $1.24 billion, utilizing the $1.21
billion net proceeds from our April 2019 follow-on offering and cash drawn from our senior unsecured revolving credit facility. Cloverleaf
was the fifth largest temperature-controlled warehousing provider in the United States, based in Sioux City, Iowa that consisted of 22
facilities in nine states. Cloverleaf also generates income through a small component of transportation operations. Since the date of
acquisition, we have reported the results of 21 facilities within our warehouse segment, the results of one facility within our third-party
managed segment and the results of Cloverleaf’s transportation operations within our transportation segment.
Also, on May 1, 2019, we completed the Lanier Acquisition for approximately $81.9 million utilizing cash drawn from our senior
unsecured revolving credit facility. Lanier consisted of two temperature-controlled storage facilities in Georgia serving the poultry industry.
Since the date of acquisition, we have reported the results of these facilities within our warehouse segment.
On November 19, 2019, we completed the MHW Acquisition for a purchase price of approximately $50.1 million, net of cash
received. MHW consisted of two temperature-controlled storage facilities, one located in
62
Chambersburg, Pennsylvania and another in Perryville, Maryland. Since the date of acquisition, we have reported the results of these
facilities within our warehouse segment.
Our results of operations for the year ended December 31, 2019 includes the one month and partial period of November for the
activity of the MHW Acquisition, eight months of activity for the Cloverleaf Acquisition and Lanier Acquisition, and eleven months of
activity for the PortFresh Acquisition. Refer to Notes 2 and 3 to the Consolidated Financial Statements in this Annual Report on Form 10-K
for further information.
Foreign Currency Translation Impact on Our Operations
Our consolidated revenues and expenses are subject to variations caused by the net effect of foreign currency translation on revenues
and expenses incurred by our operations outside the United States. Future fluctuations of foreign currency exchange rates and their impact on
our Consolidated Statements of Operations are inherently uncertain. As a result of the relative size of our international operations, these
fluctuations may be material on our results of operations. Our revenues and expenses from our international operations are denominated in
the local currency of the country in which they are derived or incurred. Therefore, the impact of foreign currency fluctuations on our results
of operations and margins is partially mitigated.
The following table shows a comparison of underlying average exchange rates of the foreign currencies that impacted our U.S. dollar-
reported revenues and expenses during the periods discussed herein together with a comparison against the exchange rates of such currencies
at the end of the applicable periods presented herein. The rates below represent the U.S. dollar equivalent of one unit of the respective foreign
currency. Amounts presented in constant currency within our results of operations are calculated by applying the average foreign exchange
rate from the comparable prior year period to actual local currency results in the current period, rather than the actual exchange rates in effect
during the respective period. While constant currency metrics are a non-GAAP calculation and do not represent actual results, the comparison
allows the reader to understand the impact of the underlying operations in addition to the impact of changing foreign exchange rates.
Foreign Currency
Australian dollar
New Zealand dollar
Argentine peso
Canadian dollar
Foreign
exchange
rates as of
December 31,
2019
Average foreign exchange rates
used to translate actual operating
results for the year ended
December 31, 2019
Foreign
exchange
rates as of
December 31,
2018
Prior period average
foreign exchange rate
used to adjust actual operating
results for the year ended
December 31, 2019(1)
0.703
0.675
0.017
0.772
0.695
0.659
0.021
0.754
0.705
0.671
0.037
0.733
0.747
0.692
0.036
0.772
(1) Represents the relevant average foreign exchange rates in effect in the comparable prior period applied to the activity for the current period. The average
foreign currency exchange rates we apply to our operating results are derived from third party reporting sources for the periods indicated.
Focus on Our Operational Effectiveness and Cost Structure
We continuously seek to execute on various initiatives aimed at streamlining our business processes and reducing our cost structure,
including: realigning and centralizing key business processes and fully integrating acquired assets and businesses; implementing standardized
operational processes; integrating and launching new information technology tools and platforms; instituting key health, safety, leadership
and training programs; and capitalizing on the purchasing power of our network. Through the realignment of our business processes, we have
acquired new talent and strengthened our service offerings. In order to reduce costs in our facilities, we have invested in energy efficiency
projects, including LED lighting, thermal energy storage, motion-sensor technology,
63
variable frequency drives for our fans and compressors, third party efficiency reviews and real-time monitoring of energy consumption, rapid
open and close doors, and alternative-power generation technologies to improve the energy efficiency of our warehouses. We have also
performed fine-tuning of our refrigeration systems, deployed efficient energy management practices, such as time-of-use and awareness, and
have increased our participation in Power Demand Response programs with some of our power suppliers. These initiatives have allowed us to
reduce our consumption of kilowatt hours and energy spend.
As part of our initiatives to streamline our business processes and to reduce our cost structure, we have evaluated and exited less
strategic and profitable markets or business lines, including the sale of certain warehouse assets, the exit of certain leased facilities, the exit of
certain managed warehouse agreements and the exit of the China JV(see Note 4 to the Consolidated Financial Statements in this Annual
Report on Form 10-K for more information regarding the China JV). Through our process of active portfolio management, we continue to
evaluate our markets and offerings.
Strategic Shift within Our Transportation Segment
In order to better focus our business on the operation of our temperature-controlled warehouses, we have undertaken a strategic shift
in the solutions we provide in our transportation segment. As a result of this strategic shift, we have gradually exited certain commoditized,
non-scalable, or low margin services we historically offered to our customers, including traditional brokered transportation services. We
continue to offer more profitable and value added programs, such as national and regional cross-dock, regional and multi-vendor
consolidation service, and dedicated transportation services. We designed each of these programs to improve efficiency and reduce
transportation and logistics costs to our warehouse customers, whose transportation spend typically represents the majority of their supply-
chain costs. We believe this efficiency and cost reduction helps to drive increased occupancy in our temperature-controlled warehouses.
Historically Significant Customer
For the years ended December 31, 2019, 2018, and 2017 one customer accounted for more than 10% of our total revenues, with
revenues received of $211.1 million, $212.8 million and $198.6 million, respectively. The substantial majority of this customer’s business
relates to our third-party managed segment. We are reimbursed for substantially all expenses we incur in managing warehouses on behalf of
third-party owners. We recognize these reimbursements as revenues under applicable accounting guidance, but generally do not affect our
financial results because they are offset by the corresponding expenses that we recognize in our third-party managed segment cost of
operations. Of the revenues received from this customer, $195.4 million ,$196.3 million, and $183.1 million represented reimbursements for
certain expenses we incurred during the years ended December 31, 2019, 2018 and 2017, respectively, that were offset by matching expenses
included in our third-party managed cost of operations.
Economic Occupancy of our Warehouses
We define average economic occupancy as the aggregate number of physically occupied pallets and any additional pallets otherwise
contractually committed for a given period, without duplication. We estimate the number of contractually committed pallet positions by
taking into account the actual pallet commitment specified in each customers’ contract, and subtracting the physical pallet positions. We
regard economic occupancy as an important driver of our financial results. Historically, providers of temperature-controlled warehouse space
have offered storage services to customers on an as-utilized, on-demand basis. We actively seek to enter into contracts that implement our
commercial business rules which contemplate, among other things, fixed storage commitments in connection with establishing new customer
relationships. Additionally, we actively seek opportunities to transition our current customers to contracts that feature a fixed storage
commitment when
64
renewing existing agreements or upon the change in the anticipated profile of our customer. This strategy mitigates the impact of changes in
physical occupancy throughout the course of the year due to seasonality, as well as other factors that can impact physical occupancy.
Throughput at our Warehouses
The level and nature of throughput at our warehouses is an important factor impacting our warehouse services revenues in our
warehouse segment. Throughput refers to the volume of pallets that enter and exit our warehouses. Higher levels of throughput drive
warehouse services revenues in our warehouse segment as customers are typically billed on a basis that takes into account the level of
throughput of the goods they store in our warehouses. The nature of throughput may be driven by the expected turn of the underlying product
or commodity.
How We Assess the Performance of Our Business
Segment Contribution (NOI)
We evaluate the performance of our primary business segments based on their contribution (NOI) to our overall results of operations.
We use the term “segment contribution (NOI)” to mean a segment’s revenues less its cost of operations (excluding any depreciation,
depletion and amortization, impairment charges, corporate-level selling, general and administrative expenses and corporate-level acquisition,
litigation and other expenses). We use segment contribution (NOI) to evaluate our segments for purposes of making operating decisions and
assessing performance in accordance with FASB ASC, Topic 280, Segment Reporting.
We also analyze the “segment contribution (NOI) margin” for each of our business segments, which we calculate as segment
contribution (NOI) divided by segment revenues.
In addition to our segment contribution (NOI) and segment contribution (NOI) margin, we analyze the contribution (NOI) of our
warehouse rent and storage operations and our warehouse services operations within our warehouse segment. We calculate the contribution
(NOI) of our warehouse rent and storage operations as rent and storage revenues less power and other facilities cost. We calculate the
contribution (NOI) of our warehouse services operations as warehouse services revenues less labor and other service costs. We calculate the
contribution (NOI) margin for each of these operations as the applicable contribution (NOI) measure divided by the applicable revenue
measure. We believe the presentation of these contribution (NOI) and contribution (NOI) margin measures helps investors understand the
relative revenues, costs and earnings resulting from each of these separate types of services we provide to our customers in the same manner
reviewed by our management in connection with the operation of our business. These contribution (NOI) measures within our warehouse
segment are not measurements of financial performance under U.S. GAAP, and these measures should be considered as supplements, but not
as alternatives, to our results calculated in accordance with U.S. GAAP. We provide reconciliations of these measures in the discussions of
our comparative results of operations below.
65
Same Store Analysis
We refer to a “same store” as a warehouse we owned or leased for the entirety of two comparable periods and which has reported at
least twelve months of consecutive normalized operations prior to the commencement of the earlier period being considered. We define
“normalized operations” as a site open for operation or lease after a warehouse acquisition, development or significant modification,
including the expansion of a warehouse footprint or a warehouse rehabilitation subsequent to an extraordinary event, such as natural disasters
or similar events. In addition, our definition of “normalized operations” takes into account changes in the ownership structure (e.g.,
acquisition of a previously leased warehouse would result in different charges in the compared periods), which would impact comparability in
our warehouse segment contribution (NOI). Warehouses are excluded from the same store population as of the beginning of the fiscal quarter
following the occurrence of such events. We evaluate our same store portfolio on a quarterly basis.
We calculate “same store contribution (NOI)” as revenues for the same store population less its cost of operations (excluding any
depreciation, depletion and amortization, impairment charges and corporate-level selling, general and administrative expenses, corporate-
level acquisition, litigation and other expenses and gain or loss on sale of real estate). In order to derive an appropriate measure of period-to-
period operating performance, we also calculate our same store contribution (NOI) on a constant currency basis to remove the effects of
foreign currency exchange rate movements by using the comparable prior period exchange rate to translate from local currency into
U.S. dollars for both periods. We evaluate the performance of the warehouses we own or lease using a “same store” analysis, and we believe
that same store contribution (NOI) is helpful to investors as a supplemental performance measure because it includes the operating
performance from the population of properties that is consistent from period to period and also on a constant currency basis, thereby
eliminating the effects of changes in the composition of our warehouse portfolio and currency fluctuations on performance measures.
The following table shows the number of same-store warehouses in our portfolio and the number of warehouses excluded as same-
store warehouses for the year ended December 31, 2019. While not included in the non-same store warehouse count in the table below, the
results of operations for the non-same store warehouses includes the partial period impact of the sites that were exited during the year ended
December 31, 2019, as described in footnote 2 following the table.
Total Warehouses
Same Store Warehouses (1)
Non-Same Store Warehouses (1)
Third-Party Managed Warehouses (2)
178
136
31
11
(1) During 2019, we acquired one facility in connection with the PortFresh Acquisition, two facilities in connection with the Lanier Acquisition, 21
facilities in connection with the Cloverleaf Acquisition and two facilities in connection with the MHW Acquisition, all of which were added to the non-same store
population. During 2019, one facility was moved from the non-same store population to the same store population as a result of achieving normalized operations
following an event in 2015 that resulted in an extended period of business interruption. One of our Australia campus locations was moved from the same store
population to the non-same store population as we exited a leased facility and transitioned the business to the remaining owned facilities within its campus, and one
leased warehouse was fully exited during the third quarter of 2019 resulting in a decrease to our warehouse count. Finally, the only remaining idle facility in our
portfolio within the non-same store population was sold during 2019.
(2) During 2019, we exited a third-party managed warehouse, which was operated under a joint venture agreement, upon termination of the agreement and
return of our capital investment. Additionally, we exited the operations of one facility in the third-party managed segment for which the operating agreement was
not renewed. Finally, in connection with the
66
Cloverleaf Acquisition, one facility was added to the third-party managed segment as a result of meeting the definition of this segment.
Same store contribution (NOI) is not a measurement of financial performance under U.S. GAAP. In addition, other companies providing
temperature-controlled warehouse storage and handling and other warehouse services may not define same store or calculate same store
contribution (NOI) in a manner consistent with our definition or calculation. Same store contribution (NOI) should be considered as a
supplement, but not as an alternative, to our results calculated in accordance with U.S. GAAP. We provide reconciliations of these measures
in the discussions of our comparative results of operations below.
Constant Currency Metrics
As discussed above under “Key Factors Affecting Our Business and Financial Results—Foreign Currency Translation Impact on Our
Operations,” our consolidated revenues and expenses are subject to variations outside our control that are caused by the net effect of foreign
currency translation on revenues generated and expenses incurred by our operations outside the United States. As a result, in order to provide
a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we analyze our
business performance based on certain constant currency reporting that represents current period results translated into U.S. dollars at the
relevant average foreign exchange rates applicable in the comparable prior period. We believe that the presentation of constant currency
results provides a measurement of our ongoing operations that is meaningful to investors because it excludes the impact of these foreign
currency movements that we cannot control. Constant currency results are not measurements of financial performance under U.S. GAAP, and
our constant currency results should be considered as a supplement, but not as an alternative, to our results calculated in accordance with
U.S. GAAP. The constant currency performance measures should not be considered a substitute for, or superior to, the measures of financial
performance prepared in accordance with U.S. GAAP. We provide reconciliations of these measures in the discussions of our comparative
results of operations below. Our discussion of the drivers of our performance below are based upon U.S. GAAP.
Presentation
A detailed discussion of the 2019 year-over-year changes can be found below and a detailed discussion of the 2018 year-over-year
changes can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” on Form 10-K
filed with the SEC on February 26, 2019.
Additionally, we have reported a new financial statement line referred to as “Acquisition, litigation and other” within our Statements
of Operations due to the various material charges incurred in the current period, and accordingly have reclassified certain costs from “Selling,
general and administrative” in the comparable prior periods to conform with the new presentation. This reclassification did not result in an
impact to our previously reported operating income. This caption represents certain costs that are highly variable from period to period and
greater detail of these can be found in Note 8 of the Consolidated Financial Statements within this Annual Report on Form 10-K, including
amounts pertaining to the comparable prior periods.
67
Results of Operations
The results of operations discussion is combined for Americold Realty Trust and our Operating Partnership because there are no material
differences in the results of operations between the two reporting entities.
Comparison of Results for the Years Ended December 31, 2019 and 2018
Warehouse Segment
The following table presents the operating results of our warehouse segment for the years ended December 31, 2019 and 2018.
Year ended December 31,
Change
2019 actual
2019 constant
currency(1)
2018 actual
Actual
Constant currency
Rent and storage
Warehouse services
Total warehouse segment revenue
Power
Other facilities costs (2)
Labor
Other services costs (3)
Total warehouse segment cost of operations
Warehouse segment contribution (NOI)
Warehouse rent and storage contribution (NOI) (4)
Warehouse services contribution (NOI) (5)
Total warehouse segment margin
Rent and storage margin(6)
Warehouse services margin(7)
$
$
$
$
582,509
794,708
1,377,217
82,380
113,551
614,049
119,646
929,626
(Dollars in thousands)
$
589,402
$
806,792
1,396,194
83,626
115,226
624,363
120,951
944,166
447,591
$
452,028
$
386,578
61,013
$
$
390,550
61,478
$
$
514,755
662,157
1,176,912
72,332
104,618
526,080
99,348
802,378
374,534
337,805
36,729
13.2%
20.0%
17.0%
13.9%
8.5%
16.7%
20.4%
15.9%
19.5%
14.4%
66.1%
14.5%
21.8%
18.6%
15.6%
10.1%
18.7%
21.7%
17.7%
20.7%
15.6%
67.4%
32.5%
66.4%
7.7%
32.4%
66.3%
7.6%
31.8%
65.6%
5.5%
68 bps
74 bps
213 bps
55 bps
64 bps
207 bps
(1) The adjustments from our U.S. GAAP operating results to calculate our operating results on a constant currency basis are the effect of changes in foreign currency exchange
rates relative to the comparable prior period.
Includes real estate rent expense of $12.3 million and $13.9 million for the year ended December 31, 2019 and 2018, respectively.
Includes non-real estate rent expense (equipment lease and rentals) of $12.0 million and $13.8 million for the year ended December 31, 2019 and 2018, respectively.
(2)
(3)
(4) Calculated as rent and storage revenue less power and other facilities costs.
(5) Calculated as warehouse services revenue less labor and other services costs.
(6) Calculated as warehouse rent and storage contribution (NOI) divided by warehouse rent and storage revenue.
(7) Calculated as warehouse services contribution (NOI) divided by warehouse services revenue.
Warehouse segment revenue was $1.38 billion for the year ended December 31, 2019, an increase of $200.3 million, or 17.0%,
compared to $1.18 billion for the year ended December 31, 2018. On a constant currency basis, our warehouse segment revenue was $1.40
billion for the year ended December 31, 2019, an increase of $219.3 million, or 18.6%, compared to the prior year. Approximately $168.6
million of the increase, on an actual basis, was driven by the additional 26 facilities in the warehouse segment we acquired in the Cloverleaf,
Lanier, MHW and PortFresh acquisitions in 2019. The remaining increase was primarily due to a more favorable customer mix,
improvements in our commercial terms and contractual rate escalations, the incremental revenue from our expansion of the Rochelle, Illinois
facility and opening of the build-to-suit facility
68
in Middleboro, Massachusetts at the end of the third quarter 2018. The foreign currency translation of revenue received by our foreign
operations had an $19.0 million unfavorable impact during the year ended December 31, 2019, which was mainly driven by the strengthening
of the U.S. dollar over the Australian dollar and to a lesser extent the strengthening of the U.S. dollar over the Argentine peso.
Warehouse segment cost of operations was $929.6 million for the year ended December 31, 2019, an increase of $127.2 million, or
15.9%, compared to $802.4 million for the year ended December 31, 2018. On a constant currency basis, our warehouse segment cost of
operations was $944.2 million for the year ended December 31, 2019, an increase of $141.8 million, or 17.7%, compared to the prior year.
Approximately $111.3 million of the increase, on an actual basis, was driven by the additional 26 facilities in the warehouse segment
discussed above. Additionally, during 2019 our cost of operations was negatively impacted by higher health care insurance expenses and start
up costs associated with our expansion of the Rochelle facility. Health care insurance expense, which can vary significantly from period to
period, is reflected as a component of labor within the warehouse segment cost of operations table above. The $6.6 million increase from the
prior year, which excludes the amount pertaining to acquired facilities in 2019, was driven by the volume and severity of individual large
claims as compared to the prior year. Despite the impact of the health care insurance expense increase, we continue to see positive impact
from our ongoing efforts to enhance productivity. The foreign currency translation of expenses incurred by our foreign operations had a $14.5
million favorable impact during the year ended December 31, 2019.
Warehouse segment contribution (NOI) was $447.6 million for the year ended December 31, 2019, an increase of $73.1 million, or
19.5%, compared to $374.5 million for the year ended December 31, 2018. On a constant currency basis, warehouse segment contribution
was $452.0 million for the year ended December 31, 2019, an increase of $77.5 million, or 20.7%, compared to the prior year. The foreign
currency translation of our results of operations had a $4.4 million unfavorable impact to the warehouse segment contribution period-over-
period. The increase is driven by the previously mentioned reasons including the additional 26 facilities in the warehouse segment. The
remainder of the increase was driven by transitioning to a more favorable customer mix, improvements in our commercial terms, and the
leveraging of our fixed expenses, which allowed us to generate higher contribution margins and the contribution from the opening of the
Middleboro facility. The increases were partially offset by the negative impacts of higher health care insurance expenses, the start up costs
associated with our Rochelle facility and the currency translation impact of the strengthening of the U.S. dollar.
Same Store Analysis
We had 136 same stores for the years ended December 31, 2019 and 2018. The following table presents revenues, cost of operations,
contribution (NOI) and margins for our same stores and non-same stores with a reconciliation to the total financial metrics of our warehouse
segment for the years ended December 31, 2019 and December 31, 2018. Amounts related to the Cloverleaf, Lanier, MHW and PortFresh
acquisitions are reflected within non-same store results.
69
The following table presents revenues, cost of operations, contribution (NOI) and margins for our same stores and non-same stores
with a reconciliation to the total financial metrics of our warehouse segment for the years ended December 31, 2019 and 2018.
Year ended December 31,
Change
Number of same store sites
Same store revenue:
Rent and storage
Warehouse services
Total same store revenue
Same store cost of operations:
Power
Other facilities costs
Labor
Other services costs
Total same store cost of operations
Same store contribution (NOI)
Same store rent and storage contribution (NOI)(2)
Same store services contribution (NOI)(3)
Total same store margin
Same store rent and storage margin(4)
Same store services margin(5)
Number of non-same store sites
Non-same store revenue:
Rent and storage
Warehouse services
Total non-same store revenue
Non-same store cost of operations:
Power
Other facilities costs
Labor
Other services costs
Total non-same store cost of operations
Non-same store contribution (NOI)
Non-same store rent and storage contribution (NOI)(2)
Non-same store services contribution (NOI)(3)
Total non-same store margin
Non-same store rent and storage margin(4)
Non-same store services margin(5)
Total warehouse segment revenue
Total warehouse cost of operations
Total warehouse segment contribution
2019 constant
currency(1)
2019 actual
136
499,151
668,673
1,167,824
67,537
97,158
527,687
94,870
(Dollars in thousands)
$
505,811
$
680,640
1,186,451
68,760
98,684
537,894
96,125
787,252
$
801,463
$
380,572
334,456
46,116
$
$
$
384,988
338,367
46,621
$
$
$
$
$
$
$
$
2018 actual
136
495,130
650,806
1,145,936
69,844
97,018
516,052
96,834
779,748
366,188
328,268
37,920
Actual
Constant currency
n/a
0.8 %
2.7 %
1.9 %
(3.3)%
0.1 %
2.3 %
(2.0)%
1.0 %
3.9 %
1.9 %
21.6 %
n/a
2.2 %
4.6 %
3.5 %
(1.6)%
1.7 %
4.2 %
(0.7)%
2.8 %
5.1 %
3.1 %
22.9 %
32.6%
67.0%
6.9%
32.4%
66.9%
6.8%
32.0%
66.3%
5.8%
63 bps
71 bps
107 bps
49 bps
60 bps
102 bps
Year ended December 31,
Change
2019 constant
currency(1)
2018 actual
Actual
2019 actual
31
(Dollars in thousands)
$
83,358
$
83,591
$
126,035
209,393
14,843
16,393
86,362
24,776
142,374
$
67,019
52,122
14,897
$
$
$
32.0%
62.5%
11.8%
126,152
209,743
14,866
16,542
86,469
1
24,826
142,703
67,040
52,183
14,857
32.0%
62.4%
11.8%
$
$
$
$
$
$
$
$
8
19,625
11,351
30,976
2,488
7,600
10,028
2,514
22,630
8,346
9,537
(1,191)
26.9 %
48.6 %
(10.5)%
Constant currency
n/a
n/a
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
n/r
$
$
$
1,377,217 $
1,396,194 $
1,176,912
929,626 $
447,591 $
944,166 $
452,028 $
802,378
374,534
17.0%
15.9%
19.5%
18.6%
17.7%
20.7%
70
(1) The adjustments from our U.S. GAAP operating results to calculate our operating results on a constant currency basis is the effect of changes in foreign currency exchange
rates relative to the comparable prior period.
(2) Calculated as rent and storage revenues less power and other facilities costs.
(3) Calculated as warehouse services revenues less labor and other services costs.
(4) Calculated as rent and storage contribution (NOI) divided by rent and storage revenue.
(5) Calculated as warehouse services contribution (NOI) divided by warehouse services revenue.
n/r - not relevant
The following table provides certain operating metrics to explain the drivers of our same store performance.
Units in thousands except per pallet and site number data - unaudited
Number of same store sites
Same store rent and storage:
Economic occupancy(1)
Average occupied economic pallets
Economic occupancy percentage
Same store rent and storage revenue per economic occupied pallet
Constant currency same store rent and storage revenue per economic occupied pallet
Physical occupancy(2)
Average physical occupied pallets
Average physical pallet positions
Physical occupancy percentage
Same store rent and storage revenue per physical occupied pallet
Constant currency same store rent and storage revenue per physical occupied pallet
Same store warehouse services:
Throughput pallets (in thousands)
Same store warehouse services revenue per throughput pallet
Constant currency same store warehouse services revenue per throughput pallet
Number of non-same store sites
Non-same store rent and storage:
Economic occupancy(1)
Average occupied economic pallets
Economic occupancy percentage
Physical occupancy(2)
Average physical occupied pallets
Average physical pallet positions
Physical occupancy percentage
Non-same store warehouse services:
Throughput pallets (in thousands)
Year ended December 31,
2019
136
2018
Change
136
n/a
2,414
79.5%
206.81
209.57
$
$
2,284
3,034
75.3%
218.50
221.42
$
$
26,149
25.57
26.03
$
$
$
$
$
$
$
$
2,447
(1.4)%
80.3%
-76 bps
202.30
202.30
2,347
3,048
2.2 %
3.6 %
(2.6)%
(0.4)%
77.0%
-171 bps
211.01
211.01
26,422
24.63
24.63
31
8
452
79.3%
117
80.7%
444
570
112
145
77.9%
76.9%
3.5 %
4.9 %
(1.0)%
3.8 %
5.7 %
n/a
n/r
n/r
n/r
n/r
(1) We define average economic occupancy as the aggregate number of physically occupied pallets and any additional pallets otherwise contractually committed for a given
period, without duplication. We estimate the number of contractually committed pallet positions by taking into account actual pallet commitment specified in each
customers’ contract, and subtracting the physical pallet positions.
(2) We define average physical occupancy as the average number of occupied pallets divided by the estimated number of average physical pallet positions in our warehouses
for the applicable period. We estimate the number of physical pallet positions by taking into account actual racked space and by estimating unracked space on an as-if
racked basis. We base this estimate on a formula utilizing the total cubic feet of each room within the warehouse that is unracked divided by the volume of an assumed rack
space that is consistent with the characteristics of the relevant warehouse. On a warehouse by warehouse basis, rack space generally ranges from three to four feet
depending upon the type of facility and the nature of the customer goods stored therein. The number of our pallet positions is reviewed and updated quarterly, taking into
account changes in racking configurations and room utilization.
71
3,941
523
n/r
Economic occupancy at our same stores was 79.5% for the year ended December 31, 2019, a decrease of 76 basis points compared to
80.3% for the year ended December 31, 2018. This change was the result of lower average physical occupancy, partially driven by the
continued efforts to improve our commercial terms within our customers’ contracts through fixed commitments which limits our ability to
resell physically unoccupied space to other customers not subject to fixed commitments. Our economic occupancy at our same stores for the
year ended December 31, 2019 was 426 basis points higher than our corresponding average physical occupancy of 75.3%. The decrease of
171 basis points in average physical occupancy compared to 77.0% for the year ended December 31, 2018 was driven by the timing and size
of harvest, our customers production plans and our focus to optimize our warehouse network as previously discussed. The decrease was also
partially due to normal course movement by our smaller market customers.
Despite the reduction in average occupied pallets, same store rent and storage revenues per occupied pallet increased 3.5% compared
to the prior year, primarily driven by a more favorable customer mix, net new business, improvements in our commercial terms and
contractual rate escalations. On a constant currency basis, the increase in our same store rent and storage revenue per occupied pallet was
4.9% compared to the prior year largely driven by the strengthening of the U.S. dollar against the Australian dollar and to a lesser extent the
strengthening of the U.S. dollar against the Argentine peso.
Throughput pallets at our same stores were 26.1 million pallets for the year ended December 31, 2019, a decrease of 1.0% from 26.4
million pallets for the year ended December 31, 2018. This decrease was primarily attributable to a shift in the inbound/outbound profile of
certain domestic customers from higher inventory turn customers to lower inventory turn customers with more profitable volumes. Same
store warehouse services revenue per throughput pallet increased 3.8% compared to the prior year primarily as a result of contractual rate
escalations, favorable business mix and an increase in higher-priced, value-added warehouse services such as repackaging, blast freezing, and
case-picking. On a constant currency basis, our same store services revenue per throughput pallet increased 5.7% compared to the prior year.
Third-Party Managed Segment
The following table presents the operating results of our third-party managed segment for the years ended December 31, 2019 and
2018.
Number of managed sites
Third-party managed revenue
Third-party managed cost of operations
Third-party managed segment contribution
$
$
2019 actual
11
252,939
241,178
(Dollars in thousands)
$
254,489
$
242,494
11,761
$
11,995
$
12
259,034
244,274
14,760
(2.4)%
(1.3)%
(20.3)%
(1.8)%
(0.7)%
(18.7)%
Year ended December 31,
Change
2019 constant
currency(1)
2018 actual
Actual
Constant currency
Third-party managed margin
4.6%
4.7%
5.7%
-105 bps
-98 bps
(1) The adjustments from our U.S. GAAP operating results to calculate our operating results on a constant currency basis are the effect of changes in foreign currency exchange
rates relative to the comparable prior period.
Third-party managed revenue was $252.9 million for the year ended December 31, 2019, a decrease of $6.1 million, or 2.4%,
compared to $259.0 million for the year ended December 31, 2018. On a constant currency basis, third-party managed revenue was $254.5
million for the year ended December 31, 2019, a decrease of $4.5 million, or 1.8%, compared to the prior year. The decrease is primarily due
to lower business volume from our
72
largest domestic third-party managed customer, paired with the loss of revenue from a managed site for which the contract expired and was
not renewed during the first quarter of 2019 and a managed site exited during the third quarter of 2019. The decreases were partially offset by
the addition of one managed site in connection with the Cloverleaf Acquisition and higher business volume from our Australia managed
operations.
Third-party managed cost of operations was $241.2 million for the year ended December 31, 2019, a decrease of $3.1 million, or
1.3%, compared to $244.3 million for the year ended December 31, 2018. On a constant currency basis, third-party managed cost of
operations was $242.5 million for the year ended December 31, 2019, a decrease of $1.8 million, or 0.7%, compared to the prior year. The
decrease was as a result of lower business volume, the expired contract and exited managed sites. This decrease was partially offset by the
costs associated with the third-party managed site purchased as part of the Cloverleaf Acquisition, as described above.
Third-party managed segment contribution (NOI) was $11.8 million for the year ended December 31, 2019, a decrease of $3.0
million, or 20.3%, compared to $14.8 million for the year ended December 31, 2018. On a constant currency basis, third-party managed
segment contribution (NOI) was $12.0 million for the year ended December 31, 2019, a decrease of $2.8 million, or 18.7%, compared to the
prior year. Decreased margins in this segment were primarily driven by lower volume with our largest domestic customer.
Transportation Segment
The following table presents the operating results of our transportation segment for the years ended December 31, 2019 and 2018.
Year ended December 31,
Change
2019 actual
2019 constant
currency(1)
2018 actual
Actual
Constant currency
Transportation revenue
$
144,844
(Dollars in thousands)
$
149,464
$
Brokered transportation
Other cost of operations
Total transportation cost of operations
104,393
22,384
126,777
107,876
22,939
130,815
Transportation segment contribution (NOI)
$
18,067
$
18,649
$
158,790
117,639
25,416
143,055
15,735
(8.8)%
(5.9)%
(11.3)%
(11.9)%
(11.4)%
14.8 %
(8.3)%
(9.7)%
(8.6)%
18.5 %
Transportation margin
12.5%
12.5%
9.9%
256 bps
257 bps
(1) The adjustments from our U.S. GAAP operating results to calculate our operating results on a constant currency basis are the effect of changes in foreign currency exchange
rates relative to the comparable prior period.
Our transportation segment continued its strategic shift to focus on more profitable solutions, which create value for our customers
while driving and supporting our warehouse business including consolidation offerings. Transportation revenue was $144.8 million for the
year ended December 31, 2019, a decrease of $13.9 million, or 8.8%, compared to $158.8 million for the year ended December 31, 2018. On
a constant currency basis, transportation revenue was $149.5 million for the year ended December 31, 2019, a decrease of $9.3 million, or
5.9%, compared to the prior year. The decrease was primarily due to the exit of certain low-margin international and domestic transportation
business and the unfavorable impact of foreign currency translation from our international operations. The decrease is partially offset by the
revenue associated with transportation operations from the Cloverleaf Acquisition, which contributed $8.4 million.
73
Transportation cost of operations was $126.8 million for the year ended December 31, 2019, a decrease of $16.3 million, or 11.4%,
compared to $143.1 million for the year ended December 31, 2018. On a constant currency basis, transportation cost of operations was
$130.8 million for the year ended December 31, 2018, a decrease of $12.2 million, or 8.6%, compared to the prior year. The strategic shift
referenced above paired with the impact of the foreign currency translation of our international costs led to a decline in transportation cost of
operations for the segment. The decrease was partially offset by the cost associated with transportation operations from the Cloverleaf
Acquisition.
Transportation segment contribution (NOI) was $18.1 million for the year ended December 31, 2019, an increase of $2.3 million, or
14.8%, compared to $15.7 million for the year ended December 31, 2018. Transportation segment margin increased 256 basis points from the
prior year, to 12.5% from 9.9%. On a constant currency basis, transportation segment contribution was $18.6 million for the year ended
December 31, 2019, an increase of $2.9 million, or 18.5%, compared to the prior year. The overall increase in margin was primarily due to
the strategic shift referenced above, which resulted in more profitable business. The impact of operations from the Cloverleaf Acquisition was
nominal for the year ended 2019.
Quarry Segment
The following table presents the operating results of our quarry segment for the years ended December 31, 2019 and 2018.
Quarry revenue
Quarry cost of operations
Quarry segment contribution (NOI)
Quarry margin
Year ended December 31,
2019
2018
Change
(Dollars in thousands)
$
8,705
7,867
838
$
8,899
8,279
620
$
$
(2.2)%
(5.0)%
35.2 %
9.6%
7.0%
260 bps
Quarry revenue was $8.7 million for the year ended December 31, 2019, a decrease of $0.2 million, or 2.2%, compared to $8.9
million for the year ended December 31, 2018. Lower revenue in our quarry operations was attributable to lower demand from our
construction and industrial customers. Demand from these customers was higher in 2018 due to inclement weather driving the demand for
roofing materials containing limestone.
Quarry cost of operations was $7.9 million for the year ended December 31, 2019, a decrease of $0.4 million, or 5.0%, compared to
$8.3 million for the year ended December 31, 2018. During the year ended December 31, 2018, the quarry recognized workers’ compensation
expense of approximately $0.5 million related to a current realized claim, with no such cost incurred in 2019. After excluding the prior year
impact of this charge, quarry costs of operations were relatively flat compared to the prior year.
Quarry segment contribution (NOI) was $0.8 million for the year ended December 31, 2019, as compared to $0.6 million for the year
ended December 31, 2018, largely driven by the factors described above.
74
Other Consolidated Operating Expenses
Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $163.3 million for the year ended
December 31, 2019, an increase of $45.7 million, or 38.8%, compared to $117.7 million for the year ended December 31, 2018. This increase
was primarily due to the Cloverleaf, Lanier, MHW and PortFresh acquisitions in 2019, as well as the Rochelle expansion facility being placed
into service in 2019 and the Middleboro facility placed into service during the third quarter of 2018.
Selling, general and administrative. Corporate-level selling, general and administrative expenses were $129.3 million for the year
ended December 31, 2019, an increase of $18.5 million, or 16.7%, compared to $110.8 million for the year ended December 31, 2018.
Included in these amounts are business development expenses attributable to our customer onboarding, engineering and consulting services to
support our customers in the cold chain. Business development expenses represented approximately 14% of corporate-level selling, general
and administrative expenses for 2019 and 2018. We believe these costs are comparable to leasing costs for other publicly-traded REITs. The
increase in corporate-level selling, general and administrative expenses compared to the prior year was partially due to the Cloverleaf
Acquisition. The increase was also due to higher share-based compensation expense we incurred for certain equity incentive awards to certain
employees and non-employee directors. Overall, share-based compensation expense increased $4.3 million compared to the prior year. The
increase was also driven by higher payroll and benefits and higher professional fees we incurred in preparation for our first external
assessment of internal control over financial reporting. For the years ended December 31, 2019 and 2018, corporate-level selling, general and
administrative expenses were 7.2% and 6.9%, respectively, of total revenues.
Acquisition, litigation and other. Corporate-level acquisition, litigation and other expenses were $40.6 million for the year ended
December 31, 2019, an increase of $36.7 million compared to $3.9 million for the year ended December 31, 2018. Included in these amounts
are business acquisition related costs, litigation costs associated with litigation charges outside of the normal course of business or resulting
from a settlement, severance and equity acceleration costs incurred in connection with former executives, severance as a result of synergies
realized from acquisitions or operational realignment, non-offering related equity issuance expenses, non-recurring public company
implementation costs and terminated site operations costs. We view all of these costs as corporate in nature regardless of the segment or
segments involved in certain transactions. During the year ended December 31, 2019, we incurred $10.0 million in investment advisory fees
related to the Cloverleaf and Lanier acquisitions. Other professional fees, integration costs and employee retention expenses incurred in
connection with completed and potential acquisitions totaled $14.3 million for the year ended December 31, 2019. In addition, we incurred
$4.3 million of severance and equity acceleration expenses related to exited former executives and the resignation of a member of the Board
of Trustees and $5.4 million of severance related to reduction in headcount as a result of the synergies created from the Cloverleaf and Lanier
acquisitions and organizational realignment of our international operations. We also incurred $4.6 million of legal settlement and related
litigation professional fees and $1.4 million of costs in connection with the secondary offering of common shares on behalf of our previously
significant shareholders in March 2019, for which we received no proceeds. These increases are partially offset by the following costs
incurred during 2018: $2.0 million related to the modification of certain terms governing equity awards issued under the 2010 Equity
Incentive Plan, $1.8 million for the non-offering related equity issuance expenses incurred in connection with the IPO and September 2018
follow-on offering, $1.2 million of non-recurring public company implementation costs and $0.7 million of acquisition related costs.
Additionally, during the third quarter of 2017, we recorded a charge of $2.1 million representing expense to repair a leased facility to restore
the site to its original condition prior to the lease expiration. This charge was subsequently reversed during the fourth quarter of 2018, when
the Company was released from this liability by the landlord.
75
Impairment of long-lived assets. For the years ended December 31, 2019 and 2018, we recorded impairment charges of $13.5 million
and $0.7 million, respectively. During the first quarter of 2019, management and our Board of Trustees formally approved the “Atlanta Major
Market Strategy” plan which includes the partial redevelopment of an existing warehouse facility. The partial redevelopment required the
demolition of 75% of the current warehouse, which was unused. We expect the remainder of the site to continue operating as normal during
the construction period. As a result of this initiative, we recorded an impairment charge of $9.6 million. Additionally, during the first quarter
of 2019, we recorded an impairment charge of $2.9 million related to a domestic idle warehouse facility in anticipation of sale of the asset,
which was completed during the second quarter of 2019. Each of these impaired assets previously mentioned related to the Warehouse
segment. As previously discussed, during the second quarter of 2019, management determined that certain international transportation related
assets were going to be idled and we recorded an impairment charge of $0.9 million as a result. These impaired assets related to the
transportation segment. Finally, the impairment charge recorded during 2018 related to the planned disposal of an idle facility within the
Warehouse segment, which was subsequently sold during 2019.
Other Expense
The following table presents other items of income and expense for the years ended December 31, 2019 and 2018.
Other (expense) income:
Interest expense
Interest income
Bridge loan commitment fees
Loss on debt extinguishment, modifications and termination of derivative instruments
Foreign currency exchange gain, net
Other expense - net
Loss from partially owned entities
Gain from sale of partially owned entities
Year ended December 31,
2019
2018
Change
%
(Dollars in thousands)
(94,408) $
(93,312)
$
6,286
(2,665)
—
10
(1,870)
(111)
4,297
3,996
—
(47,559)
2,882
(532)
(1,069)
—
1.2 %
57.3 %
100.0 %
(100.0)%
(99.7)%
251.5 %
(89.6)%
100.0 %
Interest expense. Interest expense was $94.4 million for the year ended December 31, 2019, an increase of $1.1 million, or 1.2%,
compared to $93.3 million for the year ended December 31, 2018. Overall, interest expense increased slightly, which was due to the interest
expense incurred in connection with the $350.0 million aggregate principal amount of Series C senior unsecured notes issued in May 2019,
which were used to fund a portion of the Cloverleaf and Lanier acquisitions, offset by the effect of lower interest rates attained in multiple
debt refinancing transactions during the fourth quarter of 2018. While our average outstanding principal has increased from the comparable
prior period, on average, the effective interest rate of our outstanding debt has decreased from 5.35% for the year ended December 31, 2018
to 4.79% for the year ended December 31, 2019.
Bridge loan commitment fees. Corporate-level bridge loan commitment fees were $2.7 million for the year ended December 31, 2019.
We obtained a bridge loan commitment to support the Cloverleaf Acquisition. The bridge loan facility ultimately did not need to be funded,
and accordingly, we expensed the lender commitment and loan fee.
Interest income. Interest income of $6.3 million for the year ended December 31, 2019 was 57.3% higher when compared to $4.0
million for the year ended December 31, 2018. This change was primarily driven by the increase in interest income associated with the
increase in net cash provided by our initial and follow-on offerings which was deposited into interest bearing cash equivalent accounts. The
increase in interest income is driven by a
76
higher average cash balance period-over-period, paired with a higher interest rate of 2.3% earned during the year ended December 31, 2019
as compared to 1.9% during the year ended December 31, 2018.
Loss on debt extinguishment, modifications and termination of derivative instruments. In 2018, we recognized an aggregate $47.6
million loss on debt extinguishment and modifications charge. This was comprised of a write-off of unamortized debt issuance costs in
connection with the refinancing of our pre-IPO Senior Secured Credit Facilities in connection with the IPO for $21.4 million, the defeasance
of our 2010 CMBS debt for $18.5 million and write-off of related unamortized debt issuance costs of $3.4 million, the write-off of
unamortized debt issuance costs in connection with the prepayment of our ANZ Loans for $2.2 million, and the recognition of the remaining
unamortized Accumulated other comprehensive loss resulting from the interest rate swaps terminated in connection with the prepayment of
our ANZ Loans for $1.8 million. No such costs were incurred during the year ended December 31, 2019.
Foreign currency exchange gain (loss), net. We reported nominal foreign currency exchange gain for the year ended December 31,
2019 compared to a $2.9 million gain for the year ended December 31, 2018. The monthly re-measurement of an intercompany loan
denominated in Australian dollars, issued from our Australian subsidiary to one of our U.S. corporate subsidiaries, resulted in a foreign
currency exchange gain in the year ended December 31, 2018, as the U.S. dollar strengthened against the Australian dollar as compared to the
year ended December 31, 2017. This intercompany loan was refinanced in December 2018, and the Company entered into a cross-currency
swap, eliminating foreign currency exchange gain (loss) on the intercompany loan in future periods. The resulting foreign currency exchange
gain for the year ended December 31, 2019 stems from other immaterial foreign currency denominated transactions.
Loss from partially owned entities. We reported a loss of $0.1 million for the year ended December 31, 2019 compared to a loss of
$1.1 million for the year ended December 31, 2018. This decrease is due to the sale of our interest in the China JV during the third quarter of
2019.
Gain from sale of partially owned entities. During the year ended December 31, 2019, we sold our interest in the China JV which
resulted in the $4.3 million gain.
Income Tax Benefit (Expense)
Income tax benefit for the year ended December 31, 2019 was $5.2 million, which represented an increase of $1.6 million, from an
income tax benefit of $3.6 million for the year ended December 31, 2018. The deferred tax benefit increased by $7.5 million, primarily due to
the reduction of a valuation allowance for $9.6 million to benefit deferred tax liabilities recorded for certain acquisitions in 2019 as a source
of income against existing deferred tax assets that have been subject to valuation allowance. The benefit was reduced primarily for losses at
our TRS that remain subject to valuation allowance. Current tax expense in 2019 increased by $6.0 million, primarily because we recognized
a one-time Alternative Minimum Tax benefit of $3.8 million in 2018. The remainder represents foreign taxes for the increase in 2019 of pre-
tax book income generated by our Australia and New Zealand operations.
77
Liquidity and Capital Resources of the Parent Company
In this section and in the section “Liquidity and Capital Resources of the Operating Partnership” below, the term “Parent Company”
refers to Americold Realty Trust on an unconsolidated basis, excluding our Operating Partnership.
Analysis of Liquidity and Capital Resources
Our Parent Company’s business is operated primarily through our Operating Partnership, of which our Parent Company is the sole
general partner and limited partner, and for which it consolidates for financial reporting purposes. Because our Parent Company operates on a
consolidated basis with our Operating Partnership, the section entitled “Liquidity and Capital Resources of the Operating Partnership” should
be read in conjunction with this section to understand the liquidity and capital resources of our Parent Company on a consolidated basis and
how our Company is operated as a whole.
Our Parent Company issues public equity from time to time, but generally does not otherwise generate any capital itself or conduct
any business itself, other than incurring certain expenses in operating as a public company which are fully reimbursed by the Operating
Partnership. Our Parent Company itself does not hold any indebtedness other than guarantees of the indebtedness of our Operating
Partnership and certain of its subsidiaries, and its only material asset is its ownership of partnership interests of our Operating Partnership.
Therefore, the consolidated assets and liabilities and the consolidated revenues and expenses of our Parent Company and our Operating
Partnership are the same on their respective financial statements. However, all debt is held directly or indirectly at the Operating Partnership
level. Our Parent Company’s principal funding requirement is the payment of dividends on its common and preferred shares. Our Parent
Company’s principal source of funding for its dividend payments is distributions it receives from our Operating Partnership.
As the sole general partner of our Operating Partnership, our Parent Company has the full, exclusive and complete responsibility for
our Operating Partnership’s day-to-day management and control. Our Parent Company causes our Operating Partnership to distribute such
portion of its available cash as our Parent Company may in its discretion determine, in the manner provided in our Operating Partnership’s
partnership agreement. Our Parent Company receives proceeds from its equity issuances from time to time, but is generally required by our
limited partnership agreement to contribute the proceeds from its equity issuances to our Operating Partnership in exchange for partnership
units of our Operating Partnership.
Our Parent Company is a well-known seasoned issuer with an effective shelf registration statement filed on February 25, 2019, which
allows our Parent Company to register an indeterminate amount of common shares. As circumstances warrant, our Parent Company may
issue equity from time to time on an opportunistic basis, dependent upon market conditions and available pricing. Any proceeds from such
equity issuances would generally be contributed to our Operating Partnership in exchange for additional equity interests in our Operating
Partnership. Our Operating Partnership may use the proceeds for general business purposes, which may include the repayment of outstanding
indebtedness, the funding of development, expansion and acquisition opportunities and to increase working capital.
78
On August 26, 2019, our Parent Company entered into an equity distribution agreement pursuant to which we may sell, from time to
time, up to an aggregate sales price of $500.0 million of our common shares through the ATM Equity Program. Sales of our common shares
made pursuant to the ATM Equity Program may be made in negotiated transactions or transactions that are deemed to be “at the market”
offerings as defined in Rule 415 under the Securities Act, including sales made directly on the NYSE, or sales made to or through a market
maker other than on an exchange, or as otherwise agreed between the applicable Agent and us. Sales may also be made on a forward basis
pursuant to separate forward sale agreements. We intend to use the net proceeds from sales of our common shares pursuant to the ATM
Equity Program for general corporate purposes, which may include funding acquisitions, development and expansion projects and repayment
of outstanding indebtedness. There were no common shares sold under the ATM Equity Program during 2019.
The liquidity of our Parent Company is dependent on our Operating Partnership’s ability to make sufficient distributions to our Parent
Company. The primary cash requirement of our Parent Company is its payment of dividends to its shareholders. Our Parent Company also
guarantees our Operating Partnership’s, as well as certain of its subsidiaries’ and affiliates’, unsecured debt. If our Operating Partnership or
such subsidiaries fail to fulfill their debt requirements, which trigger Parent Company guarantee obligations, then our Parent Company will be
required to fulfill its cash payment commitments under such guarantees. However, our Parent Company’s only material asset is its investment
in our Operating Partnership.
We believe our Operating Partnership’s sources of working capital, specifically its cash flow from operations, and funds available
under its revolving credit facility are adequate for it to make its distribution payments to our Parent Company and, in turn, for our Parent
Company to make its dividend payments to shareholders. However, we cannot assure you that our Operating Partnership’s sources of capital
will continue to be available at all or in amounts sufficient to meet its needs, including making distribution payments to our Parent Company.
The lack of availability of capital could adversely affect our Operating Partnership’s ability to pay its distributions to our Parent Company,
which would in turn, adversely affect our Parent Company’s ability to pay cash dividends to its shareholders.
Dividends and Distributions
Our Parent Company is required to distribute 90% of its taxable income (excluding capital gains) on an annual basis in order for it to
continue to qualify as a REIT for federal income tax purposes. Accordingly, our Parent Company intends to make, but is not contractually
bound to make, regular quarterly distributions to shareholders from cash flow from our Operating Partnership’s operating activities. While
historically our Parent Company has satisfied this distribution requirement by making cash distributions to its shareholders, it may choose to
satisfy this requirement by making distributions of cash or other property. All such distributions are at the discretion of our Parent Company’s
board of trustees. Our Parent Company considers market factors and our Operating Partnership’s performance in addition to REIT
requirements in determining distribution levels. Our Parent Company has distributed at least 100% of its taxable income annually since
inception to minimize corporate level federal income taxes. Amounts accumulated for distribution to shareholders are invested primarily in
interest-bearing accounts and short-term interest-bearing securities, which are consistent with our intention to maintain our Parent Company’s
status as a REIT.
As a result of this distribution requirement, our Operating Partnership cannot rely on retained earnings to fund its ongoing operations
to the same extent that other companies whose parent companies are not REITs can. Our Parent Company may need to continue to raise
capital in the debt and equity markets to fund our Operating Partnership’s working capital needs, as well as potential developments at new or
existing properties, acquisitions or investments in newly created joint ventures. In addition, our Parent Company may be required to use
79
borrowings under our revolving credit facility, if necessary, to meet REIT distribution requirements and maintain our Parent Company’s
REIT status.
Our Parent Company declared the following dividends on its common and Series B preferred shares during the years ended
December 31, 2019 and 2018 (in thousands, except per share amounts):
Month Declared/Paid
Dividend Per
Share
2019 (Common Shares)
Distributions Declared
Distributions Paid
(In thousands, except per share amounts)
December (2018)/January
$
0.1875 $
— $
28,218
December (a)
—
(127)
December (2018)/January
March/April
$
0.2000
—
30,235
7
30,235
March (b)
March/April
June/July
June (c)
—
(142)
$
0.2000
—
38,764
15
38,764
—
(172)
June/July
September/October
$
0.2000
—
38,795
13
38,795
October (d)
—
(170)
September/October
December/January (2020)
$
0.200
—
38,796
$
146,590 $
7
—
135,443
(a) Declared in December 2018 and included in the $28.2 million declared, see description to the right regarding timing of payment.
(b) Declared in March and included in the $30.2 million declared, see description to the right regarding timing of payment.
(c) Declared in June and included in the $38.8 million declared, see description to the right regarding timing of payment.
(d) Declared in September and included in the $38.8 million declared, see description to the right regarding timing of payment.
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Dividend equivalents accrued on
unvested restricted stock units to be paid
when the awards vest.
Dividend equivalents paid on unvested
restricted stock units that are not
expected to vest (recognized as
additional compensation).
Dividend equivalents accrued on
unvested restricted stock units to be paid
when the awards vest.
Dividend equivalents paid on unvested
restricted stock units that are not
expected to vest (recognized as
additional compensation).
Dividend equivalents accrued on
unvested restricted stock units to be paid
when the awards vest.
Dividend equivalents paid on unvested
restricted stock units that are not
expected to vest (recognized as
additional compensation).
Dividend equivalents accrued on
unvested restricted stock units to be paid
when the awards vest.
Dividend equivalents paid on unvested
restricted stock units that are not
expected to vest (recognized as
additional compensation).
Month Declared/Paid
Dividend Per
Share
2018
Distributions Declared
Distributions Paid
Common
Shares
Series B
Preferred
Shares
Common
Shares
Series B
Preferred
Shares
(In thousands, except per share amounts)
January (a)
March/April
$
$
0.0186 $
1,291 $
619 $
1,291 $
619
0.1396
20,145
—
20,145
March (c)
March/April
June/July
June (d)
June/July
—
—
(79)
$
0.1875
—
27,250
—
—
20
27,250
September/October
$
0.1875
—
—
(118)
—
28,072
—
—
28
28,072
October(e)
—
—
(114)
September/October
December/January 2019
$
0.1875
—
28,218
—
—
28
—
$
104,976
$
76,523
Dividend equivalents accrued on unvested
restricted stock units to be paid when the
awards vest.
Dividend equivalents paid on unvested
restricted stock units that are not expected to
vest (recognized as additional compensation).
—
—
—
Dividend equivalents accrued on unvested
restricted stock units to be paid when the
awards vest.
Dividend equivalents paid on unvested
restricted stock units that are not expected to
vest (recognized as additional compensation).
Dividend equivalents accrued on unvested
restricted stock units to be paid when the
awards vest.
Dividend equivalents paid on unvested
restricted stock units that are not expected to
vest (recognized as additional compensation).
—
—
—
—
—
Series B Preferred Shares - Fixed Dividend
January (a)
Total distributions paid to holders of Series B Preferred
Shares (b)
1,198
1,198
$
1,817
$
1,817
(a) Stub period dividend paid to shareholders of record prior to the IPO.
(b) Last participating and fixed dividend paid to holders of Series B Preferred Shares in connection with the conversion to common shares on the IPO date.
(c) Declared in March and included in the $20.1 million declared, see description to the right regarding timing of payment.
(d) Declared in June and included in the $27.3 million declared, see description to the right regarding timing of payment.
(e) Declared in September and included in the $28.1 million declared, see description to the right regarding timing of payment.
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Liquidity and Capital Resources of the Operating Partnership
In this section, the terms “we”, “our” and “us” refer to our Operating Partnership together with its consolidated subsidiaries or our
Operating Partnership and our Parent Company together with their consolidated subsidiaries, as the context requires.
Analysis of Liquidity and Capital Resources
Our Parent Company is our sole general partner and consolidates our results of operations for financial reporting purposes. Because
we operate on a consolidated basis with our Parent Company, the section entitled “Liquidity and Capital Resources of the Parent Company”
should be read in conjunction with this section to understand our liquidity and capital resources on a consolidated basis.
We currently expect that our principal sources of funding for working capital, facility acquisitions, expansions, maintenance and
renovation of our properties, developments projects, debt service and distributions to our shareholders will include:
•
•
•
•
•
•
current cash balances;
cash flows from operations;
our 2018 forward sale agreement;
borrowings under our 2018 Senior Unsecured Credit Facilities;
our ATM Equity Program; and
other forms of debt financings and equity offerings.
We expect that our funding sources as noted above are adequate and will continue to be adequate to meet our short-term liquidity
requirements and capital commitments. These liquidity requirements and capital commitments include:
•
•
•
•
operating activities and overall working capital;
capital expenditures;
debt service obligations; and
quarterly shareholder distributions.
We expect to utilize the same sources of capital we will rely on to meet our short-term liquidity requirements to also meet our long-
term liquidity requirements, which include funding our operating activities, our debt service obligations and shareholder distributions, and our
future development and acquisition activities.
Security Interests in Customers’ Products
By operation of law and in accordance with our customer contracts (other than leases), we typically receive warehouseman’s liens on
products held in our warehouses to secure customer payments. Such liens permit us to take control of the products and sell them to third
parties in order to recover any monies receivable on a delinquent account, but such products may be perishable or otherwise not readily
saleable by us. Historically, in instances where we have warehouseman’s liens and our customer sought bankruptcy protection, we have been
successful in receiving “critical vendor” status, which has allowed us to fully collect on our accounts receivable during the pendency of the
bankruptcy proceeding.
Our bad debt expense was $1.8 million and $2.3 million for the years ended December 31, 2019 and 2018, respectively. As of
December 31, 2019, we maintained bad debt allowances of approximately $6.9 million, which we believed to be adequate.
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Distributions
All distributions on our units are at the discretion of our Parent Company’s board of trustees. In 2019 and 2018, our Operating
Partnership declared and paid the following distributions (in thousands):
Month Declared/Paid
Distributions Declared
Distributions Paid
2019
December (2018)/January
March/April
June/July
September/October
December/January (2020)
(In thousands)
$
— $
30,235
38,764
38,795
38,796
$
146,590 $
28,098
30,108
38,605
38,632
—
135,443
Month Declared/Paid
Distributions Declared
Distributions Paid
2018
January (a)
March/April
June/July
September/October
December/January (2019)
$
(In thousands)
3,242 $
20,145
27,250
28,072
28,218
$
106,927 $
3,242
20,086
27,160
27,986
—
78,474
(a) Stub period distribution paid to Parent immediately prior to the IPO.
83
$
181,443 $
70,000
32,000
283,443
200,000
400,000
350,000
950,000
475,000
1,708,443
(12,996)
187,957
70,000
32,000
289,957
200,000
400,000
—
600,000
475,000
1,364,957
(13,943)
1,351,014
Outstanding and Available Indebtedness
The following table presents our outstanding and available indebtedness as of December 31, 2019 and 2018.
Effective
interest rate (2)
as of
December 31,
2019
Contractual
interest rate (1)
Outstanding principal amount at
December 31, 2019
December 31, 2018
Indebtedness
2013 Mortgage Loans
Senior note
Mezzanine A
Mezzanine B
Total 2013 Mortgage Loans
Senior Unsecured Notes
Series A notes
Series B notes
Series C notes
Total Senior Unsecured Notes
Stated
maturity
date
5/2023
5/2023
5/2023
1/2026
1/2029
1/2030
3.81%
7.38%
11.50%
4.68%
4.86%
4.10%
4.14%
7.55%
11.75%
4.77%
4.92%
4.15%
2018 Senior Unsecured Term Loan A Facility(1)
1/2023
L+1.00%
3.14%
Total principal amount of indebtedness
Less deferred financing costs
Total indebtedness, net of unamortized deferred financing costs
$
1,695,447 $
2018 Senior Unsecured Revolving Credit Facility(1)
1/2021
L+0.90%
0.36%
$
— $
—
(1) References in this table to L are references to one-month LIBOR.
(2) The effective interest rate includes effects of amortization of the deferred financing costs. The weighted average effective interest rate for total debt was 4.57% and 5.04%
as of December 31, 2019 and 2018, respectively.
2018 Senior Unsecured Credit Facility
On December 4, 2018, we entered into the 2018 Senior Unsecured Credit Facility to, among other things, (i) increase the revolver
borrowing capacity from $450 million to $800 million, (ii) convert the credit facility (term loan and revolver) from a secured credit facility to
an unsecured credit facility, and (iii) decrease the applicable interest rate margins from 2.35% to 1.45% and decrease the fee on unused
borrowing capacity by 5 basis points. The terms of the revolver allow for the ability to draw proceeds in multiple currencies, up to $400
million. In connection with entering into the original agreement and subsequent amendments for the Term Loan A Credit Facility, we
capitalized approximately $8.9 million of debt issuance costs, which we amortize as interest expense under the effective interest method. The
unamortized balance of Term Loan A debt issuance costs are included in “Mortgage notes, senior unsecured notes and term loan” on the
accompanying Consolidated Balance Sheets. As of December 31, 2019, $2.8 million of unamortized debt issuance costs related to the
revolving credit facility are included in “Other assets” in the accompanying Consolidated Balance Sheet.
On September 24, 2019, we reduced our interest rate margins from 1.45% to 1.00% and decreased the fee on unused borrowing
capacity to a flat 20 basis points regardless of the percentage of total commitment used. The
84
Company received a favorable credit rating during the third quarter of 2019. This rating, when combined with existing ratings, allowed the
Company to transition to a favorable ratings-based pricing grid.
Our 2018 Senior Unsecured Revolving Credit Facility is structured to include a borrowing base, which will allow us to borrow
against the lesser of our Senior Unsecured Term Loan A Facility balance outstanding, our Senior Unsecured Notes balance outstanding, $800
million in revolving credit commitments, and the value of certain owned assets and ground leased assets. At December 31, 2019, the gross
value of our assets included in the calculations under our 2018 Senior Unsecured Revolving Credit Facility, was in excess of $4.3 billion, and
had an effective borrowing base collateral value (after concentration limits and advance rates as calculated under the anticipated terms of our
2018 Senior Unsecured Revolving Credit Facility) in excess of $2.6 billion.
The 2018 Senior Unsecured Credit Facility contains representations, covenants and other terms customary for a publicly traded REIT.
In addition, it contains certain financial covenants, as defined in the credit agreement, including:
•
•
•
•
•
•
•
a maximum leverage ratio of less than or equal to 60% of our total asset value;
a minimum borrowing base coverage ratio of greater than or equal to 1.00 to 1.00;
a minimum fixed charge coverage ratio of greater than or equal to 1.50 to 1.00;
a minimum borrowing base debt service coverage ratio of greater than or equal to 2.00 to 1.00;
a minimum tangible net worth requirement of greater than or equal to $1.1 billion plus 70% of any future net equity proceeds
following the completion of the IPO transactions;
a maximum recourse secured debt ratio of less than or equal to 15% of our total asset value; and
a maximum secured debt ratio of less than or equal to 40% of total asset value.
Our 2018 Senior Unsecured Credit Facility is fully recourse to our Operating Partnership. As of December 31, 2019, we were in
compliance with all debt covenants.
Series A, B and C Senior Unsecured Notes
On November 6, 2018, we priced a debt private placement transaction consisting of (i) $200 million senior unsecured notes with a
coupon of 4.68% due January 8, 2026 (“Series A”) and (ii) $400 million senior unsecured notes with a coupon of 4.86% due January 8, 2029
(“Series B”), collectively referred to as the debt private placement. The transaction closed on December 4, 2018. Interest is paid on January 8
and July 8 of each year until maturity, with the first payment occurring July 8, 2019. The notes are our general unsecured senior obligations
and are guaranteed by us and our subsidiaries. We applied a portion of the proceeds of the debt private placement to complete the defeasance
of the $600 million Americold 2010 LLC Trust, Commercial Mortgage Pass-Through Certificates, Series 2010, ART, or the 2010 Mortgage
Loans. We applied the remaining proceeds to the Australian term loan and the New Zealand term loan, or the ANZ Loans.
On April 26, 2019, we priced a debt private placement transaction consisting of $350 million senior unsecured notes with a coupon of
4.10% due January 8, 2030 (“Series C”). The transaction closed on May 7, 2019. Interest is payable on January 8 and July 8 of each year until
maturity, with the first payment occurring January 8, 2020. The initial January 8, 2020 payment will include interest accrued since May 7,
2019. The notes are general unsecured obligations of the Company and are guaranteed by the Company and the subsidiaries of the Company.
The Company applied the proceeds of the private placement transaction to repay the indebtedness outstanding under our senior unsecured
revolving credit facility incurred in connection with the funding of the Cloverleaf and Lanier acquisitions.
85
The Series A, Series B and Series C senior notes and guarantee agreement includes a prepayment option executable at any time
during the term of the loans. The prepayment can be either a partial payment or payment in full, as long as the partial payment is at least 5%
of the outstanding principal. Any prepayment in full must include a make-whole amount, which is the discounted remaining scheduled
payments due to the lender. The discount rate to be used is equal to 0.50% plus the yield to maturity reported for the most recently actively
traded U.S. Treasury Securities with a maturity equal to the remaining average life of the prepaid principal. The Company must give each
lender at least 10 day’s written notice whenever it intends to prepay any portion of the debt.
If a change in control occurs for us, we must issue an offer to prepay the remaining portion of the debt to the lenders. The prepayment
amount will be 100% of the principal amount, as well as accrued and unpaid interest.
The Senior Unsecured Notes require compliance with leverage ratios, secured and unsecured indebtedness ratios, and unsecured
indebtedness to qualified assets ratios. In addition, we are required to maintain at all times a credit rating for each series of notes from a
nationally recognized statistical rating organization. The Senior Unsecured Notes agreement includes the following financial covenants:
• a maximum leverage ratio of less than or equal to 60% of our total asset value;
• a maximum unsecured indebtedness to qualified assets ratio of less than 0.60 to 1.00;
• a minimum fixed charge coverage ratio of greater than or equal to 1.50 to 1.00;
• a minimum unsecured debt service ratio of greater than or equal to 2.00 to 1.00; and
• a maximum total secured indebtedness ratio of less than 0.40 to 1.00.
As of December 31, 2019, we were in compliance with all debt covenants.
2013 Mortgage Loans
On May 1, 2013, we entered into a mortgage financing in an aggregate principal amount of $322.0 million, which we refer to as the
2013 Mortgage Loans. The debt consists of a senior debt note and two mezzanine notes. The components are cross-collateralized and cross-
defaulted. The senior debt note requires monthly principal payments. The mezzanine notes require no principal payments until the stated
maturity date in May 2023. The interest rates on the notes are fixed and range from 3.81% to 11.50% per annum. The senior debt note and the
two mezzanine notes remain subject to yield maintenance provisions. We used the net proceeds of these loans to refinance certain of the 2006
Mortgage Loans, acquire two warehouses, and fund general corporate purposes.
The 2013 Mortgage Loans are collateralized by 15 warehouses. The terms governing the 2013 Mortgage Loans require us to maintain
certain cash amounts in accounts that are restricted as to their use for the respective warehouses. As of December 31, 2019, the amount of
restricted cash associated with the 2013 Mortgage Loans was $3.2 million. Additionally, if we do not maintain certain financial thresholds,
including a debt service coverage ratio of 1.10x, the cash generated will further be temporarily restricted and limited to the use for scheduled
debt service and operating costs. The debt service coverage ratio as of December 31, 2019 was 1.76x. The 2013 Mortgage Loans are non-
recourse to us subject to customary non-recourse carve-outs.
The 2013 Mortgage Loans also require compliance with other financial covenants, including a debt coverage ratio and cash flow
calculation, as defined.
86
Debt Covenants
Our 2018 Senior Unsecured Credit Facility, the Senior Unsecured Notes, and 2013 Mortgage Loans require financial statements
reporting, periodic requirements to report compliance with established thresholds and performance measurements, and affirmative and
negative covenants that govern our allowable business practices. The affirmative and negative covenants include continuation of insurance,
maintenance of collateral, the maintenance of REIT status, and our ability to enter into certain types of transactions or exposures in the
normal course of business. As of December 31, 2019, we were in compliance with all debt covenants.
Loss on debt extinguishment, modifications and termination of derivative instruments
During 2018, we completed multiple refinancing and extinguishment of debt transactions resulting in an aggregate amount of $47.6
million each of which was recorded to “Loss on debt extinguishment, modifications and termination of derivative instruments”. During the
first quarter of 2018, simultaneous with the IPO, we closed on a Senior Secured Term Loan A and repaid the Term Loan B. Shortly
thereafter, we amended the facility by repaying a portion of the Term Loan A and increasing the capacity on the revolving credit facility. The
total amount recorded to Loss on debt extinguishment, modifications and termination of derivative instruments as a result of these
transactions totaled $21.4 million, representing the write-off of unamortized deferred financing costs and debt discount from Term Loan B.
During the fourth quarter of 2018, the 2010 Mortgage Loans were extinguished. This resulted in an $18.5 million defeasance fee, as well as a
$3.4 million write-off of unamortized deferred financing costs recorded to Loss on debt extinguishment, modifications and termination of
derivative instruments. Additionally, during the fourth quarter of 2018, the ANZ Loans were fully prepaid, which resulted in a write-off of
$2.2 million in unamortized deferred financing costs and $1.8 million charge for termination of the related interest rate swaps, both recorded
to Loss on debt extinguishment, modifications and termination of derivative instruments.
Credit Ratings
Our capital structure and financial practices have earned us investment grade credit ratings from three nationally recognized credit
rating agencies. During the fourth quarter of 2018, we received our inaugural investment grade ratings of BBB with a Stable outlook from
both Fitch and Morningstar. During the third quarter of 2019, we received an investment grade rating of Baa3 with a stable outlook from
Moody’s. These credit ratings are important to our ability to issue debt at favorable rates of interest, among other terms. Refer to our risk
factor “Adverse changes in our credit ratings could negatively impact our financing activity” for further details regarding the potential
impacts from changes to our credit ratings.
Recurring Maintenance Capital Expenditures and Repair and Maintenance Expenses
We utilize a strategic approach to recurring maintenance capital expenditures and repair and maintenance expenses to maintain the
high quality and operational efficiency of our warehouses and ensure that our warehouses meet the “mission-critical” role they serve in the
cold chain.
Recurring Maintenance Capital Expenditures
Recurring maintenance capital expenditures are capitalized investments 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 systems. Examples of recurring maintenance capital expenditures related to our existing temperature-controlled warehouse
network include replacing roofs and refrigeration equipment, and upgrading our racking systems. Examples of recurring maintenance capital
expenditures related to personal property include expenditures on material handling equipment (e.g., fork lifts and
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pallet jacks) and related batteries. Examples of recurring maintenance capital expenditures related to information technology include
expenditures on existing servers, networking equipment and current software. The following table sets forth our recurring maintenance
capital expenditures for the years ended December 31, 2019 and 2018.
Real estate
Personal property
Information technology
Total recurring maintenance capital expenditures
Total recurring maintenance capital expenditures per cubic foot
Repair and Maintenance Expenses
Year ended December 31,
2019
2018
(In thousands, except per cubic foot amounts)
50,966 $
4,357
3,977
59,300 $
0.055 $
37,613
3,175
3,187
43,975
0.048
$
$
$
We incur repair and maintenance expenses that include costs of normal maintenance and repairs and minor replacements that do not
materially extend the life of the property or provide future economic benefits. Repair and maintenance expenses consist of expenses related to
our existing temperature-controlled warehouse network and its existing supporting personal property and are reflected as operating expenses
on our income statement. Examples of repair and maintenance expenses related to our warehouse portfolio include ordinary repair and
maintenance on roofs, racking, walls, doors, parking lots and refrigeration equipment. Examples of repair and maintenance expenses related
to personal property include ordinary repair and maintenance expenses on material handling equipment (e.g., fork lifts and pallet jacks) and
related batteries. The following table sets forth our repair and maintenance expenses for the years ended December 31, 2019 and 2018.
Real estate
Personal property
Total repair and maintenance expenses
Repair and maintenance expenses per cubic foot
Year ended December 31,
2019
2018
(In thousands, except per cubic foot amounts)
22,378 $
33,150
55,528 $
0.051 $
19,813
32,536
52,349
0.057
$
$
$
External Growth, Expansion and Development Capital Expenditures
External growth expenditures represent asset acquisitions or business combinations. Expansion and development capital expenditures
are investments made to support both our customers and our warehouse expansion and development initiatives. It also includes investments in
enhancing our information technology platform. Examples of capital expenditures associated with expansion and development initiatives
include funding of construction costs, increases to warehouse capacity and pallet positions, acquisitions of reusable incremental material
handling equipment, and implementing energy efficiency projects, such as thermal energy storage, LED lighting, motion-sensor technology,
variable frequency drives for our fans and compressors, rapid-close doors and alternative-power generation technologies. Examples of capital
expenditures to enhance our information technology platform include the delivery of new systems and software and customer interface
functionality.
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Acquisitions
The acquisitions completed during 2019 relate to Cloverleaf, Lanier, MHW and PortFresh, and exclude amounts related to the assets
under construction for expansion and development projects, further detailed below. The PortFresh Acquisition cost included approximately
$15.9 million allocated to land which we are developing a new facility upon, and have classified within expansion and development
expenditures in order to reflect the total cost of the project. The Cloverleaf Acquisition included approximately $12.5 million allocated to
assets under construction which we have classified within expansion and development expenditures in order to reflect the total cost of the
projects discussed further below. Refer to Notes 2 and 3 of the Consolidated Financial Statements for details of the purchase price allocation
for each acquisition.
Expansion and development
The increase in expenditures can be attributed to the increase in construction and acquisition activity during 2019 as compared to
2018. In 2019, we completed the Rochelle, Illinois fully-automated expansion project, with its grand opening at the end of the second quarter
of the year. We also began the Atlanta major markets strategy project, which is expected to be completed in the second quarter of 2021. As it
relates to the projects resulting from the Cloverleaf Acquisition, we completed the Chesapeake, Virginia expansion which totaled $24.3
million, and the North Little Rock, Arkansas expansion which totaled $18.9 million. The Cloverleaf Acquisition expansion project in
Columbus, Ohio, which we have incurred $6.3 million to date, is expected to be completed during the first quarter of 2020. During the first
quarter of 2019, we acquired land in conjunction with the acquisition of PortFresh in Savannah, Georgia. We are developing a new site upon
this land and broke ground on the project during the second quarter of 2019. The resulting expenditures during 2019 were $41.5 million and
we expect to complete construction during the second quarter of 2020. Finally, during the second quarter of 2019 we acquired land in
Sydney, Australia for $45.5 million. Following December 31, 2019, it was determined that the Company would no longer be moving forward
with the three developments contemplated under the previously announced letter of intent we executed with a top customer in Australia, as
the scope of the projects materially changed. Under the agreement with the customer, the Company will be reimbursed for its land purchase
in Sydney and related costs. The Company continues to maintain a strong relationship with the customer and is proceeding with a new
expansion project in Auckland, New Zealand. We expect to break ground on this expansion during 2020 with completion during 2021. In
2018, only our Middleboro and Rochelle facilities were under construction with our Middleboro facility announcing its grand opening in
August 2018.
The following table sets forth our acquisitions, expansion and development capital expenditures for the years ended December 31,
2019 and 2018 (in thousands).
Acquisitions, net of cash acquired and adjustments
Expansion and development initiatives
Information technology
Total growth and expansion capital expenditures
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Year ended December 31,
2019
2018
$
$
1,377,220 $
210,594
5,857
1,593,671 $
—
72,049
3,686
75,735
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2019:
Principal on mortgage notes, senior unsecured notes and term
loan
$
Interest on mortgage notes, senior unsecured notes and term
loan (1)
Sale leaseback financing obligations, including interest (2)
Operating lease obligations, including interest
Financing lease obligations, including interest
Employee benefit obligations(3)
Acquisitions(6)
Growth and expansion commitments(4)
Total
Less than 1
Year
1-3 Years
3-5 Years
More than 5
Years
Payments due by period
1,708,443 $
6,750 $
14,347 $
737,346 $
950,000
465,977
203,209
72,258
66,489
50,495
257,100
57,974
73,832
17,087
23,399
18,534
7,796
257,100
41,742
143,123
34,970
21,928
29,204
10,124
—
16,232
92,552
36,062
12,635
13,365
9,729
—
—
156,470
115,090
14,296
5,386
22,846
—
—
Total (5)
$
2,881,945 $
446,240 $
269,928 $
901,689 $
1,264,088
(1)
Interest payable is based on interest rates in effect at December 31, 2019. Amounts include variable-rate interest payments, which are calculated utilizing the applicable
interest rates as of December 31, 2019.
(2) Sale leaseback financing obligations are subject to multiple expiration dates and bear interest rates that vary from 7.00%-19.59%. For more information, refer to Note 12 of
the Consolidated Financial Statements included in this Annual Report on Form 10-K.
(3) Represents primarily our estimated minimum required funding for our qualified defined benefit pension plans based on actuarially determined estimates and projected
future benefit payments from our unfunded postretirement plans. For additional information about our defined benefit pension plan obligations, refer to Note 20 of the
Consolidated Financial Statements included in this Annual Report on Form 10-K.
(4) Growth and expansion commitments reflect open commitments related to construction expansion projects expected to be completed during 2020 and 2021.
(5) The table above excludes $3.5 million aggregate fair value for an interest rate swap expiring in 2024 and $2.6 million aggregate fair value for a foreign exchange forward
contract with a January 31, 2020 maturity (both of which are included in ‘Accounts payable and accrued expenses’ in the accompanying Consolidated Balance Sheet as of
December 31, 2019).
(6) Represents the approximate USD purchase price of Nova Cold, which is $336.8 million CAD. This purchase price has been partially hedged with foreign currency
forwards.
Historical Cash Flows
The following summary discussion of our cash flows is based on the Consolidated Statements of Cash Flows and is not meant to be
an all-inclusive discussion of the changes in our cash flows for the periods presented below.
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
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Year ended December 31,
2019
2018
(In thousands)
236,189 $
(1,604,934) $
1,395,371 $
188,171
(125,703)
84,942
$
$
$
Operating Activities
For the year ended December 31, 2019, our net cash provided by operating activities was $236.2 million, an increase of $48.0
million, or 25.5%, compared to $188.2 million for the year ended December 31, 2018. The increase is due to higher segment contribution in
our same store results and as a result of our acquisitions during 2019, paired with less cash paid for interest due to the timing of payments on
debt issued subsequent to December 31, 2018. This was partially offset by an increase in acquisition related expenses, bridge loan
commitment fees incurred during the second quarter of 2019 and higher selling, general and administrative expenses due to the reasons
discussed within results of operations.
Investing Activities
Our net cash used in investing activities was $1.6 billion for the year ended December 31, 2019 compared to $125.7 million for the
year ended December 31, 2018. Cash used for the acquisitions of Cloverleaf and Lanier and accounted for as business combinations totaled
$1.3 billion. Cash used in the acquisition of real estate was $85.2 million, which related to the asset acquisitions of PortFresh during the first
quarter of 2019 and MHW during the fourth quarter of 2019. Additions to property, buildings and equipment were $217.2 million and $145.2
million for the years ended December 31, 2019 and 2018, respectively. The increase in additions to property, buildings and equipment were
driven by the significant expansion and development projects in 2019. These cash outflows were partially offset by the proceeds from the sale
of our investment in the China JV for $14.3 million and $2.0 million return of investment in a joint venture during 2019.
Financing Activities
Our net cash provided by financing activities was $1.4 billion for the year ended December 31, 2019 compared to $84.9 million for
the year ended December 31, 2018. Cash provided by financing activities for the current year primarily consisted of $1.2 billion net proceeds
from the April 2019 follow-on offering, $350.0 million proceeds from the issuance of our Series C senior unsecured notes in May 2019,
$100.0 million in proceeds from revolving line of credit and $10.2 million in proceeds from stock options exercised. These cash inflows were
partially offset by $100.0 million of repayment on revolving line of credit, $135.4 million of distributions paid, $16.5 million of repayments
on lease obligations, $10.4 million of repayments on mortgage notes and notes payable, $7.1 million paid for tax withholdings remitted to
authorities related to stock options exercised and $2.1 million of payments related to debt issuance costs.
Net cash provided by financing activities was $84.9 million for the year ended December 31, 2018 and primarily consisted of $600.0
million in proceeds from the issuance of senior unsecured notes, $525.0 million received in connection with the issuance of our Senior
Secured Term Loan A Facility, $493.6 million net proceeds from the IPO, $92.7 million in proceeds from the follow-on public offering, and
$14.8 million in proceeds received from stock options exercised. These cash inflows were partially offset by $900.0 million paid to
extinguish term loans, mortgage notes, and construction loans, $622.4 million to complete the early retirement of the 2010 Mortgage Loans
and ANZ Loans, $13.0 million of repayments on lease obligations, $16.6 million paid for debt issuance costs associated with the issuance of
our Senior Secured Term Loan A Facility, $12.7 million paid for tax withholdings remitted to authorities related to stock options exercised,
and $78.5 million of quarterly dividend distributions and stub period dividend distributions paid to both preferred and common shareholders
of record as of the day prior to the IPO effective date.
Net cash provided by financing activities for the Operating Partnership was $1.4 billion for the year ended December 31, 2019
compared to $84.9 million of cash provided by financing activities for the year ended December 31, 2018. Cash provided by financing
activities for the current period primarily consisted of $1.2 billion of cash contributed by the Parent primarily related to equity issuances,
$350.0 million proceeds from the
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issuance of our Series C senior unsecured notes in May 2019 and $100.0 million in proceeds from revolving line of credit. These cash inflows
were partially offset by $135.4 million of distributions to the Parent, $2.1 million paid for debt issuance costs, and $16.5 million of
repayments on lease obligations.
Net cash provided by financing activities for the Operating Partnership for the year ended December 31, 2018 primarily consisted of
$600.0 million received from the debt private placement, $525.0 million received in connection with the issuance of our Senior Secured Term
Loan A Facility and $597.4 million of cash contributed by the Parent primarily related to equity issuances. These cash inflows were partially
offset by $900.0 million paid to extinguish term loans, mortgage notes, and construction loans, $622.4 million to complete the early
retirement of the 2010 CMBS and ANZ loans, $86.7 million of distributions to the Parent, $16.6 million paid for debt issuance costs, and
$13.0 million of repayments on lease obligations.
Withdrawal Liability from Multi-employer Plans
As of December 31, 2019, we participated in seven multiemployer pension plans administered by labor unions representing
approximately 26% of our employees. We make periodic contributions to these plans pursuant to the terms of our collective bargaining
agreements to allow the plans to meet their pension benefit obligations.
In the event that we withdraw from participation in any of the multiemployer pension plans in which we participate, the documents
governing the applicable plan and applicable law could require us to make an additional contribution to the applicable plan in the amount of
the unfunded vested benefits allocable to our participation in the plan, and we would have to reflect that as an expense on our Consolidated
Statement of Operations and as a liability on our Consolidated Balance Sheet. Our withdrawal liability for any multiemployer pension plan
would depend on the extent of the plan’s funding of vested benefits as of the year in which the withdrawal occurs, and may vary depending
on the funded status of the applicable multiemployer pension plan, whether there is a mass withdrawal of all participating employers and
whether any other participating employer in the applicable plan withdraws from the plan due to insolvency and is not able to contribute an
amount sufficient to fund the unfunded liabilities associated with its participants in the plan. The present value of all benefits vested under
each of the multiemployer plans that we participated in as of December 31, 2019 (based on the labor union’s assumptions used to fund such
plan) did not, as of the last annual valuation date applicable thereto, exceed the value of the assets of such plan allocable to such vested
benefits. Based on the latest information available from plan administrators, we estimate our share of the aggregate withdrawal liability for
the multiemployer pension plans in which we participate could have been as much as $566.7 million as of December 31, 2019, of which we
estimate that certain of our customers are contractually obligated to make indemnification payments to us for approximately $533.7 million.
However, there is no guarantee that, to the extent we incurred any such withdrawal liability, we would be successful in obtaining any
indemnification payments therefor.
In the ordinary course of our renegotiation of collective bargaining agreements with labor unions that maintain these plans, we could
agree to discontinue participation in one or more plans, and in that event we could face a withdrawal liability. Additionally, we could be
treated as withdrawing from a plan if the number of our employees participating in the plan is reduced to a certain degree over certain periods
of time.
Inflation
Our business could be impacted due to inflation. We believe, however, that we are well positioned to be able to manage our business
in an inflationary environment. Certain of our expenses are subject to normal inflationary pressures and this could lead to increases in the
operating costs of our properties, such as wages and benefits, insurance, real estate taxes, utility expenses, equipment repair and replacement
and other operating expenses. Although to date we have been able to offset inflationary cost increases with increased operating efficiencies
and the ability to increase prices in our customer contracts (many of which contain provisions for
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inflationary price escalators), we can give no assurance that we will be able to offset any future inflationary cost increases through similar
efficiencies or increased storage or service charges.
Off-Balance Sheet Arrangements
As of December 31, 2019, we had no material off-balance sheet arrangements that have or are reasonably likely to have a current or
future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources.
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Critical Accounting Policies
Our discussion and analysis of our historical financial condition and results of operations for the periods described is based on our
audited consolidated financial statements and our unaudited interim condensed consolidated financial statements, each of which has been
prepared in accordance with U.S. GAAP. The preparation of these historical financial statements in conformity with U.S. GAAP requires
management to make estimates, assumptions and judgments in certain circumstances that affect the reported amounts of assets, liabilities and
contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We
evaluate our assumptions and estimates on an ongoing basis. We base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions. For more information on our significant accounting policies, see Note 2 to our Consolidated Financial
Statements included in this Annual Report on Form 10-K. The following critical accounting discussion pertains to accounting policies
management believes are most critical to the portrayal of our historical financial condition and results of operations and that require
significant, difficult, subjective or complex judgments. Other companies in similar businesses may use different estimation policies and
methodologies, which may impact the comparability of our financial condition, results of operations and cash flows to those of other
companies.
Goodwill Impairment Evaluation
We perform impairment testing of goodwill as of October 1 of each year, and between annual evaluations if events occur or
circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Such events or
changes in circumstances may include a significant deterioration in overall economic conditions, changes in the business climate of our
industry, a decline in our market capitalization, operating performance indicators and competition. Our reporting units are comprised of the
following operations: U.S. warehouse, U.S. transportation, North America third-party managed, international warehouse, international third-
party managed, and international transportation. We may use both qualitative and quantitative approaches when testing goodwill for
impairment. For selected reporting units where we use the qualitative approach, we perform a qualitative evaluation of events and
circumstances impacting the reporting unit to determine the likelihood of goodwill impairment. Based on that qualitative evaluation, if we
determine it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary.
Otherwise, we perform a quantitative impairment test. We may also perform a quantitative evaluation periodically, even if there is no change
of events or circumstances.
To perform the quantitative impairment test, we compare the fair value of a reporting unit to its carrying value, including goodwill. If
the fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired. If the carrying value of the
reporting unit, including goodwill, exceeds its fair value, a goodwill impairment loss is recognized in an amount equal to that excess. We
generally estimate the fair value of each reporting unit using a combination of a discounted cash flow analysis and market-based valuation
methodologies such as comparable public company trading values and values observed in recent business acquisitions. The estimation of the
net present value of future cash flows is based upon varying economic assumptions, including significant assumptions such as revenue
growth rates, operating costs and margins, capital expenditures, tax rates, long-term growth rates and discount rates. These assumptions are
based on risk-adjusted growth rates and discount factors accommodating conservative viewpoints that consider the full range of variability
contemplated in the current and potential future economic situations. The discount rates utilized in the discounted cash flow analysis are
based on the respective reporting units weighted average cost of capital, which takes into account the relative weights of each component of
capital structure (equity and debt) and represents the
94
expected cost of new capital, adjusted as appropriate to consider the risk inherent in future cash flows of the respective reporting unit. The
carrying value of each reporting unit includes the assets and liabilities employed in its operations, goodwill and allocations of amounts held at
the business segment and corporate levels. We also assess market-based multiples of other market-participant companies, further
corroborating that our discounted cash flow models reflect fair value assumptions that are appropriately aligned with market-participant
valuation multiples.
Historically, our reporting units have generated sufficient returns to recover the value of goodwill. The results of our 2019
impairment test indicated that the estimated fair value of each of our reporting units was substantially in excess of the corresponding carrying
amount as of October 1, and no impairment of goodwill existed. Our most valuable reporting unit, U.S. warehouse, had an estimated fair
value approximately 237% greater than its carrying amount as of October 1, 2019.
Business Combinations
From time to time, we may enter into business combinations. In accordance with ASC 805, “Business Combinations”, we generally
recognize the identifiable assets acquired and the liabilities assumed at their fair values as of the date of acquisition. We measure goodwill as
the excess of consideration transferred over the net of the acquisition date fair values of the identifiable assets acquired and liabilities
assumed. Goodwill is assigned to each reporting unit based upon the expected proportionate gross margin. The acquisition method of
accounting requires us to make significant estimates and assumptions regarding the fair values of the elements of a business combination as
of the date of acquisition, including the fair values of identifiable intangible assets, land and buildings and improvements. Significant
estimates and assumptions include subjective and/or complex judgments regarding items such as revenue growth rates, operating costs and
margins, capital expenditures, tax rates, long-term growth rates, discount rates, customer attrition rates, economic lives and other factors,
including estimating future cash flows that we expect to generate from the acquired assets. The significant assumptions impacting the fair
value of the acquired real property include estimates of indirect costs and entrepreneurial profit on the transaction, which were added to the
replacement cost of the acquired assets in order to estimate their fair value in the market.
The acquisition method of accounting also requires us to refine these estimates over a measurement period not to exceed one year to
reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the
measurement of the amounts recognized as of that date. If we are required to adjust provisional amounts that we have recorded for the fair
values of assets and liabilities in connection with acquisitions, these adjustments could have a material impact on our financial condition and
results of operations. If the subsequent actual results and updated projections of the underlying business activity change compared with the
assumptions and projections used to develop these values, we could record future impairment charges. In addition, we have estimated the
economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense.
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Revenue Recognition
Our primary revenue source consists of rent, storage and warehouse services revenues. Additionally, we charge transportation fees to
those customers who use our transportation services, where we act as the principal in the arrangement of the services. We also receive a
reimbursement of substantially all expenses for warehouses that we manage on behalf of third-party owners, with all reimbursements
recognized as revenues under the relevant accounting guidance. We also earn management fees, incentive fees upon achieving negotiated
performance and cost-savings results, or an applicable mark-up on costs. Revenues from storage and handling are recognized over the period
consistent with the transfer of the service to the customer. Multiple contracts with a single counterparty are accounted for as separate
arrangements. We recognize transportation fees and expenses on a gross basis upon delivery of products on behalf of our customers. We also
recognize management fees and related expense reimbursements as revenues as we perform management services and incur the expense.
New Accounting Pronouncements
See Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K.
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ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Our future income and cash flows relevant to financial instruments are dependent upon prevalent market interest rates. Market risk
refers to the risk of loss from adverse changes in market prices and interest rates.
As of December 31, 2019, we had $475.0 million of outstanding variable-rate debt. This consisted of our Senior Unsecured Term
Loan A Facility bearing interest at one-month LIBOR plus a margin up to 1.00%. $100.0 million of this debt is hedged by an interest rate
swap that effectively locks the floating LIBOR rate at 2.48%. An additional $225.0 million of this debt is hedged by an interest rate swap that
effectively locks the floating LIBOR rate at 1.30%. After incorporating the effects of the interest rate swaps, our outstanding variable rate
debt is $150.0 million. At December 31, 2019, one-month LIBOR was at approximately 1.80%, therefore a 100 basis point increase in market
interest rates would result in an increase in interest expense to service our variable-rate debt of approximately $1.5 million. A 100 basis point
decrease in market interest rates would also result in a $1.5 million decrease in interest expense to service our variable-rate debt.
Foreign Currency Risk
Our international revenues and expenses are generated in the currencies of the countries in which we operate, including Australia,
New Zealand, Argentina and Canada. We are exposed to foreign currency exchange variability related to investments in and earnings from
our foreign investments. Foreign currency market risk is the possibility that our results of operations or financial position could be better or
worse than planned because of changes in foreign currency exchange rates. When the local currencies in these countries decline relative to
our reporting currency, the U.S. dollar, our consolidated revenues, contribution (NOI) margins and net investment in properties and
operations outside the United States decrease. The impact of currency fluctuations on our earnings is partially mitigated by the fact that most
operating and other expenses are also incurred and paid in the local currency. The impact of devaluation or depreciating currency on an entity
depends on the residual effect on the local economy and the ability of an entity to raise prices and/or reduce expenses. Due to our constantly
changing currency exposure and the potential substantial volatility of currency exchange rates, we cannot predict the effect of exchange rate
fluctuations on our business. As a result, changes in the relation of the currency of our international operations to U.S. dollars may also affect
the book value of our assets and the amount of shareholders’ equity. A 10% depreciation in the year-end functional currencies of our
international operations, relative to the U.S. dollar, would have resulted in a reduction in our shareholders’ equity of approximately $7.0
million as of December 31, 2019.
Our operations in Argentina are reported using highly inflationary accounting. The Argentina subsidiary’s functional currency is the
Australian dollar, which is the reporting and functional currency of their immediate parent company. The entity’s statements of operations
and balance sheets have been measured in Australian dollars using both current and historical exchange rates prior to translation into U.S.
dollars in consolidation. As of December 31, 2019, the net monetary assets of the Argentina subsidiary were immaterial and, therefore, a 10%
unfavorable change in the exchange rate would not be material. Additionally, the operating income of the Argentina subsidiary was less than
3.5% of our consolidated operating income for the years ended December 31, 2019 and 2018.
For the years ended December 31, 2019 and 2018, revenues from our international operations were $274.3 million and $289.8
million, respectively, which represented 15.4% and 18.1% of our consolidated revenues, respectively.
97
Net assets in international operations were approximately $70.3 million and $69.7 million as of December 31, 2019 and 2018,
respectively.
The effect of a change in foreign exchange rates on our net investment in foreign subsidiaries is reflected in the Accumulated other
comprehensive loss component of equity of our Consolidated Financial Statements included in this Annual Report on Form 10-K.
We attempt to mitigate a portion of the risk of currency fluctuation by financing certain of our foreign investments in local currency
denominations, effectively providing a natural hedge. However, given the volatility of currency exchange rates, there can be no assurance that
this strategy will be effective. The Company has entered into cross-currency swaps on its foreign denominated intercompany loans to hedge
the cash flow variability from the impact of changes in foreign currency on the interest payments on the intercompany loan as well as the
final principal payment. Since the critical terms of the derivatives match the critical terms of the intercompany loans, the hedge is considered
perfectly effective. All changes in fair value will be recorded to Accumulated other comprehensive loss.
In November 2019, we entered into an agreement to acquire Nova Cold for a purchase price of CAD $336.8 million, which
subsequently closed on January 2, 2020. As of December 31, 2019, we had an outstanding forward contract to purchase approximately CAD
$217.0 million and sell U.S. $165.0 million with a January 2, 2020 maturity, to hedge a portion of our exposure to foreign exchange rate
movement on the purchase price of Nova Cold. The remainder of the purchase price was funded utilizing a spot foreign exchange forward
contract and a draw on our 2018 Senior Unsecured Revolving Credit Facility denominated in Canadian dollars. Additionally, as of December
31, 2019, we had an outstanding forward contract to sell approximately CAD $217.0 million and purchase U.S. $165.0 million with a January
31, 2020 maturity, to hedge the return of capital to our parent company subsequent to the newly created Canadian entity entering into
Canadian denominated debt to finance our foreign investment in the subsidiary. On January 27, 2020, the forward contract was extended to
February 28, 2020. At the time of settlement, we either pay or receive the net settlement amount from any forward contract and recognize this
amount in “Foreign currency exchange gain (loss), net” in the accompanying Statement of Operations. We have not designated either of these
forward contracts as hedges as of December 31, 2019. As a result, we recorded unrealized foreign exchange gain or loss for the mark-to-
market valuation of these forward contracts for the year ended December 31, 2019, aggregating to an amount less than $0.1 million recorded
in “Foreign currency exchange gain (loss), net” in the accompanying Statement of Operations.
ITEM 8. Financial Statements and Supplementary Data
The independent registered public accounting firm’s reports, consolidated financial statements and schedule listed in the “Index to
Financial Statements” on page F-1 of this Annual Report are filed as part of this report and incorporated herein by reference.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
98
ITEM 9A. Controls and Procedures
Management’s Report on Internal Control over Financial Reporting (Americold Realty Trust)
Management is responsible for the preparation and fair presentation of the consolidated financial statements included in this annual
report. The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles and reflect
management’s judgments and estimates concerning events and transactions that are accounted for or disclosed.
Management is also responsible for establishing and maintaining effective internal control over financial reporting, as such term is
defined in Exchange Act Rule 13a-15(f). Management recognizes that there are inherent limitations in the effectiveness of any internal
control and effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement
preparation. Additionally, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control-Integrated Framework (2013 framework). The scope of our efforts to comply with Section 404 of the Sarbanes-Oxley Act
with respect to 2019 included all of our operations other than those we acquired in 2019 as described in Note 1 to the consolidated financial
statements. In accordance with the SEC’s published guidance, because we acquired these operations during the year, we excluded these
operations from our efforts to comply with Section 404 with respect to 2019. These acquired businesses constituted 36% of total assets as of
December 31, 2019 and 10% of revenue for the year then ended. Of these acquisitions, the acquisition of Cloverleaf Cold Storage represented
32% of total assets as of December 31, 2019 and 9% of revenue for the year then ended. The SEC’s published guidance specifies that the
period in which management may omit an assessment of an acquired business’s internal control over financial reporting from its assessment
of the Company’s internal control may not extend beyond one year from the date of acquisition. Based on our assessment, which as discussed
herein excluded the operations of the businesses acquired, management believes that the Company maintained effective internal control over
financial reporting as of December 31, 2019.
The effectiveness of our internal control over financial reporting has been audited by Ernst & Young LLP, an independent registered
public accounting firm, as stated in their report which is included in this Annual Report.
Changes in Internal Control over Financial Reporting
During the year ended December 31, 2019, we adopted ASU 2016-02 effective January 1, 2019. In connection with the adoption of
ASU 2016-02, we implemented a new lease accounting system and also redesigned certain processes and controls pertaining to our lease
portfolio.
There were no other changes in our internal control over financial reporting (as defined in Rule 13a - 15(f) of the Exchange Act)
identified in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act during the year ended December 31, 2019
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures (Americold Realty Operating Partnership, L.P.)
Management is responsible for the preparation and fair presentation of the consolidated financial statements included in this annual
report. The consolidated financial statements have been prepared in conformity with U.S.
99
generally accepted accounting principles and reflect management’s judgments and estimates concerning events and transactions that are
accounted for or disclosed.
Management is also responsible for establishing and maintaining effective internal control over financial reporting, as such term is
defined in Exchange Act Rule 13a-15(f). Management recognizes that there are inherent limitations in the effectiveness of any internal
control and effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement
preparation. Additionally, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control-Integrated Framework (2013 framework). The scope of our efforts to comply with Section 404 of the Sarbanes-Oxley Act
with respect to 2019 included all of our operations other than those we acquired in 2019 as described in Note 1 to the consolidated financial
statements. In accordance with the SEC’s published guidance, because we acquired these operations during the year, we excluded these
operations from our efforts to comply with Section 404 with respect to 2019. These acquired businesses constituted 36% of total assets as of
December 31, 2019 and 10% of revenue for the year then ended. Of these acquisitions, the acquisition of Cloverleaf Cold Storage represented
32% of total assets as of December 31, 2019 and 9% of revenue for the year then ended. The SEC’s published guidance specifies that the
period in which management may omit an assessment of an acquired business’s internal control over financial reporting from its assessment
of the Company’s internal control may not extend beyond one year from the date of acquisition. Based on our assessment, which as discussed
herein excluded the operations of the businesses acquired, management believes that the Company maintained effective internal control over
financial reporting as of December 31, 2019.
Changes in Internal Control over Financial Reporting
During the year ended December 31, 2019, we adopted ASU 2016-02 effective January 1, 2019. In connection with the adoption of
ASU 2016-02, we implemented a new lease accounting system and also redesigned certain processes and controls pertaining to our lease
portfolio.
There were no other changes in our internal control over financial reporting (as defined in Rule 13a - 15(f) of the Exchange Act)
identified in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act during the year ended December 31, 2019
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
100
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees
Americold Realty Trust and Subsidiaries
Opinion on Internal Control over Financial Reporting
We have audited Americold Realty Trust and subsidiaries’ internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, Americold Realty Trust and subsidiaries (the Company) maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and
conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of businesses acquired during
the year ended December 31, 2019, which are included in Note 1 of the 2019 consolidated financial statements of the Company and
constituted 36% of total assets as of December 31, 2019 and 10% of revenue for the year then ended. Of these acquisitions, the acquisition of
Cloverleaf Cold Storage represented 32% of total assets as of December 31, 2019 and 9% of revenue for the year then ended. Our audit of
internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of
the businesses acquired during the year ended December 31, 2019.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations,
comprehensive income, shareholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2019, and
the related notes and the financial statement schedule listed in the index at Item 15(a) and our report dated March 2, 2020 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our
audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
101
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Atlanta, Georgia
March 2, 2020
102
ITEM 9C. Other Information
None.
103
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
The information required by Item 10 will be included in the definitive proxy statement relating to the 2020 Annual Meeting of
Shareholders of Americold Realty Trust and is incorporated herein by reference.
ITEM 11. Executive Compensation
The information required by Item 11 will be included in the definitive proxy statement relating to the 2020 Annual Meeting of
Shareholders of Americold Realty Trust and is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 will be included in the definitive proxy statement relating to the 2020 Annual Meeting of
Shareholders of Americold Realty Trust and is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 will be included in the definitive proxy statement relating to the 2020 Annual Meeting of
Shareholders of Americold Realty Trust and is incorporated herein by reference.
ITEM 14. Principal Accounting Fees and Services
The information required by Item 14 will be included in the definitive proxy statement relating to the 2020 Annual Meeting of
Shareholders of Americold Realty Trust and is incorporated herein by reference.
104
PART IV
ITEM 15. Exhibits, Financial Statements and Schedules
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
The following documents are filed as a part of this Annual Report on Form 10-K:
a.Financial Statements and Schedules
Financial Statements:
Americold Realty Trust and Subsidiaries
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Shareholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Americold Realty Operating Partnership, L.P. and Subsidiaries
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Partners’ Capital
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements of Americold Realty Trust and Subsidiaries and Americold Realty Operating
Partnership, L.P. and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
Page
F-1
F-5
F-6
F-7
F-8
F-10
F-4
F-12
F-13
F-14
F-15
F-16
F-18
F-103
b. Exhibits
Exhibit No.
Description
EXHIBIT INDEX
2.1
3.1
3.2
3.3
3.4
Equity Purchase Agreement, dated as of April 16, 2019 (incorporated by reference to Exhibit 2.1 to Americold Realty Trust’s Current Report on Form 8-K
filed on April 16, 2019 (File No. 001-34723))
Amended and Restated Declaration of Trust of Americold Realty Trust, dated as of January 22, 2018 (incorporated by reference to Exhibit 3.1 to
Americold Realty Trust’s Current Report on Form 8-K filed on January 23, 2018 (File No. 001-34723))
Amended and Restated Bylaws of Americold Realty Trust (incorporated by reference to Exhibit 3.1 to Americold Realty Trust’s Current Report on Form
8-K filed on May 23, 2019 (File No. 001-34723))
Certificate of Limited Partnership of Americold Realty Operating Partnership, L.P. (incorporated by reference to Exhibit 3.3 to Americold Realty’s
Annual Report on Form 10-K filed on February 26, 2019 (File No. 001-34723))
Amended and Restated Limited Partnership Agreement of Americold Realty Operating Partnership, L.P. (incorporated by reference to Exhibit 3.1 to
Americold Realty Trust’s Current Report on Form 8-K filed on July 2, 2019 (File No. 001-34723))
4.1 Description of shares of Beneficial Interest
10.1
10.2
Credit Agreement, dated as of December 4, 2018, by and among the Operating Partnership, the Company, the Several Lenders and Letter of Credit Issuers
from Time to Time Parties Thereto and Bank of America, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 to
Americold Realty Trust’s Current Report on Form 8-K filed on December 5, 2018 (File No. 001-34723))
Consent and First Amendment to Credit Agreement, dated as of December 23, 2019, by and among the Company, the Operating Partnership and the
guarantors, lenders and letter of credit issues named therein (incorporated by reference to Exhibit 10.1 to Americold Realty Trust’s Current Form on Form
8-K filed on January 9, 2020 (File No. 001-34723))
10.3
Note and Guaranty Agreement, dated as of December 4, 2018, by and among the Operating Partnership, the Company and the purchasers named therein
(incorporated by reference to Exhibit 10.2 to Americold Realty Trust’s Current Report on Form 8-K filed on December 5, 2018 (File No. 001-34723))
10.4
Note and Guaranty Agreement, dated as of May 7, 2019, by and among the Operating Partnership, the Company and the purchasers named therein
(incorporated by reference to Exhibit 10.1 to Americold Realty Trust’s Current Report on Form 8-K filed on May 8, 2019 (File No. 001-34723))
10.5#
Employment Agreement, dated as of January 23, 2018, by and between AmeriCold Logistics, LLC and Fred Boehler (incorporated by reference to Exhibit
10.3 to Americold Realty Trust’s Current Report on Form 8-K filed on January 23, 2018 (Registration No. 333-221560))
10.6#
Employment Agreement, dated as of January 23, 2018, by and between AmeriCold Logistics, LLC and Marc Smernoff (incorporated by reference to
Exhibit 10.4 to Americold Realty Trust’s Current Report on Form 8-K filed on January 23, 2018 (Registration No. 333-221560))
10.7#
Employment Agreement, dated as of January 23, 2018, by and between AmeriCold Logistics, LLC and Thomas Novosel (incorporated by reference to
Exhibit 10.5 to Americold Realty Trust’s Current Report on Form 8-K filed on January 23, 2018 (Registration No. 333-221560))
10.8#
10.9#
10.10#
10.11#
10.12#
10.13#
10.14#
Letter Agreement, dated May 11, 2018, by and between Americold Realty Trust and Marc Smernoff (incorporated by reference to Exhibit 10.5 to
Americold Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, filed on May 15, 2018 (File No. 001-34723))
Employment Agreement, dated as of September 11, 2018, by and between AmeriCold Logistics, LLC and Carlos Rodriguez (incorporated by reference to
Exhibit 10.1 to Americold Realty Trust’s Current Report on Form 8-K/A filed on September 11, 2018 (File No. 001-34723)
Employment Agreement, dated as of March 26, 2018, by and between AmeriCold Logistics, LLC and James Snyder (incorporated by reference to Exhibit
10.10 to Americold Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2018, filed on February 27, 2019 (File No. 001-34723))
Employment Agreement, dated as of September 25, 2018, by and between AmeriCold Logistics, LLC and James Harron (incorporated by reference to
Exhibit 10.11 to Americold Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2018, filed on February 27, 2019 (File No. 001-
34723))
Employment Agreement, dated as of September 13, 2018, by and between AmeriCold Logistics, LLC and David Stuver (incorporated by reference to
Exhibit 10.10 to Americold Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2018, filed on February 27, 2019 (File No. 001-
34723))
Employment Agreement, dated January 7, 2020, by and between Americold Realty Trust and Robert Chambers (incorporated by reference to Exhibit 10.1
to Americold Realty Trust’s Current Report on Form 8-K filed on January 10, 2020 (File No. 001-34723))
Separation Agreement effective as of February 19, 2019 by and between AmeriCold Logistics, LLC and Thomas Musgrave (incorporated by reference to
Exhibit 10.1 to Americold Realty Trust’s Current Form on Form 8-K/A filed on February 22, 2019 (File No. 001-34723))
106
10.15#
Separation Agreement effective as of February 24, 2019 by and between AmeriCold Logistics, LLC and Andrea Darweesh (incorporated by reference to
Exhibit 10.1 to Americold Realty Trust’s Current Form on Form 8-K filed on February 25, 2019 (File No. 001-34723))
10.16
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.16 to Americold Realty Trust’s Registration Statement on Form S-11/A,
filed on December 19, 2017 (Registration No. 333-221560))
10.17
Americold Realty Trust 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.21 to Americold Realty Trust’s Registration Statement on
Form S-11/A, filed on January 12, 2018 (Registration No. 333-221560))
10.18
Americold Realty Trust 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.14 to Americold Realty Trust’s Registration Statement on
Form S-11/A, filed on December 20, 2017 (Registration No. 333-221560))
10.19
Americold Realty Trust 2017 Equity Incentive Plan, effective as of January 23, 2018 (incorporated by reference to Exhibit 10.8 to Americold Realty
Trust’s Current Report on Form 8-K filed on January 23, 2018 (Registration No. 333-221560))
10.20
Form of Annual Trustee Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.2 to Americold Realty Trust’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2018, filed on May 15, 2018 (File No. 001-34723))
10.21
Form of Retention Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.3 to Americold Realty Trust’s Quarterly Report on Form 10-
Q for the quarter ended March 31, 2018, filed on May 15, 2018 (File No. 001-34723))
10.22
Form of Performance Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.4 to Americold Realty Trust’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2018, filed on May 15, 2018 (File No. 001-34723))
10.23
10.24
10.25
Form of Annual Trustee OP Unit Award Agreement (incorporated by referenced to Exhibit 10.1 to Americold Realty Trust’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2019, filed on August 9, 2019 (File No. 001-34723))
Form of Retention OP Unit Award Agreement (incorporated by referenced to Exhibit 10.2 to Americold Realty Trust’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2019, filed on August 9, 2019 (File No. 001-34723))
Form of Performance OP Unit Award Agreement (incorporated by referenced to Exhibit 10.3 to Americold Realty Trust’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2019, filed on August 9, 2019 (File No. 001-34723))
10.26 Form of Performance Restricted Stock Unit Agreement
21.1 List of Subsidiaries
23.1 Consent of Ernst & Young LLP
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Americold Realty Trust
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Americold Realty Trust
31.3 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Americold Realty Operating Partnership, L.P.
31.4 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Americold Realty Operating Partnership, L.P.
32.1
32.2
32.3
32.4
95.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -
Americold Realty Trust
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -
Americold Realty Trust
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -
Americold Realty Operating Partnership, L.P.
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -
Americold Realty Operating Partnership, L.P.
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act.
# This document has been identified as a management contract or compensatory plan or arrangement.
Certain agreements and other documents filed as exhibits to this Annual Report on Form 10-K contain representations and warranties that the parties
thereto made to each other. These representations and warranties have been made solely for the benefit of the other parties to such agreements and may have been
qualified by certain information that has been disclosed to the other parties to such agreements and other documents and that may not be reflected in such
agreements and other documents. In addition, these representations and warranties may be intended as a way of allocating risks among parties if the statements
contained therein prove to be incorrect, rather than as actual statements of fact. Accordingly, there can be no reliance on any such representations and warranties as
characterizations of the actual state of facts. Moreover, information concerning the subject matter of any such representations and warranties may have changed
since the date of such agreements and other documents.
107
ITEM 16. Form 10-K Summary
Not Applicable.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees
Americold Realty Trust and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Americold Realty Trust and subsidiaries (the Company) as of December
31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, shareholders' equity (deficit) and cash flows for
each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in the index at
Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated
March 2, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating
the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
F-1
Accounting for the Acquisition of Cloverleaf Cold Storage
Description of the Matter As more fully described in Note 3 to the consolidated financial statements, the Company acquired Cloverleaf
Cold Storage (“Cloverleaf”) in May 2019 for aggregate cash consideration of $1.2 billion. The acquisition was
accounted for as a business combination and, as such, the Company preliminarily measured the assets acquired
and liabilities assumed at their acquisition-date fair values, including preliminary fair values of the acquired land,
buildings and improvements, and the customer relationships intangible asset of $60.5 million, $668.2 million, and
$250.3 million, respectively. As the valuation of certain assets and liabilities for purposes of purchase price
allocations are preliminary in nature, they are subject to adjustment as additional information is obtained about
the facts and circumstances regarding the assets and liabilities that existed at the acquisition date.
Auditing management's accounting for the acquisition of Cloverleaf involved especially subjective judgments and
complex analyses related to the preliminary fair value estimates of the acquired land, buildings and
improvements, and customer relationships intangible asset due to the significant estimation required in
determining fair value. The estimate of fair value of the acquired land and buildings and improvements is
sensitive to changes in assumptions of comparable transactions in the market. The estimate of fair value of the
acquired customer relationships intangible asset is sensitive to changes in assumptions impacting the net present
value of future cash flows expected from the future performance of the acquired business. The significant
assumptions impacting the preliminary fair value of the acquired land and buildings and improvements included
estimates of indirect costs and entrepreneurial profit, which were added to the replacement cost of the acquired
assets in order to estimate their fair value in the market, and the significant assumptions used to estimate the fair
value of the acquired customer relationships intangible asset include revenue growth rates, customer attrition
rates, operating costs and margins, capital expenditures, tax rates, long-term growth rates, and discount rates,
which are affected by expectations about future market and economic conditions.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness over the Company's
controls related to the accounting for the Cloverleaf acquisition process. For example, we tested controls over the
recognition and measurement of the acquired land, buildings and improvements and customer relationships
intangible asset, including the Company’s controls over the valuation approach and method selected, and the
significant assumptions used in the fair value measurement described above.
To test the fair value of the acquired land and buildings and improvements, our audit procedures, which involved
the assistance of our valuation specialists, included evaluating the Company's valuation methods and related
significant assumptions used as well as testing the completeness and accuracy of the underlying data supporting
the significant assumptions and estimates. For example, we compared the significant assumptions used to
estimate the concluded fair value of the acquired land and buildings and improvements to recent, historical
transactions within the industry.
To test the fair value of the acquired customer relationships intangible asset, our audit procedures included
evaluating the Company's valuation method and significant assumptions used and testing the completeness and
accuracy of the underlying data supporting the significant assumptions and estimates. We compared the
significant assumptions used by management to current economic trends, where applicable, the historical results
of the acquired business, and other relevant factors. We involved our valuation specialists to assist with our
evaluation of the valuation method and certain significant assumptions, including the discount rate used in
determining the fair value of the customer relationships intangible asset.
F-2
Test of Goodwill for Impairment
Description of the Matter As more fully described in Note 2 to the consolidated financial statements, the Company evaluates the carrying
value of goodwill each year as of October 1 and between annual evaluations if events occur or circumstances
change that would more likely than not reduce the fair value of a reporting unit to which goodwill has been
allocated below its carrying amount. The carrying value of the Company’s goodwill balance totaled $318.5
million as of December 31, 2019.
How We Addressed the
Matter in Our Audit
Auditing management’s goodwill impairment test involved especially subjective judgments due to the significant
estimation required in determining the fair value of the reporting units to which goodwill has been allocated. In
particular, the estimates of fair value are sensitive to changes in assumptions impacting the net present value of
future cash flows attributable to the reporting units, including revenue growth rates, operating costs and margins,
capital expenditures, tax rates, long-term growth rates, and discount rates, which are affected by expectations
about future market and economic conditions.
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the
Company’s goodwill impairment review process. For example, we tested controls over the estimation of the fair
values of the reporting units to which goodwill has been allocated, including the Company’s controls over the
valuation models, the mathematical accuracy of the valuation models and development of underlying assumptions
used to determine the fair values of the reporting units. We also tested controls over management’s review of the
reconciliation of the aggregate estimated fair value of the reporting units to the market capitalization of the
Company.
To test the estimated fair values of the Company’s reporting units, our audit procedures included, among others,
assessing the valuation methodology and the underlying data used by the Company in its analysis, including
testing the significant assumptions discussed above. We compared the significant assumptions used by
management to current economic trends, historical results, and other relevant factors. We assessed the historical
accuracy of management’s assumptions of future expected net cash flows and performed sensitivity analyses of
significant assumptions to evaluate the changes in the fair values of the reporting units that would result from
changes in the assumptions. We involved valuation specialists to assist in our evaluation of the valuation
methodology and the significant assumptions, including the discount rate used in determining the fair values of
the reporting units. We also tested the reconciliation of the aggregate estimated fair value of the reporting units to
the market capitalization of the Company.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2010.
Atlanta, Georgia
March 2, 2020
F-3
Report of Independent Registered Public Accounting Firm
The General and Limited Partners
Americold Realty Operating Partnership, L.P. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Americold Realty Operating Partnership, L.P. and subsidiaries (the
Partnership) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, Partners’ capital,
and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule
listed in the index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Partnership at December 31, 2019 and 2018, and the results of
its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally
accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the
Partnership’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Partnership in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the
United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Partnership is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Partnership’s auditor since 2010.
Atlanta, Georgia
March 2, 2020
F-4
Americold Realty Trust and Subsidiaries
Consolidated Balance Sheets
(In thousands, except shares and per share amounts)
Assets
Property, buildings and equipment:
Land
Buildings and improvements
Machinery and equipment
Assets under construction
Accumulated depreciation and depletion
Property, buildings and equipment – net
Operating lease right-of-use assets
Accumulated depreciation – operating leases
Operating leases – net
Financing leases:
Buildings and improvements
Machinery and equipment
Accumulated depreciation – financing leases
Financing leases – net
Cash and cash equivalents
Restricted cash
Accounts receivable – net of allowance of $6,927 and $5,706 at December 31, 2019 and 2018, respectively
Identifiable intangible assets – net
Goodwill
Investments in partially owned entities
Other assets
Total assets
Liabilities and shareholders’ equity
Liabilities:
Borrowings under revolving line of credit
Accounts payable and accrued expenses
Mortgage notes, senior unsecured notes and term loan – net of deferred financing costs of $12,996 and $13,943 in the aggregate, at
December 31, 2019 and 2018, respectively
Sale-leaseback financing obligations
Financing lease obligations
Operating lease obligations
Unearned revenue
Pension and postretirement benefits
Deferred tax liability – net
Multiemployer pension plan withdrawal liability
Total liabilities
Shareholders’ equity:
Common shares of beneficial interest, $0.01 par value – authorized 250,000,000 shares; 191,799,909 and 148,234,959 issued and
outstanding at December 31, 2019 and 2018, respectively
Paid-in capital
Accumulated deficit and distributions in excess of net earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
December 31,
2019
2018
$
526,226
$
2,696,732
817,617
108,639
4,149,214
(1,216,553)
2,932,661
385,232
1,849,749
577,175
85,983
2,898,139
(1,097,624)
1,800,515
77,723
(18,110)
59,613
11,227
76,811
88,038
(29,697)
58,341
234,303
6,310
214,842
284,758
318,483
—
61,372
—
—
—
11,227
49,276
60,503
(21,317)
39,186
208,078
6,019
194,279
25,056
186,095
14,541
58,659
$
$
4,170,683 $
2,532,428
— $
350,963
—
253,080
1,695,447
115,759
58,170
62,342
16,423
12,706
17,119
8,736
1,351,014
118,920
40,787
—
18,625
16,317
17,992
8,938
2,337,665
1,825,673
1,918
1,482
2,582,087
1,356,133
(736,861)
(14,126)
1,833,018
(638,345)
(12,515)
706,755
$
4,170,683 $
2,532,428
See accompanying notes to consolidated financial statements.
F-5
Americold Realty Trust and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
Revenues:
Rent, storage and warehouse services
Third-party managed services
Transportation services
Other
Total revenues
Operating expenses:
Rent, storage and warehouse services cost of operations
Third-party managed services cost of operations
Transportation services cost of operations
Cost of operations related to other revenues
Depreciation, depletion and amortization
Selling, general and administrative
Acquisition, litigation and other
Impairment of long-lived assets
Loss (gain) from sale of real estate, net
Total operating expenses
Operating income
Other (expense) income:
Interest expense
Interest income
Bridge loan commitment fees
Loss on debt extinguishment, modifications and termination of derivative instruments
Foreign currency exchange gain (loss), net
Other expense, net
Loss from partially owned entities
Gain from sale of partially owned entities
Impairment of partially owned entities
Income before income tax benefit (expense)
Income tax benefit (expense):
Current
Deferred
Total income tax benefit (expense)
Net income (loss) attributable to Americold Realty Trust
Less distributions on preferred shares of beneficial interest - Series A
Less distributions on preferred shares of beneficial interest - Series B
Less accretion on preferred shares of beneficial interest – Series B
Net income (loss) attributable to common shares of beneficial interest
Weighted average common shares outstanding – basic
Weighted average common shares outstanding – diluted
Net income (loss) per common share of beneficial interest - basic
Net income (loss) per common share of beneficial interest - diluted
Distributions declared per common share of beneficial interest
Years Ended December 31,
2019
2018
2017
$
1,377,217
$
1,176,912
$
1,145,662
252,939
144,844
8,705
259,034
158,790
8,899
242,189
146,070
9,666
1,783,705
1,603,635
1,543,587
929,626
241,178
126,777
7,867
163,348
129,310
40,614
13,485
34
802,378
244,274
143,055
8,279
117,653
110,825
3,935
747
(7,471)
797,334
229,364
133,120
9,664
116,741
99,616
11,329
9,473
(43)
1,652,239
1,423,675
1,406,598
131,466
179,960
136,989
(94,408)
6,286
(2,665)
—
10
(1,870)
(111)
4,297
—
(93,312)
3,996
—
(47,559)
2,882
(532)
(1,069)
—
—
43,005
44,366
(5,544)
10,701
467
3,152
5,157
3,619
48,162 $
47,985 $
—
—
—
(1)
(1,817)
—
48,162 $
46,167 $
179,598
183,950
141,415
144,338
0.26 $
0.26 $
0.31 $
0.31 $
(114,898)
1,074
—
(986)
(3,591)
(1,944)
(1,363)
—
(6,496)
8,785
(13,051)
3,658
(9,393)
(608)
(16)
(28,436)
(867)
(29,927)
70,022
70,022
(0.43)
(0.43)
0.82 $
0.74 $
0.29
$
$
$
$
$
See accompanying notes to consolidated financial statements.
F-6
Americold Realty Trust and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands)
Years Ended December 31,
2019
2018
2017
Net income (loss) attributable to Americold Realty Trust
$
48,162
$
47,985
$
(608)
Other comprehensive (loss) income - net of tax:
Adjustment to accrued pension liability
Change in unrealized net (loss) gain on foreign currency
Unrealized (loss) gain on cash flow hedge
Other comprehensive (loss) income attributable to Americold Realty Trust
3,269
(3,388)
(1,492)
(1,611)
(901)
(11,640)
256
(12,285)
5,754
4,444
116
10,314
Total comprehensive income
$
46,551 $
35,700 $
9,706
See accompanying notes to consolidated financial statements.
F-7
Americold Realty Trust and Subsidiaries
Consolidated Statements of Shareholders’ Equity (Deficit)
(In thousands, except shares)
Balance - December 31, 2016
Net loss
Other comprehensive income
Distribution on preferred shares of beneficial interest - Series
A
Distributions on preferred shares of beneficial interest - Series
B
Distributions on common shares
Accretion on preferred shares of beneficial interest - Series B
Share-based compensation expense (Stock Options and
Restricted Stock Units)
Balance - December 31, 2017
Net income
Other comprehensive loss
Distribution on preferred shares of beneficial interest - Series
A
Distributions on preferred shares of beneficial interest - Series
B
Distributions on common shares
Share-based compensation expense (Stock Options and
Restricted Stock Units)
Share-based compensation expense (modification of Restricted
Stock Units)
Common share issuance related to share-based payment plans,
net of shares withheld for employee taxes
Warrants exercise
Issuance of common shares
Conversion of mezzanine Series B Preferred shares
Other
Balance - December 31, 2018
Preferred Shares of
Beneficial Interest
Common Shares of
Series A
Beneficial Interest
Number of
Shares
Par Value
Number of
Shares
Par Value
Paid-in
Capital
Accumulated
Deficit and
Distributions
in Excess of
Net Earnings
Accumulated
Other
Comprehensive
(Loss)
Total
125 $
— 69,370,609 $
694 $ 392,591 $
(532,196) $
(10,544) $ (149,455)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(867)
(608)
—
(16)
(28,436)
(20,214)
—
2,358
–
—
(608)
10,314
10,314
—
—
—
—
—
(16)
(28,436)
(20,214)
(867)
2,358
125 $
— 69,370,609 $
694 $ 394,082 $
(581,470) $
(230) $ (186,924)
—
—
(125)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 1,847,274
— 6,426,818
— 37,350,000
— 33,240,258
—
—
—
—
—
—
—
—
—
18
64
374
332
—
—
—
(133)
—
—
8,556
2,042
2,649
(64)
576,964
372,459
47,985
—
(1)
(1,817)
(104,976)
—
—
—
—
—
—
—
(9,492)
—
—
—
—
—
—
—
—
—
47,985
(9,492)
(134)
(1,817)
(104,976)
8,556
2,042
2,667
—
577,338
372,791
(422)
1,934
(2,793)
(1,281)
— $
— 148,234,959 $
1,482 $1,356,133 $
(638,345) $
(12,515) $
706,755
F-8
Americold Realty Trust and Subsidiaries
Consolidated Statements of Shareholders’ Equity (Deficit) (Continued)
(In thousands, except shares)
Balance - December 31, 2018
Net income
Other comprehensive loss
Distributions on common shares
Share-based compensation expense (Stock Options and
Restricted Stock Units)
Share-based compensation expense (modification of Restricted
Stock Units)
Common share issuance related to share-based payment plans,
net of shares withheld for employee taxes
Issuance of common shares
Other
Balance - December 31, 2019
See accompanying notes to consolidated financial statements.
Preferred Shares of
Beneficial Interest
Common Shares of
Series A
Beneficial Interest
Number of
Shares
Par Value
Number of
Shares
Par Value
Paid-in
Capital
Accumulated
Deficit and
Distributions
in Excess of
Net Earnings
Accumulated
Other
Comprehensive
(Loss)
Income
Total
— $
— 148,234,959 $
1,482 $1,356,133 $
(638,345) $
(12,515) $
706,755
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 1,502,450
—
—
—
—
—
15
—
—
—
48,162
—
(146,590)
12,822
3,044
3,461
—
—
—
—
— 42,062,500
421
1,206,627
—
—
—
—
(88)
—
(1,611)
—
—
—
—
48,162
(1,611)
(146,590)
12,822
3,044
3,476
— 1,207,048
—
(88)
— $
— 191,799,909 $
1,918 $2,582,087 $
(736,861) $
(14,126) $ 1,833,018
F-9
Americold Realty Trust and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Operating activities:
Net income (loss) attributable to Americold Realty Trust
$
48,162
$
47,985
$
(608)
Years Ended December 31,
2019
2018
2017
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization
Amortization of deferred financing costs and pension withdrawal liability
Amortization of above/below market leases
Loss on debt extinguishment and modification, non-cash
Foreign exchange (gain) loss
Loss from and impairment of investments in partially owned entities
Gain from sale of partially owned entities
Share-based compensation expense (Stock Options and Restricted Stock Units)
Share-based compensation expense (Modification of Restricted Stock Units)
Deferred tax benefit
Loss (gain) from sale of real estate
Loss (gain) on other asset disposals
Impairment of long-lived assets and inventory
Multi-employer pension plan withdrawal expense
Provision for doubtful accounts receivable
Changes in operating assets and liabilities:
Accounts receivable
Accounts payable and accrued expenses
Other
Net cash provided by operating activities
Investing activities:
Return of investment in joint venture
Proceeds from sale of investments in partially owned entities
Proceeds from sale of property, buildings and equipment
Business combinations, net of cash acquired
Acquisitions of property, buildings and equipment, net of cash acquired
Additions to property, buildings and equipment
Net cash used in investing activities
Financing activities:
Distributions paid on beneficial interest shares – preferred – Series A
Distributions paid on beneficial interest shares – preferred – Series B
Distributions paid on common shares
Proceeds from revolving line of credit
Repayment of revolving line of credit
Proceeds from stock options exercised
Tax withholdings related to net share settlements of certain stock awards
Payment of underwriters’ costs
Reimbursement of underwriters’ costs
Repayment of sale-leaseback financing obligations
Repayment of financing lease obligations
Payment of debt issuance costs
Repayment of term loans, mortgage notes, notes payable and construction loans
Proceeds from senior unsecured notes
Proceeds from term loans
Proceeds from construction loans
Net proceeds from initial and follow-on public offerings
Net cash provided by (used in) financing activities
Net increase in cash, cash equivalents and restricted cash
163,348
6,028
151
—
(10)
111
(4,297)
12,822
3,044
(10,701)
34
870
13,485
—
1,218
(3,681)
841
4,764
117,653
6,177
151
28,446
(2,882)
1,069
—
8,639
2,042
(3,152)
(7,471)
(152)
747
—
2,324
(1,940)
(5,219)
(6,246)
236,189
188,171
116,741
8,604
151
400
3,591
7,859
—
2,358
—
(3,658)
(43)
(107)
11,581
9,134
1,229
1,597
18,202
(13,704)
163,327
—
—
2,000
14,250
1,151
(1,319,905)
(85,216)
(217,214)
(1,604,934)
—
—
(135,443)
100,000
(100,000)
10,204
(7,063)
—
—
(3,161)
(13,339)
(2,062)
(10,392)
350,000
—
—
1,206,627
1,395,371
26,626
—
—
19,513
10,163
—
—
(145,216)
(125,703)
(134)
(1,817)
(76,523)
—
—
14,842
(12,680)
(8,205)
8,952
(2,595)
(10,360)
(16,563)
(1,522,347)
600,000
525,000
1,097
586,275
84,942
147,410
—
—
(148,994)
(138,831)
(16)
(28,436)
(20,214)
34,000
(62,000)
—
—
—
—
(2,100)
(8,429)
(4,212)
(56,868)
—
110,000
19,671
—
(18,604)
5,892
Effect of foreign currency translation on cash, cash equivalents and restricted cash
(110)
(3,276)
1,141
Cash, cash equivalents and restricted cash:
Beginning of period
End of period
214,097
69,963
$
240,613 $
214,097 $
62,930
69,963
F-10
Americold Realty Trust and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
(In thousands)
Supplemental disclosures of cash flows information:
Acquisition of fixed assets under financing lease obligations
Acquisition of fixed assets under operating lease obligations
Interest paid – net of amounts capitalized
Income taxes paid – net of refunds
Acquisition of property, buildings and equipment on accrual
$
$
30,416 $
13,290 $
12,492
68,016
2,207
—
85,595
5,509
51,335 $
18,799 $
18,614
—
106,557
11,854
20,942
Reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets to the ending cash, cash equivalents and restricted cash balances above:
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
Allocation of purchase price of property, buildings and equipment to:
Land
Building and improvements
Machinery and equipment
Operating and finance lease right-of-use assets
Assembled workforce
Cash and cash equivalents
Other assets and liabilities, net
Operating and finance lease obligations
Cash paid for acquisition of property, buildings and equipment
Allocation of purchase price to business combinations:
Land
Building and improvements
Machinery and equipment
Assets under construction
Operating and finance lease right-of-use assets
Cash and cash equivalents
Restricted cash
Accounts receivable
Goodwill
Acquired identifiable intangibles:
Customer relationships
Trade names and trademarks
Other assets
Accounts payable and accrued expenses
Notes payable
Operating and finance lease obligations
Unearned revenue
Deferred tax liability
Total consideration
As of December 31,
2019
2018
2017
$
$
234,303 $
208,078 $
6,310
6,019
240,613 $
214,097 $
48,873
21,090
69,963
As of December 31,
2019
$
$
23,439
41,913
19,027
4,620
854
1,594
(17)
(4,620)
86,810
As of December 31,
2019
$
65,074
706,795
162,389
16,974
1,336
4,977
526
22,959
132,371
266,633
1,623
7,127
(45,000)
(3,878)
(1,336)
(3,536)
(9,626)
$
1,325,408
See accompanying notes to consolidated financial statements.
F-11
Americold Realty Operating Partnership, L.P. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except shares and per share amounts)
Assets
Property, buildings and equipment:
Land
Buildings and improvements
Machinery and equipment
Assets under construction
Accumulated depreciation and depletion
Property, buildings and equipment – net
Operating lease right-of-use assets
Accumulated depreciation – operating leases
Operating leases – net
Financing leases:
Buildings and improvements
Machinery and equipment
Accumulated depreciation – financing leases
Financing leases – net
Cash and cash equivalents
Restricted cash
Accounts receivable – net of allowance of $6,927 and $5,706 at December 31, 2019 and 2018, respectively
Identifiable intangible assets – net
Goodwill
Investments in partially owned entities
Other assets
Total assets
Liabilities and partners’ capital
Liabilities:
Borrowings under revolving line of credit
Accounts payable and accrued expenses
Mortgage notes, senior unsecured notes and term loan – net of deferred financing costs of $12,996 and $13,943 in the aggregate, at
December 31, 2019 and 2018, respectively
Sale-leaseback financing obligations
Financing lease obligations
Operating lease obligations
Unearned revenue
Pension and postretirement benefits
Deferred tax liability – net
Multiemployer pension plan withdrawal liability
Total liabilities
Partners’ capital:
General partner – 189,881,910 and 146,752,609 units issued and outstanding as of December 31, 2019 and 2018, respectively
Limited partner – 1,917,999 and 1,482,350 units issued and outstanding as of December 31, 2019 and 2018, respectively
Accumulated other comprehensive loss
Total partners’ capital
Total liabilities and partners’ capital
December 31,
2019
2018
$
526,226 $
2,696,732
817,617
108,639
4,149,214
(1,216,553)
2,932,661
77,723
(18,110)
59,613
11,227
76,811
88,038
(29,697)
58,341
234,303
6,310
214,842
284,758
318,483
—
61,372
385,232
1,849,749
577,175
85,983
2,898,139
(1,097,624)
1,800,515
—
—
—
11,227
49,276
60,503
(21,317)
39,186
208,078
6,019
194,279
25,056
186,095
14,541
58,659
$
$
4,170,683 $
2,532,428
— $
350,963
—
253,080
1,695,447
115,759
58,170
62,342
16,423
12,706
17,119
8,736
1,351,014
118,920
40,787
—
18,625
16,317
17,992
8,938
2,337,665
1,825,673
1,828,673
18,471
(14,126)
1,833,018
712,078
7,192
(12,515)
706,755
$
4,170,683 $
2,532,428
See accompanying notes to consolidated financial statements.
F-12
Americold Realty Operating Partnership, L.P. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
Revenues:
Rent, storage and warehouse services
Third-party managed services
Transportation services
Other
Total revenues
Operating expenses:
Rent, storage and warehouse services cost of operations
Third-party managed services cost of operations
Transportation services cost of operations
Cost of operations related to other revenues
Depreciation, depletion and amortization
Selling, general and administrative
Acquisition, litigation and other
Impairment of long-lived assets
Loss (gain) from sale of real estate, net
Total operating expenses
Operating income
Other (expense) income:
Interest expense
Interest income
Bridge loan commitment fees
Loss on debt extinguishment, modifications and termination of derivative instruments
Foreign currency exchange gain (loss), net
Other expense, net
Loss from partially owned entities
Gain from sale of partially owned entities
Impairment of partially owned entities
Income before income tax benefit (expense)
Income tax benefit (expense):
Current
Deferred
Total income tax benefit (expense)
Net income (loss) attributable to the Partnership
General partners’ interest in net income (loss) attributable to unitholders
Limited partners’ interest in net income (loss) attributable to unitholders
General partner weighted average units outstanding
Limited partner weighted average units outstanding
General partners’ net income (loss) per unit
Limited partners’ net income (loss) per unit
General partners’ distributions declared per unit
Years Ended December 31,
2019
2018
2017
$
1,377,217 $
1,176,912 $
1,145,662
252,939
144,844
8,705
259,034
158,790
8,899
242,189
146,070
9,666
1,783,705
1,603,635
1,543,587
929,626
241,178
126,777
7,867
163,348
129,310
40,614
13,485
34
802,378
244,274
143,055
8,279
117,653
110,825
3,935
747
(7,471)
797,334
229,364
133,120
9,664
116,741
99,616
11,329
9,473
(43)
1,652,239
1,423,675
1,406,598
131,466
179,960
136,989
(94,408)
(93,312)
(114,898)
6,286
(2,665)
—
10
(1,870)
(111)
4,297
—
3,996
—
(47,559)
2,882
(532)
(1,069)
—
—
43,005
44,366
(5,544)
10,701
5,157
467
3,152
3,619
48,162 $
47,985 $
1,074
—
(986)
(3,591)
(1,944)
(1,363)
—
(6,496)
8,785
(13,051)
3,658
(9,393)
(608)
47,680 $
47,505 $
482 $
480 $
(602)
(6)
177,180
139,394
1,790
1,408
68,677
694
0.27 $
0.27 $
0.34 $
0.34 $
(0.01)
(0.01)
0.82 $
0.76 $
0.70
$
$
$
$
$
$
Limited partners’ distributions declared per unit
$
0.82 $
0.76 $
0.70
See accompanying notes to consolidated financial statements.
F-13
Americold Realty Operating Partnership, L.P. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands)
Years Ended December 31,
2019
2018
2017
Net income (loss) attributable to Americold Realty Operating Partnership, L.P.
$
48,162 $
47,985 $
(608)
Other comprehensive (loss) income - net of tax:
Adjustment to accrued pension liability
Change in unrealized net (loss) gain on foreign currency
Unrealized (loss) gain on cash flow hedge
Other comprehensive (loss) income attributable to Americold Realty Operating Partnership. L.P.
3,269
(3,388)
(1,492)
(1,611)
(901)
(11,640)
256
(12,285)
5,754
4,444
116
10,314
Total comprehensive income
$
46,551 $
35,700 $
9,706
See accompanying notes to consolidated financial statements.
F-14
Americold Realty Operating Partnership, L.P. and Subsidiaries
Consolidated Statements of Partners’ Capital
(In thousands, except shares)
Limited
Partners’ Units
Limited
Partners’
Capital
General
Partners’ Units
General
Partners’
Capital
Accumulated
Other
Comprehensive
(Loss) Income
Total Capital
Balance - December 31, 2016
693,706 $
2,329
68,676,903 $
230,687 $
(10,544) $
222,472
Net loss
Other comprehensive income
Distributions to parent
Share-based compensation expense
—
—
—
—
(6)
—
(487)
24
—
—
—
—
(602)
—
(48,179)
2,334
—
10,314
—
—
(608)
10,314
(48,666)
2,358
Balance - December 31, 2017
693,706 $
1,860
68,676,903 $
184,240 $
(230) $
185,870
Net income
Other comprehensive loss
Distributions to parent
Share-based compensation expense
Contributions to partners’ capital
Other
—
—
—
—
788,644
—
480
—
(1,069)
106
5,800
15
—
—
—
—
78,075,706
—
47,505
(105,858)
10,492
574,202
1,497
—
(9,492)
—
—
—
(2,793)
47,985
(9,492)
(106,927)
10,598
580,002
(1,281)
Balance - December 31, 2018
1,482,350 $
7,192
146,752,609 $
712,078 $
(12,515) $
706,755
Net income
Other comprehensive loss
Distributions to parent
Share-based compensation expense
Contributions to partners’ capital
Other
—
—
—
—
482
—
(1,466)
159
—
—
—
—
47,680
—
(145,124)
15,707
435,649
—
12,105
43,129,301
1,198,419
(1)
—
(87)
—
(1,611)
—
—
—
—
48,162
(1,611)
(146,590)
15,866
1,210,524
(88)
Balance - December 31, 2019
1,917,999 $
18,471
189,881,910 $
1,828,673 $
(14,126) $
1,833,018
See accompanying notes to consolidated financial statements.
F-15
Americold Realty Operating Partnership, L.P. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Operating activities:
Net income (loss) attributable to Americold Realty Operating Partnership, L.P.
$
48,162 $
47,985 $
(608)
Years Ended December 31,
2019
2018
2017
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization
Amortization of deferred financing costs and pension withdrawal liability
Amortization of above/below market leases
Loss on debt extinguishment and modification, non-cash
Foreign exchange (gain) loss
Loss from and impairment of investments in partially owned entities
Gain from sale of partially owned entities
Share-based compensation expense (Stock Options and Restricted Stock Units)
Share-based compensation expense (Modification of Restricted Stock Units)
Deferred tax benefit
Loss (gain) from sale of real estate
Loss (gain) on other asset disposals
Impairment of long-lived assets and inventory
Multi-employer pension plan withdrawal expense
Provision for doubtful accounts receivable
Changes in operating assets and liabilities:
Accounts receivable
Accounts payable and accrued expenses
Other
Net cash provided by operating activities
Investing activities:
Return of investment in joint venture
Proceeds from sale of investments in partially owned entities
Proceeds from sale of property, buildings and equipment
Business combinations, net of cash acquired
Acquisitions of property, buildings and equipment, net of cash acquired
Additions to property, buildings and equipment
Net cash used in investing activities
Financing activities:
Distributions to parent
Proceeds from revolving line of credit
Repayment of revolving line of credit
Repayment of sale-leaseback financing obligations
Repayment of financing lease obligations
Payment of debt issuance costs
Repayment of term loans, mortgage notes, notes payable and construction loans
Proceeds from senior unsecured notes
Proceeds from term loans
Proceeds from construction loans
General partner contributions
Net cash provided by (used in) financing activities
Net increase in cash, cash equivalents and restricted cash
Effect of foreign currency translation on cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash:
Beginning of period
163,348
6,028
151
—
(10)
111
(4,297)
12,822
3,044
(10,701)
34
870
13,485
—
1,218
(3,681)
841
4,764
117,653
6,177
151
28,446
(2,882)
1,069
—
8,639
2,042
(3,152)
(7,471)
(152)
747
—
2,324
(1,940)
(5,219)
(6,246)
236,189
188,171
116,741
8,604
151
400
3,591
7,859
—
—
2,358
(3,658)
(43)
(107)
11,581
9,134
1,229
1,597
18,202
(13,704)
163,327
—
—
2,000
14,250
1,151
(1,319,905)
(85,216)
(217,214)
(1,604,934)
(135,443)
100,000
(100,000)
(3,161)
(13,339)
(2,062)
(10,392)
350,000
—
—
1,209,768
1,395,371
26,626
(110)
—
—
19,513
10,163
—
—
(145,216)
(125,703)
(86,679)
—
—
(2,595)
(10,360)
(16,563)
(1,522,347)
600,000
525,000
1,097
597,389
84,942
147,410
(3,276)
—
—
(148,994)
(138,831)
(48,666)
34,000
(62,000)
(2,100)
(8,429)
(4,212)
(56,868)
—
110,000
19,671
—
(18,604)
5,892
1,141
214,097
69,963
62,930
End of period
Supplemental disclosures of cash flows information:
Acquisition of fixed assets under financing lease obligations
Acquisition of fixed assets under operating lease obligations
Interest paid – net of amounts capitalized
Income taxes paid – net of refunds
Acquisition of property, buildings and equipment on accrual
$
$
$
240,613 $
214,097 $
69,963
30,416 $
13,290 $
12,492
68,016
2,207
—
85,595
5,509
51,335 $
18,799 $
18,614
—
106,557
11,854
20,942
F-16
Americold Realty Operating Partnership, L.P. and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
(In thousands)
Reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets to the ending cash, cash equivalents and restricted cash balances above:
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
Allocation of purchase price of property, buildings and equipment to:
Land
Building and improvements
Machinery and equipment
Operating and finance lease right-of-use assets
Assembled workforce
Cash and cash equivalents
Other assets and liabilities, net
Operating and finance lease obligations
Cash paid for acquisition of property, buildings and equipment
Allocation of purchase price to business combinations:
Land
Building and improvements
Machinery and equipment
Assets under construction
Operating and finance lease right-of-use assets
Cash and cash equivalents
Restricted cash
Accounts receivable
Goodwill
Acquired identifiable intangibles:
Customer relationships
Trade names and trademarks
Other assets
Accounts payable and accrued expenses
Notes payable
Operating and finance lease obligations
Unearned revenue
Deferred tax liability
Total consideration
See accompanying notes to consolidated financial statements.
As of December 31,
2019
2018
2017
$
$
234,303 $
208,078 $
6,310
6,019
240,613 $
214,097 $
48,873
21,090
69,963
As of December 31,
2019
$
$
23,439
41,913
19,027
4,620
854
1,594
(17)
(4,620)
86,810
As of December 31,
2019
$
65,074
706,795
162,389
16,974
1,336
4,977
526
22,959
132,371
266,633
1,623
7,127
(45,000)
(3,878)
(1,336)
(3,536)
(9,626)
$
1,325,408
F-17
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements
1. Description of the Business
The Company
Americold Realty Trust, together with its subsidiaries (ART, the Company, or we) is a real estate investment trust (REIT) organized under
Maryland law.
During 2010, the Company formed a Delaware limited partnership, Americold Realty Operating Partnership, L.P. (the Operating
Partnership), and transferred substantially all of its interests in entities and associated assets and liabilities to the Operating Partnership. This
structure is commonly referred to as an umbrella partnership REIT or an UPREIT structure. The REIT is the sole general partner of the
Operating Partnership, owning 99% of the common general partnership interests as of December 31, 2019. Americold Realty Operations,
Inc., a Delaware corporation and wholly-owned subsidiary of the REIT, is the sole limited partner of the Operating Partnership, owning 1%
of the common general partnership interests as of December 31, 2019. As the sole general partner of the Operating Partnership, the REIT has
full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership.
No limited partner shall be liable for any debts, liabilities, contracts or obligations of the Operating Partnership. A limited partner shall be
liable to the Operating Partnership only to make payments of capital contribution, if any, as and when due. After a capital contribution is fully
paid, no limited partner shall, except as otherwise may be legally required under Delaware law, be required to make any further contribution
or other payments or lend any funds to the Operating Partnership. The limited partners of the Operating Partnership do not have rights to
replace Americold Realty Trust as the general partner nor do they have participating rights, although they do have certain protective rights.
During the third quarter of 2019, the Company granted Operating Partnership Profit Units (OP Units) to certain members of the Board of
Trustees of the Company, which are described further in Note 17. Upon vesting, these units will represent noncontrolling interests in the
Operating Partnership that are not owned by Americold Realty Trust. The Company expects that the expense associated with the OP Units in
the Operating Partnership will be immaterial to the consolidated financial statements of the Company and the Operating Partnership.
The Operating Partnership includes numerous qualified REIT subsidiaries (QRSs). Additionally, the Operating Partnership conducts various
business activities in the United States (U.S.), Australia, New Zealand, Argentina, and Canada through several wholly owned taxable REIT
subsidiaries (TRSs).
Business and Industry Information
The Company is the world’s largest publicly traded REIT focused on the ownership, operation and development of temperature-controlled
warehouses. The Company is organized as a self-administered and self-managed REIT with proven operating, acquisition and development
experience. As of December 31, 2019, the Company operated a global network of 178 temperature-controlled warehouses, with 160
warehouses in the United States, six warehouses in Australia, seven warehouses in New Zealand, two warehouses in Argentina and three
warehouses in Canada. The Company also owns and operates a limestone quarry.
The Company provides its customers with technological tools to review real-time detailed inventory information via the Internet. In addition,
the Company manages customer-owned warehouses for which it earns fixed and incentive fees.
F-18
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Ownership
Pre-Initial Public Offering (IPO)
Prior to the IPO on January 23, 2018, YF ART Holdings, a partnership among investment funds affiliated with The Yucaipa Companies
(Yucaipa) and Fortress Investment Group, LLC (Fortress), owned approximately 100% of the Company’s common shares of beneficial
interest. In addition, affiliates of The Goldman Sachs Group, Inc. (Goldman) owned 325,000 Series B Preferred Shares, which were
converted to 28,808,224 common shares in connection with the IPO.
In connection with the IPO, China Merchants Holds International Company (CMHI), as defined in Note 4, converted their Series B Preferred
Shares into 4,432,034 common shares of the Company. After giving effect to the full exercise of the underwriters’ option to purchase
additional common shares during the IPO, CMHI owned approximately 3.1% of the Company’s common shares.
Initial Public Offering
On January 23, 2018, we completed an initial public offering of our common shares, or IPO, in which we issued and sold 33,350,000 of our
common shares, including 4,350,000 common shares pursuant to the exercise in full of the underwriters’ option to purchase additional
common shares. The common shares sold in the offering were registered under the Securities Act pursuant to our Registration Statement on
Form S-11 (File No. 333-221560), as amended, which was declared effective by the SEC on January 18, 2018. The common shares were sold
at an initial offering price of $16.00 per share, which generated net proceeds of approximately $493.6 million to us, after deducting
underwriting fees and other offering costs of approximately $40.0 million. We primarily used the net proceeds from the IPO to repay (i)
$285.1 million of indebtedness outstanding under our Senior Secured Term Loan B Facility, including $3.0 million of accrued and unpaid
interest and closing expense of $0.2 million (ii) $20.9 million of indebtedness outstanding under our Clearfield, Utah and Middleboro,
Massachusetts construction loans, including a nominal amount of accrued and unpaid interest; and (iii) to pay a stub period dividend totaling
$3.1 million to the holders of record of our common shares, Series A Preferred Shares and Series B Preferred Shares as of January 22, 2018.
Holders of the Series A Preferred Shares also received a redemption payment from the offering proceeds of $0.1 million. The
remaining $184.4 million net proceeds from the IPO were used for general corporate purposes.
The following is a list of other significant events that occurred in connection with the IPO:
• All outstanding Series A Preferred Shares were redeemed resulting in a cash payment of approximately $0.1 million, including
accrued and unpaid dividends;
• All outstanding Series B Preferred Shares were converted into an aggregate of 33,240,258 common shares resulting in a cash
payment of approximately $1.2 million of accrued and unpaid dividends.
•
•
The cashless exercise by YF ART Holdings GP, LLC, an affiliate of Yucaipa (YF ART Holdings), of all outstanding warrants to
purchase 18,574,619 common shares, exercisable at a price of $9.81 per share, into an aggregate of 6,426,818 common shares based
on a deemed valuation of $15.00 per share pursuant to the terms of the warrants;
The issuance of new senior secured credit facilities (2018 Senior Secured Credit Facilities), consisting of a five-year, $525.0 million
senior secured term loan A facility (Senior Secured Term Loan A Facility), with net proceeds of $517.0 million, and a three-year,
$400.0 million senior secured revolving credit facility (2018 Senior Secured Revolving Credit Facility). The 2018 Senior Secured
Credit Facility also had an additional
F-19
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
$400.0 million accordion option. Upon the completion of the IPO, $525.0 million was outstanding under the Company’s Senior
Secured Term Loan A Facility and no borrowings were outstanding under the Company’s 2018 Senior Secured Revolving Credit
Facility. During the month following the IPO, the Company paid $50 million of principal on the Senior Secured Term Loan A
Facility, resulting in an outstanding balance of $475.0 million.
September 2018 Follow-On Public Offering
On September 18, 2018, the Company completed a follow-on public offering of 4,000,000 of its common shares at a public offering price of
$24.50 per share, which generated net proceeds of approximately $92.5 million to the Company after deducting the underwriting discount and
estimated offering expenses payable by the Company, and an additional 6,000,000 common shares that are subject to a forward sale
agreement to be settled by September 2020. The term was extended from its original settlement of September 2019. The Company did not
initially receive any proceeds from the sale of the common shares subject to the forward sale agreement that were sold by the forward
purchaser or its affiliate. The Company accounts for the 2018 forward contract as equity and therefore is exempt from derivative and fair
value accounting. Before the issuance of the Company’s common shares, if any, upon physical or net share settlement of the 2018 forward
sale agreement, the Company expects that the common shares issuable upon settlement of the 2018 forward sale agreement will be reflected
in its diluted earnings per share calculations using the treasury stock method. Under this method, the number of the Company’s common
shares used in calculating diluted earnings per share is deemed to be increased by the excess, if any, of the number of common shares that
would be issued upon full physical settlement of the 2018 forward sale agreement less the number of common shares that could be purchased
by the Company in the market (based on the average market price during the period) using the proceeds receivable upon full physical
settlement (based on the adjusted forward sale price at the end of the reporting period). If and when the Company physically or net share
settles the 2018 forward sale agreement, the delivery of the Company’s common shares would result in an increase in the number of common
shares outstanding and dilution to our earnings per share. As of December 31, 2019, the Company has not settled any portion of the 2018
forward sale agreement. Additionally, in connection with the the follow-on public offering, YF ART Holdings GP, LLC (YF ART Holdings),
a partnership among investment funds affiliated with Yucaipa, sold 16.5 million common shares, affiliates of Goldman sold approximately
9.1 million common shares, and affiliates of Fortress sold approximately 7.2 million common shares.
Other Capital Markets Activity in 2018
On February 6, 2018, we amended the Credit Agreement with the lenders of our 2018 Senior Revolving Credit Facility to increase the
aggregate revolving credit commitments on this facility by $50.0 million to $450.0 million. Concurrently, we utilized cash on hand to repay
$50.0 million on our Senior Secured Term Loan A facility. As a result of these modifications, our total aggregate commitments under our
2018 Senior Credit Facilities remained unchanged at $925.0 million.
On March 8, 2018, YF ART Holdings used the proceeds from a margin loan to pay in full the outstanding preferred investment, including the
preferred return thereon, of Fortress, which ceased to be a limited partner in YF ART Holdings and no longer has any economic interest
therein. As of December 31, 2018, YF ART Holdings owned approximately 25.9% of the Company’s common shares.
On December 4, 2018, the Company recast its 2018 Senior Credit Facilities (2018 Senior Unsecured Credit Facility) to, among other things,
(i) increase the revolver borrowing capacity from $450 million to $800 million, (ii) convert the credit facility (term loan and revolver) from a
secured credit facility to an unsecured credit facility, and (iii) decrease the applicable interest rate margins from 2.35% to 1.45% and decrease
the fee on unused borrowing capacity by 5 basis points. Refer to Note 10 for further details.
F-20
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
March 2019 Secondary Public Offering
In March 2019, the Company completed a secondary public offering in which certain funds affiliated with YF ART Holdings and Goldman
sold their remaining interest in the Company of 38,422,583 and 8,061,228 common shares, respectively, at $27.75 per share, which included
6,063,105 shares purchased by the underwriters upon the exercise in full of their option to purchase additional shares. The selling
shareholders received proceeds from the offering, which, net of underwriting fees, totaled $1.1 billion. The Company received no proceeds
and incurred fees of $1.5 million related to this offering.
April 2019 Follow-On Public Offering
On April 22, 2019, the Company completed a follow-on public offering of 42,062,000 of its common shares, including 6,562,000 common
shares pursuant to the exercise in full of the underwriters’ option to purchase additional common shares, at a public offering price of $29.75
per share, which generated net proceeds of approximately $1.21 billion to the Company after deducting the underwriting discount and
estimated offering expenses payable by the Company, and an additional 8,250,000 common shares pursuant to the 2019 forward sale
agreement, which is expected to be settled within one year. The Company did not initially receive any proceeds from the sale of the common
shares subject to the 2019 forward sale agreement that were sold by the forward purchaser or its affiliate. The Company accounts for the 2019
forward contract as equity and therefore is exempt from derivative and fair value accounting. Refer to the above discussion under “September
2018 Follow-On Public Offering” for the earnings per share treatment and the impact as a result of this 2019 forward contract. The proceeds
of the follow-on public offering were used to fund a portion of the purchase of Cloverleaf. We used the cash proceeds that we received upon
settlement of the 2019 forward sale agreement on January 2, 2020 to fund the Nova Cold Logistics (Nova Cold) acquisition.
At the Market (ATM) Equity Program
On August 26, 2019, the Company entered into an equity distribution agreement pursuant to which we may sell, from time to time, up to an
aggregate sales price of $500.0 million of our common shares through the ATM Equity Program. Sales of our common shares made pursuant
to the ATM Equity Program may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined
in Rule 415 under the Securities Act, including sales made directly on the NYSE, or sales made to or through a market maker other than on
an exchange, or as otherwise agreed between the applicable Agent and us. Sales may also be made on a forward basis pursuant to separate
forward sale agreements. We intend to use the net proceeds from sales of our common shares pursuant to the ATM Equity Program for
general corporate purposes, which may include funding acquisitions and development projects. There were no common shares sold under the
ATM Equity Program during 2019.
Acquisitions
On February 1, 2019, the Company acquired PortFresh Holdings, LLC (PortFresh). The Company paid aggregate cash consideration of $35.2
million, net of cash acquired.
On May 1, 2019, the Company entered into an equity purchase agreement to acquire Cloverleaf. The Company refers to the completion of the
acquisition of Cloverleaf pursuant to the executed purchase agreement as “the Cloverleaf Acquisition”. The Company paid aggregate cash
consideration of approximately $1.24 billion, net of cash acquired. The consideration paid by the Company was funded using net proceeds
from the Company’s equity offering that closed on April 22, 2019, along with funds drawn under the Company’s senior unsecured revolving
credit facility.
F-21
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
On May 1, 2019, the Company acquired Lanier Cold Storage (Lanier). The Company paid aggregate cash consideration of approximately
$81.9 million, net of cash acquired.
On November 19, 2019, the Company acquired MHW Group Inc. (MHW). The Company paid aggregate cash consideration of
approximately $50.1 million, net of cash acquired. Additionally, on this date the Company announced the acquisition of Nova Cold which
closed in January 2020 for CAD $336.8 million. The Company funded the Nova Cold acquisition using a combination of equity from its
April 2019 forward sale agreement, the Company’s revolving credit facility and cash on hand.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
U.S. (GAAP) and include all of the accounts of Americold Realty Trust and Subsidiaries and the Operating Partnership and the subsidiaries
of the Operating Partnership. Intercompany balances and transactions have been eliminated.
The notes to the consolidated financial statements of Americold Realty Trust and the Operating Partnership have been combined to provide
the following benefits:
•
•
enhancing investors’ understanding of the Company and the Operating Partnership by enabling investors to view the business as a
whole in the same manner as management views and operates the business;
eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of the
disclosure applies to both the Company and the Operating Partnership; and
• creating time and cost efficiencies through the preparation of one set of notes instead of two separate sets of notes.
There are a few differences between the Company and the Operating Partnership, which are reflected in these consolidated financial
statements and the accompanying notes. We believe it is important to understand the differences between the Company and the Operating
Partnership in the context of how we operate as an interrelated consolidated company. Americold Realty Trust’s only material asset is its
ownership of partnership interests of the Operating Partnership. As a result, Americold Realty Trust generally does not conduct business
itself, other than acting as the sole general partner of the Operating Partnership, issuing public securities from time to time and guaranteeing
certain unsecured debt of the Operating Partnership and certain of its subsidiaries and affiliates. Americold Realty Trust itself has not issued
any indebtedness but guarantees the unsecured debt of the Operating Partnership and certain of its subsidiaries and affiliates, as disclosed in
these notes.
The Operating Partnership holds substantially all the assets of the Company. The Operating Partnership conducts the operations of the
business and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by Americold
Realty Trust, which are generally contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership
generally generates the capital required by the Company’s business primarily through the Operating Partnership’s operations, by the
Operating Partnership’s or its affiliates’ direct or indirect incurrence of indebtedness or through the issuance of partnership units.
The presentation of shareholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements
of Americold Realty Trust and those of the Operating Partnership. As of December 31, 2019 and for each of the years ended December 31,
2019, 2018 and 2017, the general partner, Americold Realty Trust
F-22
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
held a 99% interest in partnership units, and the limited partner, Americold Realty Operations, Inc. held a 1% interest in partnership units.
The general partnership interests held by Americold Realty Trust in the Operating Partnership are presented as general partner’s capital
within partners’ capital in the Operating Partnership’s consolidated financial statements and as common stock, additional paid-in capital and
accumulated dividends in excess of earnings within shareholders’ equity in Americold Realty Trust’s consolidated financial statements. The
limited partnership interests held by Americold Realty Operations, Inc., a wholly owned subsidiary of ART, in the Operating Partnership are
presented as limited partners’ capital within partners’ capital in the Operating Partnership’s consolidated financial statements and within
equity in Americold Realty Trust’s consolidated financial statements. The differences in the presentations between shareholders’ equity and
partners’ capital result from the differences in the equity presented at the Americold Realty Trust and the Operating Partnership levels.
To help investors understand the significant differences between the Company and the Operating Partnership, these consolidated financial
statements present the following notes to the consolidated financial statements for each of the Company and the Operating Partnership:
• Debt of the Company and Debt of the Operating Partnership
•
•
Partners’ Capital
Selected Quarterly Financial Information
In the sections that combine disclosure of Americold Realty Trust and the Operating Partnership, these notes refer to actions or holdings as
being actions or holdings of the Company. Although the Operating Partnership is generally the entity that enters into contracts and joint
ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Company
generally operates the business through the Operating Partnership.
Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Actual results
could differ from those estimates.
Property, Buildings and Equipment
Property, buildings and equipment is stated at cost, less accumulated depreciation. Depreciation is computed on a straight-line basis over the
estimated useful lives of the respective assets or, if less, the term of the underlying lease. Depreciation begins in the month an asset is placed
into service. Useful lives range from 5 to 43 years for buildings and building improvements and 3 to 12 years for machinery and equipment.
For the years ended December 31, 2019, 2018 and 2017, the Company recorded depreciation expense of $153.9 million, $116.0 million and
$115.1 million, respectively. Depletion on the limestone quarry is computed by the units-of-production method based on estimated
recoverable units. The Company periodically reviews the appropriateness of the estimated useful lives of its long-lived assets.
Costs of normal maintenance and repairs and minor replacements are charged to expense as incurred. When non-real estate assets are sold or
otherwise disposed of, the cost and related accumulated depreciation are removed, and any resulting gain or loss is included in “Other
expense, net” on the accompanying Consolidated Statements of Operations. Gains or losses from the sale of real estate assets are reported in
the accompanying Consolidated Statement of Operations as an operating expense.
F-23
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Costs incurred to develop software for internal use and purchased software are capitalized and included in “Machinery and equipment” on the
accompanying Consolidated Balance Sheets. Capitalized software is amortized over the estimated life of the software which ranges from 3 to
10 years. Amortization of previously capitalized amounts was $6.4 million, $5.2 million and $5.0 million for 2019, 2018 and 2017,
respectively, and is included in “Depreciation, depletion and amortization expense” on the accompanying Consolidated Statements of
Operations.
Activity in real estate facilities during the years ended December 31, 2019 and 2018 is as follows:
Operating facilities, at cost:
Beginning balance
Capital expenditures
Acquisitions
Newly developed warehouse facilities
Disposition
Impairment
Conversion of leased assets to owned
Impact of foreign exchange rate changes
Ending balance
Accumulated depreciation:
Beginning balance
Depreciation expense
Dispositions
Impact of foreign exchange rate changes
Ending balance
Total real estate facilities
Non-real estate assets
Total property, buildings and equipment and finance leases, net
2019
2018
(In thousands)
2,575,367 $
177,268
975,045
21,316
(7,409)
(12,555)
—
557
3,729,589
(827,892)
(114,512)
6,679
(697)
(936,422)
2,793,167 $
2,506,656
50,680
—
62,353
(30,199)
(747)
8,405
(21,781)
2,575,367
(770,006)
(87,355)
24,672
4,797
(827,892)
1,747,475
197,835
2,991,002 $
92,226
1,839,701
$
$
$
The total real estate facilities amounts in the table above include $76.8 million and $80.3 million of assets under sale-leaseback agreements
accounted for as a financing lease as of December 31, 2019 and 2018, respectively. The Company does not hold title in these assets under
sale-leaseback agreements.
During the second quarter of 2019, the Company sold an idle facility, which was written down earlier in 2019 resulting in an impairment
charge of $2.9 million and the write-off of primarily “Buildings and improvements” on the accompanying Consolidated Balance Sheets.
During the second quarter of 2018, the Company sold a facility resulting in an $8.4 million gain on sale of real estate and the write-off of
primarily “Land” and “Buildings and improvements” on the accompanying Consolidated Balance Sheets. In preparation of the exit of this
facility, the Company transferred most of its customers inventory to other owned warehouses within the same region. During the fourth
quarter of 2018, the Company disposed of an idle facility resulting in a $0.9 million loss on sale of real estate and the write-off of primarily
“Land” and “Buildings and improvement” on the accompanying Consolidated Balance Sheets.
F-24
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
In February 2019, the Company acquired one facility and adjacent land in connection with the PortFresh Acquisition, with total property,
buildings and equipment of $35.0 million. In May 2019, the Company acquired 21 facilities in connection with the Cloverleaf Acquisition,
with total property, buildings and equipment of $891.3 million. Additionally, in May 2019, the Company acquired two facilities in connection
with the Lanier Acquisition, with total property, buildings and equipment of $60.0 million. In November 2019, the Company acquired two
facilities in connection with the MHW Acquisition, with total property, buildings and equipment of $49.4 million. During 2018, the Company
purchased a portion of a facility that was previously operated under a lease agreement for $13.8 million.
In addition to selling and purchasing facilities, the Company also invested in development projects throughout 2019 and 2018. During the
third quarter of 2018, the Company commenced operations in a production-advantaged facility in Middleboro, MA which cost approximately
$23.5 million to construct. As of December 31, 2018, the Company was also constructing an automated expansion project at the Rochelle, IL
facility. The expansion was completed during the second quarter of 2019, with a total cost of $89.7 million incurred as of December 31, 2019.
During 2019, the Company began the “Atlanta Major Market Strategy” which includes the partial redevelopment of an existing warehouse
facility. The costs incurred for this ongoing project totaled $30.6 million as of December 31, 2019. During the fourth quarter of 2019, the
Company completed expansion projects at two legacy Cloverleaf facilities, Chesapeake, Virginia which totaled $24.3 million and North Little
Rock, Arkansas which totaled $18.9 million. The costs incurred for the ongoing expansion project at the legacy Cloverleaf facility in
Columbus, Ohio totaled $6.3 million as of December 31, 2019. The costs incurred for the ongoing development project at the legacy
PortFresh site in Savannah, Georgia totaled $41.5 million as of December 31, 2019. Finally, the Company acquired land in Sydney, Australia
during the second quarter of 2019 for $45.5 million for potential future development of a customer build-to-suit facility, for which it has
recourse should the customer choose to not move forward with this development project. Refer to Note 30 regarding updates on this project
that occurred subsequent to December 31, 2019.
Lease Accounting
Arrangements wherein we are the lessee:
At the inception of a contract, we determine if the contract is or contains a lease. Leases are classified as either financing or operating based
upon criteria within ASC 842, Leases, and a right-of-use (ROU) asset and liability are established for leases with an initial term greater than
12 months. Leases with an initial term of 12 months or less, and not expected to renew beyond 12 months, are not recorded on the balance
sheet.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease
payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the present value of the lease
payments over the lease term, as adjusted for prepayments, incentives and initial direct costs. ROU assets are subsequently measured at the
value of the remeasured lease liability, adjusted for the remaining balance of the following, as applicable: lease incentives, cumulative
prepaid or accrued rent and unamortized initial direct costs. When available, we use the rate implicit in the lease to discount lease payments
to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental
borrowing rate to discount the lease payments based on information available at lease commencement. We generally use our incremental
borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at
commencement date. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise
that option. The depreciable lives of assets are limited by the expected lease term, unless there is a transfer of title or purchase option
reasonably certain of exercise. Depreciation expense on assets acquired under financing leases is included in “Depreciation, depletion and
amortization” on the accompanying Consolidated Statements of Operations. Depreciation expense on assets acquired under operating leases
is included within cost of operations for the respective segment the asset pertains to, or within “Selling, general and administrative” for
corporate assets on the accompanying
F-25
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Consolidated Statements of Operations. As with other long-lived assets, ROU assets are reviewed for impairment when events or change in
circumstances indicate the carrying value may not be recoverable.
Operating leases are included in “Operating lease right-of-use assets”, “Accounts payable and accrued expenses” and “Operating lease
obligations” on our Consolidated Balance Sheet. Financing lease assets are included in “Financing leases-net”, “Accounts payable and
accrued expenses” and “Financing lease obligations” on our Consolidated Balance Sheet.
Arrangements wherein we are the lessor:
Each new lease contract is evaluated for classification as a sales-type lease, direct financing or operating lease. A lease is a sales-type lease if
any one of five criteria are met, as outlined in ASC 842 each of which indicate the lease, in effect, transfers control of the underlying asset to
the lessee. If none of those five criteria are met, but two additional criteria are both met, indicating we have transferred substantially all the
risks and benefits of the underlying asset to the lessee and a third party, the lease is a direct financing lease. All leases that are not sales-type
or direct financing leases are operating leases. We do not currently have any sales-type or direct financing leases.
For operating leases wherein we are the lessor, we assess the probability of payments at commencement of the lease contract and
subsequently recognize lease income, including variable payments based on an index or rate, over the lease term on a straight-line basis. We
continue to measure and disclose the underlying assets subject to operating leases based on our policies for application of ASC 360, Property,
Plant and Equipment.
For all asset classes we have elected to not separate the lease and non-lease components which generally relate to taxes and common area
maintenance. Additionally, we elected a practical expedient to present all funds collected from lessees for sales and other similar taxes net of
the related sales tax expense. Our lease contracts are structured in a manner to reduce risks associated with the residual value of leased assets.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment when events or changes in circumstances (such as decreases in operating income
and declines in occupancy) indicate that the carrying amounts may not be recoverable. A comparison is made of the expected future operating
cash flows of the long-lived assets on an undiscounted basis to their carrying amounts.
If the carrying amounts of the long-lived assets exceed the sum of the expected future undiscounted cash flows, an impairment charge is
recognized in an amount equal to the excess of the carrying amount over the estimated fair value of the long-lived assets, which the Company
calculates based on projections of future cash flows and appraisals with significant unobservable inputs classified as Level 3 of the fair value
hierarchy. The Company determined that individual warehouse properties constitute the lowest level of independent cash flows for purposes
of considering possible impairment.
For the years ended December 31, 2019, 2018 and 2017, the Company recorded charges of $13.5 million, $0.7 million and $9.5 million,
respectively, as “Impairment of long-lived assets” on the accompanying Consolidated Statements of Operations. During the first quarter of
2019, management and the Company’s Board of Trustees formally approved the “Atlanta Major Market Strategy” plan which included the
partial redevelopment of an existing warehouse facility. The partial redevelopment required the demolition of approximately 75% of the
current warehouse, which was unused. The Company expects the remainder of the site to continue operating as normal during the
construction period. As a result of this initiative, the Company impaired the carrying value of the portion of the warehouse no
F-26
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
longer in use, resulting in a charge of $9.6 million of Warehouse segment assets. Additionally, during the first quarter of 2019 the Company
recorded an impairment charge of $2.9 million of Warehouse segment assets related to a domestic idle warehouse facility in anticipation of a
potential future sale of the asset. The estimated fair value of this asset was determined based on ongoing negotiations with prospective
buyers. The sale of this property was completed during the second quarter of 2019. During the second quarter of 2019, the Company recorded
impairment charges of $0.9 million of Transportation segment assets related to the discontinued use of internally developed software and
other personal property assets due to the loss of a significant customer relationship within our foreign operations. During the year ended
December 31, 2018, the Company recorded an impairment charge of $0.7 million of Warehouse segment assets related to an idle domestic
warehouse facility in anticipation of a future sale of the asset, which was subsequently completed during the fourth quarter of 2018. During
the year ended December 31, 2017, the Company recorded $9.5 million of impairment associated with the planned disposal of certain
facilities, with a net book value in excess of their estimated fair value based on third-party appraisals or purchase offers. All 2017 long-lived
asset impairments related to the Warehouse segment.
Impairment of Other Assets
In 2017, the Company evaluated the limestone inventory held at its Quarry operations, and determined that approximately $2.1 million of that
inventory was not of saleable quality. As a result, the Company recognized an impairment charge for that amount, which is included as a
component of “Cost of operations related to other revenues” on the accompanying Consolidated Statements of Operations for the year ended
December 31, 2017.
Also during 2017, the Company recognized an impairment charge totaling $6.5 million related to its investments in two joint ventures in
China accounted for under the equity method. It was determined that the recorded investments were no longer recoverable from the projected
future cash flows expected to be received from the ventures. The estimated fair value of each investment was determined based on an
assessment of the proceeds expected to be received from the potential sale of the Company’s investment interests to the joint venture
partner. The impairment charge is included in “Impairment of partially owned entities” on the accompanying Consolidated Statements of
Operations for the year ended December 31, 2017.
There were no other asset impairment charges recorded during the years ended December 31, 2019 and 2018.
Capitalization of Costs
Project costs that are clearly associated with the development of properties are capitalized as incurred. Project costs include all costs directly
associated with the development of a property, including construction costs, interest, and costs of personnel working on the project. Costs that
do not clearly relate to the projects under development are not capitalized and are charged to expense as incurred.
Capitalization of costs begins when the activities necessary to get the development project ready for its intended use commence, which
include costs incurred before the beginning of construction. Capitalization of costs ceases when the development project is substantially
complete and ready for its intended use. Determining when a development project commences and when it is substantially complete and
ready for its intended use involves a degree of judgment. We generally consider a development project to be substantially complete and ready
for its intended use upon receipt of a certificate of occupancy. If and when development of a property is suspended pursuant to a formal
change in the planned use of the property, we will evaluate whether the accumulated costs exceed the estimated value of the project and write
off the amount of any such excess accumulated costs. For a development project that is suspended for reasons other than a formal change in
the planned use of such property, the accumulated project costs are written off. Capitalized costs are allocated to the specific components of a
project that are benefited.
F-27
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
During each of the years ended 2019, 2018 and 2017, we capitalized interest of approximately $3.3 million, $3.2 million, and $1.1 million,
respectively. During the years ended 2019, 2018 and 2017, we capitalized amounts relating to compensation and travel expense of employees
direct and incremental to development of properties of approximately $0.5 million, $0.6 million, and $0.2 million, respectively.
Business Combinations
For business combinations, the excess of purchase price over the net fair value of assets acquired and liabilities assumed is recorded as
goodwill. In an asset acquisition where we have determined that the cost incurred differs from the fair value of the net assets acquired, we
assess whether we have appropriately determined the fair value of the assets and liabilities acquired and we also confirm that all identifiable
assets have been appropriately identified and recognized. After completing this assessment, we allocate the difference on a relative fair value
basis to all assets acquired except for financial assets (as defined in ASC 860, Transfers and Servicing), deferred taxes, and assets defined as
“current” (as defined in ASC 210, Balance Sheet).
Whether the acquired business is being accounted for as a business combination or an asset acquisition, the determination of fair values of
identifiable assets and liabilities requires estimates and the use of valuation techniques. The Company estimates the fair values using
observable inputs classified as Level 2 and unobservable inputs classified as Level 3 of the fair value hierarchy. Significant judgment is
involved specifically in determining the estimated fair value of the acquired land and buildings and improvements and intangible assets. For
intangible assets, we typically use the excess earnings method. Significant estimates used in valuing intangible assets acquired in a business
combination include, but are not limited to, revenue growth rates, customer attrition rates, operating costs and margins, capital expenditures,
tax rates, long-term growth rates and discount rates. For land and buildings and improvements, we used a combination of methods including
the cost approach to value buildings and improvements and the sales comparison approach to value the underlying land. Significant estimates
used in valuing land and buildings and improvements acquired in a business combination include, but are not limited to estimates of indirect
costs and entrepreneurial profit, which were added to the replacement cost of the acquired assets in order to estimate their fair value in the
market.
On May 1, 2019, the Company completed the acquisitions of Cloverleaf and Lanier, both of which are accounted for as business
combinations. Refer to Note 3 for the disclosures related to these acquisitions.
F-28
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Asset Acquisitions
We acquired PortFresh in an asset acquisition on February 1, 2019 for $35.2 million, net of cash. The cost incurred in connection with this
asset acquisition was allocated primarily to $35.0 million of property, buildings and equipment, $0.4 million of an assembled workforce
intangible asset and $0.6 million of other assets and liabilities, net. Additionally, we acquired MHW in an asset acquisition on November 19,
2019 for $50.1 million. The cost incurred in connection with this asset acquisition was allocated primarily to $49.4 million of property,
buildings and equipment, $0.5 million of an assembled workforce intangible asset and $0.1 million of other assets and liabilities, net.
Additionally, the purchase agreement included a call option to purchase land from the holder of the ground lease at for $4.1 million, which
was exercised in January 2020. A right-of-use asset and related obligation were recorded for leases for approximately $4.5 million and $4.5
million, respectively.
Bridge Loan Commitment Fees
During the second quarter of 2019, we incurred costs of approximately $2.7 million related to unused bridge loan commitment fees in
connection with the potential funding need to complete the Cloverleaf Acquisition which ultimately was not utilized. These costs are
classified as a component of interest expense within the caption titled “Bridge loan commitment fees” and are presented within “Other
expense” on the accompanying Consolidated Statement of Operations.
F-29
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand deposits, and short-term liquid investments purchased with original maturities of
three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
As of December 31, 2019 and 2018, the Company held $34.1 million and $37.3 million, respectively, of cash and cash equivalents in bank
accounts of its foreign subsidiaries.
Restricted Cash
Restricted cash relates to cash on deposit and cash restricted for the payment of certain property repairs or obligations related to warehouse
properties collateralized by mortgage notes, cash on deposit for certain workers’ compensation programs and cash collateralization of certain
outstanding letters of credit, and payment of costs to administer and service the New Market Tax Credit (“NMTC”) entity. Refer to Note 19
for further details of the New Market Tax Credit.
Restricted cash balances as of December 31, 2019 and 2018 are as follows:
2013 mortgage notes’ escrow accounts
2013 mortgage notes’ cash managed accounts
Cash on deposit for workers’ compensation program in Australia
New market tax credit reserve accounts
Total restricted cash
Accounts Receivable
2019
2018
(In thousands)
877 $
2,343
2,525
565
6,310 $
974
2,410
2,635
—
6,019
$
$
Accounts receivable are recorded at the invoiced amount. The Company periodically evaluates the collectability of amounts due from
customers and maintains an allowance for doubtful accounts for estimated amounts uncollectable from customers. Management exercises
judgment in establishing these allowances and considers the balance outstanding, payment history, and current credit status in developing
these estimates. Specific accounts are written off against the allowance when management determines the account is uncollectable.
The following table provides a summary of activity of the allowance for doubtful accounts:
Allowance for doubtful accounts:
Year ended December 31, 2017
Year ended December 31, 2018
Year ended December 31, 2019
Balance at beginning
of year
Charged to
expense/against
revenue
Amounts written off,
net of recoveries
Balance at end of year
$
$
$
4,072
5,309
5,706
(In thousands)
2,510
1,969
3,608
(1,273) $
(1,572) $
(2,387) $
5,309
5,706
6,927
The Company records interest on delinquent billings within “Interest income” in the Consolidated Statements of Operations, offset by a bad
debt provision equal to the amount of interest charged until collected.
F-30
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Identifiable Intangibles Assets
Identifiable intangibles consist of a trade name and customer relationships.
Indefinite-Lived Asset
The trade name asset, with a carrying amount of $15.1 million as of December 31, 2019 and 2018, relates to “Americold” and has an
indefinite life; thus, it is not amortized. The Company evaluates the carrying value of its trade name each year as of October 1, and between
annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the trade name below its
carrying amount. There were no impairments to the Company’s trade name for the years ended December 31, 2019, 2018 and 2017.
Finite-Lived Assets
Customer relationship assets are the Company’s largest finite-lived assets amortized over 6 to 25 years using a straight-line or accelerated
amortization method dependent on the estimated benefits, which reflects the pattern in which economic benefits of intangible assets are
expected to be realized by the Company. Customer relationship amortization expense for the years ended December 31, 2019, 2018 and 2017
was $7.9 million, $0.8 million and $0.9 million, respectively. The weighted-average remaining life of the customer relationship assets is 24.2
years as of December 31, 2019. The Company reviews these intangible assets for impairment when circumstances indicate the carrying
amount may not be recoverable. There were no impairments to customer relationship assets for the years ended December 31, 2019, 2018 and
2017.
Leasehold Interests - Below Market Leases, Above Market Leases and In-place Lease
In reference to certain temperature-controlled warehouses where the Company is the lessee in an acquired business, below-market and above-
market leases are amortized on a straight-line basis over the remaining lease terms in a manner that adjusts lease expense to the market rate in
effect as of the acquisition date. In reference to certain temperature-controlled warehouses where the Company has a tenant lease assigned
through an acquisition, the resulting intangible asset is amortized over the remaining term of the tenant lease and recorded to amortization
expense. There were no impairments to leasehold interests for the years ended December 31, 2019, 2018 or 2017.
Deferred Financing Costs
Direct financing costs are deferred and amortized over the terms of the related agreements as a component of “Interest expense” in the
accompanying Consolidated Statements of Operations. The Company amortizes such costs based on the effective interest rate or on a
straight-line basis. The Company uses the latter approach when the periodic amortization approximates the amounts calculated under the
effective-interest rate method. Deferred financing costs related to revolving line of credits are classified as other assets, whereas deferred
financing costs related to long-term debt are offset against “Mortgages notes, senior unsecured notes and term loan”, as applicable in the
accompanying Consolidated Balance Sheets.
F-31
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Goodwill
The Company evaluates the carrying value of goodwill each year as of October 1 and between annual evaluations if events occur or
circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. When evaluating
whether goodwill is impaired, the Company compares the fair value of its reporting units to its carrying amounts, including goodwill. The
Company estimates the fair value of its reporting units based upon a combination of the net present value of future cash flows and a market-
based approach. Future cash flows are estimated based upon certain economic assumptions. The estimates of future cash flows are subject,
but not limited to the following significant assumptions: revenue growth rates, operating costs and margins, capital expenditures, tax rates,
long-term growth rates and discount rates, which are affected by expectations about future market and economic conditions. The assumptions
are based on risk-adjusted growth rates and discount factors accommodating multiple viewpoints that consider the full range of variability
contemplated in the current and potential future economic situations. The market-based multiples approach assesses the financial
performance and market values of other market-participant companies. If the estimated fair value of each of the reporting units exceeds the
corresponding carrying value, no impairment of goodwill exists. If a reporting unit’s carrying amount exceeds its fair value, an impairment
loss would be calculated by comparing the implied fair value of goodwill to the reporting unit’s carrying amount. The excess of the fair value
of the reporting unit over the amount assigned for fair value to its other assets and liabilities is the implied fair value of goodwill. There were
no goodwill impairment charges for the years ended December 31, 2019, 2018 and 2017.
Revenue Recognition
Revenues for the Company include rent, storage and warehouse services (collectively, Warehouse Revenue), third-party managed services for
locations or logistics services managed on behalf of customers (Third-Party Managed Revenue), transportation services (Transportation
Revenue), and revenue from the sale of quarry products (Other Revenue).
Warehouse Revenue
The Company’s customer arrangements generally include rent, storage and service elements that are priced separately. Revenues from
storage and handling are recognized over the period consistent with the transfer of the service to the customer. Multiple contracts with a
single counterparty are accounted for as separate arrangements.
Third-Party Managed Revenue
The Company provides management services for which the contract compensation arrangement includes: reimbursement of operating costs,
fixed management fee, and contingent performance-based fees (Managed Services). Managed Services fixed fees are recognized as revenue
as the management services are performed ratably over the service period. Managed Services performance-based fees are recognized ratably
over the service period based on the likelihood of achieving performance targets.
Cost reimbursements related to Managed Services arrangements are recognized as revenue as the services are performed and costs are
incurred. Managed Services fees and related cost reimbursements are presented on a gross basis as the Company is the principal in the
arrangement. Multiple contracts with a single counterparty are accounted for as separate arrangements.
F-32
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Transportation Revenue
The Company records transportation revenue and expenses upon delivery of the product. Since the Company is the principal in the
arrangement of transportation services for its customers, revenues and expenses are presented on a gross basis.
Other Revenue
Other revenue primarily includes the sale of limestone produced by the Company’s quarry business. Revenues from the sale of limestone are
recognized upon delivery to customers.
Contracts with Multiple Service Lines
When considering contracts containing more than one service to a customer, a contract’s transaction price is pre-defined or allocated to each
distinct performance obligation and recognized as revenue when, or as the performance obligation is satisfied, either over time as work
progresses, or at a point in time. For contracts with multiple service lines or distinct performance obligations, the Company evaluates and
allocates the contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct
good or service in the contract. The primary method used to estimate standalone selling price is the expected cost plus a margin approach,
under which the Company forecasts expected costs of satisfying a performance obligation and then adds an appropriate margin for that
distinct good or service.
Income Taxes
The Company operates in a manner intended to enable it to continue to qualify as a REIT under Sections 856-860 of the Code. Under those
sections, a REIT that distributes at least 100% of its REIT taxable income, as defined in the Code, as a dividend to its shareholders each year
and that meets certain other conditions will not be taxed on that portion of its taxable income that is distributed to its shareholders for U.S.
federal income tax purposes. Through cash dividends, the Company, for tax purposes, has distributed an amount equal to or greater than its
REIT taxable income for the years ended December 31, 2019, 2018 and 2017. For all periods presented, the Company has met all the
requirements to qualify as a REIT. Thus, no provision for federal income taxes was made for the years ended December 31, 2019, 2018 and
2017, except as needed for the Company’s U.S. Taxable REIT Subsidiaries (TRSs), for the Company’s foreign entities, and a REIT excise tax
payment in 2018 disclosed in Note 18 of these financial statements. To qualify as a REIT, an entity cannot have at the end of any taxable year
any undistributed earnings and profits that are attributable to a non-REIT taxable year (undistributed E&P). The Company believes that it has
no undistributed E&P as of December 31, 2019. However, to the extent there is a determination (within the meaning of Section 852(e)(1)) of
the Code that the Company has undistributed earnings and profits (as determined for U.S. federal income tax purposes) accumulated (or
acquired from another entity) from any taxable year in which the Company (or any other entity that converts to a Qualified REIT Subsidiary
(QRS) that was acquired during the year) was not a REIT or a QRS, the Company will take all necessary steps to permit the Company to
avoid the loss of its REIT status, including, but not limited to: 1) within the 90-day period beginning on the date of the determination, making
one or more qualified designated distributions (within the meaning of the Section 852(e)(2)) of the Code in an amount not less than such
undistributed earnings and profits over the interest payable under section 852(e)(3) of the Code; and 2) timely paying to the IRS the interest
payable under Section 852(e)(3) of the Code resulting from such a determination.
If the Company fails to qualify as a REIT in any taxable year, it will be subject to U.S. federal income taxes at regular corporate rates and
may not be able to qualify as a REIT for the four subsequent taxable years. Even as a REIT, it
F-33
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
may be subject to certain state and local income and franchise taxes, and to U.S. federal income and excise taxes on undistributed taxable
income and on certain built-in gains.
The Company has elected TRS status for certain wholly-owned subsidiaries. This allows the Company to provide services at those
consolidated subsidiaries that would otherwise be considered impermissible for REITs. Many of the foreign countries in which we have
operations do not recognize REITs or do not accord REIT status under their respective tax laws to our entities that operate in their
jurisdiction. Accordingly, the Company recognizes income tax expense for the U.S. federal and state income taxes incurred by the TRSs,
taxes incurred in certain U.S. states and foreign jurisdictions, and interest and penalties associated with unrecognized tax benefit liabilities, as
applicable.
Taxable REIT Subsidiary
The Company has elected to treat certain of its wholly owned subsidiaries as TRSs. A TRS is subject to U.S. federal and state income taxes at
regular corporate tax rates. Thus, income taxes for the Company’s TRSs are accounted for using the asset and liability method, under which
deferred income taxes are recognized for (i) temporary differences between the financial reporting and tax bases of assets and liabilities and
(ii) operating loss and tax credit carryforwards based on enacted tax rates expected to be in effect when such amounts are realized or settled.
The Company records a valuation allowance for deferred tax assets when it estimates that it is more likely than not that future taxable income
will be insufficient to fully use a deduction or credit in a specific jurisdiction. In assessing the need for the recognition of a valuation
allowance for deferred tax assets, we consider whether it is more likely than not that some portion, or all, of the deferred tax assets will not be
realized and adjust the valuation allowance accordingly. We evaluate all significant available positive and negative evidence as part of our
analysis. Negative evidence includes the existence of losses in recent years. Positive evidence includes the forecast of future taxable income
by jurisdiction, tax-planning strategies that would result in the realization of deferred tax assets, reversal of existing deferred tax liabilities,
and the presence of taxable income in prior carryback years. The underlying assumptions we use in forecasting future taxable income require
significant judgment and take into account our recent performance. The ultimate realization of deferred tax assets depends on the generation
of future taxable income during the periods in which temporary differences are deductible or creditable.
The Company accrues liabilities when it believes that it is more likely than not that it will not realize the benefits of tax positions that it has
taken in its tax returns or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with ASC 740-10,
Uncertain Tax Positions. The Company recognizes interest and penalties related to unrecognized tax benefits within “Income tax (expense)
benefit” in the accompanying Consolidated Statements of Operations.
The earnings of certain foreign subsidiaries, including any other components of the outside basis difference in these subsidiaries, are
considered to be indefinitely reinvested, except for Canada and Hong Kong. The Company changed its assertion for its Canadian subsidiaries
in 2018 to begin repatriating its unremitted earnings to the U.S. starting in 2018. The Company is also no longer permanently reinvested with
regard to its investment in Hong Kong in 2019. If our plans change in the future for any other foreign subsidiary or if we elect to repatriate
the unremitted earnings of our other foreign subsidiaries in the form of distributions or otherwise, we would be subject to additional income
taxes which could result in a higher effective tax rate. As disclosed in Note 18 of these financial statements, the U.S. government enacted
comprehensive tax legislation on December 22, 2017 which imposed a one-time inclusion for our REIT or tax for our TRS on the deemed
repatriation of unremitted foreign earnings and profits. However, the Company has provided for local country withholding taxes related to the
unremitted earnings to be repatriated in certain foreign jurisdictions to the U.S. TRS. With respect to the foreign subsidiaries owned directly
by the REIT, any unremitted earnings would not be subject to additional U.S. level taxes because the REIT would distribute 100% of such
earnings or would be subject to a participation exemption beginning in 2018.
F-34
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Pension and Post-Retirement Benefits
The Company has defined benefit pension plans that cover certain union and nonunion employees. The Company also participates in multi-
employer union defined benefit pension plans under collective bargaining agreements for certain union employees. The Company also has a
post-retirement benefit plan to provide life insurance coverage to eligible retired employees. The Company also offers defined contribution
plans to all of its eligible employees. Contributions to multi-employer union defined benefit pension plans are expensed as incurred, as are the
Company’s contributions to the defined contribution plans. For the defined benefit pension plans and the post-retirement benefit plan, an
asset or a liability is recorded in the consolidated balance sheet equal to the funded status of the plan, which represents the difference between
the fair value of the plan assets and the projected benefit obligation at the consolidated balance sheet date. The Company utilizes the services
of a third-party actuary to assist in the assessment of the fair value of the plan assets and the projected benefit obligation at each measurement
date. Certain changes in the value of plan assets and the projected benefit obligation are not recognized immediately in earnings but instead
are deferred as a component of accumulated other comprehensive income (loss) and amortized to earnings in future periods.
Foreign Currency Gains and Losses
The local currency is the functional currency for the Company’s operations in Australia, New Zealand and Canada. For these operations,
assets and liabilities are translated at the rates of exchange on the consolidated balance sheet date, while income and expense items are
translated at average rates of exchange during the period. The resulting gains or losses arising from the translation of accounts from the
functional currency into U.S. dollars are included as a separate component of shareholders’ equity in accumulated other comprehensive
income (loss) until a partial or complete liquidation of the Company’s net investment in the foreign operation.
From time to time, the Company’s foreign operations may enter into transactions that are denominated in a currency other than their
functional currency. These transactions are initially recorded in the functional currency of the subsidiary based on the applicable exchange
rate in effect on the date of the transaction. On a monthly basis, these transactions are remeasured to an equivalent amount of the functional
currency based on the applicable exchange rate in effect on the remeasurement date. Any adjustment required to remeasure a transaction to
the equivalent amount of functional currency is recorded in “Foreign currency exchange gain (loss), net” in the accompanying Consolidated
Statements of Operations.
During the fourth quarter of 2018, the Company entered into two intercompany loan agreements, whereby the Australia and New Zealand
entities borrowed from the U.S. entity. These intercompany loan agreements were denominated in the functional currency of the respective
entities. The intercompany loan receivable balances as of December 31, 2019 are AUD $153.5 million and NZD $37.5 million, and are
remeasured at the end of each month to the United States Dollar (USD) with any required adjustment recorded in “Foreign currency exchange
gain (loss), net” in the accompanying Consolidated Statements of Operations. Foreign currency transaction gains and losses on the
remeasurement of short-term intercompany loans denominated in currencies other than a subsidiary’s functional currency are recognized as a
component of foreign currency gain or loss, except to the extent that the transaction is effectively hedged. For loans that are effectively
hedged, the transaction gains and losses on remeasurement are recorded to “Accumulated other comprehensive income (loss)”. Foreign
currency transaction gains and losses resulting from the remeasurement of long-term intercompany loans denominated in currencies other
than a subsidiary’s functional currency are recognized as a component of “Accumulated other comprehensive income (loss)” if a repayment
of these loans is not anticipated.
F-35
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Recently Adopted Accounting Standards
Lease Accounting
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), as amended, which the Company adopted using a modified
retrospective transition approach effective January 1, 2019. All leases that commenced prior to our adoption of this new standard were
accounted for and disclosed in accordance with our existing policies for application of ASC 840, Leases. Accordingly, prior year amounts
were not recast under the new standard.
Upon adoption, we elected a package of practical expedients for expired and existing contracts whereby we (1) did not reassess our prior
conclusions about lease identification, lease classification and initial direct costs, (2) continued to apply existing accounting policies for all
land easements that existed or expire before the date of adoption, (3) did not recognize ROU assets or liabilities for leases that qualify as
short-term leases for all classes of underlying assets, and (4) did not separate lease and non-lease components for all classes of underlying
assets. The Company did not elect to apply the hindsight practical expedient when determining the term for our leases.
The new standard requires disclosure of additional quantitative and qualitative information for lessee and lessor arrangements which has been
included above in the Summary of Significant Accounting Policies and in Note 13.
Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment. This update eliminates step two of the goodwill impairment test, and specifies that goodwill impairment should be measured by
comparing the fair value of a reporting unit with its carrying amount. Additionally, the amount of goodwill allocated to each reporting unit
with a zero or negative carrying amount of net assets should be disclosed. For public business entities that are SEC filers, this ASU is
effective for annual and any interim impairment tests for periods beginning after December 15, 2019. Early adoption is allowed for all entities
as of January 1, 2017, for annual and any interim impairment tests occurring after January 1, 2017. The Company adopted ASU 2017-04 on
January 1, 2019 on a prospective basis and it did not have a material effect on its consolidated financial statements.
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging
Activities. This ASU refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create
more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes
certain targeted improvements to simplify the application of hedge accounting guidance. ASU 2017-12 is effective for public business entities
for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption, including adoption in an
interim period, is permitted. The Company adopted ASU 2017-12 on January 1, 2019 on a prospective basis and it did not have a material
impact on its consolidated financial statements.
Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as
a Benchmark Interest Rate for Hedge Accounting Purposes
In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate
(“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. This ASU permits the use of
the OIS rate based upon SOFR as a U.S. benchmark interest rate for purposes of applying hedge accounting under Topic 815. The Alternative
Reference Rates Committee announced
F-36
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
that it identified the Secured Overnight Funding Rate (SOFR) as its preferred alternative to LIBOR. The Company intends to continue to use
LIBOR until its extermination date in 2021, and intends to replace LIBOR with SOFR at that time. The Company adopted ASU 2018-16 on
January 1, 2019 and does not believe that the transition from LIBOR to SOFR will have a material impact on its consolidated financial
statements.
Improvements to Nonemployee Share-Based Payment Accounting
In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which more closely aligns
the accounting for employee and nonemployee share-based payments. The standard will be effective for interim and annual reporting periods
beginning after December 15, 2018. The Company adopted this standard on January 1, 2019 on a prospective basis, and it did not have a
material impact on its consolidated financial statements.
Future Adoption of Accounting Standards
Fair Value Measurement - Disclosure Framework
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure
Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements on fair value measurements. The ASU removes
the requirement to disclose: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for
timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. The ASU requires disclosure of changes
in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements
held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair
value measurements. For public business entities, this guidance is effective for fiscal years beginning after December 15, 2019 with early
adoption permitted. The Company is currently evaluating the effect that this guidance will have on its consolidated financial statements.
Collaborative Arrangements
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the interaction between Topic 808
and Topic 606. ASU 2018-18 clarifies that certain transactions between participants in a collaborative arrangement should be accounted for
under ASC 606 when the counterparty is a customer and precludes an entity from presenting consideration from a transaction in a
collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. For public
business entities, these amendments are effective for fiscal years beginning after December 15, 2019, and interim periods therein. The
Company believes the adoption of ASU 2018-18 will not have a material effect on its consolidated financial statements.
Credit Losses
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326). This ASU introduces new guidance for the
accounting for credit losses. For trade receivables, the Company will be required to use a forward-looking expected loss model rather than the
incurred loss model for recognizing credit losses which reflects losses that are probable. The standard will be effective for interim and annual
reporting periods beginning after December 15, 2019, with early adoption permitted. The Company continues to assess the impact of
adopting this standard and does not believe the adoption of ASU 2016-13 will have a material effect on its consolidated financial statements.
F-37
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Defined Benefit Plans
In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20):
Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans. This update amends ASC 715 to remove
disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements
identified as relevant to defined benefit pension and other postretirement plans. The ASU’s changes related to disclosures are part of the
FASB’s disclosure framework project. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2020. Early adoption is permitted for all entities and the amendments in this update are required to be applied on a
retrospective basis to all periods presented. The Company does not expect the provisions of ASU 2018-14 will have a material impact on its
consolidated financial statements.
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) . This ASU is intended to
simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic
740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2020, however, early adoption is permitted for all entities. The Company
continues to assess the impact of adopting this standard and does not believe the adoption of ASU 2019-12 will have a material effect on its
consolidated financial statements.
Other Presentation Matters
Reclassifications
Certain immaterial, prior period amounts have been reclassified to conform to the current period presentation on the Consolidated Statements
of Operations, the Consolidated Statements of Shareholders’ Equity and the Consolidated Statements of Cash Flows. The Consolidated
Statement of Operations reflects the reclassification required in the prior period upon addition of a new caption described as “Acquisition,
litigation and other”, which was previously classified within “Selling, general and administrative”. Refer to Note 8 for further detail of this
caption. The Consolidated Statements of Shareholders’ Equity reflects the reclassification required in the prior period upon addition of a new
caption described as “Common share issuance related to share-based payment plans, net of shares withheld for employee taxes”, which was
previously classified within “Share-based compensation expense (Stock Options and Restricted Stock Units)”. The Consolidated Statements
of Cash Flows reflects the reclassification of certain immaterial amounts related to amortization from the caption previously described as
“Multi-employer pension plan withdrawal expense and amortization” which is now classified within “Amortization of deferred financing
costs and pension withdrawal liability”.
F-38
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
3. Business Combinations
Acquisition of Cloverleaf
The Company completed the acquisition of privately-held Cloverleaf on May 1, 2019. A summary of the preliminary fair values of the assets
acquired and liabilities assumed for total cash consideration of $1.24 billion, as well as adjustments made during 2019 (referred to as
“measurement period adjustments”), is as follows (in thousands):
Amounts Recognized as of
the
Acquisition Date
Measurement Period
Adjustments (1)
Amounts Recognized as of
the Acquisition Date (as
Adjusted)(2)
$
Assets
Land
Buildings and improvements
Machinery and equipment
Assets under construction
Operating lease right-of-use assets
Cash and cash equivalents
Restricted cash
Accounts receivable
Goodwill
Acquired identifiable intangibles:
Customer relationships
Trade names and trademarks
Other assets
Total assets
Liabilities
Accounts payable and accrued expenses
Notes payable
Operating lease obligations
Unearned revenue
Pension and postretirement benefits
Deferred tax liability
Total liabilities
Total consideration for Cloverleaf acquisition
$
59,363 $
687,821
144,825
20,968
1,254
4,332
—
21,358
107,643
241,738
1,623
18,720
1,309,645
30,905
17,179
1,254
3,536
2,020
9,063
63,957
1,245,688 $
1,131 $
(19,670)
822
(3,994)
—
—
526
220
18,297
8,608
—
(11,668)
(5,728)
12,598
(13,301)
—
—
(2,020)
(195)
(2,918)
(2,810) $
60,494
668,151
145,647
16,974
1,254
4,332
526
21,578
125,940
250,346
1,623
7,052
1,303,917
43,503
3,878
1,254
3,536
—
8,868
61,039
1,242,878
(1) The measurement period adjustments recorded in 2019 did not have a significant impact on our Consolidated Statements of Operations for the year ended
December 31, 2019.
(2) The measurement period adjustments were primarily due to refinements to third party appraisals and carrying amounts of certain assets and liabilities, as well as
adjustments to certain tax accounts based on, among other things, adjustments to deferred tax liabilities. The net impact of the measurement period adjustments
results in a net increase to goodwill.
As the valuation of certain assets and liabilities for purposes of purchase price allocations are preliminary in nature, they are subject to
adjustment as additional information is obtained about the facts and circumstances regarding these
F-39
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
assets and liabilities that existed at the acquisition date. Any adjustments to our estimates of purchase price allocation will be made in the
periods in which the adjustments are determined and the cumulative effect of such adjustments will be calculated as if the adjustments had
been completed as of the acquisition dates. Adjustments recorded subsequent to the acquisition date are detailed in the table above, and were
not material to the Consolidated Balance Sheets, the Consolidated Statements of Operations or the Consolidated Statements of Cash Flows.
The preliminary purchase price allocation will be finalized within one year from the date of acquisition.
As shown above, the Company recorded approximately $125.9 million of goodwill related to the Cloverleaf Acquisition. The strategic
benefits of the acquisition include the Company’s ability to add complementary customers into its network, provide an opportunity for growth
in the Central and Southeast markets, deepen existing customer relationships, provide three expansion opportunities that are already under
construction and leverage integration experience to drive synergies and further enhance the warehouse network for new and existing
customers. These factors contributed to the goodwill that was recorded upon consummation of the transaction. The Cloverleaf acquisition was
completed through the acquisition of both stock and partnership units; the acquisition of partnership units allowed a portion of the goodwill
recorded as a result of the Cloverleaf Acquisition to be deductible for federal income tax purposes. The goodwill related to the Cloverleaf
Acquisition has been substantially assigned to the Warehouse segment, with a de minimis amount assigned to the Transportation segment.
Deferred taxes may not be recorded for deductible goodwill unless the tax basis in goodwill exceeds the book basis, and the Company has not
recorded any deferred taxes as a result. Deductible goodwill will be available to reduce taxable income for both the REIT and its domestic
TRS.
Also shown above, in connection with the Cloverleaf Acquisition the Company recorded an intangible asset of approximately $250.3 million
for customer relationships which has been assigned a useful life of 25 years, and approximately $1.6 million for trade names and trademarks
which has been assigned a useful life of 1.5 years. These intangible assets will be amortized on a straight-line basis over their respective
useful lives. Based on the discussion under goodwill above, the Cloverleaf Acquisition resulted in federal income tax deductibility for a
portion of the intangible assets. The deductible intangible assets will be available to reduce taxable income for both the REIT and its domestic
TRS. The Company has recorded a deferred tax liability of $1.9 million for intangible assets.
The unaudited pro forma financial information set forth below is based on the historical Consolidated Statements of Operations for the years
ended December 31, 2019 and 2018, adjusted to give effect to the Cloverleaf Acquisition as if it had occurred on January 1, 2018. The pro
forma adjustments primarily relate to acquisition expenses, depreciation expense on acquired assets, amortization of acquired intangibles, and
estimated interest expense related to financing transactions, the proceeds of which were used to fund the acquisition of Cloverleaf.
On March 1, 2019, Cloverleaf acquired Zero Mountain, Inc. and Subsidiaries (Zero Mountain). As a result, we have included the results of
operations of Zero Mountain in the below pro forma financial information. The pro forma adjustments made include the acquisition expenses
incurred in connection with Cloverleaf’s acquisition of Zero Mountain.
The accompanying unaudited pro forma consolidated financial statements exclude the results of the Lanier acquisition, which was deemed
immaterial. These statements are provided for illustrative purposes only and do not purport to represent what the actual Consolidated
Statements of Operations of the Company or the Operating Partnership would have been had the Cloverleaf Acquisition occurred on the dates
assumed, nor are they necessarily indicative of what the results of operations would be for any future periods.
F-40
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Americold Realty Trust and Subsidiaries
Total revenue
Net income available to common shareholders(1)
Net income per share, diluted(2)
Americold Realty Operating Partnership, L.P. and Subsidiaries
Pro forma (unaudited)
(in thousands, except per share data)
Years Ended December 31,
2019
2018
$
$
$
1,859,265 $
52,026 $
0.27 $
1,829,048
(3,232)
(0.02)
Pro forma (unaudited)
(in thousands, except per share data)
Years Ended December 31,
2019
2018
1,829,048
Total revenue
Net income available to common unitholders(1)
(3,232)
Net income per unit, diluted(2)
(0.02)
(1) Pro forma net income available to common shareholders was adjusted to exclude $26.6 million of acquisition related costs incurred by the Company during the
year ended December 31, 2019, and to include these charges in pro forma net income for the year ended December 31, 2018.
(2)Adjusted to give effect to the issuance of approximately 42.1 million common shares in connection with the Cloverleaf Acquisition.
1,859,265 $
52,026 $
0.27 $
$
$
$
Since the date of acquisition, total revenues of approximately $152.8 million and net income of approximately $9.0 million associated with
properties and operations acquired in the Cloverleaf Acquisition are included in the Consolidated Statements of Operations for the year ended
December 31, 2019.
Acquisition of Lanier
The Company completed the acquisition of privately-held Lanier on May 1, 2019 for total cash consideration of $81.9 million, net of cash
received. The allocation of consideration primarily included $60.0 million of property, buildings and equipment, $6.4 million of goodwill,
and $16.3 million of customer relationship intangible assets. The customer relationship asset has been assigned a useful life of twenty-five
years and will be amortized on a straight-line basis. The goodwill recorded is primarily attributable to the strategic benefits of the acquisition
including the increased presence in the north Georgia poultry market and leveraging integration experience to drive synergies and further
enhance the warehouse network for new and existing customers. The Lanier acquisition was completed through the acquisition of both stock
and partnership units; the acquisition of partnership units allowed a portion of the goodwill recorded to be deductible for federal income tax
purposes. Deferred taxes may not be recorded for deductible goodwill unless the tax basis exceeds the book basis, and the Company has not
recorded any deferred taxes as a result. Deductible goodwill will be available to reduce taxable income at both the REIT and its domestic
TRS. Adjustments recorded subsequent to the acquisition date were not material to the Consolidated Balance Sheets, the Consolidated
Statements of Operations or the Consolidated Statements of Cash Flows. The preliminary purchase price allocation will be finalized within
one year from the date of acquisition. We have included the financial results of the acquired operations in our Warehouse segment since the
date of the acquistion.
F-41
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
4. Equity-Method Investments
During 2010, the Company, through its wholly owned subsidiaries, made total cash investments of $46.2 million in two newly-formed Hong
Kong entities, China Merchants Americold Holdings Logistics Company Limited (CMAL) and China Merchants Americold Holdings
Company Limited (CMAH, together with CMAL, the Joint Venture, or China JV). Through these subsidiaries, the Company acquired a 49%
interest in the Joint Venture, while China Merchants Holdings International Company (CMHI) acquired the remaining 51% interest in the
Joint Venture. CMHI is a Hong Kong based entity that is part of the China Merchants Group. Other affiliates of CMHI subsequently
purchased 50,000 shares of the Company’s Series B Preferred Shares, subsequently converted to common shares in connection with our IPO.
The Joint Venture was formed with the purpose of acquiring, owning, and operating temperature-controlled warehouses, primarily in the
People’s Republic of China. During 2015, the Company made an additional capital contribution of $1.3 million to the Joint Venture for
general corporate purposes.
In 2017, the Company recognized an impairment charge totaling $6.5 million related to our investment in the Joint Venture as we determined
that the recorded investment was no longer recoverable from the projected future cash flows expected to be received from the Joint Venture.
The estimated fair value of this investment was determined based on active negotiations of the proceeds expected to be received from the
potential sale of our investment interests to the joint venture partner.
During the third quarter of 2019, the Company completed the sale of its equity interest in its China JV to an affiliate of its joint venture
partner for total cash consideration of $15.0 million. The resulting gain on the sale of the China JV totaled $4.3 million and is included in
“Gain from sale of partially owned entities” on the accompanying Consolidated Statements of Operations. The gain recorded includes $2.6
million related to cumulative foreign currency translation historically recorded through Other Comprehensive Income which stemmed from
the remeasurement of the foreign denominated equity-method investment in the China JV. The following tables summarize the financial
information of the Company’s China JV for the periods presented, prior to disposition.
The condensed summary financial information for the Company’s China JV is as follows for the portion of the year which the Company held
ownership interest in the China JV during 2019 and the full year ended December 31, 2018:
Condensed results of operations
CMAL
2019
CMAH
(In thousands)
Revenues
Operating (loss) income
Net (loss) income
Company’s (loss) income from partially owned entities
Condensed results of operations
Revenues
Operating (loss) income
Net (loss) income
Company’s (loss) income from partially owned entities
$
$
$
$
$
$
$
$
28,334 $
(348) $
(507) $
(429) $
10,907 $
1,920 $
1,018 $
318 $
CMAL
2018
CMAH
(In thousands)
37,458 $
(1,748) $
(1,960) $
(1,419) $
13,621 $
2,432 $
1,651 $
350 $
F-42
Total
39,241
1,572
511
(111)
Total
51,079
684
(309)
(1,069)
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Condensed results of operations
CMAL
2017
CMAH
(In thousands)
Revenues
Operating (loss) income
Net loss
Company’s loss from partially owned entities
$
$
$
$
38,662 $
(2,052) $
(2,479) $
(1,143) $
12,294 $
314 $
(296) $
(220) $
Total
50,956
(1,738)
(2,775)
(1,363)
In addition to the China JV, the Company had an investment in a joint venture accounted for under the equity-method, for which a complete
return of capital totaling $2.0 million was received during the first quarter of 2019, eliminating the Company’s involvement in the joint
venture.
5. Goodwill and Intangible Assets
The changes in the carrying amount of the Company’s goodwill by reportable segment for the years ended December 31, 2019, 2018 and
2017 are as follows:
December 31, 2016
Impact of foreign currency translation
December 31, 2017
Impact of foreign currency translation
December 31, 2018
Goodwill acquired
Impact of foreign currency translation
December 31, 2019
Warehouse
Third-party
managed
Transportation
Total
$
$
171,582 $
972
172,554
(1,658)
170,896
130,919
9
301,824 $
(In thousands)
3,056 $
8
3,064
(174)
2,890
—
(8)
2,882 $
12,167 $
384
12,551
(242)
12,309
1,452
16
13,777 $
186,805
1,364
188,169
(2,074)
186,095
132,371
17
318,483
The goodwill acquired in 2019 primarily related to the Cloverleaf and Lanier acquisitions in the Warehouse segment. Refer to Note 3 for
additional information.
F-43
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Intangible assets subject to amortization as of December 31, 2019 and 2018 are as follows:
Customer
relationships
Above-
market leases In-place lease
Below-market
leases
Assembled
Workforce
Trade names and
trademarks
Total
Gross
Additions
Accumulated amortization
Net definite lived intangible
assets
$
$
(In thousands, except years)
143 $
—
(60)
3,778 $
—
(1,578)
33,788 $
266,633
(38,036)
9,126 $
—
(5,794)
— $
908
(128)
— $
1,623
(721)
46,835
269,164
(46,317)
262,385 $
83 $
2,200 $
3,332 $
780 $
902
Indefinite lived intangible asset (Trade name)
Identifiable intangible assets – net, December 31, 2019
Weighted-average remaining
useful life at December 31,
2019
24.2
3.8
3.8
32.6
2.7
0.8
23.9
Gross
Additions
Accumulated amortization
Net definite lived intangible
assets
$
$
33,788 $
—
(30,169)
143 $
—
(38)
3,778 $
—
(1,004)
9,126 $
—
(5,644)
3,619 $
105 $
2,774 $
3,482 $
— $
—
—
— $
Indefinite lived intangible asset (Trade name)
Identifiable intangible assets – net, December 31, 2018
Weighted-average remaining
useful life at December 31,
2018
9.1
4.8
4.8
33.2
N/A
N/A
16.3
269,682
15,076
284,758
$
— $
—
—
—
$
46,835
—
(36,855)
9,980
15,076
25,056
Additions in 2019 relate to the Cloverleaf, Lanier, MHW and PortFresh acquisitions. Refer to Notes 2 and 3 for further details of each
acquisition.
F-44
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
The following table describes the estimated amortization of intangible assets for the next five years and thereafter. In addition, the table
describes the net impact on rent expense due to the amortization of below-market leases for the next five years and thereafter:
Estimated Amortization of Customer
Relationships,
In-Place Lease, Assembled
Workforce, Trade names
and Trademarks
Intangible Assets
Estimated Net Decrease to Lease
Revenue Related to Amortization of
Above-Market Leases
Estimated Net Increase to Lease
Expense Related to Amortization
of Below-Market Leases
(In thousands)
Years Ending December 31:
2020
2021
2022
2023
2024
Thereafter
Total
6. Other Assets
$
$
Other assets as of December 31, 2019 and 2018 are as follows:
Various insurance and workers’ compensation receivables
Prepaid accounts
Inventory and supplies
Other receivables
Fair value of derivatives
Marketable securities - (Deferred compensation plan)
Utility, workers’ compensation escrow and lease deposits
Deferred financing costs
Deferred registration statement costs
Income taxes receivable
Deferred tax assets
13,110 $
12,119
11,902
11,543
10,976
206,617
266,267 $
22 $
22
22
17
—
—
83 $
151
151
151
106
102
2,671
3,332
2019
2018
(In thousands)
12,143 $
11,345
9,371
7,528
6,886
4,895
4,222
2,767
912
885
418
61,372 $
9,595
12,532
7,875
8,770
2,283
3,072
1,726
5,437
—
6,978
391
58,659
$
$
F-45
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
7. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of December 31, 2019 and 2018 are as follows:
Trade payables
Accrued workers’ compensation liabilities
Accrued payroll
Accrued bonus
Accrued vacation and long service leave
Accrued health benefits
Accrued property taxes
Accrued utilities
New market tax credit deferred contribution liability
Income taxes payable
Dividends payable
Accrued interest
Other accrued expenses
8. Acquisition, Litigation and Other Charges
2019
2018
(In thousands)
109,222 $
30,642
17,104
20,729
16,403
13,020
20,370
7,854
4,882
997
39,753
24,872
45,115
350,963 $
85,038
30,585
12,238
17,335
14,988
10,987
14,376
6,274
—
290
28,540
4,843
27,586
253,080
$
$
The components of the charges included in “Acquisition, litigation and other” in our Consolidated Statements of Operations are as follows (in
thousands):
Acquisition, litigation and other
Acquisition related costs
Litigation
Strategic alternative costs
Other:
Severance, equity award modifications and acceleration
Non-offering related equity issuance expenses
Terminated site operations costs
Non-recurring public company implementation costs
Total other
Years Ended December 31,
2019
2018
2017
$
24,284 $
4,553
—
671 $
—
—
9,789
1,356
632
—
11,777
2,053
1,813
(1,804)
1,202
3,264
—
—
8,136
516
—
2,677
—
3,193
Total acquisition, litigation and other
$
40,614
$
3,935 $
11,329
Acquisition related costs include costs associated with business transactions, whether consummated or not, such as advisory, legal,
accounting, valuation and other professional or consulting fees. We also include integration costs
F-46
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
pre- and post-acquisition that reflect work being performed to facilitate merger and acquisition integration, such as work associated with
information systems and other projects including spending to support future acquisitions, and primarily consist of professional services. We
consider acquisition related costs to be corporate costs regardless of the segment or segments involved in the transaction. Acquisition costs
for the year ended December 31, 2019, primarily consisted of a $10.0 million investment advisory fee, employee retention expense, non-
capitalizable legal and professional fees related to completed and potential acquisitions, and acquisition integration costs. Refer to Note 3 for
further information regarding acquisitions completed in the current year.
Litigation costs consist of expenses incurred in order to defend the Company from litigation charges outside of the normal course of business
as well as related settlements not in the normal course of business. Litigation costs incurred in connection with matters arising from the
ordinary course of business are expensed as a component of “Selling, general and administrative expense” on the Consolidated Statements of
Operations.
Strategic alternative costs consist of operating costs associated with our review of various contemplated strategic transactions prior to our
initial public offering.
Severance costs represent certain contractual and negotiated severance and separation costs from exited former executives, reduction in
headcount due to synergies achieved through acquisitions or operational efficiencies and reduction in workforce costs associated with exiting
or selling non-strategic warehouses or businesses. Equity acceleration and modification costs represent the unrecognized expense for stock
awards that vest and convert to common shares in advance of the original negotiated vesting date and any other equity award changes
resulting in accounting for the award as a modification. For the year ended December 31, 2019, we recognized $2.4 million of severance
related to reduction in headcount as a result of the synergies created from the Cloverleaf Acquisition, $1.2 million of severance related to the
departure of two former executives, $3.0 million related to a reduction in headcount within our international operations from organizational
realignments, as well as $3.1 million of accelerated equity award vesting. Refer to Note 17 for further details of all equity modifications and
equity acceleration.
Non-offering related equity issuance expense consists of non-registration statement related legal fees associated with the selling shareholders’
secondary public offering completed during the first quarter of 2019, which consisted solely of shares sold by YF ART Holdings and
Goldman Sachs and affiliates (see Note 1 for more information). The Company received no proceeds from the secondary offering. Non-
offering related equity issuance expense for the year ended December 31, 2018 consisted of non-capitalizable legal and professional fees
associated with the September 2018 follow-on equity issuance and non-registration statement related costs and an Australian stamp duty tax
related to the Company’s IPO.
Terminated site operations costs relates to repair expenses incurred to return leased sites to their original physical state at lease inception in
connection with the termination of the applicable underlying lease. These terminations were part of our strategic efforts to exit or sell non-
strategic warehouses as opposed to ordinary course lease expirations. In 2018, the Company was released from liability under a previously
exited leased facility, for which we originally recorded in 2017 a charge of $2.1 million repair expense to return the site to its original
condition. As a result, we reversed this charge in 2018. In total, $0.3 million was paid in conjunction with the exit of this facility.
Repair and maintenance expenses associated with our ordinary course operations are reflected as operating expenses on our Consolidated
Statement of Operations.
Non-recurring public company implementation costs for the year ended December 31, 2018, represent costs associated with the
implementation of financial reporting systems and processes needed to convert the organization to a public company.
F-47
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
9. Debt of the Company
In this Note 9, the “Company” refers only to Americold Realty Trust and not to any of its subsidiaries.
The Company itself does not have any indebtedness. All debt is held directly or indirectly by the Operating Partnership.
The Company guarantees the Operating Partnership’s obligations with respect to its outstanding debt as of December 31, 2019 and 2018, as
detailed in Note 10, with the exception of the 2013 Mortgage Loans which have limited guarantees for fraud and environmental carve-outs by
Americold Realty Operating Partnership, L.P.
F-48
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
10. Debt of the Operating Partnership
A summary of outstanding indebtedness of the Operating Partnership as of December 31, 2019 and 2018 is as follows (in thousands):
Indebtedness
2013 Mortgage Loans
Senior note
Mezzanine A
Mezzanine B
Total 2013 Mortgage Loans
Senior Unsecured Notes
Series A notes
Series B notes
Series C notes
Total Senior Unsecured Notes
Stated
Maturity
Date
5/2023
5/2023
5/2023
Effective
Interest Rate
as of
December 31,
2019
Contractual
Interest Rate
2019
2018
Carrying
Amount
Estimated Fair
Value
Carrying
Amount
Estimated Fair
Value
3.81%
7.38%
11.50%
4.14%
7.55%
11.75%
$
181,443 $
184,618 $
187,957 $
184,667
70,000
32,000
70,525
32,320
70,000
32,000
67,900
31,120
283,443
287,463
289,957
283,687
1/2026
1/2029
1/2030
4.68%
4.86%
4.10%
4.77%
4.92%
4.15%
200,000
400,000
350,000
217,750
439,000
366,625
200,000
400,000
—
202,500
407,000
—
950,000
1,023,375
600,000
609,500
2018 Senior Unsecured Term Loan A Facility(1)
1/2023
L+1.00%
3.14%
475,000
472,625
475,000
472,625
Total principal amount of indebtedness
Less deferred financing costs
Total indebtedness, net of unamortized deferred financing costs
2018 Senior Unsecured Revolving Credit Facility(1)
1/2021
L+0.90%
0.36%
(1) L = one-month LIBOR
2018 Senior Unsecured Credit Facility
1,708,443
1,783,463
1,364,957
1,365,812
(12,996)
n/a
(13,943)
n/a
1,695,447 $ 1,783,463 $ 1,351,014 $ 1,365,812
— $
— $
— $
—
$
$
On December 4, 2018, the Company entered into the 2018 Senior Unsecured Credit Facility to, among other things, (i) increase the revolver
borrowing capacity from $450 million to $800 million, (ii) convert the credit facility (term loan and revolver) from a secured credit facility to
an unsecured credit facility, and (iii) decrease the applicable interest rate margins from 2.35% to 1.45% and decrease the fee on unused
borrowing capacity by five basis points. The terms of the revolver allow for the ability to draw proceeds in multiple currencies, up to $400
million. In connection with entering into the original agreement and subsequent amendments for the Term Loan A Credit Facility, we
capitalized approximately $8.9 million of debt issuance costs, which we amortize as interest expense under the effective interest method. The
unamortized balance of Term Loan A debt issuance costs are included in “Mortgage notes, senior unsecured notes and term loan” on the
accompanying Consolidated Balance Sheets. As of December 31, 2019, $2.8 million of unamortized debt issuance costs related to the
revolving credit facility are included in “Other assets” in the accompanying Consolidated Balance Sheet.
On September 24, 2019, the Company reduced our interest rate margins from 1.45% to 1.00% on the Term Loan A, and 1.45% to 0.90% on
the Revolving Credit Facility. In addition, the Company decreased the fee on unused borrowing capacity to a flat 20 basis points regardless of
the percentage of total commitment used. The Company received a favorable credit rating during the third quarter of 2019. This rating, when
combined with existing ratings, allowed the Company to transition to a favorable ratings-based pricing grid.
F-49
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Our 2018 Senior Unsecured Revolving Credit Facility is structured to include a borrowing base, which allows us to borrow against the lesser
of our Senior Unsecured Term Loan A Facility balance outstanding, our Senior Unsecured Notes balance outstanding, $800 million in
revolving credit commitments, and the value of certain owned real estate assets and ground leased assets.
Our 2018 Senior Unsecured Credit Facility contains representations, covenants and other terms customary for a publicly traded REIT. In
addition, it contains certain financial covenants, as defined in the credit agreement, including:
•
•
•
•
•
•
•
a maximum leverage ratio of less than or equal to 60% of our total asset value;
a minimum borrowing base coverage ratio of greater than or equal to 1.00 to 1.00;
a minimum fixed charge coverage ratio of greater than or equal to 1.50 to 1.00;
a minimum borrowing base debt service coverage ratio of greater than or equal to 2.00 to 1.00;
a minimum tangible net worth requirement of greater than or equal to $1.1 billion plus 70% of any future net equity proceeds
following the completion of the IPO transactions;
a maximum recourse secured debt ratio of less than or equal to 15% of our total asset value; and
a maximum secured debt ratio of less than or equal to 40% of total asset value.
Our 2018 Senior Unsecured Credit Facility is fully recourse to our Operating Partnership. As of December 31, 2019, the Company was in
compliance with all debt covenants.
Series A, B and C Senior Unsecured Notes
On November 6, 2018, the Company priced a debt private placement transaction consisting of (i) $200 million senior unsecured notes with a
coupon of 4.68% due January 8, 2026 (“Series A”) and (ii) $400 million senior unsecured notes with a coupon of 4.86% due January 8, 2029
(“Series B”), (collectively referred to as the “Senior Unsecured Notes”). The transaction closed on December 4, 2018. Interest will be paid on
January 8 and July 8 of each year until maturity, with the first payment occurring July 8, 2019. The notes are general unsecured senior
obligations of the Company and are guaranteed by the Company and the subsidiaries of the Company. The Company applied a portion of the
proceeds of the private placement transaction to repay the outstanding balances of the $600 million Americold 2010 LLC Trust, Commercial
Mortgage Pass-Through Certificates, Series 2010, ART (2010 Mortgage Loans). The Company also used the remaining proceeds to
extinguish the Australian term loan and the New Zealand term loan (ANZ Loans). See below for further detail regarding the early
extinguishment of debt under Loss on debt extinguishment, modifications and termination of derivative instruments.
On April 26, 2019, we priced a debt private placement transaction consisting of $350 million senior unsecured notes with a coupon of 4.10%
due January 8, 2030 (“Series C”). The transaction closed on May 7, 2019. Interest is payable on January 8 and July 8 of each year until
maturity, with the first payment occurring January 8, 2020. The initial January 8, 2020 payment will include interest accrued since May 7,
2019. The notes are general unsecured obligations of the Company and are guaranteed by the Company and the subsidiaries of the Company.
The Company applied the proceeds of the private placement transaction to repay the indebtedness outstanding under our senior unsecured
revolving credit facility incurred in connection with the funding of the Cloverleaf and Lanier acquisitions, and general corporate purposes.
The Senior Unsecured Notes and guarantee agreement includes a prepayment option executable at any time during the term of the loans. The
prepayment can be either a partial payment, or payment in full, as long as the partial payment is at least 5% of the outstanding principal. Any
prepayment in full must include a make-whole amount, which is the discounted remaining scheduled payments due to the lender. The
discount rate to be used is equal to 0.50% plus the yield to maturity reported for the most recently actively traded U.S. Treasury Securities
with a maturity
F-50
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
equal to the remaining average life of the prepaid principal. The Company must give each lender at least 10 day’s written notice whenever it
intends to prepay any portion of the debt.
If a change in control occurs for the Company, the Company must issue an offer to prepay the remaining portion of the debt to the lenders.
The prepayment amount will be 100% of the principal amount, as well as accrued and unpaid interest.
The Senior Unsecured Notes require compliance with leverage ratios, secured and unsecured indebtedness ratios, and unsecured indebtedness
to qualified assets ratios. In addition, the Company is required to maintain at all times a debt rating for each series of notes from a nationally
recognized statistical rating organization. The Senior Unsecured Notes agreement includes the following financial covenants:
•
•
•
•
•
a maximum leverage ratio of less than or equal to 60% of our total asset value;
a maximum unsecured indebtedness to qualified assets ratio of less than 0.60 to 1.00;
a minimum fixed charge coverage ratio of greater than or equal to 1.50 to 1.00;
a minimum unsecured debt service ratio of greater than or equal to 2.00 to 1.00; and
a maximum total secured indebtedness ratio of less than 0.40 to 1.00.
As of December 31, 2019, the Company was in compliance with all debt covenants.
2013 Mortgage Loans
On May 1, 2013, we entered into a mortgage financing in an aggregate principal amount of $322.0 million, which we refer to as the 2013
Mortgage Loans. The debt consists of a senior debt note and two mezzanine notes. The components are cross-collateralized and cross-
defaulted. The senior debt note requires monthly principal payments. The mezzanine notes require no principal payments until the stated
maturity date in May 2023. The interest rates on the notes are fixed and range from 3.81% to 11.50% per annum. The senior debt note and the
two mezzanine notes remain subject to yield maintenance provisions. We used the net proceeds of these loans to refinance certain mortgage
loans, acquire two warehouses, and fund general corporate purposes.
The 2013 Mortgage Loans are collateralized by 15 warehouses. The terms governing the 2013 Mortgage Loans require us to maintain certain
cash amounts in accounts that are restricted as to their use for the respective warehouses. As of December 31, 2019, the amount of restricted
cash associated with the 2013 Mortgage Loans was $3.2 million. Additionally, if we do not maintain certain financial thresholds, including a
debt service coverage ratio of 1.10x, the cash generated will further be temporarily restricted and limited to the use for scheduled debt service
and operating costs. The debt service coverage ratio as of December 31, 2019 was 1.76x. The 2013 Mortgage Loans are non-recourse to the
Company, subject to customary non-recourse provisions as stipulated in the agreements.
The mortgage loan also requires compliance with other financial covenants, including a debt coverage ratio and cash flow calculation, as
defined. As of December 31, 2019, the Company was in compliance with all debt covenants.
Debt Covenants
The Company’s Senior Unsecured Credit Facilities, the Senior Unsecured Notes, and 2013 Mortgage Loans require financial statement
reporting, periodic requirements to report compliance with established thresholds and performance measurements, and affirmative and
negative covenants that govern allowable business practices of the Company. The affirmative and negative covenants include continuation of
insurance, maintenance of collateral, the
F-51
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
maintenance of REIT status, and the Company’s ability to enter into certain types of transactions or exposures in the normal course of
business. As of December 31, 2019, the Company was in compliance with all debt covenants.
Loss on debt extinguishment, modifications and termination of derivative instruments
During 2018, the Company completed multiple refinancing and extinguishment of debt transactions resulting in an aggregate amount of $47.6
million each of which was recorded to “Loss on debt extinguishment, modifications and termination of derivative instruments”. During the
first quarter of 2018, simultaneous with the IPO, the Company closed on a Senior Secured Term Loan A and repaid the Term Loan B. Shortly
thereafter, the Company amended the facility by repaying a portion of the Term Loan A and increasing the capacity on the revolving credit
facility. The total amount recorded as a result of these transactions totaled $21.4 million, representing the write-off of unamortized deferred
financing costs and debt discount from Term Loan B. During the fourth quarter of 2018, the 2010 Mortgage Loans were extinguished. This
resulted in an $18.5 million defeasance fee, as well as a $3.4 million write-off of unamortized deferred financing costs. Additionally, during
the fourth quarter of 2018, the ANZ Loans were fully prepaid, which resulted in a write-off of $2.2 million in unamortized deferred financing
costs and $1.8 million charge for termination of the related interest rate swaps.
The aggregate maturities of indebtedness as of December 31, 2019, including amortization of principal amounts due under the mortgage
notes for each of the next five years and thereafter, are as follows:
Years Ending December 31:
2020
2021
2022
2023
2024
Thereafter
Aggregate principal amount of debt
Less unamortized deferred financing costs
Total debt net of deferred financing costs
Special Purpose Entity (SPE) Separateness
(In thousands)
6,750
7,035
7,312
737,346
—
950,000
1,708,443
(12,996)
1,695,447
$
$
Each of the Company’s legal entities listed in the table below is a special purpose, bankruptcy remote entity, meaning that such entity’s assets
and credit are not available to satisfy the debt and other obligations of either the Company or any of its other affiliates.
ART Mortgage Borrower Propco 2013 LLC
ART Mortgage Borrower Opco 2013 LLC
2013 Mortgage Notes
Legal Entity/SPE
Related Obligation
For financial reporting purposes, the assets, liabilities, results of operations, and cash flows of each legal entity in the table above are included
in the Company’s consolidated financial statements. Because each legal entity is separate and distinct from the Company and its affiliates, the
creditors of each legal entity have a claim on the assets of such
F-52
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
legal entity prior to those assets becoming available to the legal entity’s equity holders and, therefore, to the creditors of the Company or its
other affiliates.
11. Derivative Financial Instruments
The Company is subject to volatility in interest rates due to variable-rate debt. To manage this risk, the Company has entered into multiple
interest rate swap agreements. The January 2019 agreement hedges $100 million of variable interest-rate debt, or 21%, of the Company’s
outstanding variable-rate debt as of December 31, 2019. The August 2019 agreement hedges $225 million of variable interest-rate debt, or
47%, of the Company’s outstanding variable-rate debt as of December 31, 2019. Each agreement converts the Company’s variable-rate debt
to a fixed-rate basis for the next five years, thus reducing the impact of interest rate changes on future interest expense. These agreements
involve the receipt of variable-rate amounts in exchange for fixed-rate interest payments over the life of the respective agreement without an
exchange of the underlying notional amount. The Company’s objective for utilizing these derivative instruments is to reduce its exposure to
fluctuations in cash flows due to changes in interest rates.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in
Accumulated Other Comprehensive Income and subsequently reclassified into interest expense in the same period during which the hedged
transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to
interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates
that an additional $0.2 million will be reclassified as an increase to interest expense. The Company classifies cash inflows and outflows from
derivatives within operating activities on the Consolidated Statements of Cash Flows.
The Company is subject to volatility in foreign exchange rates due to foreign-currency denominated intercompany loans. The Company
implemented cross-currency swaps to manage the foreign currency exchange rate risk on these intercompany loans. These agreements
effectively mitigate the Company’s exposure to fluctuations in cash flows due to foreign exchange rate risk. These agreements involve the
receipt of fixed USD amounts in exchange for payment of fixed AUD and NZD amounts over the life of the respective intercompany loan.
The entirety of the Company’s outstanding intercompany loans receivable balances, $153.5 million AUD and $37.5 million NZD, were
hedged under the cross-currency swap agreements at December 31, 2019.
For derivatives designated and that qualify as cash flow hedges of foreign exchange risk, the gain or loss on the derivative is recorded in
Accumulated Other Comprehensive Income and subsequently reclassified in the period(s) during which the hedged transaction affects
earnings within the same income statement line item as the earnings effect of the hedged transaction. During the next twelve months, the
Company estimates that an additional $0.1 million will be reclassified as a decrease to interest expense. The Company classifies cash inflows
and outflows from derivatives within operating activities on the Consolidated Statements of Cash Flows.
The Company is subject to volatility in foreign currencies against its functional currency, the US dollar. Periodically, the Company uses
foreign currency derivatives including currency forward contracts to manage its exposure to fluctuations in the CAD-USD exchange
rate. While these derivatives are hedging the fluctuations in foreign currencies, they do not meet the strict hedge accounting requirements to
be classified as hedging instruments. As a result, the changes in the fair value of derivatives not designated in hedging relationships are
recorded directly in earnings. As of December 31, 2019, the Company had two outstanding foreign exchange forward contracts, which were
entered into in conjunction with the funding of the Nova Cold Acquisition that were not designated as hedges in a qualifying hedging
relationship. The first contract was entered into in December 2019 with a notional to purchase 217.0 million CAD and sell USD maturing on
January 2, 2020. The second contract was entered into simultaneously with a notional to sell 217 million CAD and purchase USD maturing
on January 31, 2020. The net unrealized gain
F-53
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
(loss) on the change in fair value of the outstanding foreign exchange forward contracts included within “Foreign currency exchange gain
(loss), net” on the accompanying Consolidated Statement of Operations for the year ended December 31, 2019 was less than ($0.1) million.
The Company determines the fair value of these derivative instruments using a present value calculation with significant observable inputs
classified as Level 2 of the fair value hierarchy. Derivative asset balances are recorded on the accompanying Consolidated Balance Sheets
within “Other assets” and derivative liability balances are recorded on the accompanying Consolidated Balance Sheets within “Accounts
payable and accrued expenses”. The following table presents the fair value of the derivative financial instruments within “Other assets” and
“Accounts payable and accrued expenses” as of December 31, 2019 and 2018 (in thousands):
Designated derivatives
Foreign exchange contracts
Interest rate contracts
Undesignated derivatives
Foreign exchange forwards
Total fair value of derivatives
Derivative Assets
As of December 31,
Derivative Liabilities
As of December 31,
2019
2018
2019
2018
1,376 $
2,933
2,283 $
—
— $
3,505
2,546
6,855 $
—
2,283 $
2,589
6,094 $
—
—
—
—
$
$
The following tables present the effect of the Company’s designated derivative financial instruments on the accompanying Consolidated
Statements of Operations for the years ended December 31, 2019, 2018 and 2017, including the impacts to Accumulated Other
Comprehensive Income (AOCI) (in thousands):
Amount of Gain or (Loss) Recognized in Other
Comprehensive Income on Derivative
As of December 31,
2019
2018
2017
Location of Gain or
(Loss) Reclassified
from AOCI into
Income
Amount of Gain or (Loss) Reclassified from
Accumulated Other Comprehensive Income into
Income
As of December 31,
2019
2018
2017
(571) $
(1,422) $
1,422 Interest expense
$
248 $
(1,191) $
(1,547)
(879)
—
2,283
—
Foreign currency
exchange gain, net
—
— Interest expense
(264)
58
3,449
—
—
—
(1,450) $
861 $
1,422
$
42 $
2,258 $
(1,547)
Interest rate contracts
Foreign exchange contracts
Foreign exchange contracts
Total designated cash flow
hedges
$
$
Total interest expense recorded in the Consolidated Statements of Operations was $94.4 million, $93.3 million and $114.9 million during the
years ended December 31, 2019, 2018 and 2017, respectively. Total “Foreign currency exchange gain (loss), net”, recorded in the
accompanying Consolidated Statements of Operations was nominal, $2.9 million and ($3.6) million during the years ended December 31,
2019, 2018, and 2017, respectively.
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of
December 31, 2019 and 2018, respectively. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of
fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the accompanying
Consolidated Balance Sheets (in thousands):
F-54
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Offsetting of Derivative Assets
December 31, 2019
Gross Amounts of
Recognized Assets
Gross Amounts
Offset in the
Consolidated Balance
Sheet
Net Amounts of Assets
Presented in the
Consolidated Balance
Sheet
Financial
Instruments
Cash Collateral
Received
Net Amount
Derivatives
$
6,855 $
— $
6,855 $
(3,966)
$
— $
2,889
Gross Amounts Not Offset in the
Consolidated Balance Sheet
Offsetting of Derivative Liabilities
Gross Amounts of
Recognized
Liabilities
Gross Amounts
Offset in the
Consolidated Balance
Sheet
Net Amounts of
Liabilities Presented
in the Consolidated
Balance Sheet
Financial
Instruments
Cash Collateral
Received
Net Amount
Derivatives
$
(6,094) $
— $
(6,094)
$
3,966 $
— $
(2,128)
Gross Amounts Not Offset in the
Consolidated Balance Sheet
Offsetting of Derivative Assets
December 31, 2018
Gross Amounts of
Recognized Assets
Gross Amounts
Offset in the
Consolidated
Balance Sheet
Net Amounts of Assets
Presented in the
Consolidated Balance
Sheet
Financial Instruments
Cash Collateral
Received
Net Amount
Derivatives
$
2,283 $
— $
2,283 $
— $
— $
2,283
Gross Amounts Not Offset in the Consolidated
Balance Sheet
Offsetting of Derivative Liabilities
Gross Amounts of
Recognized
Liabilities
Gross Amounts
Offset in the
Consolidated
Balance Sheet
Net Amounts of
Liabilities Presented
in the Consolidated
Balance Sheet
Financial Instruments
Cash Collateral
Received
Net Amount
Derivatives
$
— $
— $
— $
— $
— $
—
Gross Amounts Not Offset in the Consolidated
Balance Sheet
As of December 31, 2019, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment
for nonperformance risk, related to these agreements was $3.6 million. As of December 31, 2019, the Company has not posted any collateral
related to these agreements. If the Company had breached any of these provisions at December 31, 2019, it could have been required to settle
its obligations under the agreements at their termination value of $3.6 million.
F-55
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in
default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on
the indebtedness.
Refer to Note 22 for additional details regarding the impact of the Company’s derivatives on AOCI for the years ended December 31, 2019,
2018 and 2017, respectively.
12. Sale-Leasebacks of Real Estate
The Company’s outstanding sale-leaseback financing obligations of real estate-related long-lived assets as of December 31, 2019 and 2018
are as follows:
1 warehouse – 2010
11 warehouses – 2007
Total sale-leaseback financing obligations
Maturity
7/2030
9/2027
Interest Rate as of December 31,
2019
10.34%
7.00%-19.59%
2019
2018
(In thousands)
$
$
18,994 $
96,765
115,759 $
19,265
99,655
118,920
In September 2010, the Company entered into a transaction by which it assigned to an unrelated third party its fixed price “in the money”
purchase option of $18.3 million on a warehouse it was leasing in Ontario, California. The purchase option was exercised in September 2010,
and the Company simultaneously entered into a new 20-year lease agreement with the new owner and received $1.0 million of consideration
to use towards warehouse improvements. Under the terms of the new lease agreement, the Company will exercise control over the asset for
more than 90% of the asset’s remaining useful life, and it has a purchase option within the last six months of the initial lease term at 95% of
the fair market value as of the date such option is exercised. The transaction was accounted for as a financing whereby the Company
recognized a long-lived asset equal to the purchase price of $18.2 million, a receivable of $1.0 million for the additional consideration, and a
financing obligation of $19.2 million. During 2019 and 2018, the principal balance was amortized by nominal amounts. The long-lived asset
is being depreciated on a straight-line basis over its remaining economic useful life and a proportionate amount of each periodic rental
payment is being charged to interest expense on the effective-interest-rate method.
In September 2007, the Company completed a sale-leaseback of 11 warehouses for gross proceeds of $170.7 million. Concurrent with the
sale, the Company agreed to lease the properties for various initial terms of 10 to 20 years. The rent increases annually by 1.75%. The lease
terms can be extended up to four times at the discretion of the Company, each for a five-year period. The leases are guaranteed by an
unsecured indemnity from a related party and the Company had the ability to extend the lease through a period which exceeds 90.0% of the
assets’ remaining useful lives. The transaction was accounted for as a financing with an amount of each periodic rental payment being
charged to interest expense. The assets continue to be reflected as long-lived assets and depreciated over their remaining useful lives. In July
2013, the lease agreements for six of the 11 warehouses were amended. The amendments extended the expiration date on four of the
warehouse leases to September 27, 2027, reduced the annual rent increases from 1.75% to 0.50% on five of the warehouse leases and released
the guarantee by the unsecured indemnity from the related party. All of the 11 warehouses subject to the sale-leaseback transaction continue
to be accounted for as a financing.
F-56
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
As of December 31, 2019, future minimum lease payments, inclusive of certain obligations to be settled with the residual value of related
long-lived assets upon expiration of the lease agreement, of the sale-leaseback financing obligations are as follows:
Years Ending December 31:
(In thousands)
2020
2021
2022
2023
2024
Thereafter
Total minimum payments
Interest portion
Present value of net minimum payments
13. Lease Accounting
Arrangements wherein we are the lessee:
$
$
17,087
17,351
17,619
17,892
18,170
115,090
203,209
(87,450)
115,759
We have operating and finance leases for land, warehouses, offices, vehicles, and equipment with remaining lease terms ranging from 1 to 33
years. Many of our leases include one or more options to extend the lease term from 1 to 10 years that may be exercised at our sole discretion.
Additionally, many of our leases for vehicles and equipment include options to purchase the underlying asset at or before expiration of the
lease agreement. Rental payments are generally fixed over the term of the lease agreement with the exception of certain equipment leases for
which the rental payment may vary based on usage of the asset. Our lease agreements do not contain any material residual value guarantees
or material restrictive covenants.
As of December 31, 2019, the rights and obligations with respect to leases which have been signed but have not yet commenced are not
material to our financial position or results of operations.
The components of lease expense were as follows (in thousands):
Components of lease expense:
Operating lease cost (a)
Financing lease cost:
Depreciation
Interest on lease liabilities
Sublease income (b)
Net lease expense
Year Ended December 31,
2019
$
$
29,205
11,252
2,941
(499)
42,899
(a) Includes short-term lease and variable lease costs, which are immaterial.
(b) Sublease income relates to two warehouses in the U.S. and New Zealand.
For the years ended December 31, 2018 and 2017, rent expense of $36.7 million and $42.3 million, respectively, was recorded pursuant to
ASC 840, Leases.
F-57
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Other information related to leases is as follows:
Supplemental Cash Flow Information (in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for lease obligations
Operating leases
Finance leases
Weighted-average remaining lease term (years)
Operating leases
Finance leases
Weighted-average discount rate
Operating leases
Finance leases
Year Ended December 31,
2019
$
$
$
$
$
(24,992)
(2,941)
(13,339)
12,492
30,416
6.1
4.4
4.1%
5.5%
Future minimum lease payments under non-cancellable leases as of December 31, 2019 were as follows (in thousands):
Operating Lease
Payments
Finance Lease
Payments
Years ending December 31,
2020
2021
2022
2023
2024
Thereafter
Total future minimum lease payments
Less: Interest
Total future minimum lease payments less interest
Reported as of December 31, 2019
Accounts payable and accrued expenses
Operating lease obligations
Finance lease obligations
Total lease obligations
Total Lease Payments
41,933
29,523
21,609
16,577
9,423
19,682
138,747
(17,986)
120,761
18,534 $
17,217
11,987
8,538
4,827
5,386
66,489
(8,249)
58,240 $
70 $
—
58,170
58,240 $
249
62,342
58,170
120,761
23,399 $
12,306
9,622
8,039
4,596
14,296
72,258
(9,737)
62,521 $
179 $
62,342
—
62,521 $
$
$
$
$
F-58
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Arrangements wherein we are the lessor:
We receive lease income as the lessor for certain buildings and warehouses or space within a warehouse. The remaining term on existing
leases ranges from 1 to 9 years. Lease income is generally fixed over the duration of the contract and each lease contract contains clauses
permitting extension or termination. Lease incentives and options for purchase of the leased asset by the lessee are generally not included.
The Company is party to operating leases only and currently does not have sales-type or direct financing leases. Lease income is included
within “Rent, storage and warehouse services” in the accompanying Consolidated Statements of Operations as denoted in Note 27 “Revenues
from Contracts with Customers”.
Property, buildings and equipment underlying operating leases is included in “Land” and “Buildings and improvements” on the
accompanying Consolidated Balance Sheets. The gross value and net value of these assets was $786.4 million and $600.1 million, for Land
and Buildings and improvements, respectively, as of December 31, 2019. Depreciation expense for such assets was $23.1 million for the year
ended December 31, 2019.
Future minimum lease payments due from our customers on leases as of December 31, 2019 were as follows (in thousands):
Year ending December 31,
2020
2021
2022
2023
2024
Thereafter
Total
14. Fair Value Measurements
Operating Leases
16,736
13,223
11,244
9,782
7,274
18,920
77,179
$
$
The Company categorizes assets and liabilities that are recorded at fair values into one of three tiers based upon fair value hierarchy. These
tiers include: Level 1, defined as quoted market prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than
Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are
not active, model-based valuation techniques for which all significant assumptions are observable in the market, or other inputs that are
observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3, defined as
unobservable inputs that are not corroborated by market data. The carrying amounts of cash and cash equivalents, restricted cash, accounts
receivable, accounts payable, accrued expenses and revolving line of credit approximate their fair values due to the short-term maturities of
the instruments.
The Company’s mortgage notes, senior unsecured notes, and term loan are reported at their aggregate principal amount less unamortized
deferred financing costs on the accompanying Consolidated Balance Sheets. The fair value of these financial instruments is estimated based
on the present value of the expected coupon and principal payments using a discount rate that reflects the projected performance as of each
valuation date. The inputs used to estimate the fair value of the Company’s mortgage notes, senior unsecured notes, and term loan are
comprised of Level 2 inputs, including senior industrial commercial real estate loan spreads, trading data on comparable unsecured industrial
REIT debt, corporate industrial loan indexes, risk-free interest rates, and Level 3 inputs, such as future coupon and principal payments, and
projected future cash flows.
F-59
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
The Company’s financial assets and liabilities recorded at fair value on a recurring basis include derivative instruments. The fair value of
interest rate swap and cross currency swap agreements, which are designated as cash flow hedges, is based on inputs other than quoted
market prices that are observable (Level 2). The fair value of foreign currency forward contracts is based on adjusting the spot rate utilized at
the balance sheet date for translation purposes by an estimate of the forward points observed in active markets (Level 2). Additionally, the
fair value of derivatives includes a credit valuation adjustment to appropriately incorporate nonperformance risk for the Company and the
respective counterparty. Although the credit valuation adjustments associated with derivatives utilize Level 3 inputs, such as estimates of
current credit spreads to evaluate the likelihood of default by us and our counterparties, the significance of the impact on the overall valuation
of our derivative positions is insignificant. The Company’s cash equivalent money market funds and restricted cash assets are valued at
quoted market prices in active markets for identical assets (Level 1), which the Company receives from the financial institutions that hold
such investments on its behalf. The fair value hierarchy discussed above is also applicable to the Company’s pension and other post-
retirement plans. The Company uses the fair value hierarchy to measure the fair value of assets held by various plans. Refer to Note 20 for the
fair value of the pension plan assets. The Company recognizes transfers between levels within the hierarchy as of the beginning of the
reporting period. There were no transfers between levels within the hierarchy for the years ended December 31, 2019 and 2018.
The Company’s assets and liabilities recorded at fair value on a non-recurring basis include long-lived assets when events or changes in
circumstances indicate that the carrying amounts may not be recoverable. Additionally, the assets and liabilities recorded through acquisitions
are measured at fair value on a non-recurring basis. Refer to Note 2 for asset acquisitions and Note 3 for business combinations, and the
respective purchase price allocation of the Company’s acquisitions. The Company estimates the fair values using unobservable inputs
classified as Level 3 of the fair value hierarchy.
The Company’s assets and liabilities measured or disclosed at fair value are as follows:
Measured at fair value on a recurring basis:
Interest rate swap asset
Interest rate swap liability
Cross-currency swap asset
Foreign exchange forward contract asset
Foreign exchange forward contract liability
Assets held by various pension plans:
$
Fair Value
Hierarchy
Level 2
Level 2
Level 2
Level 2
Level 2
Level 1
Level 2
Fair Value
December 31,
2019
2018
(In thousands)
2,936 $
3,507
1,404
2,546
2,589
35,317
33,991
—
—
2,283
—
—
30,281
29,456
Disclosed at fair value:
Mortgage notes, senior unsecured notes and term loan(1)
Level 3
$
1,783,463 $
1,365,812
(1)The carrying value of mortgage notes, senior unsecured notes and term loan is disclosed in Note 10.
F-60
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
15. Dividends and Distributions
In order to comply with the REIT requirements of the Internal Revenue Code, the Company is generally required to make common share
distributions (other than capital gain distributions) to its shareholders at least equal to 90% of its REIT taxable income, as defined in the
Code, computed without regard to the dividends paid deduction and net capital gains. The Company’s common share dividend policy is to
distribute a percentage of cash flow to ensure distribution requirements of the IRS are met while allowing the Company to retain cash to meet
other needs, such as principal amortization, capital improvements and other investment activities.
Common share dividends are characterized for U.S. federal income tax purposes as ordinary income, qualified dividend, capital gains, non-
taxable income return of capital, or a combination of the four. Common share dividends that exceed current and accumulated earnings and
profits (calculated for tax purposes) constitute a return of capital rather than a dividend and generally reduce the shareholder’s basis in the
common share. At the beginning of each year, we notify our shareholders of the taxability of the common share dividends paid during the
preceding year. The payment of common share dividends is dependent upon our financial condition, operating results, and REIT distribution
requirements and may be adjusted at the discretion of the Company’s Board of Trustees.
The following tables summarize dividends declared and distributions paid to the holders of common shares and Series B Preferred Shares in
2019, 2018 and 2017:
F-61
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Month Declared/Paid
Dividend Per
Share
2019 (Common Shares)
Distributions Declared
Distributions Paid
(In thousands, except per share amounts)
December (2018)/January
$
0.1875 $
— $
28,218
December (a)
—
(127)
December (2018)/January
March/April
$
0.2000
—
30,235
7
30,235
March (b)
March/April
June/July
June (c)
—
(142)
$
0.2000
—
38,764
15
38,764
—
(172)
June/July
September/October
$
0.2000
—
38,795
13
38,795
October (d)
—
(170)
September/October
December/January (2020)
$
0.2000
$
—
38,796
146,590 $
7
—
135,443
(a) Declared in December 2018 and included in the $28.2 million declared, see description to the right regarding timing of payment.
(b) Declared in March and included in the $30.2 million declared, see description to the right regarding timing of payment.
(c) Declared in June and included in the $38.8 million declared, see description to the right regarding timing of payment.
(d) Declared in September and included in the $38.8 million declared, see description to the right regarding timing of payment.
F-62
Dividend equivalents accrued on
unvested restricted stock units to be paid
when the awards vest.
Dividend equivalents paid on unvested
restricted stock units that are not
expected to vest (recognized as
additional compensation).
Dividend equivalents accrued on
unvested restricted stock units to be paid
when the awards vest.
Dividend equivalents paid on unvested
restricted stock units that are not
expected to vest (recognized as
additional compensation).
Dividend equivalents accrued on
unvested restricted stock units to be paid
when the awards vest.
Dividend equivalents paid on unvested
restricted stock units that are not
expected to vest (recognized as
additional compensation).
Dividend equivalents accrued on
unvested restricted stock units to be paid
when the awards vest.
Dividend equivalents paid on unvested
restricted stock units that are not
expected to vest (recognized as
additional compensation).
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Month Declared/Paid
Dividend Per
Share
2018
Distributions Declared
Distributions Paid
Common
Shares
Series B
Preferred
Shares
Common
Shares
Series B
Preferred
Shares
(In thousands, except per share amounts)
January (a)
March/April
$
$
0.0186 $
0.1396
1,291 $
20,145
619 $
—
1,291 $
20,145
619
March (c)
—
—
(79)
—
March/April
June/July
$
0.1875
—
27,250
—
—
20
27,250
June (d)
—
—
(118)
June/July
September/October
$
0.1875
—
28,072
—
—
28
28,072
October(e)
—
—
(114)
September/October
December/January
(2019)
—
$
0.1875
28,218
104,976
$
—
—
28
—
$
76,523
Dividend equivalents accrued on
unvested restricted stock units to be paid
when the awards vest.
Dividend equivalents paid on unvested
restricted stock units that are not
expected to vest (recognized as
additional compensation).
—
—
Dividend equivalents accrued on
unvested restricted stock units to be paid
when the awards vest.
Dividend equivalents paid on unvested
restricted stock units that are not
expected to vest (recognized as
additional compensation).
Dividend equivalents accrued on
unvested restricted stock units to be paid
when the awards vest.
Dividend equivalents paid on unvested
restricted stock units that are not
expected to vest (recognized as
additional compensation).
—
—
—
—
—
Series B Preferred Shares - Fixed Dividend
January (a)
Total distributions paid to holders of Series B
Preferred Shares (b)
1,198
1,198
$
1,817
$
1,817
(a) Stub period dividend paid to shareholders of record prior to the IPO.
(b) Last participating and fixed dividend paid to holders of Series B Preferred Shares in connection with the conversion to common shares on the IPO date.
(c) Declared in March and included in the $20.1 million declared, see description to the right regarding timing of payment.
(d) Declared in June and included in the $27.3 million declared, see description to the right regarding timing of payment.
(e) Declared in September and included in the $28.1 million declared, see description to the right regarding timing of payment.
F-63
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Month Declared
Dividend Per Share
Distributions Paid
Month Paid
2017
March
June
September
December
Common Shares
Series B Preferred Shares
(In thousands, except per share amounts)
$
$
$
$
0.0730 $
0.0730
0.0730
0.0730
$
5,053 $
5,054
5,053
5,054
20,214
April
July
October
December
2,421
2,422
2,421
2,422
9,686 (a)
Series B Preferred Shares - Fixed Dividend
Total distributions paid to holders of Series B Preferred Shares
$
18,750 (b)
28,436
(a) Participating dividend.
(b) Paid in equal quarterly amounts along with the participating dividend.
The dividends declared and paid to holders of Series A Preferred Shares were $0.001 million and $0.016 million for the years ended
December 31, 2018 and 2017, respectively. In 2018, in connection with the IPO, all outstanding Series A Preferred Shares were redeemed
and there were no dividends for the year ended December 31, 2019.
For income tax purposes, distributions to preferred and common shareholders are characterized as ordinary income, capital gains, or as a
return of shareholder invested capital. The composition of the Company’s distributions per common share and per preferred share is as
follows:
Common Shares
Ordinary income
Capital gains
Return of capital
Preferred Shares
Ordinary income
Capital gains
Return of capital
2019
2018
2017
83%
0%
17%
100%
66%
0%
34%
100%
85%
0%
15%
100%
2019
2018
2017
N/A
N/A
N/A
N/A
100%
0%
0%
100%
100%
0%
0%
100%
16. Partners’ Capital
Allocations of Net Income and Net Losses to Partners
The Operating Partnership’s net income will generally be allocated to Americold Realty Trust (the general partner) and the Operating
Partnership’s limited partner, Americold Realty Operations Inc., and certain trustees of Americold Realty Trust, in accordance with the
respective percentage interests in the units issued by the Operating Partnership.
F-64
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Net loss will generally be allocated to the general partner and the Operating Partnership’s limited partners in accordance with the respective
common percentage interests in the Operating Partnership until the limited partner’s capital is reduced to zero and any remaining net loss
would be allocated to the general partner. However, in some cases, losses may be disproportionately allocated to partners who have
guaranteed our debt. The allocations described above are subject to special allocations relating to depreciation deductions and to compliance
with the provisions of Sections 704(b) and 704(c) of the Code, and the associated Treasury Regulations.
Distributions
All distributions on our units are at the discretion of Americold Realty Trusts’ Board of Trustees. We have declared and paid the following
distributions to Americold Realty Trust for the years ended December 31, 2019, 2018 and 2017 (in thousands):
Month Declared/Paid
December (2018)/January
March/April
June/July
September/October
December/January (2020)
Month Declared/Paid
January (a)
March/April
June/July
September/October
December/January (2019)
2019
Distributions Declared
$
— $
30,235
38,764
38,795
38,796
146,590 $
$
2018
Distributions Declared
$
3,242 $
20,145
27,250
28,072
28,218
106,927 $
Distributions Paid
28,098
30,108
38,605
38,632
—
135,443
Distributions Paid
3,242
20,086
27,160
27,986
—
78,474
(a) Stub period distribution paid to Parent immediately prior to the IPO.
$
Month Declared/Paid
Distributions Paid
2017
March/April
June/July
September/October
December
$
$
F-65
12,161
12,171
12,162
12,172
48,666
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
17. Share-Based Compensation
All share-based compensation cost is measured at the grant date, based on the estimated fair value of the award. The Company issues time-
based, performance-based and market performance-based equity awards. Time-based and cliff vesting market performance-based awards are
recognized on a straight-line basis over the employees’ requisite service period, as adjusted for estimate of forfeitures. Performance-based
awards are recognized ratably over the vesting period using a graded vesting attribution model upon the achievement of the performance
target, as adjusted for estimate of forfeitures. The only performance-based awards issued by the Company were granted in 2016 and 2017.
Aggregate share-based compensation charges were $15.9 million, $10.7 million and $2.4 million during the years ended December 31, 2019,
2018 and 2017, respectively. Approximately $12.8 million, $8.7 million and $2.4 million of these charges were considered routine share-
based compensation expense, and were included as a component of “Selling, general and administrative” expense on the accompanying
Consolidated Statements of Operations during the years ended December 31, 2019, 2018 and 2017, respectively. Approximately $3.1 million
of share-based compensation expense was recorded during the year ended December 31, 2019 due to accelerated vesting of awards
outstanding to former executives and an equity award modification upon trustee resignation, and were included as a component of
“Acquisition, litigation and other” expense on the accompanying Consolidated Statements of Operations. Approximately $2.0 million of
share-based compensation expense was recorded during the year ended December 31, 2018 as a result of modification to certain restricted
stock units, and is included as a component of “Acquisition, litigation and other” expense on the accompanying Consolidated Statements of
Operations. The award modifications and awards with accelerated vesting are discussed further under the section “Modification of Restricted
Stock Units and Accelerated Vesting of Awards”. As of December 31, 2019, there was $24.7 million of unrecognized share ‑based
compensation expense related to stock options and restricted stock units, which will be recognized over a weighted-average period of 1.9
years.
Americold Realty Trust 2008 and 2010 Equity Incentive Plans
During December 2008, the Company and the common shareholders approved the Americold Realty Trust 2008 Equity Incentive Plan (2008
Plan), whereby the Company may issue either stock options or stock appreciation rights based upon a reserved pool of 4,900,025 common
shares. No additional awards may be granted under the 2008 Plan. During December 2010, the Company and the common shareholders
approved the Americold Realty Trust 2010 Equity Incentive Plan (2010 Plan), whereby the Company could issue stock options, stock
appreciation rights, restricted stock, restricted stock units, stock bonus awards, and/or dividend equivalents with respect to the Company’s
common shares, cash bonus awards, and/or performance compensation awards to certain eligible participants, as defined, based upon a
reserved pool of 3,849,976 of the Company’s common shares. No additional awards may be granted under the 2010 Plan.
Americold Realty Trust 2017 Equity Incentive Plan
On January 4, 2018, the Company’s Board of Trustees adopted the Americold Realty Trust 2017 Equity Incentive Plan (2017 Plan), which
permits the grant of various forms of equity- and cash-based awards from a reserved pool of 9,000,000 common shares of the Company. On
January 17, 2018, the Company’s shareholders approved the 2017 Plan. Equity-based awards issued under the 2017 Plan have the rights to
receive dividend equivalents on an accrual basis. Dividend equivalents for market performance-based awards are forfeitable in the event of
termination for cause or when voluntary departure occurs during the vesting period. Otherwise, dividend equivalents are accrued at the time
of declaration and paid upon the vesting of the awards. Time-based awards have the right to receive nonforfeitable dividend equivalent
distributions on unvested units throughout the vesting period. As of December 31, 2019 and 2018, the Company accrued $1.1 million and
$0.4 million, respectively, of dividend equivalents on unvested units payable to employees and non-employee trustees.
F-66
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Modification of Restricted Stock Units and Accelerated Vesting of Awards
On January 4, 2018, the Company’s Board of Trustees approved the modification of awards to allow the grant of dividend equivalents to all
participants in the 2010 Plan with respect to any and all vested restricted stock units of the Company that have not been settled or converted
to shares pursuant to the 2010 Plan. On the same day, the Company’s Board of Trustees resolved that no further awards may be granted under
the 2010 Plan after the approval of the 2017 Plan. As a result, the Company recognized share-based compensation expense of $2.0 million to
reflect the change in fair value associated with the modification of the dividend equivalents rights of the outstanding equity awards under the
2010 Plan.
During the first quarter of 2019, the Company’s Compensation Committee approved the modification of an award issued in 2018 to a
member of the Board of Trustees upon his resignation. This modification immediately accelerated the next vesting tranche of 100,000
restricted stock units which otherwise would not have vested until 2020 assuming the trustee continued service, under the original award
agreement. As a result of this modification, the Company recognized approximately $2.9 million of share-based compensation expense
during the first quarter of 2019.
Additionally, during the first quarter of 2019, the Company recognized accelerated share-based compensation expense of $0.2 million upon
the termination of former executives, in accordance with the terms of their original award agreements.
Restricted Stock Units
Restricted stock units are nontransferable until vested. Prior to the issuance of a common share, the grantees of restricted stock units are not
entitled to vote the shares. Time-based restricted stock unit awards vest in equal annual increments over the vesting period. The grant date fair
values for time-based restricted unit stock awards is equal to the closing market price of Americold Realty Trust common stock on the grant
date. Performance-based and market performance-based restricted stock unit awards vest upon the achievement of the performance target, as
well as completion of performance period.
The following table summarizes restricted stock unit grants by grantee type during the years ended December 31, 2019, 2018 and 2017:
Year Ended
December 31
2019
2019
2018
2018
2017
2017
Grantee Type
Trustees
Employees
Trustees
Employees
Trustees
Employees
Number of
Restricted Stock
Units Granted
18,267
504,984
373,438
1,263,751
18,348
141,288
Vesting
Period
1 year
1-3 years
1-3 years
1-4 years
2-3 years
5 years
$
$
$
$
$
$
Grant Date
Fair Value
(in thousands)
575
16,843
5,975
22,196
199
1,897
Of the restricted stock units granted for the year ended December 31, 2019, (i) 12,285 were time-based restricted stock units with a one-year
vesting period issued to non-employee trustees in recognition of their efforts and oversight in the first year as a public company, (ii) 5,982
were time-based restricted stock units with a one-year vesting period issued to non-employee trustees as part of their annual compensation
(iii) 261,816 were time-based graded vesting restricted stock units with various vesting periods ranging from one to three years issued to
certain employees and
F-67
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
(iv) 243,168 were market performance-based cliff vesting restricted stock units with a three-year vesting period issued to certain employees.
Of the restricted stock units granted for the year ended December 31, 2018, (i) 331,250 were time-based graded vesting restricted stock units
with a three-year vesting period issued to non-employee trustees in connection with the IPO, (ii) 42,188 were time-based graded vesting
restricted stock units with a one-year vesting period issued to non-employee trustees as part of their annual compensation, (iii) 659,751 were
time-based graded vesting restricted stock units with various vesting periods ranging from one to four years years issued to certain employees
and (iv) 604,000 were market performance-based cliff vesting restricted stock units with a three-year vesting period issued to certain
employees.
Of the restricted stock units granted for the year ended December 31, 2017, (i) 18,348 were time-based graded vesting restricted stock units
with a two-year and a three-year vesting period issued to non-employee trustees as part of their annual compensation, (ii) 69,860 were time-
based graded vesting restricted stock units with a five-year vesting period issued to certain employees a (iii) 71,428 were performance-based
cliff vesting restricted stock units with a five-year vesting period based upon achievement of annual Company EBITDA performance against
target.
The following table provides a summary of restricted stock awards activity under the 2010 and 2017 Plans as of December 31, 2019:
Restricted Stock
Non-vested as of December 31, 2018
Granted
Vested(1)
Forfeited
Non-vested as of December 31, 2019
Shares vested, but not released(1)
Total outstanding restricted stock units
Year Ended December 31, 2019
Number of Time-
Based Restricted
Stock Units
Aggregate
Intrinsic Value
(in millions)
Number of
Performance-
Based Restricted
Stock Units
Aggregate
Intrinsic Value
(in millions)
Number of Market
Performance-
Based Restricted
Stock Units
Aggregate
Intrinsic Value
(in millions)
1,028,256 $
280,083
(443,481)
(150,795)
714,063 $
615,643
1,329,706 $
26.3
25.0
21.6
46.6
71,428 $
—
(14,286)
—
57,142 $
14,286
71,428 $
1.8
2.0
0.5
2.5
587,500 $
243,168
—
(51,480)
779,188 $
—
779,188 $
15.0
27.3
—
27.3
(1) For certain vested restricted stock units, common share issuance is contingent upon the first to occur of: (1) termination of service; (2) change in control;
(3) death; or (4) disability, as defined in the 2010 Plan. Of these vested restricted stock units, 568,753 belong to a member of the Board of Trustees who has
resigned and common shares shall not be issued until the first to occur: (1) change in control; or (2) April 13, 2022. Holders of these certain vested restricted
stock units are entitled to receive dividend equivalents, but are not entitled to vote the shares until common shares are issued. The weighted average grant date
fair value of these units is $9.29 per unit. During 2019, an additional 16,324 of these restricted stock units vested. Of the total restricted stock units vested, but
not yet released, 613,605 time-based restricted stock units vested prior to January 1, 2019.
The weighted average grant date fair value of restricted stock units granted during years 2019, 2018, and 2017 was $33.29, $17.21 and $13.13
per unit, respectively. During the year ended December 31, 2019 the weighted average grant date fair value of vested and converted restricted
stock units was $17.34 and forfeited restricted stock units
F-68
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
was $16.75. The weighted average grant date fair value of non-vested restricted stock units was $22.50 and $17.06 per unit as of
December 31, 2019 and 2018, respectively.
Market Performance-Based Restricted Stock Units
During the year ended December 31, 2019, the Compensation Committee of the Board of Trustees approved the annual grant of market
performance-based restricted stock units under the 2017 Plan to employees of the Company. The awards utilize relative total shareholder
return (TSR) over a three-year measurement period as the market performance metric. Awards will vest based on the Company’s TSR
relative to the RMZ over a three-year market performance period, or the Market Performance Period, commencing in January 1, 2019 and
ending on December 31, 2021, as applicable (or, if earlier, ending on the date on which a change in control of the Company occurs), subject
to continued services. Vesting with respect to the market condition is measured based on the difference between the Company’s TSR
percentage and the TSR percentage of the RMZ, or the RMZ Relative Market Performance. In the event that the RMZ Relative Market
Performance during the Market Performance Period is achieved at the “threshold,” “target” or “high” level as set forth below, the awards will
become vested as to the market condition with respect to the percentage of RSUs, as applicable, set forth below:
Performance Level Thresholds
High Level
Target Level
Threshold Level
Below Threshold Level
RMS Relative
Market Performance
above 75th percentile
55th percentile
30th percentile
below 30th percentile
Market Performance
Vesting Percentage
200%
100%
50%
0%
If the RMZ Relative Market Performance falls between the levels specified above, the percentage of the award that will vest with respect to
the market condition will be determined using straight-line linear interpolation between such levels.
Market performance-based restricted units granted during 2018 utilize absolute total shareholder return (TSR) over a three-year measurement
period as the market performance metric. Awards will vest based on the Company’s TSR relative to the percentage appreciation (rounded to
the nearest tenth of a percent), in the value per share of stock during the performance period, over a three-year market performance period,
commencing on January 18, 2018 and ending on December 31, 2020 (or, if earlier, ending on the date on which a change in control of the
Company occurs), subject to continued services. In the event that the TSR upon completion of the market performance period is achieved at
the “minimum,” “target” or “maximum” level as set forth below, the awards will become vested as to the market condition with respect to the
percentage RSUs, as applicable, set forth below:
Performance Level Thresholds
Maximum
Target
Minimum
TSR
12%
10%
8%
Market Performance Percentage
150% of Target Award
100% of Target Award
50% of Target Award
In the event TSR falls between 8% and 10%, TSR shall be determined using a straight line linear interpolation between 50% and 100% and in
the event it falls between 10% and 12%, TSR shall be determined using a straight line linear interpolation between 100% and 150%.
F-69
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
In the event that the Company’s TSR does not meet 50% of the Target Award (i.e., the minimum threshold listed above), the Restricted Stock
Units shall be automatically forfeited and neither the Company nor any Subsidiary shall have any further obligations to the participant under
the agreement. In no event will the number of RSUs that vest pursuant to the agreement exceed 150% of the Target Award.
The fair values of the awards were measured using a Monte Carlo simulation to estimate the probability of the market vesting condition being
satisfied. The Company’s achievement of the market vesting condition is contingent on its TSR over a three-year market performance period,
relative to the total stock price. Monte Carlo simulation is well-accepted for pricing market based awards, where the number of shares that
will vest depends on the future stock price movements. For each simulated path, the TSR is calculated at the end of the performance period
and determines the vesting percentage based on achievement of the performance target. The fair value of the RSUs is the average discounted
payout across all simulation paths. Assumptions used in the valuations are summarized as follows:
Award Date
2018
2019
Expected Stock Price Volatility
25% - 30%
22%
Risk-Free Interest Rate
2.34% - 2.85%
2.40% - 2.43%
Dividend Yield (1)
N/A
N/A
(1) Dividends are assumed to be reinvested and therefore not applicable.
Performance-Based Restricted Stock Units
The grant of the performance-based restricted stock unit award in April 2017 resulted in a grant date fair value of $13.43 and was measured
utilizing the Black-Scholes methodology. The Company’s achievement of the performance vesting condition was contingent on the
achievement of Core EBITDA. The key assumptions used in the valuation of the April 2017 award were as follows:
Award Date
4/10/2017
Expected Stock Price Volatility
30%
Risk-Free Interest Rate
1.63%
Dividend Yield
2%
OP Units
During the year ended December 31, 2019, upon recommendation by the Compensation Committee, the Board of Trustees approved the grant
of OP units in connection with future grants made to the Board of Trustees and management of the Company at the Senior Vice President
level or above. The recipient will have the option to elect their grant in the form of either restricted stock units or OP units. As a result of this
election, a total of 20,190 time-based OP Units were granted to certain trustees as part of their annual compensation. The OP units will vest in
one year, had an aggregate grant date fair value of $0.7 million, and had an aggregate intrinsic value of $0.7 million as of December 31, 2019.
During the year ended December 31, 2019, there were no OP units granted to management of the Company.
F-70
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Stock Options Activity
The following table provides a summary of option activity for the year ended December 31, 2019:
Outstanding as of December 31, 2018
Granted
Exercised
Forfeited or expired
Outstanding as of December 31, 2019
Exercisable as of December 31, 2019
Number of Options
Weighted-Average
Exercise Price
Weighted-Average
Remaining Contractual
Terms (Years)
2,355,787 $
—
(1,342,289)
(219,000)
794,498 $
301,500 $
9.81
—
9.81
9.81
9.81
9.81
5.4
5.8
5.1
The total fair value at grant date of stock option awards that vested during the years ended December 31, 2019, 2018 and 2017 was
approximately $0.9 million, $1.5 million and $1.6 million, respectively. The total intrinsic value of options exercised for the year ended
December 31, 2019 and 2018 was $27.8 million and $38.8 million, respectively. There were no options exercised during the years ended
December 31, 2017.
18. Income Taxes
As discussed in Note 2, the Company operates in compliance with REIT requirements for federal income tax purposes. As a REIT, the
Company must distribute at least 90 percent of its taxable income (including dividends paid to it by its TRSs). In addition, the Company must
meet a number of other organizational and operational requirements. It is management’s intention to adhere to these requirements and
maintain the Company’s REIT status. Most states where we operate conform to the federal rules recognizing REITs. On August 1, 2019, the
Company issued OP Units of the Operating Partnership to unrelated third parties. As a result, the Operating Partnership is now a regarded
partnership under federal tax law, and the Operating Partnership’s accompanying consolidated financial statements include the related
provision balances for federal income taxes. Certain subsidiaries have made an election with the Company to be treated as TRSs in
conjunction with the Company’s REIT election; the TRS elections permit us to engage in certain business activities in which the REIT may
not engage directly. A TRS is subject to federal and state income taxes on the income from these activities. A provision for taxes of the TRSs
and of foreign branches of the REIT is included in our consolidated financial statements.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation in the form of the Tax Cuts and Jobs Act (TCJA) that
significantly revised the U.S. tax code effective January 1, 2018 by, among other things, lowering the corporate income tax rate from a top
marginal rate of 35% to a flat 21%, imposing a mandatory one-time deemed repatriation of unremitted foreign earnings (commonly referred
to as the “transition tax”), limiting deductibility of interest expense and certain executive compensation, and implementing a territorial tax
system. The full impact of this change in tax law is final and the Company completed its accounting for the tax effects of the TCJA as of
December 31, 2018. As a result of adopting the TCJA, a $3.8 million non-recurring tax benefit was recognized in 2018 for the refund of
alternative minimum tax credits.
The Company determined that no inclusion was required for the transition tax in 2018.
F-71
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
The Company recorded an opening deferred tax liability of $9.6 million as part of its preliminary purchase price allocation on the
acquisitions. This deferred tax liability primarily arose from book to tax basis differences in land, buildings and equipment and intangible
assets acquired offset by certain liabilities assumed in the acquisition. Purchase accounting related to the deferred income tax assets and
liabilities acquired in the acquisitions is preliminary and subject to change as additional information is obtained.
The Company continues to assert that the undistributed earnings of its Argentine subsidiary are permanently reinvested. The Company
changed its assertion for the earnings of its Canadian subsidiaries in 2018 due to the Company’s plans to remit cash in the future. During
2019 the Company recognized an amount of deferred tax liability related to the outside basis difference of $0.4 million in its Canadian
subsidiaries. The Company plans on liquidating its Hong Kong subsidiary in 2020 and is, therefore, no longer asserting permanent
reinvestment. However, the outside basis difference cannot be monetized in the US and, as a result, the associated deferred tax asset is not
realizable in the near future. No additional income taxes have been provided for any additional outside basis difference inherent in the other
foreign entities, as these amounts continue to be indefinitely reinvested in foreign operations. Undistributed earnings of the Argentine
subsidiary amounted to approximately $13.8 million at December 31, 2019.
The global intangible low-taxed income (GILTI) provisions of the TCJA impose a tax on the income of certain foreign subsidiaries in excess
of a specified return on tangible assets used by the foreign companies. The Company continues to account for the GILTI inclusion as a period
cost and thus has not recorded any deferred tax liability associated with GILTI. There was no taxable deemed dividend recorded for the
Company for the 2019 tax year. The amount of taxable deemed dividend recorded for the Company for the 2018 tax year is $0.2 million.
Also, as a result of IRS guidance issued during the third quarter of 2018, the Company now includes any GILTI as REIT qualified income.
Following is a summary of the income/(loss) before income taxes in the U.S. and foreign operations:
U.S.
Foreign
Pre-tax income
2019
2018
2017
(In thousands)
$
$
33,417 $
9,588
43,005 $
37,060 $
7,306
44,366 $
(11,212)
19,997
8,785
F-72
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
The benefit (expense) for income taxes for the years ended December 31, 2019, 2018 and 2017 is as follows:
Current
U.S. federal
State
Foreign
Total current portion
Deferred
U.S. federal
State
Foreign
Total deferred portion
Total income tax benefit (expense)
2019
2018
2017
(In thousands)
$
$
(20) $
(670)
(4,854)
(5,544)
7,701
2,217
783
10,701
5,157 $
4,424 $
(353)
(3,604)
467
2,094
494
564
3,152
3,619 $
(4,848)
(644)
(7,559)
(13,051)
2,277
(72)
1,453
3,658
(9,393)
Income tax benefit (expense) attributable to income (loss) before income taxes differs from the amounts computed by applying the U.S.
statutory federal income tax rate of 21% to income (loss) before income taxes. The reconciliation between the statutory rate and reported
amount is as follows:
Income taxes at statutory rates
Earnings (loss) from REIT - not subject to tax
State income taxes, net of federal income tax benefit
Provision to return
Rate and permanent differences on non-U.S. earnings
Change in valuation allowance
Non-deductible expenses
Change in uncertain tax positions
Effect of Tax Cuts and Jobs Act
REIT excise tax
Other
Total
2019
2018
2017
(In thousands)
$
$
(9,031) $
9,526
(542)
2
(971)
2,761
3,462
(367)
—
—
317
5,157 $
(9,317) $
9,015
(187)
360
(1,228)
(2,227)
4,021
347
3,797
—
(962)
3,619 $
(2,987)
(425)
(445)
(205)
668
2,950
(2,345)
94
(3,113)
(4,772)
1,187
(9,393)
F-73
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities as of December 31, 2019 and 2018 are
as follows:
Deferred tax assets:
Net operating loss and credits carryforwards
Accrued expenses
Share-based compensation
Lease obligations
Other assets
Total gross deferred tax assets
Less: valuation allowance
Total net deferred tax assets
Deferred tax liabilities:
Intangible assets and goodwill
Property, buildings and equipment
Lease right-of-use assets
Other liabilities
Total gross deferred tax liabilities
Net deferred tax liability
2019
2018
(In thousands)
11,806 $
26,911
4,618
9,674
4,420
57,429
(16,043)
41,386
(8,739)
(38,358)
(9,674)
(1,316)
(58,087)
(16,701) $
14,062
25,889
4,709
—
241
44,901
(19,627)
25,274
(5,628)
(35,672)
—
(1,144)
(42,444)
(17,170)
$
$
As of December 31, 2019, the Company has gross U.S. federal net operating loss carryforwards of approximately $41.8 million, of which
$20.4 million was generated prior to 2018 and will expire between 2032 and 2036. These losses are subject to an annual limitation under IRC
section 382 as a result of our IPO and another ownership change experienced in March of 2019; however the limitation should not impair the
Company’s ability to utilize the losses. The remaining $21.4 million was generated after 2017 and is subject to new laws as set forth by the
TCJA and has no expiration date, but can only be utilized to offset up to 80% of future taxable income annually. The Company has gross
state net operating loss carryforwards of approximately $36.1 million from its TRSs, which will expire at various times between 2020 and
2039. The Company has an Alternative Minimum Tax credit carryforward remaining in the amount of $2.2 million that can be used to offset
regular tax until 2021 or any unused credit will continue to be partially refunded in 2019 and 2020 and fully refundable by 2021.
Additionally, the Company has a federal Research and Experimentation Credit of approximately $0.9 million that will expire between 2036
and 2039.
Annually we consider whether it is more-likely-than-not that the deferred tax assets will be realized. In making this assessment, we consider
recent operating results, the expected scheduled reversal of deferred tax liabilities, projected future taxable benefits and tax planning
strategies. In performing our quarterly valuation allowance assessment during 2019, we concluded that certain deferred tax liabilities totaling
$9.6 million from acquisitions during the year would be available to offset deferred tax assets for one of our U.S. TRSs that were historically
subject to a valuation allowance. These deferred tax liabilities are are expected to turn and subsequently generate taxable income in the
future. The $9.6 million benefit was offset by a $6.0 million increase to the valuation allowance for additional deferred tax assets created by
that TRS. Consequently, we reduced the valuation allowance by $3.6 million from $19.6 million in 2018 to $16.0 million in 2019 associated
with these deferred tax assets.
F-74
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
The following table summarizes the activity related to our gross unrecognized tax benefits for the years ended December 31, 2019, 2018 and
2017:
Balance at December 31, 2016*
Increases related to current-year tax positions
Decreases related to prior-year tax positions
Decreases due to lapse in statute of limitations
Balance at December 31, 2017*
Decreases due to lapse in statute of limitations
Balance at December 31, 2018*
Increase related to current-year tax positions
Decreases due to lapse in statute of limitations
Balance at December 31, 2019*
Tax
Interest
Penalties
Total
(In thousands)
$
$
857 $
—
—
(73)
784
(353)
431
367
(431)
367 $
19 $
3
(4)
(12)
6
(6)
—
—
—
— $
$
8
—
(8)
—
—
—
—
—
—
— $
884
3
(12)
(85)
790
(359)
431
367
(431)
367
*Balance would favorably affect the Company’s effective tax rate if recognized.
The Company’s unrecognized tax benefits include exposures related to positions taken on U.S. federal, state, and foreign income tax returns
as of December 31, 2019. Due to the lapse in statutes of limitations during 2019, the Company reduced its unrecognized tax benefits related
to U.S. federal and state exposures to zero offset by $0.4 million for a new position taken in a foreign jurisdiction at the end of 2019.
In the normal course of business, the Company’s tax returns are subject to examination by various taxing authorities. Such examinations may
result in future tax and interest assessments by these taxing authorities and the Company has accrued a liability when it believes it is more
likely than not that the tax position claimed on tax returns will not be sustained by the taxing authorities on the technical merits of the
position. Changes in the recognition of the liability are reflected in the period in which the change in judgment occurs.
The Company accrues interest and penalties related to unrecognized tax benefits as a component of income tax expense.
As of December 31, 2019, the Company is generally no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities
for years before 2016. However, for U.S. income tax purposes, the 2012 and 2013 tax years were open, to the extent that net operating losses
were generated in those years and continue to be subject to adjustments from taxing authorities in the tax year they are utilized.
In the fourth quarter of 2016, the Company filed a ruling request with the IRS for confirmation of a tax position for which it believes qualifies
(more likely than not) for the treatment historically applied by the Company. The Company settled the positions with the IRS in December
2017 and was required to make an excise tax payment in the amount of $4.3 million including interest to resolve the matter for years prior to
2017 and paid $0.6 million in 2018 to resolve the matter for 2017. The payments, excluding interest, are included in “Total income tax
benefit (expense)” in the Consolidated Statement of Operations for the year ended December 31, 2017.
F-75
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
19. Variable Interest Entities
New Market Tax Credit
On May 1, 2019, the Company assumed a financing arrangement born out of the New Markets Tax Credit (“NMTC” or “NMTC
Transactions”) program. These financing arrangements were originated by Cloverleaf in 2015 to monetize state and federal tax credits related
to the construction of a cold storage warehouse in Monmouth, Illinois. The NMTC program was provided for in the Community Renewal Tax
Relief Act of 2000 (“the Act”) and is intended to induce capital investment in qualified lower income communities.
The structure of the financing arrangement is such that Cloverleaf lent money to investment funds into which tax credit investors also made
capital contributions. The tax credit investors receive the benefit of the resulting tax credits in exchange for their capital contributions to the
investment funds. Tax credits were generated through contribution of the investment fund’s proceeds into special purpose entities having
authority from the U.S. Department of Treasury to receive tax credits in exchange for qualifying investments. These entities, known as a
Community Development Entities (“CDE”), made qualifying investments in the Monmouth, Illinois cold storage facility in the form of loans
payable by Cloverleaf.
The loan agreements for monies lent to the investments funds and amounts payable to the CDEs extend through 2045 but contain provisions
permitting dissolution in 2022. This coincides with the conclusion of the seven-year compliance period during which the tax credits may be
recognized and the NMTCs are subject to 100% recapture. Based on the nature of the arrangements, we expect them to dissolve in 2022.
The Company has determined that the financing arrangement with the investment funds and CDEs contains a variable interest entity (“VIE”).
The ongoing activities of the investment funds - collecting and remitting interest and fees and NMTC compliance - were all considered in the
initial design and are not expected to significantly affect economic performance throughout the life of the investment funds. Management
considered the contractual arrangements that obligate the Company to deliver tax benefits and provide various other guarantees to the
structure; the tax credit investor’s lack of a material interest in the underling economics of the project; and the fact that the Company is
obligated to absorb losses of the investment funds. The Company concluded that it is the primary beneficiary of the VIE and consolidated the
investments funds and CDEs, as VIEs, in accordance with the accounting standards for consolidation.
Through NMTC Transactions, the Company effectively received net loan proceeds equal to the tax credit investor’s contributions to the
investment funds. At inception of the arrangement in 2015, the benefit of contributions by tax credit investor’s totaled approximately $5.6
million. The Company is recognizing the benefit of the contributions ratably over the life of the project which these proceeds were used to
fund.
As of December 31, 2019, the balance of the deferred contribution liability was $4.9 million, which is included in “Accounts payable and
accrued expenses” on the Consolidated Balance Sheets.
The Company is required to be in compliance with various regulations and contractual provisions that apply to the NMTC arrangement. Non-
compliance with applicable requirements could result in projected tax benefits not being realized and, therefore, could require the Company
to indemnify the tax credit investors for any loss or recapture of NMTCs related to the financing until such time as the obligation to deliver
tax benefits is relieved. The Company is in compliance with all applicable requirements and does not anticipate any credit recaptures will
result in connection with this arrangement.
F-76
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
20. Employee Benefit Plans
Defined Benefit Pension and Post-Retirement Plans
The Company has defined benefit pension plans that cover certain union and nonunion employees in the U.S. Benefits under these plans are
based either on years of credited service and compensation during the years preceding retirement or on years of credited service and
established monthly benefit levels. The Company also has a post-retirement plan that provides life insurance coverage to eligible retired
employees (collectively, with the defined benefit plans, the U.S. Plans). The Company froze benefit accruals for the U.S. Plans for nonunion
employees effective April 1, 2005, and these employees no longer earn additional pension benefits. The Company also has a defined benefit
plan that covers certain employees in Australia and is referenced as superannuation (the Offshore Plan). The Company uses a December 31
measurement date for the U.S. Plans and the Offshore Plan.
F-77
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Actuarial information regarding these plans is as follows:
Change in benefit obligation:
Benefit obligation – January 1, 2019
Service cost
Interest cost
Actuarial loss
Benefits paid
Plan participants’ contributions
Foreign currency translation loss
Effect of settlement
Benefit obligation – end of year
Change in plan assets:
Fair value of plan assets – January 1, 2019
Actual return on plan assets
Employer contributions
Benefits paid
Effect of settlement
Plan participants’ contributions
Foreign currency translation loss
Fair value of plan assets – end of year
Funded status
Retirement
Income Plan
National
Service-Related
Pension Plan
Other
Post-Retirement
Benefits
2019
(In thousands)
Superannuation
Total
$
(43,364) $
(30,627) $
(678) $
(1,385) $
(76,054)
—
—
(1,590)
(3,251)
(1,245)
(4,167)
2,990
1,003
—
—
—
—
—
—
—
(23)
(62)
—
—
—
152
(78)
(49)
(77)
(78)
(2,907)
(7,557)
447
4,440
(12)
2
—
(12)
2
152
(45,215)
(35,036)
(611)
(1,152)
(82,014)
34,958
23,277
6,804
1,339
4,556
1,011
(2,990)
(1,003)
—
—
—
—
—
—
40,111
27,841
—
—
152
—
(152)
—
—
—
1,502
59,737
237
58
11,597
2,560
(447)
(4,440)
—
12
(6)
(152)
12
(6)
1,356
69,308
Amounts recognized on the consolidated balance sheet as of December 31,
$
(5,104) $
(7,195) $
(611) $
204
$
(12,706)
2019:
Pension and post-retirement liability
Accumulated other comprehensive loss (income)
Amounts in accumulated other comprehensive loss consist of:
Net loss (gain)
Prior service cost
Other changes in plan assets and benefit obligations recognized in other
comprehensive income (loss):
Net (gain) loss
Amortization of net (loss) gain
Amortization of prior service cost
Amount recognized due to special event
Foreign currency translation loss
$
(5,104) $
(7,195) $
(611) $
204
$
(12,706)
6,417
4,501
6,417
4,501
—
—
(1,793)
(1,509)
—
—
—
788
(564)
—
—
—
(21)
(21)
—
(94)
4
—
5
—
62
10,959
(15)
10,882
77
77
(78)
—
(28)
5
(5)
(1,177)
(2,069)
(28)
10
(5)
Total recognized in other comprehensive loss (income)
$
(3,302) $
224 $
(85) $
(106) $
(3,269)
Information for plans with accumulated benefit obligation in excess of
plan assets:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
$
$
$
45,215 $
45,215 $
40,111 $
35,036 $
35,036 $
27,841 $
611 $
611 $
— $
1,152
1,038
1,356
$
$
$
82,014
81,900
69,308
F-78
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Change in benefit obligation:
Benefit obligation – January 1, 2018
Service cost
Interest cost
Actuarial loss
Benefits paid
Plan participants’ contributions
Foreign currency translation gain
Benefit obligation – end of year
Change in plan assets:
Fair value of plan assets – January 1, 2018
Actual return on plan assets
Employer contributions
Benefits paid
Plan participants’ contributions
Foreign currency translation gain
Fair value of plan assets – end of year
Funded status
Amounts recognized on the consolidated balance sheet as of
December 31, 2018:
Pension and post-retirement liability
Accumulated other comprehensive loss (income)
Amounts in accumulated other comprehensive loss consist of:
Retirement
Income Plan
National
Service-Related
Pension Plan
Other
Post-Retirement
Benefits
2018
(In thousands)
Superannuation
Total
$
(45,386) $
(33,405) $
(691) $
(3,002) $
(82,484)
(31)
(78)
(1,418)
(1,199)
753
3,125
2,718
—
—
930
—
—
—
(20)
33
—
—
—
(137)
(246)
(104)
(2,741)
179
4,090
1,391
5,039
(21)
309
(21)
309
(43,364)
(30,627)
(678)
(1,385)
(76,054)
38,218
24,518
(2,042)
(1,446)
1,499
1,135
(2,717)
(930)
—
—
—
—
34,958
23,277
—
—
—
—
—
—
—
2,992
65,728
50
125
(3,438)
2,759
(1,391)
(5,038)
21
(295)
21
(295)
1,502
59,737
$
(8,406) $
(7,350) $
(678) $
117
$
(16,317)
$
(8,406) $
(7,350) $
(678) $
117
$
(16,317)
9,718
4,278
(92)
170
14,074
Net loss (gain)
Prior service cost
Other changes in plan assets and benefit obligations recognized in other
comprehensive income (loss):
Net loss (gain)
Amortization of net gain
Amortization of prior service cost
Amount recognized due to special event
Foreign currency translation loss
Total recognized in other comprehensive loss (income)
Information for plans with accumulated benefit obligation in excess of
plan assets:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
$
$
$
$
9,718
4,278
—
—
3,337
(1,244)
—
—
—
(311)
(715)
—
—
—
(92)
—
(34)
—
—
—
—
2,093 $
(1,026) $
(34) $
65
13,969
105
105
(66)
—
(28)
(64)
26
(132) $
2,926
(1,959)
(28)
(64)
26
901
43,364 $
43,364 $
34,958 $
30,627 $
30,627 $
23,277 $
678
678
$
$
— $
1,385
1,186
1,502
$
$
$
76,054
75,855
59,737
F-79
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
The components of net period benefit cost for the years ended December 31, 2019, 2018 and 2017 are as follows:
Components of net periodic benefit cost:
Service cost
Interest cost
Expected return on plan assets
Amortization of net loss (gain)
Amortization of prior service cost
Effect of settlement
Net pension benefit cost
Components of net periodic benefit cost:
Service cost
Interest cost
Expected return on plan assets
Amortization of net loss
Amortization of prior service cost
Effect of settlement
Net pension benefit cost
Components of net periodic benefit cost:
Service cost
Interest cost
Expected return on plan assets
Amortization of net loss (gain)
Amortization of prior service cost
Effect of settlement
Net pension benefit cost
$
$
$
$
December 31, 2019
Retirement
Income Plan
National
Service-Related
Pension Plan
Other
Post-Retirement
Benefits
(In thousands)
— $
1,590
(1,760)
1,509
—
—
1,339 $
— $
1,245
(1,176)
564
—
—
633 $
— $
23
—
(4)
—
(5)
14
$
December 31, 2018
Retirement
Income Plan
National
Service-Related
Pension Plan
Other
Post-Retirement
Benefits
(In thousands)
31 $
1,418
(2,047)
1,244
—
—
646 $
78 $
1,199
(1,369)
715
—
—
623 $
— $
20
—
—
—
—
20 $
National
Service-
Related
Pension Plan
Retirement
Income Plan
December 31, 2017
Other
Post-Retirement
Benefits
(In thousands)
$
$
65 $
1,583
(1,757)
1,889
—
—
1,780 $
504 $
1,256
(1,175)
815
212
—
1,612 $
— $
22
—
(1)
—
(4)
17
$
F-80
Superannuation
Total
78
49
(74)
—
28
(5)
76
$
$
78
2,907
(3,010)
2,069
28
(10)
2,062
Superannuation
Total
137
104
(172)
—
30
68
167
$
$
246
2,741
(3,588)
1,959
30
68
1,456
Superannuation
Total
153
120
(174)
—
9
67
175
$
$
722
2,981
(3,106)
2,703
221
63
3,584
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
The service cost component of defined benefit pension cost and postretirement benefit cost are presented in “Selling, general and
administrative” and all other components of net period benefit cost are presented in “Other (expense) income, net” on the Consolidated
Statements of Operations.
The Company recognizes all changes in the fair value of plan assets and net actuarial gains or losses at December 31 each year. Prior service
costs and gains/losses are amortized based on a straight-line method over the average future service of members that are expected to receive
benefits.
All actuarial gains/losses are exposed to amortization over an average future service period of 6.3 years for the Retirement Income Plan, 7.4
years for the National Service-Related Pension Plan, 5.0 years for Other Post-Retirement Benefits, and 5.8 years for Superannuation as of
December 31, 2019.
The weighted average assumptions used to determine benefit obligations and net period benefit costs for the years ended December 31, 2019,
2018 and 2017 are as follows:
Weighted-average assumptions used to determine obligations
(balance sheet):
Discount rate
Rate of compensation increase
Weighted-average assumptions used to determine net periodic
benefit cost (statement of operations):
Discount rate
Expected return on plan assets
Rate of compensation increase
Weighted-average assumptions used to determine obligations
(balance sheet):
Discount rate
Rate of compensation increase
Weighted-average assumptions used to determine net periodic
benefit cost (statement of operations):
Discount rate
Expected return on plan assets
Rate of compensation increase
December 31, 2019
Retirement Income
Plan
National Service-
Related Pension
Plan
Other
Post-Retirement
Benefits
Superan-
nuation
3.00 %
N/A
3.95 %
6.50 %
3.50 %
3.25 %
N/A
4.15 %
6.50 %
N/A
2.55 %
N/A
3.70 %
N/A
N/A
2.30 %
3.25 %
3.70 %
5.00 %
3.25 %
December 31, 2018
Retirement Income
Plan
National Service-
Related Pension
Plan
Other
Post-Retirement
Benefits
Superan-
nuation
3.95 %
3.50 %
3.35 %
7.00 %
3.50 %
4.15 %
N/A
3.65 %
7.00 %
N/A
3.70 %
N/A
3.10 %
N/A
N/A
3.70 %
3.25 %
3.70 %
6.00 %
4.00 %
F-81
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Weighted-average assumptions used to determine obligations
(balance sheet):
Discount rate
Rate of compensation increase
Weighted-average assumptions used to determine net periodic
benefit cost (statement of operations):
Discount rate
Expected return on plan assets
Rate of compensation increase
December 31, 2017
Retirement Income
Plan
National Service-
Related Pension
Plan
Other
Post-Retirement
Benefits
Superan-
nuation
3.35 %
3.50 %
3.75 %
7.00 %
3.50 %
3.65 %
N/A
4.15 %
7.00 %
N/A
3.10 %
N/A
3.40 %
N/A
N/A
3.70 %
4.00 %
4.20 %
6.00 %
4.00 %
The estimated net loss for the defined benefit plans in the U.S. that will be amortized from accumulated other comprehensive loss into net
periodic benefit cost during 2020 is $1.6 million. There is no estimated prior service cost associated with this plan to be amortized from
accumulated other comprehensive income during 2020.
There is no estimated net gain for the Offshore Plan that will be amortized from accumulated other comprehensive income into net periodic
benefit cost during 2020. The estimated prior service cost associated with this plan to be amortized from accumulated other comprehensive
income during 2020 is nominal.
The Company determines the expected return on plan assets based on their market value as of December 31 of each year, as adjusted for a)
expected employer contributions, b) expected benefit distributions, and c) estimated administrative expenses.
Plan Assets
The Company’s overall investment strategy is to achieve a mix of investments for long-term growth and near-term benefit payments. The
Company invests in both U.S. and non-U.S. equity securities, fixed-income securities, and real estate.
The allocations of the U.S. Plans’ and the Offshore Plan’s investments by fair value as of December 31, 2019 and 2018 are as follows:
U.S. equities
Non-U.S. equities
Fixed-income securities
Real estate
Cash and other
U.S. Plans
Actual
Offshore Plan
Actual
2019
2018
Target Allocation
2019
2018
Target Allocation
35%
25%
35%
5%
—%
35%
25%
35%
5%
—%
25–55%
15–45%
15–40%
0–5%
—%
20%
42%
8%
8%
22%
16%
46%
9%
8%
21%
19%
41%
13%
8%
19%
F-82
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
To develop the assumption for the long-term rate of return on assets, the Company considered the historical returns and the future
expectations for returns for each asset class, as well as the target asset allocation of the U.S. Plans’ and Offshore Plan’s assets and the effect
of periodic rebalancing, consistent with the Company’s investment strategies. For 2020, the Company expects to receive a long-term rate of
return of 6.5% for the U.S. Plans and 5.0% for the Offshore Plan. All plans are invested to maximize the return on assets while minimizing
risk by diversifying across a broad range of asset classes.
The fair values of the Company’s pension plan assets as of December 31, 2019, by category, are as follow:
Assets
U.S. equities:
Large cap(1)
Medium cap(1)
Small cap(1)
Non-U.S. equities:
Large cap(2)
Emerging markets(3)
Fixed-income securities:
Money markets(4)
U.S. bonds(5)
Non-U.S. bonds(5)
Real estate(6)
Common/collective trusts
Total assets
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Balance as of
December 31, 2019
(In thousands)
$
$
— $
—
1,360
12,919
4,060
—
10,172
6,806
—
—
35,317 $
F-83
17,698 $
3,404
1,360
—
—
3,381
3,397
—
3,395
1,356
33,991 $
— $
—
—
—
—
—
—
—
—
—
— $
17,698
3,404
2,720
12,919
4,060
3,381
13,569
6,806
3,395
1,356
69,308
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
The fair values of the Company’s pension plan assets as of December 31, 2018, by category, are as follows:
Assets
U.S. equities:
Large cap(1)
Medium cap(1)
Small cap(1)
Non-U.S. equities:
Large cap(2)
Emerging markets(3)
Fixed-income securities:
Money markets(4)
U.S. bonds(5)
Non-U.S. bonds(5)
Real estate(6)
Common/collective trusts
Total assets
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Balance as of
December 31, 2018
(In thousands)
$
$
— $
—
1,165
11,065
3,494
—
8,735
5,822
—
—
30,281 $
15,141 $
2,912
1,165
—
—
2,912
2,912
—
2,912
1,502
29,456 $
— $
—
—
—
—
—
—
—
—
—
— $
15,141
2,912
2,330
11,065
3,494
2,912
11,647
5,822
2,912
1,502
59,737
(1)
(2)
(3)
(4)
(5)
(6)
Includes funds that primarily invest in U.S. common stock.
Includes funds that invest primarily in foreign equity and equity-related securities.
Includes funds that invest primarily in equity securities of companies in emerging market countries.
Includes funds that invest primarily in short-term securities, such as commercial paper.
Includes funds either publicly traded (Level 1) or within a separate account (Level 2) held by a regulated investment company. These funds hold primarily
debt and fixed-income securities.
Includes funds in a separate account held by a regulated investment company that invest primarily in commercial real estate and includes mortgage loans
which are backed by the associated properties. The Company can call the investment in these assets with no restrictions.
The U.S. Plans’ assets are in commingled funds that are valued using net asset values. The net asset values are based on the value of the
underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. The pension assets are
classified as Level 1 when the net asset values are based on a quoted price in an active market. The U.S. Plans’ assets are classified as Level 2
when the net asset value is based on a quoted price on a private market that is not active and the underlying investments are traded on an
active market.
The Offshore Plans are common/collective trusts and commingled trusts investments, which invest in other collective trust funds otherwise
known as the underlying funds. The Company’s interests in the commingled trust funds are based on the fair values of the investments of the
underlying funds and therefore are classified as Level 2.
As of December 31, 2019 and 2018, the Company does not have any investments classified as Level 3.
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Notes to Consolidated Financial Statements-(Continued)
Cash Flow
The Company expects to contribute to all plans an aggregate of $2.5 million in 2020.
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future services, as appropriate, are expected to be paid for all plans as of
December 31, 2019:
Years Ending December 31:
2020
2021
2022
2023
2024
Thereafter
Multi-Employer Plans
(In thousands)
7,796
5,090
5,034
4,862
4,867
22,846
50,495
$
$
The Company contributes to a number of multi-employer benefit plans under the terms of collective bargaining agreements that cover union-
represented employees. These plans generally provide for retirement, death, and/or termination benefits for eligible employees within the
applicable collective bargaining units, based on specific eligibility/participation requirements, vesting periods, and benefit formulas. The risks
of participating in these multi-employer plans are different from single-employer plans in the following aspects:
• Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other current or
former participating employers.
•
•
If a participating employer stops contributing to the multi-employer plan without paying its unfunded liability, the unfunded
obligations of the plan may be borne by the remaining participating employers.
If the Company chooses to cease participation in a multi-employer plan, such full withdrawal is subject to the payment of any
unfunded liability applicable to the Company, referred to as a withdrawal liability. Additionally, such withdrawal is subject to
collective bargaining.
The table below outlines the Company’s participation in multi-employer pension plans for the periods ended December 31, 2019, 2018 and
2017, and sets forth the contributions into each plan. The “EIN/Pension Plan Number” column provides the Employer Identification Number
(EIN) and the three-digit plan number. The most recent Pension Protection Act zone status available in 2018 and 2019 relates to the plans’
two most recent fiscal year-ends. The zone status is based on information that we received from the plans’ administrators and is certified by
each plan’s actuary. Among other factors, plans certified in the red zone are generally less than 65% funded, plans certified in the orange
zone are (i) less than 80% funded and (ii) have an accumulated funding deficiency or are expected to have a deficiency in any of the next six
plan years, plans certified in the yellow zone are less than 80% funded, and plans certified in the green zone are at least 80% funded. The
“FIP/RP Status Pending/Implemented” column indicates whether a financial improvement plan (FIP) for yellow/orange zone plans, or a
rehabilitation plan (RP) for red zone plans, is
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Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
either pending or has been implemented. As of December 31, 2019, all plans that have either a FIP or RP requirement have had the respective
FIP or RP implemented (see table below).
The Company’s collective-bargained contributions satisfy the requirements of all implemented FIPs and RPs and do not currently require the
payment of any surcharges. In addition, minimum contributions outside the agreed-upon contractual rate are not required. For the plans
detailed in the following table, the expiration dates of the associated collective bargaining agreements range from February 13, 2019 to June
30, 2026. For all the plans detailed in the following table, the Company has not contributed more than 5% of the total plan contribution for
2019, 2018 and 2017.
The Company contributes to multi-employer plans that cover approximately 60% of union employees. The amounts charged to expense
within the Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017 were $18.0 million, $17.4 million
and $17.0 million, respectively. Projected minimum contributions required for the upcoming fiscal year are approximately $17.3 million.
During the third quarter of 2017, the Company recorded a charge of $9.2 million representing the present value of a liability associated with
its withdrawal obligation under the New England Teamsters & Trucking Industry Multi-Employer Pension Fund (the Fund) for hourly,
unionized associates at four of its domestic warehouse facilities. The Fund is significantly underfunded in accordance with Employee
Retirement Income Security Act of 1974 (ERISA) funding standards and, therefore, ERISA required the Fund to develop a Rehabilitation
Plan. The Fund Trustees chose to create a new fund that minimizes the pension withdrawal liability. As a result, current employers
participating in the Fund were given the opportunity to exit the Fund and convert to a new fund. The Company’s portion of the unfunded
liability (undiscounted), estimated at $13.7 million, will be repaid in equal monthly installments of approximately $0.04 million over 30
years, interest free. The Company recognized an expense and related liability equal to the present value of the withdrawal liability upon
exiting the Fund, and amortizes the difference between such present value and the estimated unfunded liability through interest expense over
the repayment period.
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Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Pension Fund
EIN/Pension
Plan Number
Pension Protection
Act Zone Status
2019
2018
FIP/RP Status
Pending/
Implemented
Americold Contributions
2019
2018
2017
Surcharge
Imposed
(In thousands)
Central Pension Fund of the International Union of
Operating Engineers and Participating Employers (2)
36-6052390
Green
Green
No
$
6
$
6
$
3
Central States SE & SW Areas Health and Welfare Pension
Plans (1)
36-6044243
Red
Red
New England Teamsters & Trucking Industry Pension Plan
(3)
04-6372430
Red
Red
Yes/
Implemented
Yes/
Implemented
Alternative New England Teamsters & Trucking Industry
Pension Plan
04-6372430
Green
Green
I.U.O.E Stationary Engineers Local 39 Pension Fund (1)
94-6118939
Green
Green
United Food & Commercial Workers International Union-
Industry Pension Fund (4)
51-6055922
Green
Green
Western Conference of Teamsters Pension Fund (1)
91-6145047
Green
Green
No
No
No
No
9,238
8,424
8,427
456
456
566
449
194
105
493
160
98
197
90
87
7,398
7,632
7,265
Minneapolis Food Distributing Industry Pension Plan (1)
41-6047047
Green
Green
Yes/
Implemented
116
180
326
No
No
No
No
No
No
No
No
Total Contributions
$
17,962
$
17,441
$
16,969
(1) The status information is for the plans’ year end at December 31, 2019 and 2018.
(2) The status information is for the plans’ year end at January 31, 2019 and 2018.
(3) The status information is for the plans’ year end at September 30, 2019 and 2018. The Company withdrew from the multi-employer plan on October, 31, 2017.
(4) The status information is for the plans’ year end at June 30, 2019 and 2018.
Government-Sponsored Plans
The Company contributes to certain government-sponsored plans in Australia and Argentina. The amounts charged to expense within the
Consolidated Statements of Operations and for the years ended December 31, 2019, 2018 and 2017 were $5.8 million, $5.7 million and $5.4
million, respectively.
Defined Contribution Plan
The Company has defined contribution employee benefit plans, which cover all eligible employees. The plans also allow contributions by
plan participants in accordance with Section 401(k) of the IRC. The Company matches a percentage of each employee’s contributions
consistent with the provisions of the plans. The aggregate cost of our contributions to the 401(k) Plan charged to expense within the
Consolidated Statements of Operations for each of the years ended December 31, 2019, 2018 and 2017 was $4.2 million, $3.9 million and
$3.6 million, respectively.
Deferred Compensation
The Company has deferred compensation and supplemental retirement plan agreements with certain of its executives. The agreements
provide for certain benefits at retirement or disability and also provide for survivor benefits in the event of death of the employee. The
Company contribution amounts charged to expense relative to this plan were nominal for the years ended December 31, 2019, 2018 and
2017.
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Notes to Consolidated Financial Statements-(Continued)
21. Commitments and Contingencies
Letters of Credit
As of December 31, 2019 and 2018, there were $23.0 million and $29.6 million, respectively, of outstanding letters of credit issued on the
Company’s Senior Unsecured Revolving Credit Facility.
Bonds
The Company had outstanding surety bonds of $4.3 million and $2.7 million as of December 31, 2019 and 2018, respectively. These bonds
were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations. The increase
relates to utility bonds from the Cloverleaf Acquisition.
Construction Commitments
As of December 31, 2019, the Company had the following construction commitments related to its expansion of existing warehouse facilities:
Facility
Columbus, OH
Savannah, GA
Atlanta, GA
Total construction commitments
Collective Bargaining Agreements
Committed construction
cost (in thousands)
$
$
241
13,692
44,041
57,974
Expected
construction
completion period
Q1 2020
Q2 2020
Q2 2021
As of December 31, 2019, worldwide we employed approximately 12,600 people. Currently, 49% of the Company’s labor force is covered
by collective bargaining agreements, and 84 of our 178 warehouses have unionized associates that are governed by 74 different collective
bargaining agreements. We are currently in negotiations for one new agreement which will bring our total to 75 agreements. During 2020, the
Company will be renegotiating 19 collective bargaining agreements, covering all or parts of 26 operating warehouses worldwide. The
Company does not anticipate any workplace disruptions during this renegotiation process.
Legal Proceedings
In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such
proceedings, the Company and its legal counsel evaluate the merits of any legal proceedings or unasserted claims, as well as the perceived
merits of the amount of relief sought or expected to be sought. If the assessment of a contingency suggests that a loss is probable, and the
amount can be reasonably estimated, then a loss is recorded.
In addition to the matters discussed below, the Company may be subject to litigation and claims arising from the ordinary course of business.
In the opinion of management, after consultation with legal counsel, the outcome of such matters is not expected to have a material impact on
the Company’s financial condition, results of operations, or cash flows.
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Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Kansas Breach of Settlement Agreement Litigation
This case was served against the Company in Wyandotte County, Kansas, on January 17, 2013, alleging breach of a 1994 Settlement
Agreement reached with customers of our predecessor company, Americold Corporation. The plaintiffs originally brought claims in 1992
arising from a fire the previous year in an underground warehouse facility.
In 1994, a settlement was reached whereby Americold Corporation agreed to the entry of a $58.7 million judgment against it and assigned its
rights to proceed against its insurer to satisfy the judgment. The settlement agreement contained a standard “cooperation provision” in which
Americold Corporation agreed to execute any additional documents necessary to fulfill the intent of the settlement agreement. The plaintiffs
then sued Americold Corporation’s insurer to recover on the consent judgment. The case was ultimately dismissed in 2012, and the Kansas
Supreme Court ruled that the 1994 consent judgment had expired and was not revivable as a matter of law.
On September 24, 2012, the plaintiffs filed a separate claim in the district court of Wyandotte County, Kansas, alleging that the Company and
one of its subsidiaries, Americold Logistics, LLC, as successors to Americold Corporation, are liable for the full amount of the judgment,
based upon the allegation that the Company failed to execute a document or take action to keep the judgment alive and viable.
On February 7, 2013, the Company removed the case to the U.S. federal court and ultimately filed a motion for summary judgment, which
the plaintiffs vigorously opposed. On October 4, 2013, the court granted the Company’s motion and dismissed the case in full. Only one
plaintiff appealed the dismissal to the U.S. Court of Appeals. The Court of Appeals ordered that the case be remanded to the Kansas State
Court and the judgment in favor of Americold be vacated, finding U.S. federal diversity jurisdiction did not exist over the Company. The
Company petitioned the U.S. Supreme Court for certiorari and oral argument occurred on January 19, 2016.
On March 7, 2016, the United States Supreme Court ruled that there was no federal diversity jurisdiction. Following the decision, the United
States District Court for the District of Kansas entered an Order vacating the summary judgment and remanding the case to Kansas state
court. Regardless of the venue, the Company remains confident that its defenses on the merits of plaintiffs’ claims are strong under Kansas
law.
Following remand to Kansas state court, Plaintiffs initially petitioned the court to amend their complaint to drop their claim for damages and
only seek an Order of Specific Performance requiring Americold to sign a new document reinstating the consent judgment assigned in the
1994 Settlement Agreement. Plaintiffs filed a later motion to add back the damages claim, which was granted in February 2018.
Since December 31, 2018, the court granted the Company’s motions to dismiss Kraft and Safeway from the case given they did not appeal
the District Court’s Order dismissing their claims and are bound by the judgment entered against them. The Kraft and Safeway plaintiffs have
appealed their dismissals. The trial court has stayed the proceedings pending the appeal. In addition, the Company has sued the Chubb Group
seeking the court’s declaration that Chubb owes coverage of the amounts sought by Plaintiffs and for bad faith damages for denying
coverage. Given the status of the proceedings to date, a liability amount cannot be reasonably estimated. The Company believes the ultimate
outcome of this matter will not have a material adverse impact on its consolidated financial statements.
Preferred Freezer Services, LLC Litigation
On February 11, 2019, Preferred Freezer Services, LLC (“PFS”) moved by Order to Show Cause in the Supreme Court of the State of New
York, New York County, asserting breach of contract and other claims against the Company and seeking to preliminarily enjoin the Company
from acting to acquire certain properties leased by PFS. In its
F-89
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
complaint and request for preliminary injunctive relief, PFS alleged that the Company breached a confidentiality agreement entered into in
connection with the Company’s participation in a bidding process for the sale of PFS by contacting PFS’s landlords and by using confidential
PFS information in bidding for the properties leased by PFS.
PFS’s request for a preliminary injunction was denied after oral argument on February 26, 2019. On March 1, 2019, PFS filed an application
for interim injunctive relief from the Appellate Division of the Supreme Court, First Judicial Department.
On April 2, 2019, while its application to the First Department was pending, PFS voluntarily dismissed its state court action, and First
Department application, and re-filed substantially the same claims against the Company in the U.S. District Court for the Southern District of
New York. In addition to an order enjoining Americold from making offers to purchase the properties leased by PFS, PFS seeks
compensatory, consequential and/or punitive damages. The Company has filed a motion to require PFS to reimburse the Company for its
legal fees it incurred for the state court action before PFS is allowed to proceed in the federal court action. On February 18, 2020, the Court
issued an order granting, in part, Americold’s request for an award of legal fees from Preferred Freezer and lifting the stay of the proceeding.
The Company denies the allegations and believes PFS’s claims are without merit and intends to vigorously defend this claim. Given the status
of the proceedings to date, a liability cannot be reasonably estimated. The Company believes the ultimate outcome of this matter will not have
a material adverse impact on its consolidated financial statements.
Jose Contreras Employment Putative Class Action
On February 22, 2019, Plaintiff Jose Contreras (a former employee) filed a putative class action against the Company in the San Bernardino
County Superior Court asserting that the Company: (1) failed to pay minimum wages; (2) failed to pay overtime wages; (3) failed to pay all
vacation wages; (4) failed to provide meal periods; (5) failed to provide accurate wage statements; (6) failed to pay wages timely to
terminated employees; and (7) violated California unfair business practices. On April 10, 2019, the Company filed an Answer and
Affirmative Defenses in response to the complaint and successfully removed the case to federal court in the U.S. District Court for the
Central District of California. On May 2, 2019, plaintiff filed a separate lawsuit for civil penalties under California’s Private Attorneys
General Act (“PAGA”) in the San Bernardino Superior Court against the Company, Case No. CIV-DS-1913525 based on similar factual
allegations that are asserted in the complaint. The Company successfully obtained a dismissal of the San Bernardino Superior Court Action.
On June 18, 2019, the plaintiff amended his complaint in the pending federal court action to add a rest period violation claim and PAGA
penalty claims based on similar allegations that are asserted in the complaint. Plaintiff’s counsel later dismissed plaintiff’s vacation wages
claim from his first amended complaint.
The Company denies the plaintiff’s claims and denies that plaintiff and the putative class members have been damaged in any respect or in
any amount as a result of any act or omission by the Company. The Company also denies that this case is appropriate for class treatment and
further asserts, among other grounds, that this case is unmanageable as a PAGA representative action. The Company has entered into a
preliminary settlement of the case for $2.5 million. The settlement of the case is subject to court approval.
Environmental Matters
The Company is subject to a wide range of environmental laws and regulations in each of the locations in which the Company operates.
Compliance with these requirements can involve significant capital and operating costs. Failure
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Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
to comply with these requirements can result in civil or criminal fines or sanctions, claims for environmental damages, remediation
obligations, the revocation of environmental permits, or restrictions on the Company’s operations.
The Company records accruals for environmental matters when it is probable that a liability has been incurred and the amount of the liability
can be reasonably estimated based on current law and existing technologies. The Company adjusts these accruals periodically as assessment
and remediation efforts progress or as additional technical or legal information become available. The Company recorded nominal
environmental liabilities in accounts payable and accrued expenses as of December 31, 2019, 2018, and 2017. The Company believes it is in
compliance with applicable environmental regulations in all material respects. Under various U.S. federal, state, and local environmental
laws, a current or previous owner or operator of real estate may be liable for the entire cost of investigating, removing, and/or remediating
hazardous or toxic substances on such property. Such laws often impose liability whether or not the owner or operator knew of, or was
responsible for, the contamination. Even if more than one person may have been responsible for the contamination, each person covered by
the environmental laws may be held responsible for the entire clean-up cost. There are no material unrecorded liabilities as of December 31,
2019. Most of the Company’s warehouses utilize ammonia as a refrigerant. Ammonia is classified as a hazardous chemical regulated by the
Environmental Protection Agency, and an accident or significant release of ammonia from a warehouse could result in injuries, loss of life,
and property damage.
Occupational Safety and Health Act (OSHA)
The Company’s warehouses located in the U.S. are subject to regulation under OSHA, which requires employers to provide employees with
an environment free from hazards, such as exposure to toxic chemicals, excessive noise levels, mechanical dangers, heat or cold stress, and
unsanitary conditions. The cost of complying with OSHA and similar laws enacted by states and other jurisdictions in which we operate can
be substantial, and any failure to comply with these regulations could expose us to substantial penalties and potentially to liabilities to
employees who may be injured at our warehouses. The Company records accruals for OSHA matters when it is probable that a liability has
been incurred and the amount of the liability can be reasonably estimated. The Company believes that it is in substantial compliance with all
OSHA regulations and that no material unrecorded liabilities exist as of December 31, 2019 and 2018.
22. Accumulated Other Comprehensive (Loss) Income
The Company reports activity in AOCI for foreign currency translation adjustments, including the translation adjustment for the investment
in the China JV prior to the sale of our interest, unrealized gains and losses on cash flow hedge derivatives, and minimum pension liability
adjustments (net of tax). The activity in AOCI for the years ended December 31, 2019, 2018 and 2017 is as follows:
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Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Pension and other postretirement benefits:
Balance at beginning of period, net of tax
Gain (loss) arising during the period
Less: Tax expense (benefit)
Net (loss) gain arising during the period
Amortization of net loss and prior service cost (1)
Net amount reclassified from AOCI to net income (loss)
Other comprehensive (loss) income, net of tax
Balance at end of period, net of tax
Foreign currency translation adjustments:
Balance at beginning of period, net of tax
(Loss) gain on foreign currency translation
Derecognition of cumulative foreign currency translation gain upon sale of partially owned entities (2)
Net (loss) gain on foreign currency translation
Balance at end of period, net of tax
Cash flow hedge derivatives:
Balance at beginning of period, net of tax
Unrealized (loss) gain on cash flow hedge derivatives
Less: Tax expense
Net (loss) gain cash flow hedge derivatives
Net amount reclassified from AOCI to net income (loss) (interest expense)
Net amount reclassified from AOCI to net income (loss) (loss on debt extinguishment, modifications and
termination of derivative instruments)
Net amount reclassified from AOCI to net income (loss) (foreign exchange loss (gain), net)
Balance at end of period, net of tax
2019
2018
2017
(In thousands)
$
(8,027) $
(7,126) $
(12,880)
1,180
(2,926)
2,663
3
27
(49)
1,177
(2,953)
2,092
2,052
2,092
2,052
3,269
(901)
2,712
3,042
3,042
5,754
(4,758)
(8,027)
(7,126)
(3,322)
8,318
(783)
(11,640)
(2,605)
—
3,874
4,444
—
(3,388)
(11,640)
4,444
(6,710)
(3,322)
8,318
(1,166)
(1,422)
(1,538)
(1,450)
—
(1,450)
862
173
689
(1,387)
44
(1,431)
(306)
1,191
1,547
—
1,825
264
(3,449)
—
—
(2,658)
(1,166)
(1,422)
Accumulated other comprehensive loss
$
(14,126) $
(12,515) $
(230)
(1) Amounts reclassified from AOCI for pension liabilities are recorded in selling, general, and administrative expenses in the Consolidated Statements of Operations.
(2) Amount reclassified from AOCI for the derecognition of cumulative foreign currency translation gain related to the sale of partially owned entities is recognized in Gain
from sale of partially owned entities in the Consolidated Statements of Operations.
23. Related-Party Transactions
Transactions with Goldman
Prior to the March 2019 secondary offering, Goldman was a significant shareholder of the Company. Goldman is considered a related party
as a result of their ownership for a portion of the current year, and therefore, the Company has disclosed the fees paid to Goldman for various
services provided. The Company continues to use services provided by Goldman in the ordinary course of business subsequent to Goldman’s
complete disposition of ownership in March 2019.
Affiliates of Goldman are part of the lending group under the 2018 Senior Unsecured Credit Facility, and have a $90.0 million, or 7.1%, total
commitment. Another affiliate of Goldman was one of the lending group under the ANZ Loans (with a 2.5% participation in the Australia
Term Loan and 31.8% in the New Zealand Term Loan), which the Company repaid during December 2018. Goldman was also the
counterparty to the interest rate swap agreements, which were terminated in December 2018 in connection with the extinguishment of the
ANZ Loans.
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Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
As a member of the previously described lending groups, the Company is required to pay certain fees to Goldman, which may include interest
on borrowings, unused facility fees, letter of credit participation fees, and letter of credit facility fees. The Company paid interest expense and
fees to Goldman totaling approximately $1.4 million, $2.3 million, and $0.9 million for the years ended December 31, 2019, 2018, and 2017,
respectively. Interest payable to Goldman was nominal as of December 31, 2019, 2018, and 2017. The net settlements of the terminated ANZ
interest rate swap agreements are not included in the figures above and totaled approximately $1.2 million and $1.5 million for the years
ended December 31, 2018 and 2017, respectively. In addition, a swap termination fee was paid to Goldman in 2018 of $1.8 million in
conjunction with the extinguishment of the ANZ Loans.
In connection with the April 2019 follow-on offering, the May 2019 debt private placement and the Cloverleaf Acquisition, Goldman
received total fees of approximately $15.2 million.
In connection with the secondary offering completed in March 2019, Goldman sold their remaining common shares of the Company, totaling
8,061,228 common shares, in an underwritten public offering. The Company did not receive any proceeds from the shares sold by Goldman
and its affiliates in this offering. In connection with this transaction, Goldman received an underwriting fee of approximately$2.6 million.
Although Goldman was no longer a significant shareholder of the Company, Bradley Gross, a partner at Goldman Sachs, remained on the
Board of Trustees through May 22, 2019. Mr. Gross did not stand for re-election to the Board of Trustees in connection with the Company’s
annual meeting of shareholders.
In January 2019, the Company entered into an interest rate swap with Goldman to hedge the changes in the cash flows of variable interest rate
payments on our outstanding 2018 Senior Unsecured Term Loan A Facility. Net settlements under the interest rate swap commenced during
the three months ended March 31, 2019. The net settlement of the swap for the year ended December 31, 2019 was $0.2 million.
In December 2018, the Company entered into cross-currency swaps with Goldman to fix the cash flows of interest and principal payments on
our foreign-currency denominated intercompany loans. Refer to Notes 2 and 11 for more information regarding the cross-currency swaps.
These cash flows under the cross currency swaps are made semi-annually and began during the third quarter of 2019. These payments are
excluded from amounts disclosed above since they represent ongoing settlements of foreign exchange forwards. Additionally, the Company
periodically enters into foreign exchange spot trades with Goldman to facilitate the movement of funds between our international subsidiaries
and the U.S., including the funding of the previously mentioned intercompany loans.
In connection with the follow-on offering completed in September 2018, Goldman sold 9,083,280 common shares, and after giving effect to
the sale owned approximately 9.9% of the Company’s common shares. In connection with the follow-on offering, Goldman received an
underwriting fee of approximately $5.0 million, and received a refund of approximately $0.7 million representing the underwriting discount
on the gross proceeds received by the selling shareholders.
In December 2017, the Company prepaid in escrow a $0.2 million fee to Goldman for its share of the 2018 Senior Secured Credit Facilities
commitment, which was related to the refinancing that occurred in tandem with the IPO. In connection with the IPO, Goldman converted its
Series B Preferred Shares into 28,808,224 common shares. After giving effect to the full exercise of the underwriters’ option to purchase
additional common shares during the IPO, and after giving effect to the sale by Goldman of 5,163,716 common shares in the IPO, Goldman
owned approximately 16.7% of the Company’s common shares. In connection with the IPO, Goldman received a refund from the
underwriters of approximately $1.6 million, which represents the underwriting discount on the gross proceeds received by the selling
shareholders.
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Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
24. Geographic Concentrations
The following table provides geographic information for the Company’s total revenues for the years ended December 31, 2019, 2018 and
2017, and total assets as of December 31, 2019 and 2018:
Total Revenues
Total Assets
2019
2018
2017
2019
2018
$
$
1,509,401 $
216,741
30,047
9,647
17,869
1,783,705 $
1,313,811 $
227,374
32,363
11,752
18,335
1,603,635 $
(In thousands)
1,253,879 $
219,738
33,289
18,319
18,362
1,543,587 $
3,812,761 $
274,288
67,046
7,794
8,794
4,170,683 $
2,242,078
226,666
51,419
7,154
5,111
2,532,428
U.S.
Australia
New Zealand
Argentina
Canada
25. Segment Information
Our principal operations are organized into four reportable segments: Warehouse, Third-party managed, Transportation and Other.
• Warehouse. Our primary source of revenues consists of rent and storage and warehouse services fees. Our rent and storage and
warehouse services revenues are the key drivers of our financial performance. Rent and storage revenues consist of recurring, periodic
charges related to the storage of frozen and perishable food and other products in our warehouses. We also provide these customers with
a wide array of handling and other warehouse services, such as (1) receipt, handling and placement of products into our warehouses for
storage and preservation, (2) retrieval of products from storage upon customer request, (3) blast freezing, which involves the rapid
freezing of non-frozen products, including individual quick freezing for agricultural produce and seafood, (4) case-picking, which
involves selecting product cases to build customized pallets, (5) kitting and repackaging, which involves assembling custom product
packages for delivery to retailers and consumers, and labeling services, (6) order assembly and load consolidation, (7) exporting and
importing support services, (8) container handling, (9) cross-docking, which involves transferring inbound products to outbound trucks
utilizing our warehouse docks without storing them in our warehouses, and (10) government-approved temperature-controlled storage
and inspection services. We may charge our customers in advance for storage and outbound handling fees. Cost of operations for our
warehouse segment consists of power, other facilities costs, labor and other services costs.
•
•
Third-party managed. We receive management and incentive fees, as well as reimbursement of substantially all expenses, for
warehouses and logistics services that we manage on behalf of third-party owners/customers. Cost of operations for our third-party
managed segment are reimbursed on a pass-through basis (typically within two weeks), with all reimbursements, plus an applicable mark-
up, recognized as revenues under the relevant accounting guidance.
Transportation. We charge transportation fees, including fuel surcharges, to our customers for whom we arrange the transportation of
their products. Cost of operations for our transportation segment consist primarily of third-party carrier charges, which are impacted by
factors affecting those carriers.
F-94
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
• Other. In addition to our primary business segments, we own a limestone quarry in Carthage, Missouri. Revenues are generated from the
sale of limestone mined at our quarry. Cost of operations for our quarry consist primarily of labor, equipment, fuel and explosives.
Our reportable segments are strategic business units separated by service offerings. Each reportable segment is managed separately and
requires different operational and marketing strategies. The accounting polices used in the preparation of our reportable segments financial
information are the same as those used in the preparation of its consolidated financial statements.
Our chief operating decision maker uses revenues and segment contribution to evaluate segment performance. We calculate segment
contribution as earnings before interest expense, taxes, depreciation and amortization, and excluding corporate selling, general and
administrative expense, acquisition, litigation and other expense, impairment of long-lived assets, gain or loss on sale of real estate and all
components of non-operating other income and expense. Selling, general and administrative functions support all the business segments.
Therefore, the related expense is not allocated to segments as the chief operating decision maker does not use it to evaluate segment
performance.
Segment contribution is not a measurement of financial performance under GAAP, and may not be comparable to similarly titled measures of
other companies. You should not consider our segment contribution as an alternative to operating income determined in accordance with
GAAP.
F-95
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
The following table presents segment revenues and contributions with a reconciliation to Income before income tax benefit (expense) for the
years ended December 31, 2019, 2018 and 2017:
Segment revenues:
Warehouse
Third-party managed
Transportation
Other
Total revenues
Segment contribution:
Warehouse
Third-party managed
Transportation
Other
Total segment contribution
Reconciling items:
Depreciation, depletion and amortization
Selling, general and administrative expense
Acquisition, litigation and other
Impairment of long-lived assets
(Loss) gain from sale of real estate, net
Interest expense
Interest income
Bridge loan commitment fees
Loss on debt extinguishment, modifications and termination of derivative
instruments
Foreign currency exchange gain (loss), net
Other expense, net
Loss from partially owned entities
Gain from sale of partially owned entities
Impairment of partially owned entities
Income before income tax benefit (expense)
$
F-96
Years Ended December 31,
2019
2018
2017
(In thousands)
$
1,377,217 $
252,939
144,844
8,705
1,783,705
1,176,912 $
259,034
158,790
8,899
1,603,635
1,145,662
242,189
146,070
9,666
1,543,587
447,591
11,761
18,067
838
478,257
(163,348)
(129,310)
(40,614)
(13,485)
(34)
(94,408)
6,286
(2,665)
—
10
(1,870)
(111)
4,297
—
43,005 $
374,534
14,760
15,735
620
405,649
(117,653)
(110,825)
(3,935)
(747)
7,471
(93,312)
3,996
—
(47,559)
2,882
(532)
(1,069)
—
—
44,366 $
348,328
12,825
12,950
2
374,105
(116,741)
(99,616)
(11,329)
(9,473)
43
(114,898)
1,074
—
(986)
(3,591)
(1,944)
(1,363)
—
(6,496)
8,785
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
The following table details our long-lived assets by reportable segments, with a reconciliation to total assets reported for each of the periods
presented in the accompanying Consolidated Balance Sheets.
Assets:
Warehouse
Third-party managed
Transportation
Other
Total segments assets
Reconciling items:
Corporate assets
Investments in partially owned entities
Total reconciling items
Total assets
26. Earnings per Common Share
Years Ended December 31,
2019
2018
(In thousands)
3,684,391 $
47,867
50,666
13,467
3,796,391
2,054,968
43,725
35,479
13,554
2,147,726
374,292
—
374,292
4,170,683 $
370,161
14,541
384,702
2,532,428
$
$
Basic and diluted earnings per common share are calculated by dividing the net income or loss attributable to common shareholders by the
basic and diluted weighted-average number of common shares outstanding in the period, respectively, using the allocation method prescribed
by the two-class method. The Company applies this method to compute earnings per share because it distributes non-forfeitable dividend
equivalents on restricted stock units granted to certain employees and non-employee trustees who have the right to participate in the
distribution of common dividends while the restricted stock units are unvested. For the year ended December 31, 2019, the weighted-average
number of unvested restricted stock units that participated in the distribution of common dividends was 1,405,421, of which 629,929
restricted stock units currently have vested but will not be settled until additional criteria are met.
The shares issuable upon settlement of the 2018 forward sale agreement and 2019 forward sale agreement are reflected in the diluted earnings
per share calculations using the treasury stock method. Under this method, the number of the Company’s common shares used in calculating
diluted earnings per share is deemed to be increased by the excess, if any, of the number of common shares that would be issued upon full
physical settlement of the applicable forward sale agreement over the number of common shares that could be purchased by the Company in
the market (based on the average market price during the period) using the proceeds receivable upon full physical settlement (based on the
adjusted forward sale price at the end of the reporting period). If and when the Company physically or net share settles either forward sale
agreement, the delivery of common shares would result in an increase in the number of shares outstanding and dilution to earnings per share.
As of December 31, 2019, the Company has not settled any portion of the forward sale agreement.
Prior to the IPO, holders of Series B Preferred Shares were entitled to cumulative dividends, which were added to the reported net loss
whether or not declared or paid to determine the net loss attributable to common shareholders under the two-class method.
F-97
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
A reconciliation of the basic and diluted weighted-average number of common shares outstanding for the years ended December 31, 2019,
2018 and 2017 is as follows:
Weighted average common shares outstanding – basic
Dilutive effect of share-based awards
Equity forward contracts
Weighted average common shares outstanding – diluted
Year ended December 31,
2019
2018
2017
179,598
1,660
2,692
183,950
(In thousands)
141,415
2,662
261
144,338
70,022
—
—
70,022
For the year ended December 31, 2017, potential common shares under the treasury stock method and the if-converted method were
antidilutive because the Company reported a net loss. Consequently, the Company did not have any adjustments in these periods between
basic and diluted loss per share related to stock options, restricted stock units, warrants and convertible preferred shares in this period.
The table below presents the weighted-average number of antidilutive potential common shares that are not considered in the calculation of
diluted income (loss) per share:
Series B Convertible Preferred Stock
Common share warrants
Employee stock options
Restricted stock units
Equity forward contracts
27. Revenue from Contracts with Customers
Disaggregated Revenue
Year ended December 31,
2019
2018
2017
(In thousands)
—
—
—
250
—
250
—
—
—
—
—
—
33,240
18,575
5,983
685
—
58,483
The following tables represent a disaggregation of revenue from contracts with customers for the years ended December 31, 2019, 2018 and
2017 by segment and geographic region:
F-98
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
United States
Australia
New Zealand
Argentina
Canada
Total
December 31, 2019
(In thousands)
Warehouse rent and storage
Warehouse services
Third-party managed
Transportation
Other
Total revenues (1)
Lease revenue (2)
Total revenues from contracts with all
customers
$
502,674 $
653,890
220,165
101,976
8,683
1,487,388
22,013
37,172 $
124,045
14,886
40,638
—
216,741
—
15,942 $
13,701
—
404
—
30,047
—
4,749 $
3,072
—
1,826
—
9,647
—
— $
—
17,869
—
—
17,869
—
560,537
794,708
252,920
144,844
8,683
1,761,692
22,013
$
1,509,401 $
216,741 $
30,047 $
9,647 $
17,869 $
1,783,705
United States
Australia
New Zealand
Argentina
Canada
Total
December 31, 2018
(In thousands)
Warehouse rent and storage
Warehouse services
Third-party managed
Transportation
Other
Total revenues (1)
Lease revenue (2)
Total revenues from contracts with all
customers
$
433,131 $
522,748
227,757
99,736
8,877
1,292,249
21,562
39,573 $
119,665
12,742
55,394
—
227,374
—
15,018 $
16,634
—
711
—
32,363
—
5,694 $
3,109
—
2,949
—
11,752
—
— $
—
18,335
—
—
18,335
—
493,416
662,156
258,834
158,790
8,877
1,582,073
21,562
$
1,313,811 $
227,374 $
32,363 $
11,752 $
18,335 $
1,603,635
United States
Australia
New Zealand
Argentina
Canada
Total
December 31, 2017
(In thousands)
Warehouse rent and storage
Warehouse services
Third-party managed
Transportation
Other
Total revenues (1)
Lease revenue (2)
Total revenues from contracts with all
customers
$
413,647 $
508,982
214,400
85,947
9,644
1,232,620
21,259
40,086 $
116,287
9,227
54,138
—
219,738
—
17,695 $
14,776
—
818
—
33,289
—
9,139 $
4,013
—
5,167
—
18,319
—
— $
—
18,362
—
—
18,362
—
480,567
644,058
241,989
146,070
9,644
1,522,328
21,259
$
1,253,879 $
219,738 $
33,289 $
18,319 $
18,362 $
1,543,587
(1) Revenues are within the scope of ASC 606: Revenue From Contracts With Customers. Elements of contracts or arrangements that are in the scope of other standards (e.g.,
leases) are separated and accounted for under those standards.
(2) Revenues are within the scope of Topic 842 and 840, Leases, for the applicable period.
F-99
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
Performance Obligations
Substantially all our revenue for warehouse storage and handling services, and management and incentive fees earned under third-party
managed and other contracts is recognized over time as the customer benefits equally throughout the period until the contractual term expires.
Typically, revenue is recognized over time using an output measure (e.g. passage of time). Revenue is recognized at a point in time upon
delivery when the customer typically obtains control, for most accessorial services, transportation services, reimbursed costs and quarry
product shipments.
For arrangements containing non-cancellable contract terms, any variable consideration related to storage renewals or incremental handling
charges above stated minimums are 100% constrained and not included in aggregate amount of the transaction price allocated to the
unsatisfied performance obligations disclosed below, given the degree in difficulty in estimation. Payment terms are generally 0 - 30 days
upon billing, which is typically monthly, either in advance or subsequent to the performance of services. The same payment terms typically
apply for arrangements containing variable consideration.
The Company has no material warranties or obligations for allowances, refunds or other similar obligations.
At December 31, 2019, the Company had $658.2 million of remaining unsatisfied performance obligations from contracts with customers
subject to a non-cancellable term and within contracts that have an original expected duration exceeding one year. These obligations also do
not include variable consideration beyond the non-cancellable term, which due to the inability to quantify by estimate, is fully constrained.
The Company expects to recognize approximately 26% of these remaining performance obligations as revenue in 2020, and the remaining
74% to be recognized over a weighted average period of 14.3 years through 2038.
Contract Balances
The timing of revenue recognition, billings and cash collections results in accounts receivable (contract assets), and unearned revenue
(contract liabilities) on the accompanying Consolidated Balance Sheets. Generally, billing occurs monthly, subsequent to revenue
recognition, resulting in contract assets. However, the Company may bill and receive advances or deposits from customers, particularly on
storage and handling services, before revenue is recognized, resulting in contract liabilities. These assets and liabilities are reported on the
accompanying Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. Changes in the contract asset
and liability balances during the year ended December 31, 2019, were not materially impacted by any other factors.
Opening and closing receivables balances related to contracts with customers accounted for under ASC 606 were $213.2 million and $192.1
million at December 31, 2019 and 2018, respectively. All other trade receivable balances relate to contracts accounted for under ASC 842 or
840, for the applicable period.
Opening and closing balances in unearned revenue related to contracts with customers were $16.4 million and $18.6 million at December 31,
2019 and 2018, respectively. Substantially all revenue that was included in the contract liability balances at the beginning of 2018 and 2017
has been recognized as of December 31, 2019 and 2018, respectively, and represents revenue from the satisfaction of monthly storage and
handling services with average inventory turns of approximately 30 days.
F-100
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
28. Selected Quarterly Financial Data (Americold Realty Trust) - Unaudited
The following table sets forth selected unaudited quarterly statements of operations data for the years ended December 31, 2019 and 2018:
Total revenues
Total operating expenses
Operating income
Net income (loss) applicable to common shareholders
Net income (loss) per common share (a)
Basic
Diluted
December 31
September 30
June 30
March 31
2019
$
485,984 $
466,182 $
438,460 $
(In thousands, except per share amounts)
439,405
46,579
20,809
0.11
0.10
426,797
39,385
27,091
0.14
0.14
409,375
29,085
4,891
0.03
0.03
393,079
376,662
16,417
(4,629)
(0.03)
(0.03)
(a) Quarterly earnings per common share amounts may not total to the annual amounts due to rounding and the changes in the number of weighted common shares outstanding
included in the calculation of basic and diluted shares.
Total revenues
Total operating expenses
Operating income
Net income (loss) applicable to common shareholders
Net income (loss) per common share (a)
Basic
2018
December 31
September 30
June 30
March. 31
$
415,817 $
402,010 $
394,667 $
(In thousands, except per share amounts)
364,646
51,171
2,678
358,457
43,553
24,540
345,363
49,304
29,406
391,141
355,209
35,932
(10,457)
0.02
0.17
0.20
(0.08)
Diluted
(0.08)
(a) Quarterly earnings per common share amounts may not total to the annual amounts due to rounding and the changes in the number of weighted common shares outstanding
0.17
0.02
0.20
included in the calculation of basic and diluted shares.
29. Selected Quarterly Financial Data (Americold Realty Operating Partnership, L.P.) - Unaudited
The following table sets forth selected unaudited quarterly statements of operations data for the years ended December 31, 2019 and 2018:
Total revenues
Total operating expenses
Operating income
Net income (loss) applicable to unitholders
Net income (loss) per unit (a)
2019
December 31
September 30
June 30
March 31
$
485,984 $
466,182 $
438,460 $
(In thousands, except per share amounts)
439,405
46,579
20,809
426,797
39,385
27,091
409,375
29,085
4,891
393,079
376,662
16,417
(4,629)
0.11
0.14
0.03
(0.03)
F-101
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Notes to Consolidated Financial Statements-(Continued)
(a) Quarterly earnings per unit amounts may not total to the annual amounts due to rounding and the changes in the number of weighted units outstanding included in the
calculation of units.
Total revenues
Total operating expenses
Operating income
Net income (loss) applicable to unitholders
Net income (loss) per unit (a)
2018
December 31
September 30
June 30
March. 31
$
415,817 $
402,010 $
394,667 $
(In thousands, except per share amounts)
364,646
51,171
2,678
358,457
43,553
24,540
345,363
49,304
29,406
391,141
355,209
35,932
(10,457)
0.02
0.17
0.21
(0.08)
(a) Quarterly earnings per unit amounts may not total to the annual amounts due to rounding and the changes in the number of weighted units outstanding included in the
calculation of units.
30. Subsequent Events (Unaudited)
On January 2, 2020, the Company completed the purchase of all outstanding shares of Nova Cold for cash consideration of CAD $336.8
million (USD $257.1 million). Nova Cold consists of four temperature-controlled facilities in Toronto, Calgary and Halifax. The acquisition
was funded utilizing proceeds from the settlement of our April 2019 forward sale agreement combined with cash drawn on our 2018 Senior
Unsecured Revolving Credit Facility. We have not yet completed our accounting assessment of the acquistion or completed our cost
allocation or preliminary purchase price allocation, as applicable.
On January 2, 2020, the Company completed the purchase of all outstanding membership interests of Newport Cold for cash consideration of
$56.0 million. Newport Cold consists of a single temperature-controlled warehouse located in St. Paul, Minnesota. We have not yet
completed our accounting assessment of the acquisition or completed our cost allocation or preliminary purchase price allocation, as
applicable.
On January 31, 2020, the Company received official notice from its customer to exercise its contractual call option to purchase land from the
Company in Sydney, Australia, which was previously purchased by the Company for future development. Under the agreement with the
customer, the Company will be reimbursed for its land purchase in Sydney and related costs.
On February 20, 2020, the Company entered into a Share Purchase and Sale agreement to acquire a 14.99% ownership interest in Superfrio
Armazéns Gerais S.A. (SuperFrio) for Brazil Real Dollars 117.8 million, or approximately USD $26.4 million. Superfrio is a Brazilian based
company that provides temperature-controlled storage and logistics services including: storage, warehouse services and transportation.
F-102
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2019
(In thousands of U.S. dollars, as applicable and unless noted)
Initial Costs
Gross amount at which carried
as of
December 31, 2019
Property
Buildings
Encumbrances
(3)
Land
Buildings and
Improvements
Costs
Capitalized
Subsequent
to
Acquisition Land
Buildings and
Improvements
(2)
Total
(4) (5)
Accumulated
Depreciation
and Depletion
(1) (6)
Date of
Construction
Date of
Acquisition
Life on
Which
Depreciation
is Computed
US
Albertville, AL
Allentown, PA
Amarillo, TX
Anaheim, CA
Appleton, WI
Atlanta - Lakewood,
GA
Atlanta - Skygate, GA
Atlanta - Southgate, GA
Atlanta - Tradewater,
GA
Atlanta - Westgate, GA
Atlanta, GA - Corporate
Augusta, GA
Babcock, WI
Bartow, FL
Belvidere-Imron, IL
Belvidere-Landmark,
IL (Cross Dock)
Benson, NC (1)
Birmingham, AL
Boston, MA
Brea, CA
Brooklyn Park, MN
Burley, ID
Burlington, WA
Carson, CA
Cartersville, GA
Carthage Quarry, MO
Carthage Warehouse
Dist, MO
Chambersburg, PA (4)
1 $
2
1
1
1
— $1,251 $
— 5,780
—
871
— 9,509
200
—
12,385 $
47,807
4,473
16,810
5,022
1
1
1
1
1
—
1
1
1
1
1
1
1
1
1
1
2
3
1
1
—
1
1
— 4,297
— 1,851
— 1,623
—
—
— 2,270
—
—
— 2,678
—
852
—
—
— 2,000
—
1
— 3,660
1,002
964
— 1,855
— 4,645
— 1,600
—
—
694
14,059
— 9,100
— 1,500
— 12,621
— 61,445
— 1,368
3,369
12,731
17,652
36,966
24,659
365
1,943
8,916
2,451
11,989
2,117
35,825
957
5,796
5,891
8,951
16,136
6,108
13,731
8,505
356
33,880
15,868
1,080
7,583
872
918
10,809
(1,539)
746
2,052
(4,140)
(1,535)
14,333
1,062
141
641
3,676
639
2,019
2,286
6,106
2,025
—
2,838
895
10
2,410
1,941
—
— 3,660
1,269
1,917
4,664
1,600
52
708
9,116
1,571
12,697
2,033
1,536
769
1,666
3,729
2,442
1,100
532
187
$1,298 $
6,513
932
9,509
916
13,418 $ 14,716 $
54,657
5,284
17,728
15,115
61,170
6,216
27,237
16,031
(5,794)
(24,289)
(2,576)
(8,375)
(4,445)
(2,165)
(4,387)
(6,769)
(6,054)
(10,278)
(4,617)
(1,616)
(2,941)
(2,417)
(6,245)
(4,001)
(857)
(892)
(2,595)
(2,778)
(4,406)
(13,720)
(4,063)
(4,853)
(3,594)
(3,088)
(21,143)
(60)
1993
1976
1973
1965
1989
1963
2001
1996
2004
1990
1999/2014
1971
1999
1962
1991
1991
1997
1963
1969
1975
1986
1959
1965
2002
1996
N/A
1972
1994
2008
2008
2008
2009
2009
2008
2008
2008
2008
2008
2008
2008
2008
2008
2009
2009
2019
2008
2008
2009
2009
2008
2008
2009
2009
2008
2008
2019
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5,488
13,309
19,041
26,720
23,369
14,698
2,845
9,014
3,082
15,255
4,059
35,825
2,723
7,270
6,641
10,617
19,813
8,536
14,815
8,966
467
6,127
15,328
21,327
32,826
25,394
14,698
5,683
9,909
3,092
17,665
4,059
39,485
3,992
9,187
11,305
12,217
19,865
9,244
23,931
10,537
13,164
6,109
62,356
— 1,368
39,078 101,434
17,236
15,868
F-103
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2019
(In thousands of U.S. dollars, as applicable and unless noted)
Initial Costs
Gross amount at which carried as
of
December 31, 2019
Property
Cherokee, IA (1)
Chesapeake, VA (1)
Chillicothe, MO (1)
City of Industry,
CA
Clearfield, UT
Clearfield 2, UT
Columbia, SC
Columbus, OH (1)
Connell, WA
Dallas, TX
Delhi, LA
Denver-50th Street,
CO
Dominguez Hills,
CA
Douglas, GA
Eagan, MN (1)
East Dubuque, IL
East Point, GA
Fairfield, OH (1)
Fairmont, MN (1)
Fort Dodge, IA
Fort Smith, AR
Fort Smith -
Highway 45, AR (1)
Fort Worth-Blue
Mound, TX
Fort Worth-
Samuels, TX
Fremont, NE
Ft. Worth, TX
(Meacham)
Ft. Worth, TX
(Railhead)
Gadsden, AL
Gaffney, SC
1
1
1
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
1
1
2
1
1
1
1
1
Buildings
Encumbrances
(3)
Land
Buildings and
Improvements
Costs
Capitalized
Subsequent
to
Acquisition Land
Buildings and
Improvements
(2)
—
580
— 2,740
670
—
—
—
— 2,881
—
806
768
—
— 2,440
—
497
— 1,468
539
15,873
8,343
13,452
44,905
1,455
14,945
21,569
1,429
38,939
8,728
14,385
12,228
3
17,932
26
1,746
4,801
1,352
1,069
5,497
1,156
13,246
502
580
2,757
670
137
2,176
1,124
860
2,775
508
2,929
580
8,346
31,367
44,931
3,064
20,451
22,603
2,406
44,101
9,873
26,170
12,689
Accumulated
Depreciation
and Depletion
(1) (6)
Date of
Construction
Date of
Acquisition
(223)
(388)
(976)
(2,357)
(8,590)
(1,863)
(1,131)
(739)
(4,178)
(7,364)
(6,585)
1965
1991
1999
1962
1973
2017
1971
1996
1969
1994
2010
2019
2019
2019
2009
2008
2017
2008
2019
2008
2009
2010
Life on
Which
Depreciation
is Computed
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
Total
(4) (5)
8,926
34,124
45,601
3,201
22,627
23,727
3,266
46,876
10,381
29,099
13,269
—
—
1,724
543
—
2,267
2,267
(2,061)
1974
2008
5 - 40 years
— 11,149
400
—
— 6,050
—
722
— 1,884
— 1,880
— 1,650
— 1,022
308
—
— 2,245
10,894
2,080
49,441
13,764
3,621
20,849
13,738
7,162
2,231
51,998
1,173
1,780
44
620
3,537
11,162
401
6,050
753
2,020
— 1,880
1,650
34
1,226
1,193
342
2,030
12,054
3,859
49,485
14,353
7,022
20,849
13,772
8,151
4,227
23,216
4,260
55,535
15,106
9,042
22,729
15,422
9,377
4,569
(4,900)
(1,330)
(1,083)
(4,765)
(2,204)
(513)
(314)
(3,442)
(1,385)
1989
1969
1964
1993
1959
1993
1968
1979
1958
2009
2009
2019
2008
2016
2019
2019
2008
2008
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
— 2,245
51,998
54,243
(1,176)
1987
2019
5 - 40 years
— 1,700
5,055
1,548
1,700
6,603
8,303
(1,884)
1995
2009
5 - 40 years
— 1,985
629
26,984
13,447
3,109
2,886
5,896
2,109
691
16,209
8,943
18,318
9,634
(6,694)
(4,412)
1977
1968
2009
2008
5 - 40 years
5 - 40 years
— 5,610
24,686
3,111
5,873
27,534
33,407
(10,642)
2005
2008
5 - 40 years
23,384
— 1,857
100
— 1,000
8,536
9,820
3,263
595
(857)
152
1,955
351
1,000
9,033
8,712
3,415
10,988
9,063
4,415
(3,828)
(2,834)
(1,323)
1998
1991
1995
2008
2013
2008
5 - 40 years
5 - 40 years
5 - 40 years
F-104
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2019
(In thousands of U.S. dollars, as applicable and unless noted)
Initial Costs
Gross amount at which carried as
of
December 31, 2019
Property
Buildings
Encumbrances
(3)
Land
Buildings and
Improvements
Costs
Capitalized
Subsequent
to
Acquisition Land
Buildings and
Improvements
(2)
Total
(4) (5)
Accumulated
Depreciation
and Depletion
(1) (6)
Date of
Construction
Date of
Acquisition
Life on
Which
Depreciation
is Computed
Gainesville, GA
Gainesville -
Candler, GA (2)
Garden City, KS
Gateway, GA
Geneva Lakes, WI
Gloucester - Rogers,
MA
Gloucester - Rowe,
MA
Gouldsboro, PA
Grand Island, NE
Green Bay, WI
Greenville, SC
Hatfield, PA
Henderson, NV
Hermiston, OR
Houston, TX
Indianapolis, IN
Jefferson, WI
Johnson, AR (1)
Lakeville, MN (1)
Lancaster, PA
LaPorte, TX
Le Mars, IA (1)
Leesport, PA
Lowell, AR (1)
Lula, GA (2)
Lynden, WA
Marshall, MO
Massillon 17th, OH
Massillon Erie, OH
1
1
1
2
1
1
1
1
1
2
1
2
2
1
1
4
2
1
1
1
1
1
1
1
1
5
1
1
1
—
400
5,704
1,035
411
6,728
7,139
(2,494)
1989
2009
5 - 40 years
716
—
—
446
— 3,271
— 1,579
3,258
4,721
19,693
36,020
—
1,549
(7,211)
3,042
716
446
3,197
2,265
3,258
6,270
12,556
38,376
3,974
6,716
15,753
40,641
(126)
(2,322)
(8,367)
(12,359)
1995
1980
1972
1991
2019
2008
2008
2009
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
— 1,683
3,675
3,073
1,818
6,613
8,431
(2,080)
1967
2008
5 - 40 years
32,851
— 1,146
— 4,224
430
—
—
—
—
200
— 5,002
— 9,043
1,322
— 1,454
— 1,897
— 1,553
— 6,159
— 4,000
— 2,203
— 2,945
— 1,000
— 1,206
— 2,610
— 3,864
— 1,420
741
175
—
10,544
—
—
2,833
29,473
6,542
2,028
1,108
28,286
14,415
7,107
10,084
18,991
19,805
24,802
47,790
15,670
19,263
12,596
14,112
31,984
35,382
8,590
10,304
15,322
1,988
6,763
2,643
(2,286)
2,841
396
9,461
1,082
425
1,264
19,772
1,676
1,272
4,930
479
69
203
5,795
9,048
1,378
1,525
3,860
1,880
— 6,159
4,000
33
2,371
758
3,332
2,863
1,107
176
1,677
11,913
— 2,610
— 3,864
1,430
826
414
—
964
379
498
516
F-105
9,470
31,410
4,207
4,800
1,501
36,954
15,492
7,476
11,277
36,800
21,154
24,802
47,823
16,260
21,739
12,665
25,554
31,984
35,382
9,544
10,598
15,581
2,504
10,742
36,340
4,686
4,869
1,704
42,749
24,540
8,854
12,802
40,660
23,034
30,961
51,823
18,631
25,071
13,772
27,231
34,594
39,246
10,974
11,424
15,995
2,504
(3,317)
(9,441)
(2,005)
(2,618)
(1,225)
(13,412)
(5,221)
(3,045)
(3,703)
(13,090)
(8,585)
(807)
(1,084)
(5,306)
(7,560)
(345)
(7,428)
(833)
(954)
(3,838)
(4,225)
(5,753)
(2,465)
1955
2006
1995
1935
1962
1983
1988
1975
1990
1975
1975
1955
1970
1993
1990
1991
1993
1992
1996
1946
1985
2000
1984
2008
2009
2008
2009
2009
2009
2009
2008
2009
2008
2009
2019
2019
2009
2009
2019
2008
2019
2019
2009
2008
2008
2008
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2019
(In thousands of U.S. dollars, as applicable and unless noted)
Initial Costs
Gross amount at which carried
as of
December 31, 2019
Property
Buildings
Encumbrances
(3)
Land
Buildings and
Improvements
Costs
Capitalized
Subsequent
to
Acquisition Land
Buildings and
Improvements
(2)
Total
(4) (5)
Accumulated
Depreciation
and Depletion
(1) (6)
Date of Construction
Date of
Acquisition
Life on
Which
Depreciation
is Computed
—
—
80
2
(81)
—
1
1
(1)
Memphis
Chelsea , TN
Middleboro,
MA
Milwaukie, OR
Mobile, AL
Modesto, CA
Monmouth, IL
(1)
Montgomery,
AL
Moses Lake,
WA
Murfreesboro,
TN
Nampa, ID
Napoleon, OH
(1)
New Ulm, MN
North Little
Rock, AR (1)
Oklahoma City,
OK
Ontario, CA
Ontario, OR
Pasco, WA
Pendergrass,
GA
Perryville, MD
(4)
Phoenix2, AZ
Piedmont, SC
Plover, WI
Portland, ME
Rochelle, IL
(Americold
Drive)
Rochelle, IL
(Caron)
Russellville, AR
- Elmira
Russellville, AR
- Route 324 (1)
Russellville, AR
- Valley
Salem, OR
1
2
1
6
1
1
1
1
4
1
7
1
1
3
4
1
1
1
1
1
1
1
1
1
1
1
1
4
— 404
— 2,473
—
10
— 2,428
— 2,660
15,031
8,112
3,203
19,594
48,348
155
1,639
765
4,491
435
2,483
17
2,915
15,155 15,590
9,741 12,224
3,978
3,961
23,598 26,513
(514)
(5,726)
(1,474)
(10,426)
— 2,660
48,348 51,008
(910)
6,689
850
7,746
(505)
1,157
6,934
8,091
(2,449)
30,357
575
11,046
2,480
1,140
12,961 14,101
(5,300)
— 1,094
— 1,588
— 2,340
— 725
10,936
11,864
57,677
10,405
3,573
2,099
34
1,109
1,332
1,719
2,340
822
14,271 15,603
13,832 15,551
57,711 60,051
11,417 12,239
(6,616)
(7,523)
(1,284)
(4,032)
— 1,680
12,841
14,661
2,226
26,956 29,182
(382)
1972
2018
1958
1976
1945
2014
1989
1967
1982
1946
1974
1984
1996
— 742
— 14,673
—
—
— 557
2,411
3,632
13,791
15,809
1,151
24,506
9,127
413
742
14,745
1,264
588
3,562
4,304
28,066 42,811
21,654 22,918
16,191 16,779
1968
(1,708)
(12,139) 1987(1)/1984(2)/1983(3)
(13,095)
(5,347)
1962
1984
— 500
12,810
2,649
580
15,379 15,959
— 1,626
— 3,182
— 500
1,390
— 305
34,297
19,083
11,312
9,883
18,298
2,402
8
28
1,441
5,024
917
1,626
3,182
506
1,994
316
19,091 20,717
11,340 14,522
11,318 11,824
22,718 24,712
3,624
3,308
(6,149)
(58)
(2,245)
(4,655)
(9,901)
(1,042)
— 1,860
18,178
48,054
4,326
63,766 68,092
(9,330)
— 2,071
36,658
734
2,213
37,250 39,463
(14,631)
— 1,261
9,910
3,185
1,352
13,004 14,356
(6,199)
— 2,467
29,179
(71)
2,494
29,081 31,575
(730)
— 708
3,055
39,370
15,832
21,096
2,466
3,534
708
3,211
18,298 19,006
24,474 27,685
(5,829)
(11,419)
1993
2007
2014
1981
1981
1952
1995
2004
1986
1993
1995
1963
F-106
2008
5 - 40 years
2018
2008
2009
2009
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
2019
5 - 40 years
2013
5 - 40 years
2008
5 - 40 years
2008
2008
2019
2009
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
2019
5 - 40 years
2008
2008
2008
2008
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
2009
5 - 40 years
2019
2014
2009
2008
2008
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
2008
5 - 40 years
2008
5 - 40 years
2008
5 - 40 years
2019
5 - 40 years
2008
2008
5 - 40 years
5 - 40 years
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2019
(In thousands of U.S. dollars, as applicable and unless noted)
Initial Costs
Gross amount at which carried as
of
December 31, 2019
Property
Buildings
Encumbrances
(3)
Land
Buildings and
Improvements
Salinas, CA
Salt Lake City, UT
San Antonio -
HEB, TX
San Antonio, TX
Sanford, NC (1)
Savannah, GA (3)
Sebree, KY
Sikeston, MO
Sioux City - 2640,
IA (1)
Sioux City - 2900,
IA (1)
Sioux Falls, SD
Springdale, AR
St. Louis, MO
St. Paul, MN
Strasburg, VA
Sumter, SC (1)
Syracuse, NY
Tacoma, WA
Tampa Plant City,
FL
Tarboro, NC
Taunton, MA
Texarkana, AR
Tomah, WI
Turlock, CA (#1)
Turlock, CA (#2)
Vernon 2, CA
Victorville, CA
Waco, TX (1)
Walla Walla, WA
5
1
1
3
1
1
1
1
1
1
1
1
2
2
1
1
2
1
2
1
1
1
1
2
1
1
1
—
2
— 7,244
—
—
— 2,014
— 1,894
— 3,110
— 20,715
638
—
258
—
— 5,951
— 3,070
856
—
844
7,851
— 2,082
— 1,800
— 1,551
—
530
— 2,177
—
—
17,545
— 1,333
1,078
— 1,477
842
3,628
886
19,047
—
944
— 3,091
— 8,100
— 2,810
— 3,003
215
—
7,181
22,481
22,902
11,101
34,104
10,456
7,895
11,936
28,391
56,336
4,780
10,754
7,566
12,129
15,038
8,738
20,056
21,216
11,836
9,586
14,159
11,169
10,715
4,056
7,004
13,490
22,811
—
4,693
Costs
Capitalized
Subsequent
to
Acquisition
9,670
3,767
Land
8,098
—
— 2,014
2,021
2,566
23
3,110
52 20,715
638
635
2,339
2,685
Buildings and
Improvements
(2)
15,997
26,248
22,902
13,540
34,127
10,508
8,530
12,540
Total
(4) (5)
24,095
26,248
24,916
15,561
37,237
31,223
9,168
14,879
Accumulated
Depreciation
and Depletion
(1) (6)
Date of
Construction
Date of
Acquisition
(6,268)
(14,083)
(3,424)
(7,666)
(794)
(433)
(2,731)
(4,428)
1958
1998
1982
1913
1996
2015
1998
1998
2009
2010
2017
2009
2019
2019
2008
2009
Life on
Which
Depreciation
is Computed
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
101
5,951
28,492
34,443
(902)
1990
2019
5 - 40 years
56,366
8,498
12,025
9,400
12,787
16,523
8,738
25,472
23,632
59,436
9,537
12,897
11,598
14,587
18,115
9,268
27,892
23,659
12,485
10,469
14,973
12,532
11,100
4,323
8,428
16,659
23,886
13,865
11,694
16,668
13,453
12,023
5,290
11,544
24,771
26,696
— 3,507
5,518
5,359
(1,385)
(4,183)
(4,951)
(3,079)
(5,148)
(5,554)
(306)
(9,581)
(7,605)
(4,350)
(3,756)
(4,914)
(4,079)
(4,546)
(1,970)
(3,457)
(7,383)
(8,359)
—
(3,107)
1995
1972
1982
1956
1970
1999
1979
1960
2010
1987
1988
1999
1992
1989
1995
1985
1965
2004
N/A
1960
2019
2008
2008
2009
2009
2008
2019
2008
2010
2009
2008
2009
2008
2008
2008
2008
2009
2008
2019
2008
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
N/A
5 - 40 years
30
3,901
1,299
1,950
658
1,526
—
5,659
2,443
696
1,030
1,032
1,442
422
290
1,449
3,181
1,075
504
610
3,070
1,039
872
2,198
1,800
1,592
530
2,420
27
1,380
1,225
1,695
921
923
967
3,116
8,112
2,810
3,507
159
F-107
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2019
(In thousands of U.S. dollars, as applicable and unless noted)
Initial Costs
Gross amount at which carried as
of
December 31, 2019
Buildings
1
1
1
1
1
1
Encumbrances
(3)
Land
690
—
—
—
— 1,460
— 1,297
— 1,552
— 3,838
Costs
Capitalized
Subsequent
to
Acquisition
727
424
2,766
1,355
2,561
2,169
Land
711
21
2,284
1,432
1,627
4,063
Buildings and
Improvements
2,645
8,138
12,300
4,717
9,860
36,621
— 1,300
800
—
7,351
10,360
380
1,572
1,315
800
Buildings and
Improvements
(2)
Total
(4) (5)
Accumulated
Depreciation
and Depletion
(1) (6)
Date of
Construction
1982
1984
1985
1972
1952
1994
Date of
Acquisition
2008
2008
2008
2008
2008
2008
Life on
Which
Depreciation
is Computed
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
(1,217)
(7,477)
(5,857)
(2,752)
(4,535)
(14,487)
(3,205)
(3,926)
1987
1996
2009
2009
5 - 40 years
5 - 40 years
3,351
8,541
14,242
5,937
12,346
38,565
7,716
11,932
4,062
8,562
16,526
7,369
13,973
42,628
9,031
12,732
—
—
12
3,554
92
3,474
3,566
(1,798)
1999
2009
5 - 40 years
— 13,489
29,428
397
11,783
31,531
43,314
(9,757)
1989/1994
2009
5 - 40 years
—
—
— 13,689
— 10,891
—
—
— 7,194
— 45,301
— 6,047
— 2,357
— 5,227
— 1,332
—
—
—
—
—
—
—
—
—
706
—
28,252
18,975
1,187
10,990
—
5,531
5,966
3,399
3,810
343
185
247
279
5,765
(2,995)
—
11,958
9,514
19,126
(1,462)
7,475
6,284
— 45,301
777
797
812
249
525
1,036
962
6,303
2,457
5,448
1,389
—
—
—
279
35,748
17,357
12,838
10,438
—
6,052
6,663
3,990
4,002
868
1,221
1,209
279
47,706
26,871
20,313
16,722
45,301
12,355
9,120
9,438
5,391
868
1,221
1,209
(279)
(11,116)
(5,943)
1997/1998
1972/2003
(3,911)
(4,134)
—
(1,882)
(2,132)
(1,579)
(1,225)
(783)
(915)
(735)
1985
1978
N/A
1988
1988
1992
2000
2004
1984
1984
2009
2009
2009
2009
2009
2019
2009
2009
2009
2009
2009
2009
2009
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
N/A
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
5 - 40 years
4,984
(2,625)
—
2,359
2,359
(1,202)
1996/1999
2009
5 - 40 years
2,586
(2,216)
667
409
1,076
(98)
2000
2009
5 - 40 years
Property
Wallula, WA
Watsonville, CA
West Memphis, AR
Wichita, KS
Woodburn, OR
York, PA
York-Willow
Springs, PA
Zumbrota, MN
Canada
Cold Logic/Taber
Australia
Arndell Park
BRIS
CORPORATE-
Acacia Ridge
Laverton
Murarrie
Prospect/ASC
Corporate
Spearwood
Wetherill Park
New Zealand
Dalgety
Diversey
Halwyn Dr
Mako Mako
Manutapu/Barber
Akld
Paisley
Smarts Rd
Argentina
Mercado Central -
Buenos Aires, ARG
Pilar - Buenos
Aires, ARG
1
3
—
2
1
2
3
2
1
—
1
1
1
1
1
2
1
1
1
Total
283,443 494,429
2,326,556
413,200
526,226
2,707,959 3,234,185
(752,711)
F-108
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2019
(In thousands of U.S. dollars, as applicable and unless noted)
Initial Costs
Gross amount at which carried
as of
December 31, 2019
Property
Land
Land, buildings, and improvements in the assets under construction balance as of December 31,
2019.
Buildings
Land
Encumbrances
(3)
Buildings and
Improvements
Costs
Capitalized
Subsequent
to
Acquisition
Buildings and
Improvements
(2)
Total
(4) (5)
Accumulated
Depreciation
and Depletion
(1) (6)
Date of
Construction
Date of
Acquisition
Life on
Which
Depreciation
is Computed
US
Allentown, PA
Amarillo, TX
Anaheim, CA
Appleton, WI
Atlanta -
Lakewood, GA
Atlanta - Skygate,
GA
Atlanta -
Southgate, GA
Atlanta -
Tradewater, GA
Atlanta - Westgate,
GA
Atlanta, GA -
Corporate
Benson, NC
Boston, MA
Burley, ID
Burlington, WA
Carthage
Warehouse Dist,
MO
Chesapeake, VA
Chillicothe, MO
Columbia, SC
Columbus, OH
Dallas, TX
Dominguez Hills,
CA
Eagan, MN
Fairfield, OH
Fort Smith, AR
Fort Worth-
Samuels, TX
Fremont, NE
Fort Worth, TX
(Meacham)
Fort Worth, TX
(Railhead)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
89
8
180
66
6
7
89
8
180
66
6
7
161
161
16,724
16,724
757
620
43
392
3
113
430
308
89
8
502
186
7
70
48
31
754
16
846
23
757
620
43
392
3
113
430
308
89
8
502
186
7
70
48
31
754
16
846
23
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-109
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2019
(In thousands of U.S. dollars, as applicable and unless noted)
Initial Costs
Gross amount at which carried
as of
December 31, 2019
Property
Buildings
Encumbrances
(3)
Land
Buildings and
Improvements
Costs
Capitalized
Subsequent
to
Acquisition
Buildings and
Improvements
(2)
Total
(4) (5)
Land
Accumulated
Depreciation
and Depletion
(1) (6)
Date of
Construction
Date of
Acquisition
Life on
Which
Depreciation
is Computed
Gadsden, AL
Gainesville
Candler, GA
Gateway, GA
Geneva Lakes, WI
Gloucester -
Rogers, MA
Gloucester - Rowe,
MA
Grand Island, NE
Green Bay, WI
Hatfield, PA
Henderson, NV
Indianapolis, IN
Johnson, AR
Lakeville, MN
Lancaster, PA
LaPorte, TX
Le Mars, IA
Leesport, PA
Lowell, AR
Lynden, WA
Marshall, MO
Massillon 17th, OH
Modesto, CA
Monmounth, IL
Murfreesboro, TN
Napoleon, OH
New Ulm, MN
North Little Rock,
AR
Oklamoma City,
OK
Ontario, CA
Ontario, OR
Piedmont, SC
Plover, WI
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7
320
13,145
22
7
320
13,145
22
1,682
1,682
1,400
3
40
215
119
510
254
51
125
594
25
11
89
74
66
19
598
34
121
133
56
236
73
2,718
70
5
600
1,400
3
40
215
119
510
254
51
125
594
25
11
89
74
66
19
598
34
121
133
56
236
73
2,718
70
5
600
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-110
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2019
(In thousands of U.S. dollars, as applicable and unless noted)
Initial Costs
Gross amount at which carried
as of
December 31, 2019
Property
Buildings
Encumbrances
(3)
Land
Buildings and
Improvements
Costs
Capitalized
Subsequent
to
Acquisition
Buildings and
Improvements
(2)
Total
(4) (5)
Land
Accumulated
Depreciation
and Depletion
(1) (6)
Date of
Construction
Date of
Acquisition
Life on
Which
Depreciation
is Computed
Portland, ME
Rochelle, IL
(Americold Drive)
Rochele, IL
(Caron)
Salem, OR
Salinas, CA
Salt Lake City, UT
San Antonio, TX
Sanford, NC
Savannah, GA
Sebree, KY
Sioux City, IA -
2640 Murray St
Sioux City, IA -
2900 Murray St
Sioux Falls, SD
Springdale, AR
Strasburg, VA
Sumter, SC
Syracuse, NY
Tampa Plant City,
FL
Tarboro, NC
Taunton, MA
Texarkana, AR
Turlock, CA (#1)
Vernon 2, CA
Wichita, KS
Woodburn, OR
Australia
Arndell Park
Laverton
Murarrie
Prospect
Spearwood
Wetherill Park -
MIT
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
80
29
10
40
402
93
250
50
41,720
564
160
531
174
19
16
17
29
309
474
94
41
146
71
523
4
80
29
10
40
402
93
250
50
41,720
564
160
531
174
19
16
17
29
309
474
94
41
146
71
523
4
1,218
379
906
446
476
24
1,218
379
906
446
476
24
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-111
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2019
(In thousands of U.S. dollars, as applicable and unless noted)
Initial Costs
Gross amount at which carried as of
December 31, 2019
Encumbrances
(3)
Land
Buildings and
Improvements
Costs
Capitalized
Subsequent
to
Acquisition
Buildings and
Improvements
(2)
Total
(4) (5)
Land
Accumulated
Depreciation
and Depletion
(1) (6)
Date of
Construction
Date of
Acquisition
Life on
Which
Depreciation
is Computed
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
954
954
1,163
614
277
143
66
241
48
1,163
614
277
143
66
241
48
—
—
98,703
98,703
—
$
283,443 $494,429 $
2,326,556 $
413,200 $526,226 $
2,806,662 $3,332,888 $
(752,711)
F-112
Property
Heathwood - MIT
Buildings
New Zealand
Dalgety
Diversey
Halwyn Dr
Mako Mako
Manutapu
Paisley
Smarts Rd
Total in assets
under
construction
Total assets
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2019
(In thousands of U.S. dollars, as applicable and unless noted)
Schedule III – Footnotes
(1) Reconciliation of total accumulated depreciation and depletion to consolidated balance sheet caption as of December 31, 2019:
Total per Schedule III
Accumulated depreciation on investments in non-real estate assets
Total accumulated depreciation and depletion per consolidated balance sheet (property, buildings and equipment and
capital leases)
$
$
(752,711)
(493,539)
(1,246,250)
(2) Reconciliation of total Buildings and improvements to consolidated balance sheet as of December 31, 2019:
Building and improvements per consolidated balance sheet
Building and improvements capital leases per consolidated balance sheet
Assets under construction per consolidated balance sheet
Less: personal property assets under construction
Total per Schedule III
$
$
2,696,732
11,227
108,639
(9,936)
2,806,662
(3) Reconciliation of total mortgage notes, senior unsecured notes and term loan to consolidated balance sheet caption as of December 31,
2019:
Total per Schedule III
283,443
Unsecured
1,425,000
Deferred financing costs, net of amortization
(12,996)
1,695,447
Total mortgage notes, senior unsecured notes and term loan per consolidated balance sheet*
*Total mortgage notes, senior unsecured notes, and term loan does not include $4.9M of secured notes related to the Monmouth, IL facility.
Refer to footnote 19 for additional details.
$
$
(4) The aggregate cost for Federal tax purposes at December 31, 2019 of our real estate assets was approximately $2.8 billion.
F-113
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2019
(In thousands of U.S. dollars, as applicable and unless noted)
(5) Includes real estate impairments recorded in 2019 for the Gateway, GA (Atlanta) site.
(6) The following table summarizes the Company’s real estate activity and accumulated depreciation for the years ended December 31:
Real Estate Facilities, at Cost:
Beginning Balance
Capital expenditures
Acquisitions
Newly developed warehouse facilities
Disposition
Impairment
Conversion of leased assets to owned
Impact of foreign exchange rate changes
Ending Balance
Accumulated Depreciation:
Beginning Balance
Depreciation expense
Dispositions
Impact of foreign exchange rate changes
Ending Balance
2019
2018
2017
$
2,575,367 $
177,268
975,045
21,316
(7,409)
(12,555)
—
557
3,729,589
2,506,656 $
50,680
—
62,353
(30,199)
(747)
8,405
(21,781)
2,575,367
(827,892)
(114,512)
6,679
(697)
(936,422)
(770,006)
(87,355)
24,672
4,797
(827,892)
2,382,343
52,555
27,958
60,598
(20,780)
(9,473)
—
13,455
2,506,656
(692,390)
(86,169)
11,143
(2,590)
(770,006)
Total Real Estate Facilities, Net at December 31
$
2,793,167 $
1,747,475 $
1,736,650
The total real estate facilities amounts in the table above include $76.8 million, $80.3 million, and $90.5 million of assets under sale-
leaseback agreements accounted for as a financing as of December 31, 2019, 2018 and 2017, respectively. The Company does not hold title
in these assets under sale-leaseback agreements. As of December 31, 2019 and 2018, the Company has no facilities classified as held for sale.
During the second quarter of 2019, the Company sold an idle facility, which was written down earlier in 2019 resulting in an impairment
charge of $2.9 million. During the second quarter of 2018, the Company sold a facility resulting in an $8.4 million gain on sale of real estate.
In preparation of the warehouse disposal, the Company transferred most of its customers inventory to other owned warehouses within the
same region. In February 2019, the Company acquired one facility and adjacent land in connection with the PortFresh Acquisition, with total
property, buildings and equipment of $35.0 million. In May
F-114
Americold Realty Trust and Subsidiaries
Americold Realty Operating Partnership, L.P. and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2019
(In thousands of U.S. dollars, as applicable and unless noted)
2019, the Company acquired 21 facilities in connection with the Cloverleaf Acquisition, with total property, buildings and equipment of
$891.3 million. Additionally, in May 2019, the Company acquired two facilities in connection with the Lanier Acquisition, with total
property, buildings and equipment of 60.0 million. In November 2019, the Company acquired two facilities in connection with the MHW
Acquisition, with total property, buildings and equipment of $49.4 million. During the fourth quarter of 2018, the Company disposed of an
idle facility, previously classified as held for sale, for a $0.9 million loss on sale of real estate, and purchased a portion of a facility that was
previously operated under a lease agreement with a purchase price of $13.8 million. During the year ending December 31, 2017, the
Company acquired a new facility for a total cost of $31.9 million, which included $3.9 million of intangible assets associated with an in-place
lease and an above-market lease. In addition, the Company disposed of two idle and one operational facilities with a net book value of $9.2
million for an aggregate amount of $9.2 million. As of December 31, 2017, the Company held for sale an idle facility of the Warehouse
segment with a carrying amount of $2.6 million, which is included in “Property, plant, and equipment – net” in the accompanying
consolidated balance sheet.
(7) Reconciliation of the Company’s real estate activity and accumulated depreciation and depletion for the years ended December 31, 2019
to Schedule III:
Total real estate facilities gross amount per Schedule III
Plus: Refrigeration equipment
Less: Quarry assets
$
Real estate facilities, at cost - ending balance
Accumulated depreciation and depletion per Schedule
III
Plus: Refrigeration equipment
Less: Quarry assets
Accumulated depreciation and depletion - ending
balance
F-115
$
$
$
3,332,888
409,865
(13,164)
3,729,589
(752,711)
(186,799)
3,088
(936,422)
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
AMERICOLD REALTY TRUST
By:
/s/ Fred W. Boehler
Fred W. Boehler
Chief Executive Officer
Date: March 2, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature
/s/ Fred W. Boehler
Fred W. Boehler
Title
Chief Executive Officer, President and Trustee
Date
March 2, 2020
/s/ Marc J. Smernoff
Chief Financial Officer and Executive Vice President
March 2, 2020
Marc J. Smernoff
/s/ Thomas C. Novosel
Chief Accounting Officer and Senior Vice President
Thomas C. Novosel
/s/ Mark R. Patterson
Chairman of the Board of Trustees
Mark R. Patterson
/s/ James R. Heistand
Trustee
James R. Heistand
/s/ George J. Alburger, Jr.
Trustee
George J. Alburger, Jr.
/s/ Kelly H. Barrett
Kelly H. Barrett
Trustee
/s/ Antonio F. Fernandez
Trustee
Antonio F. Fernandez
/s/ Michelle M. MacKay
Trustee
Michelle M. MacKay
/s/ David J. Neithercut
Trustee
David J. Neithercut
/s/ Andrew P. Power
Trustee
Andrew P. Power
March 2, 2020
March 2, 2020
March 2, 2020
March 2, 2020
March 2, 2020
March 2, 2020
March 2, 2020
March 2, 2020
March 2, 2020
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST
Exhibit 4.1
The following description of the Company’s common shares is based upon the Company’s declaration of trust, or our declaration of trust, the Company’s amended
and restated bylaws, or our bylaws, and applicable provisions of law. The following summary is not complete and is subject to, and is qualified in its entirety by
express reference to, our declaration of trust and bylaws, each of which is filed as an exhibit to the Annual Report on Form 10‑K of which this Exhibit 4.1 is a part.
General
Our declaration of trust provides that our company may issue up to 250,000,000 common shares of beneficial interest, $0.01 par value per share, or common
shares, and 25,000,000 preferred shares of beneficial interest, $0.01 par value per share, or preferred shares, of which 125 preferred shares are designated as Series
A cumulative non-voting preferred shares of beneficial interest, $0.01 par value per share, and 375,000 preferred shares are designated as Series C cumulative
convertible voting preferred shares of beneficial interest, $0.01 par value per share. As of February 26, 2020, 200,164,155 common shares were issued and
outstanding and no preferred shares were outstanding. Under Maryland law, a shareholder of a REIT is not liable for the REIT’s debts or obligations solely as a
result of its status as a shareholder.
Common Shares
All outstanding common shares are duly authorized, fully paid and non-assessable. Subject to the preferential rights of any other class or series of shares of
beneficial interest and to the provisions of our declaration of trust regarding the restrictions on the ownership and transfer of shares of beneficial interest, holders of
common shares are entitled to receive dividends on such shares if, as and when authorized by our board of trustees and declared by us out of assets legally
available therefor and to share ratably in the assets of our company legally available for distribution to our shareholders in the event of our liquidation, dissolution
or winding up after payment of or adequate provision for all known debts and liabilities of our company.
Subject to the provisions of our declaration of trust regarding the restrictions on the ownership and transfer of shares of beneficial interest, each outstanding
common share entitles the holder to one vote on all matters submitted to a vote of shareholders, including the election of trustees, and, except as provided with
respect to any other class or series of shares, the holders of such common shares will possess the exclusive voting power. Each of our trustees will be elected by a
majority of the votes cast with respect to such trustee at any meeting of shareholders duly called and at which a quorum is present and trustees are to be elected,
provided that in any contested election the trustees shall be elected by a plurality of the votes cast at any meeting of shareholders duly called and at which a
quorum is present and trustees are to be elected. There is no cumulative voting in the election of trustees, which means that the holders of a majority of the
outstanding common shares can elect all of the trustees then standing for election and the holders of the remaining common shares will not be able to elect any
trustees.
Holders of common shares have no preference, conversion, exchange, sinking fund, redemption or appraisal rights and have no preemptive rights to
subscribe for any of the securities. Subject to the provisions of our declaration of trust regarding the restrictions on the ownership and transfer of shares of
beneficial interest, all common shares have equal dividend, liquidation and other rights.
Our declaration of trust authorizes our board of trustees to reclassify any unissued common shares into other classes or series of shares of beneficial interest
and to establish the number of shares in each class or series and to set the preferences, conversion and other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications or terms or conditions of redemption for each such class or series. In addition, our declaration of trust authorizes our
board of trustees, without shareholder approval, to amend our declaration of trust from time to time to increase or decrease the aggregate number of authorized
shares of beneficial interest or the number of authorized shares of any class or series of beneficial interest.
Preferred Shares
Our declaration of trust authorizes our board of trustees to classify any unissued preferred shares and to reclassify any previously classified but unissued
preferred shares of any series from time to time, into one or more series, as authorized by our board of trustees. Prior to issuance of preferred shares of any series,
our board of trustees is required by Maryland law and our declaration of trust to set, subject to the provisions of our declaration of trust regarding the restrictions on
transfer of shares of beneficial interest, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption for such series. Thus, our board of trustees could authorize the issuance of preferred shares with
terms and conditions which could have the effect of delaying, deferring or preventing a
transaction or a change in control of our company that might involve a premium price for holders of common shares or otherwise be in their best interest.
Power to Issue Additional Common Shares and Preferred Shares
We believe that the power of our board of trustees to issue additional authorized but unissued common shares or preferred shares and to classify or reclassify
unissued common shares or preferred shares and thereafter to cause us to issue such classified or reclassified shares of beneficial interest will provide our company
with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs which might arise. The additional classes or series,
as well as our common shares, will be available for issuance without further action by our shareholders, unless such action is required by applicable law or the
rules of any stock exchange on which the securities may be listed or traded. Although our board of trustees has no intention at the present time of doing so, it could
authorize our company to issue a class or series of shares of beneficial interest that could, depending upon the terms of such class or series, delay, defer or prevent
a transaction or a change in control of our company that might involve a premium price for holders of common shares or otherwise be in their best interest.
Restrictions on Transfer
To qualify as a REIT under the Code, our shares of beneficial interest must be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of twelve months or during a proportionate part of a shorter taxable year (other than the first year for which an election to be a REIT was made). Also,
not more than 50% of the value of our outstanding shares of beneficial interest may be owned, directly or indirectly, by five or fewer individuals (as defined in the
Code to include certain entities) during the last half of a taxable year (other than the first year for which an election to be a REIT was made).
Our declaration of trust, subject to certain exceptions, contains certain restrictions on the number of our shares of beneficial interest that a person may own.
Our declaration of trust provides that no individual (including certain entities treated as individuals) may own, or be deemed to own by virtue of the relevant
applicable attribution rules of the Code, more than 9.8% (in value) of our outstanding shares, or the Ownership Limit. Our declaration of trust further prohibits
(a) any person from beneficially or constructively owning our shares of beneficial interest that would result in our company being “closely held” under
Section 856(h) of the Code or otherwise cause us to fail to qualify as a REIT, (b) any person from transferring shares of beneficial interest of our company if such
transfer would result in our shares of beneficial interest being beneficially owned by fewer than 100 persons and (c) any person from beneficially owning our
shares to the extent such ownership would result in our failing to qualify as a “domestically controlled qualified investment entity” within the meaning of
Section 897(h) of the Code (after taking into account for such purpose the statutory presumptions set forth in Section 897(h)(4)(E) of the Code).
Our board of trustees is required to exempt a proposed transferee (prospectively or retrospectively) from the Ownership Limit (but not any of the other
restrictions on the transfer or ownership of our shares of beneficial interest) and may establish or increase an excepted holder limit for such individual, or an
Excepted Holder, if the proposed transferee provides our board of trustees with information, satisfactory in the sole and absolute discretion of our board of trustees,
demonstrating: (a) that such exemption would not result in our company being “closely held” within the meaning of Section 856(h) of the Code or failing to qualify
as a “domestically controlled qualified investment entity” within the meaning of Section 897(h) of the Code; (b) that such holder does not own, actually or
constructively, an interest in a tenant of our company (or a tenant of any entity owned or controlled by our company) that would cause our company to own,
directly or indirectly, more than a 9.8% interest in such a tenant other than a tenant from whom our company (or an entity owned or controlled by our company)
derives and is expected to continue to derive a sufficiently small amount of revenue that the rent from such tenant would not, in the opinion of our board of
trustees, adversely affect our ability to qualify as a REIT; and (c) that such exemption would not otherwise result in our failure to qualify as a REIT. The individual
seeking an exemption must represent to the satisfaction of our board of trustees that it will not violate the aforementioned restrictions while such person
beneficially or constructively owns our shares of beneficial interest in excess of the Ownership Limit. The individual also must agree that any violation or
attempted violation of any of the foregoing restrictions will result in the automatic transfer of the shares causing such violation to the Trust (as defined below). In
connection with granting a waiver of the Ownership Limit or creating or modifying an Excepted Holder limit, or at any other time, our board of trustees may
increase or decrease the Ownership Limit unless, after giving effect to any increased or decreased Ownership Limit, five or fewer persons could beneficially own,
in the aggregate, more than 49.9% in value of our outstanding shares. A decreased Ownership Limit will not apply to any individual whose percentage of
ownership of our shares is in excess of the decreased Ownership Limit until the individual’s ownership of our shares equals or falls below the decreased Ownership
Limit, but any further acquisition of our shares will be subject to the decreased Ownership Limit. Our board of trustees may require a ruling from the IRS or an
opinion of counsel, in either case in form and substance satisfactory to our board of trustees, in its sole discretion, in order to determine or ensure our status as a
REIT prior to granting an exemption.
Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of our shares of beneficial interest that will or may violate
any of the foregoing restrictions on transferability and ownership, or any person who would have owned shares of beneficial interest of our company that resulted
in a transfer of shares to the Trust, is required to give written notice immediately (or, in the case of a proposed or attempted transaction, at least 15 days prior
written notice) to our company and provide our company with such other information as our company may request in order to determine the effect of such transfer
on our status as a REIT. The foregoing restrictions on transferability and ownership will not apply if our board of trustees determines that it is no longer in our best
interests to attempt to qualify, or to continue to qualify, as a REIT or that compliance is no longer required in order for us to qualify as a REIT.
Pursuant to our declaration of trust, if any transfer of our shares of beneficial interest would result in our shares being beneficially owned by fewer than 100
persons, such transfer will be null and void and the intended transferee will acquire no rights in such shares. In addition, if any transfer of our shares of beneficial
interest occurs which, if effective, would result in any person beneficially or constructively owning our shares of beneficial interest in excess or in violation of the
other transfer or ownership limitations described above, or a Prohibited Owner, then that number of shares of beneficial interest, the beneficial or constructive
ownership of which otherwise would cause such person to violate such limitations (rounded up to the nearest whole share), will be automatically transferred to a
trust, or the Trust, for the exclusive benefit of one or more charitable beneficiaries designated by us, or the Charitable Beneficiary, and the Prohibited Owner may
not acquire any rights in such shares. The automatic transfer will be deemed to be effective as of the close of business on the Business Day (as defined in our
declaration of trust) prior to the date of the violative transfer. Shares of beneficial interest held in the Trust will constitute issued and outstanding shares of
beneficial interest. The Prohibited Owner may not benefit economically from ownership of any shares of beneficial interest held in the Trust, and will have no
rights to dividends or possess any rights to vote or other rights attributable to the shares of beneficial interest held in the Trust. The trustee of the Trust, or the
Trustee, will have all voting rights and rights to dividends or other distributions with respect to shares of beneficial interest held in the Trust, which rights are to be
exercised for the exclusive benefit of the Charitable Beneficiary. Any dividend or other distribution paid prior to us discovering that shares of beneficial interest
have been transferred to the Trustee will be paid by the recipient of such dividend or distribution to the Trustee upon demand, and any dividend or other
distribution authorized but unpaid must be paid when due to the Trustee. Any dividend or distribution so paid to the Trustee will be held in trust for the Charitable
Beneficiary. The Prohibited Owner will have no voting rights with respect to shares of beneficial interest held in the Trust and, subject to Maryland law, effective
as of the date that the shares of beneficial interest have been transferred to the Trust, the Trustee will have the authority (at the Trustee’s sole discretion) (i) to
rescind as void any vote cast by a Prohibited Owner prior to our discovery that such shares have been transferred to the Trust and (ii) to recast such vote in
accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary. However, if our company has already taken irreversible trust action,
then the Trustee shall not have the authority to rescind and recast such vote.
Within 20 days of receiving notice from us that shares of beneficial interest have been transferred to the Trust, the Trustee must sell the shares of beneficial
interest held in the Trust to a person, designated by the Trustee, whose ownership of the shares will not violate the ownership limitations set forth in our declaration
of trust. Upon such sale, the interest of the Charitable Beneficiary in the shares sold will terminate and the Trustee must distribute the net proceeds of the sale to the
Prohibited Owner and to the Charitable Beneficiary as follows. The Prohibited Owner will receive the lesser of (i) the price paid by the Prohibited Owner for the
shares or, if the Prohibited Owner did not give value for the shares in connection with the event causing the shares to be held in the Trust (e.g., a gift, devise or
other such transaction), the Market Price (as defined in our declaration of trust) of such shares on the day of the event causing the shares to be held in the Trust and
(ii) the price per share received by the Trustee from the sale or other disposition of the shares held in the Trust. The Trustee may reduce the amount payable to the
Prohibited Owner by the amount of dividends and other distributions which have been paid to the Prohibited Owner and are owed by the Prohibited Owner to the
Trustee. Any net sale proceeds in excess of the amount payable to the Prohibited Owner shall be paid immediately to the Charitable Beneficiary. If, prior to our
discovery that shares of beneficial interest have been transferred to the Trust, the shares are sold by a Prohibited Owner, then (i) the shares will be deemed to have
been sold on behalf of the Trust and (ii) to the extent that the Prohibited Owner received an amount for the shares that exceeds the amount that such Prohibited
Owner was entitled to receive pursuant to the aforementioned requirement, such excess will be paid to the Trustee upon demand.
In addition, our shares of beneficial interest held in the Trust will be deemed to have been offered for sale to us, or our designee, at a price per share equal to
the lesser of (i) the price per share in the transaction that resulted in the transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of the
devise or gift) and (ii) the Market Price on the date we, or our designee, accept such offer. We may reduce the amount payable to the Prohibited Owner by the
amount of dividends and other distributions which have been paid to the Prohibited Owner and are owed by the Prohibited Owner to the Trustee. We may pay the
amount of such reduction to the Trustee for the benefit of the Charitable Beneficiary. We have the right to accept any offer until the Trustee has sold the shares of
beneficial interest held in the Trust. Upon such a sale to our company, the interest of the Charitable Beneficiary in the shares sold shall terminate and the Trustee
shall distribute the net proceeds of the sale to the Prohibited Owner.
To the extent shares of beneficial interest of our company are certificated, all certificates evidencing common shares and preferred shares will bear a legend
referring to the restrictions described above.
Every owner of 5% or more (or such lower percentage as required by the Code or the regulations promulgated thereunder) of all classes or series of our
shares of beneficial interest, including our common shares, within 30 days after the end of each taxable year, is required to give written notice to us stating the
name and address of the owner, the number of shares of each class and series of our shares of beneficial interest which the owner beneficially owns and a
description of the manner in which the shares are held and whether the beneficial owner of the shares is a “foreign person” within the meaning of Section 897(h) of
the Code. Each such owner must provide any additional information as we may reasonably request in order to determine the effect, if any, of the beneficial
ownership on our status as a REIT or as a “domestically controlled qualified investment entity” and to ensure compliance with the Ownership Limit. In addition,
each shareholder is, upon reasonable demand, required to provide to us any relevant information we reasonably request in order to determine our status as a REIT
or as a “domestically controlled qualified investment entity” and to comply with the requirements of any taxing authority or governmental authority or to determine
such compliance.
These ownership limitations could delay, defer or prevent a transaction or a change in control that might involve a premium price for our common shares or
otherwise be in the best interest of our shareholders. To reduce the ability of our board of trustees to use these ownership limitations to delay, defer or prevent a
transaction or a change in control of our company, our declaration of trust requires our board of trustees to grant a waiver of the 9.8% ownership limitation if an
individual seeking a waiver demonstrates that such ownership would not jeopardize our status as a REIT.
Transfer Agent and Registrar
The transfer agent and registrar for our common shares is American Stock Transfer & Trust Company, LLC. The transfer agent and registrar’s address is
6201 15th Avenue, Brooklyn, New York 11219.
FORM OF PERFORMANCE RSU AGREEMENT
AMERICOLD REALTY TRUST
2017 EQUITY INCENTIVE PLAN
Restricted Stock Unit Agreement
Exhibit 10.26
This Restricted Stock Unit Agreement (this “Agreement”) is made and entered into by and between Americold Realty Trust,
a Maryland real estate investment trust (the “Company”), and [•] (the “Participant”).
Grant Date: ____________________________________
Target Number of Restricted Stock Units: ____________________________________
This grant also includes Dividend Equivalents, which are described below.
1.
Grant of Restricted Stock Units and Dividend Equivalents.
1.1 Pursuant to Section 9.1 of the Americold Realty Trust 2017 Equity Incentive Plan (the “Plan”), the Company
hereby issues to the Participant an Award of Restricted Stock Units (the “Restricted Stock Units”), in an amount equal to the “target
number” set forth above (the “Target Award”). Each Restricted Stock Unit represents the right to receive Shares based on a
percentage of the Target Award (ranging from 0%-200%) as set forth on Appendix A of this Agreement, subject to the terms and
conditions set forth in this Agreement and the Plan. Capitalized terms that are used but not defined herein have the meaning ascribed
to them in the Plan.
1.2 Each Restricted Stock Unit includes one Dividend Equivalent. A Dividend Equivalent entitles the Participant to
a cash payment equal to the cash dividends declared on a Share during the vesting period (if any). The determination of the amount
of Dividend Equivalents and payment of Dividend Equivalents will be made as provided in Section 5.3.
1.3 The Restricted Stock Units shall be credited to a separate account maintained for the Participant on the books
and records of the Company (the “Account”). All amounts credited to the Account shall continue for all purposes to be part of the
general assets of the Company.
2. Consideration. The grant of the Restricted Stock Units and related Dividend Equivalents is made in consideration of the
services to be rendered by the Participant to the Company or its Subsidiaries.
3. Vesting.
3.1 Except as otherwise provided in this Agreement, provided that the Participant has not incurred a Termination of
Service as of the applicable vesting date, and further provided that any additional conditions and performance goals set forth in
Appendix A (attached hereto) have been satisfied, the Restricted Stock Units will vest and no longer be subject to any restrictions in
accordance with the following schedule:
Vesting Date
Upon completion of the Performance Period as described in
Appendix A
Number of Restricted Stock Units That Vest
As provided in Appendix A
Once vested, the Restricted Stock Units become "Vested Units."
3.2 Except as provided in Sections 3.3 and 3.4 of this Agreement, the foregoing vesting schedule notwithstanding,
upon the Participant's Termination of Service for any reason at any time before all of his or her Restricted Stock Units have vested,
the Participant's unvested Restricted Stock Units shall be automatically forfeited and neither the Company nor any Subsidiary shall
have any further obligations to the Participant under this Agreement.
3.3 If the Participant’s Termination of Service occurs as a result of a Termination of Service by the Company
without Cause [or by the Participant for Good Reason (as such term is defined in the Participant’s written employment agreement
with the Company)], a pro-rated portion of the Restricted Stock Units shall remain outstanding and eligible to vest based on actual
performance through the last day of the Performance Period, based on the number of days during the Performance Period that the
Participant was employed.
3.4 If, within the twelve (12) month period following a Change in Control, the Participant’s Termination of Service
occurs as a result of a Termination of Service by the Company without Cause [or by the Participant for Good Reason (as such term is
defined in the Participant’s written employment agreement with the Company)], the Restricted Stock Units shall immediately
become vested based on actual performance through the Termination of Service date.
4. Restrictions. Subject to any exceptions set forth in this Agreement or the Plan, until such time as the Restricted Stock
Units and Dividend Equivalents are settled and/or paid in accordance with Sections 5 and 6 of this Agreement, the Restricted Stock
Units and Dividend Equivalents (or the rights relating thereto) may not be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by the Participant. Any attempt to assign, alienate, pledge, attach, sell or otherwise transfer or encumber
the Restricted Stock Units or Dividend Equivalents (or the rights relating thereto) shall be wholly ineffective and, if any such attempt
is made, the Restricted Stock Units and Dividend Equivalents will be forfeited by the Participant and all of the Participant's rights to
such interests shall immediately terminate without any payment or consideration by the Company.
5. Rights as Shareholder; Dividend Equivalents.
5.1 The Participant shall not have any rights of a shareholder with respect to the Shares underlying the Restricted
Stock Units (including, without limitation, any voting rights or any right to dividends paid with respect to the Shares underlying the
Restricted Stock Units) unless and until the Restricted Stock Units vest and are settled by the issuance of Shares in accordance with
Section 6 of this Agreement.
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5.2 Upon and following the settlement of the Restricted Stock Units, the Participant shall be the record owner of the
Shares underlying the Restricted Stock Units unless and until such Shares are sold or otherwise disposed of, and as record owner
shall be entitled to all rights of a shareholder of the Company.
5.3 If, during the vesting period provided in Section 3, the Company declares a cash dividend on the Shares, then, on
the payment date of the dividend, the Participant’s Account shall be credited with Dividend Equivalents in an amount equal to the
dividends that would have been paid to the Participant if one Share had been issued on the Grant Date for each Restricted Stock Unit
granted to the Participant as set forth in this Agreement based the Target Award. At the end of the Performance Period and prior to
payment of such Dividend Equivalents, the amount of Dividend Equivalents credited to the Participant’s Account shall be increased
or decreased in the same proportion as the adjustment made to the Target Award when determining the number of Vested Units
(based on the Company’s performance as described in Section 3.1 and Appendix A). Dividend Equivalents shall be subject to the
same vesting and forfeiture restrictions as the Restricted Stock Units to which they are attributable and shall be paid, without
adjustment for any earnings or interest, on the same date that the Restricted Stock Units to which they are attributable are settled in
accordance with Section 6 of this Agreement. Dividend Equivalents credited to a Participant’s Account shall be distributed in cash.
Dividend Equivalents shall not be eligible for dividend reinvestment.
6. Settlement and Payment of Restricted Stock Units.
6.1 Subject to Section 9 of this Agreement, as soon as administratively practicable following the applicable vesting
date provided in Section 3.1 (but in no event later than the end of the calendar year in which such Restricted Stock Units become
vested), the Company shall (a) issue and deliver to the Participant the number of Shares equal to the number of Vested Units and
cash equal to any Dividend Equivalents as provided in Section 5.3 (as adjusted to satisfy the tax withholding requirements provided
in Section 9 of this Agreement), and (b) enter the Participant’s name on the books of the Company as the shareholder of record with
respect to the Shares delivered to the Participant.
6.2 Notwithstanding Section 6.1 of this Agreement, in accordance with Section 3.2 of the Plan, the Committee may,
but is not required to, prescribe rules pursuant to which the Participant may elect to defer settlement of the Restricted Stock Units.
Any deferral election must be made in compliance with such rules and procedures as the Committee deems advisable.
If the Participant is deemed a "specified employee" within the meaning of Code Section 409A, as determined by the
Committee, at a time when the Participant becomes eligible for settlement of the Restricted Stock Units upon his "separation from
service" within the meaning of Code Section 409A, then to the extent necessary to prevent any accelerated or additional tax under
Code Section 409A, such settlement will be delayed until the earlier of: (a) the date that is six months following the Participant's
separation from service and (b) the Participant's death.
6.3 To the extent that the Participant does not vest in any Restricted Stock Units for any reason, all interest in such
Restricted Stock Units and any related Dividend Equivalents
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shall be forfeited. The Participant has no right or interest in any Restricted Stock Units or Dividend Equivalents that are forfeited.
7. No Right to Continued Service. Neither the Plan nor this Agreement shall confer upon the Participant any right to be
retained in any position, as an Employee, consultant, advisor or Nonemployee Trustee of the Company. Further, nothing in the Plan
or this Agreement shall be construed to limit the discretion of the Company to terminate the Participant's employment or service at
any time for any reason.
8. Adjustments. If any change is made to the outstanding Shares or the capital structure of the Company, if required, the
Restricted Stock Units shall be adjusted in any manner as contemplated by Section 4.4 of the Plan.
9. Tax Liability, Net Settlement and Withholding.
9.1 The Participant shall be required to pay to the Company, and the Company shall have the right to deduct from
any compensation, including any Dividend Equivalents, paid to the Participant pursuant to the Plan, the amount of any required
withholding taxes in respect of the Restricted Stock Units or Dividend Equivalents and to take all such other action as the Committee
deems necessary to satisfy all obligations for the payment of such withholding taxes in accordance with Section 22.2 of the Plan.
9.2 Without limiting Section 9.1 of this Agreement, upon settlement of the Restricted Stock Units as provided in
Section 6 of this Agreement, the Company shall have the right in its sole discretion to withhold a portion of the Shares that have a
Fair Market Value equal to the amount required to be withheld by the Company (or its Subsidiaries) to satisfy the applicable federal,
state and local tax withholding requirements, domestic or foreign, unless the Company, in its sole discretion, requires the Participant
to make alternate arrangements satisfactory to the Company for such withholdings in advance of the arising of any withholding
obligations.
9.3 Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll
tax, or other tax-related withholding (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the
Participant's responsibility and the Company (a) makes no representation or undertakings regarding the treatment of any Tax-Related
Items in connection with the grant, vesting or settlement of the Restricted Stock Units, grant or payment of Dividend Equivalents or
the subsequent sale of any Shares; and (b) does not commit to structure the Restricted Stock Units or Dividend Equivalents to reduce
or eliminate the Participant's liability for Tax-Related Items.
10. [Non-competition and Non-solicitation.
10.1 In consideration of the Restricted Stock Units and related Dividend Equivalents, the Participant agrees and
covenants not to:
(a) contribute his or her knowledge, directly or indirectly, in whole or in part, as an employee, officer, owner,
manager, advisor, consultant, agent, partner, director, shareholder, volunteer, intern or in any other similar capacity to an entity
engaged in the same or similar business as the Company and its Subsidiaries in any geographic area in which the Participant worked,
4
represented the Company or its Subsidiaries, or had material contact with customers of the Company or its Subsidiaries during the
Participant’s employment with the Company or any of its Subsidiaries, for a period of nine (9) months following the Participant's
Termination of Service;
(b) directly or indirectly, solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of
any employee of the Company or its Subsidiaries for nine (9) months following the Participant's Termination of Service; or
(c) directly or indirectly, solicit, contact (including, but not limited to, e-mail, regular mail, express mail, telephone,
fax, and instant message), attempt to contact or meet with any current or actively sought prospective customers of the Company or
any of its Subsidiaries with whom the Participant had material contact during the Participant’s employment with the Company or
any of its Subsidiaries, for purposes of offering or providing goods or services similar to or competitive with those offered by the
Company or any of its Subsidiaries for a period of nine (9) months following the Participant's Termination of Service.
(d) The restrictions in this Section 10 are in addition to, and not in lieu of, any other similar obligations the
Participant may have under any other agreement with the Company or its affiliates.
10.2 If the Participant breaches any of the covenants set forth in Section 10.1 of this Agreement:
(a) all unvested Restricted Stock Units and related Dividend Equivalents shall be immediately forfeited; and
(b) the Participant hereby consents and agrees that the Company shall be entitled to seek, in addition to other
available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any
court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an
adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in
addition to, not in lieu of, legal remedies, monetary damages or other available forms of relief.]
11. Clawback Policy. This Award shall be subject to the terms and conditions of the Company’s Incentive-Based
Compensation Recoupment Policy adopted effective January 23, 2018, a copy of which has been provided to the Participant and
which is incorporated herein by reference. This Award is also subject to the requirements of any applicable law, government
regulation, or stock exchange listing requirement with respect to the recovery of incentive compensation.
12. Compliance with Law. This Award and the issuance or transfer of Shares in accordance with Section 6 of this
Agreement shall be subject to compliance by the Company and the Participant with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange on which the Shares may be listed. No Shares shall be
issued or transferred unless and until any then applicable requirements of state and federal law and regulatory agencies have been
fully complied with to the satisfaction of the Company and its counsel.
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13. Notices. Any notice required to be delivered to the Company under this Agreement shall be in writing and addressed to
the Committee, care of the Company, at the Company's principal corporate offices. Any notice required to be delivered to the
Participant under this Agreement shall be in writing and addressed to the Participant at the Participant's address as shown in the
records of the Company. Either party may designate another address in writing (or by such other method approved by the
Committee) from time to time.
14. Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of Georgia
without regard to conflict of law principles.
15. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Participant or the
Company to the Committee for review. The resolution of such dispute by the Committee shall be final and binding on the Participant
and the Company.
16. Restricted Stock Units and Dividend Equivalents Subject to Plan. This Agreement is subject to the Plan as approved by
the Company's shareholders. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated
herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the
applicable terms and provisions of the Plan will govern and prevail.
17. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be
binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth
herein, this Agreement will be binding upon the Participant and the Participant's beneficiaries, executors, administrators and the
person(s) to whom the Restricted Stock Units and related Dividend Equivalents may be transferred by will or the laws of descent or
distribution.
18. Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the
validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement
shall be severable and enforceable to the extent permitted by law.
19. Discretionary Nature of Plan. The Plan is discretionary and may be amended, altered, suspended or terminated by the
Board at any time, in its discretion. The grant of the Restricted Stock Units and Dividend Equivalents in this Agreement does not
create any contractual right or other right to receive any Restricted Stock Units, Dividend Equivalents or other Awards in the future.
Future Awards, if any, will be at the sole discretion of the Committee and the Board. Any amendment, modification, or termination
of the Plan shall not constitute a change or impairment of the terms and conditions of the Participant's employment with, or service
to, the Company or its Subsidiaries.
20. Amendment. The Committee has the right to amend, alter, suspend, discontinue or cancel the Restricted Stock Units and
related Dividend Equivalents, prospectively or retroactively; provided, that, no such amendment shall materially impair the
previously accrued rights of the Participant under this Agreement without the Participant's consent, subject to the provisions of
Section 21 of the Plan.
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21. Code Section 409A. This Agreement is intended to comply with Code Section 409A or an exemption thereunder and
shall be construed and interpreted in a manner that is consistent with the requirements for avoiding additional taxes or penalties
under Code Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits
provided under this Agreement comply with Code Section 409A and in no event shall the Company be liable for all or any portion of
any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with Code
Section 409A.
22. No Impact on Other Benefits. The value of the Participant's Restricted Stock Units and related Dividend Equivalents is
not part of his or her normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or
similar employee benefit.
23. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile
transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the
original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document
bearing an original signature.
24. Acceptance. The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has
read and understands the terms and provisions thereof and accepts the Restricted Stock Units and related Dividend Equivalents
subject to all of the terms and conditions of the Plan and this Agreement. The Participant acknowledges that there may be adverse
tax consequences upon the vesting or settlement of the Restricted Stock Units, payment of related Dividend Equivalents or
disposition of the underlying Shares, and that the Participant has been advised to consult a tax advisor prior to such vesting,
settlement or disposition.
[SIGNATURE PAGE FOLLOWS]
7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
AMERICOLD REALTY TRUST
By: _____________________
Name:
Title:
[PARTICIPANT NAME]
By: _____________________
Name:
8
Performance Period: [To be determined]
Appendix A
Performance Measurement: Vesting of the Restricted Stock Units shall be determined as provided in this Appendix A based on the
Company’s relative total shareholder return or “TSR” compared against the total shareholder return of each company in the MSCI
U.S. REIT Index on the first day of the Performance Period, provided, however, that any such company that is acquired or completes
a “going private” transaction during the Performance Period shall be disregarded and any such company that has filed for bankruptcy
protection or is delisted during the Performance Period from any national securities exchange will have a TSR percentile ranking of
0%. For purposes of this Agreement, “TSR” means the compounded annual growth rate, expressed as a percentage and rounded to
the nearest two decimal points, in the value of a Share due to stock price change and paid dividends on an absolute basis, during the
applicable Performance Period. For this purpose, the price of a Share shall mean the closing sales price of the Company’s common
stock on the New York Stock Exchange (or such other national securities exchange or quotation system on which the Shares may be
listed or quoted) on the applicable day of the Performance Period. At the end of the Performance Period, the Committee shall
determine and certify, in its sole discretion, the applicable TSR for such period. In determining total shareholder return of each of the
companies in the MSCI U.S. REIT Index, the Committee will use, to the extent practical, the same methodology used to compute the
TSR as set forth above.
Vesting: The number of Restricted Stock Units that will vest (if any) will be determined as provided in the table below. In the event
that the Company’s relative TSR performance does not meet the Minimum performance level threshold set forth below, the
Restricted Stock Units shall be automatically forfeited and neither the Company nor any Subsidiary shall have any further
obligations to the Participant under this Agreement.
Performance Level Thresholds
Minimum
Target
Maximum
Relative TSR Percentile
30th percentile
55th percentile
75th or greater percentile
Vesting Percentage
50% of Target Award
100% of Target Award
200% of Target Award
Restricted Stock Units Vested
[•]
[•]
[•]
9
If the Company’s relative TSR falls between the Minimum and Target performance level thresholds or the Target and Maximum
performance level thresholds provided above, the number of Restricted Stock Units that will vest will be mathematically interpolated
by the Committee on a linear basis.
If the number of Restricted Stock Units that vest pursuant to the above table exceeds the “350% Value Cap,” the number of vested
Restricted Stock Units will be reduced such that the delivered value will not exceed such 350% Value Cap. The 350% Value Cap
equals the number of Restricted Stock Units that corresponds to the product of the value of a Share on the Grant Date, multiplied by
the Target Award, multiplied by 350%. For example, assume the Company achieves the Maximum performance level threshold
(with a payout percentage of 200%), and the Company’s stock price has increased 200% (measured from the Grant Date). Because
the award would deliver a payout of 400% (200% x 200%), the number of Restricted Stock Units that vest will be reduced such that
the value delivered on the payout date does not exceed the 350% Value Cap.
If the Company’s relative TSR is negative, in no event may the number of Restricted Stock Units that vest exceed the Target Award.
In no event will the number of Restricted Stock Units that vest pursuant to this Agreement exceed 200% of the Target Award.
10
All of the following are subsidiaries of both Americold Realty Trust and Americold Realty Operating Partnership, L.P., except
Americold Realty Operating Partnership, L.P. and Americold Realty Operations, Inc. are subsidiaries of only Americold Realty
Trust.
EXHIBIT 21.1
List of Subsidiaries
Subsidiary
Americold Acquisition Partnership GP LLC
Americold Acquisition, LLC
Americold Australia PTY Ltd.
Americold Australia Realty Trust
Americold Australian Holdings PTY Ltd.
Americold Australian Logistics PTY Ltd.
Americold Blocker GP, LLC
Americold Brisbane Realty Trust
Americold Chambersburg Holdings, LLC
Americold Clearfield Opco, LLC
Americold Clearfield Propco, LLC
Americold Food Logistics PTY Ltd.
Americold Investments PTY Ltd.
Americold Logistics Argentina S.A.
Americold Logistics Hong Kong Limited
Americold Logistics Limited
Americold Logistics Services NZ Ltd.
Americold Logistics, LLC
Americold Melbourne Realty Trust
Americold Middleboro Opco, LLC
Americold Middleboro Propco, LLC
Americold NB PTY LTD
Americold Nebraska Leasing LLC
Americold NZ Limited
Americold Nova Cold Holdings, L.P.
Americold Nova Cold Holdings II, LLC
Americold Propco Phoenix Van Buren LLC
Americold Property PTY Ltd.
Americold Real Estate, L.P.
Americold Realty Australia Management PTY LTD
Americold Realty Hong Kong Limited
Americold Realty Operating Partnership, L.P.*
Americold Realty LLC.
Americold Realty Operations, Inc.*
Americold Realty State Management PTY LTD
Americold San Antonio Propco LLC
Americold Storage NB PTY Ltd.
Americold Sydney Realty Trust
Americold TRS Parent, LLC
Americold Transportation, LLC
Americold Transportation Services, LLC
AMLOG Canada Inc.
Jurisdiction of
Incorporation
Delaware
Delaware
Australia
Australia
Australia
Australia
Delaware
Australia
Delaware
Delaware
Delaware
Australia
Australia
Argentina
Hong Kong
Australia
New Zealand
Delaware
Australia
Delaware
Delaware
Australia
Nebraska
New Zealand
Delaware
Delaware
Delaware
Australia
Delaware
Australia
Hong Kong
Delaware
Delaware
Delaware
Australia
Delaware
Australia
Australia
Delaware
Delaware
Delaware
Canada
Americold Hawkeye Parent LLC
ART AL Holding LLC
ART Icecap Holdings LLC
ART Leasing LLC
ART Manager L.L.C.
ART Mezzanine Borrower Opco 2013 LLC
ART Mezzanine Borrower Propco 2013 LLC
ART Mortgage Borrower GP LLC
ART Mortgage Borrower Opco 2006-1A L.P.
ART Mortgage Borrower Opco 2006-1B L.P.
ART Mortgage Borrower Opco 2006-1C L.P.
ART Mortgage Borrower Opco 2006-2 L.P.
ART Mortgage Borrower Opco 2010 -4 LLC
ART Mortgage Borrower Opco 2010 -5 LLC
ART Mortgage Borrower Opco 2010 -6 LLC
ART Mortgage Borrower Opco 2013 LLC
ART Mortgage Borrower Opco GP 2006-1A LLC
ART Mortgage Borrower Opco GP 2006-1B LLC
ART Mortgage Borrower Opco GP 2006-1C LLC
ART MORTGAGE BORROWER OPCO GP 2006-2 LLC
ART Mortgage Borrower Propco 2006-1A L.P.
ART Mortgage Borrower Propco 2006-1B L.P.
ART Mortgage Borrower Propco 2006-1C L.P.
ART Mortgage Borrower Propco 2006-2 L.P.
ART Mortgage Borrower Propco 2010 -4 LLC
ART Mortgage Borrower Propco 2010 -5 LLC
ART Mortgage Borrower Propco 2010 -6 LLC
ART Mortgage Borrower Propco 2013 LLC
ART Mortgage Borrower Propco GP 2006-1A LLC
ART Mortgage Borrower Propco GP 2006-1B LLC
ART Mortgage Borrower Propco GP 2006-1C LLC
ART MORTGAGE BORROWER PROPCO GP 2006-2 LLC
ART Mortgage Borrower, L.P.
ART QUARRY TRS LLC
ART Second Mezzanine Borrower Opco 2013 LLC
ART Second Mezzanine Borrower Propco 2013 LLC
ART Third Mezzanine Borrower Opco 2013 LLC
ART Third Mezzanine Borrower Propco 2013 LLC
Atlas Cold Storage Logistics LLC
Atlas Logistics Group Retail Services (Atlanta) LLC
Atlas Logistics Group Retail Services (Denver) LLC
Atlas Logistics Group Retail Services (Phoenix) LLC
Atlas Logistics Group Retail Services (Roanoke) LLC
Atlas Logistics Group Retail Services (Shelbyville) LLC
BCP VII Chiller 892/U.S. TE Feeder, L.P.
Blockchain Transport, LLC
Cloverleaf Cold Storage, LLC
Cloverleaf Cold Storage Co LLC
CCS Realty, LLC
CCS Property Owner, LLC
Cold Logic ULC
Icecap Australia MIT Holding, LLC
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Minnesota
Delaware
Minnesota
Delaware
Delaware
Delaware
Delaware
Arkansas
Delaware
Ohio
Iowa
Delaware
British Columbia
Australia
Icecap Properties AU LLC
Icecap Properties NZ Holdings LLC
Icecap Properties NZ Limited LLC
Icicle Australia Property Pty Limited
Icicle NZ Property Limited
Inland Quarries, L.L.C.
KC Underground, L.L.C.
KCL Equipment Owner, LLC
Lanier Cold Storage LLC
Lanier Freezer, LLC
MHW Group at Perryville, LLC
Monmouth Property Development, LLC
Newlook Products, LLC
Nova Cold Logistics, ULC
Portfresh Development, LLC
Portfresh Holdings, LLC
Savannah Cold Storage LLC
Second Street, LLC
URS Realty, L.L.C.
URS Real Estate L.P.
VCD Pledge Holdings, LLC
Versacold Atlas Logistics Services USA LLC
Versacold Logistics, LLC
Versacold Midwest LLC
Versacold Northeast Logistics, LLC
Versacold Northeast, Inc.
Versacold Texas, L.P.
Versacold USA, L.L.C.
Zero Mountain LLC
Zero Mountain Logistics LLC
ZMI Leasing
ZM NLR Property Owner, LLC
ZM Property Owner, LLC
ZM Waco Property Owner LLC
*subsidiaries of only Americold Realty Trust
Delaware
Delaware
New Zealand
Australia
New Zealand
Delaware
Delaware
Delaware
Georgia
Georgia
Maryland
Illinois
Georgia
Nova Scotia
Delaware
Delaware
Delaware
Iowa
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Massachusetts
Massachusetts
Texas
Delaware
Arkansas
Oklahoma
Oklahoma
Delaware
Delaware
Delaware
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-3 No. 333-229819) of Americold Realty Trust, and
(2) Registration Statement (Form S-8 No. 333-222637) pertaining to the Americold Realty Trust 2017 Equity Incentive Plan, Americold Realty Trust 2010
Equity Incentive Plan, and Americold Realty Trust 2008 Equity Incentive Plan of Americold Realty Trust;
of our reports dated March 2, 2020, with respect to the consolidated financial statements and schedule of Americold Realty Trust and Americold Realty Operating
Partnership, L.P. and the effectiveness of internal control over financial reporting of Americold Realty Trust included in this Annual Report (Form 10-K) of
Americold Realty Trust and Americold Realty Operating Partnership, L.P. for the year ended December 31, 2019.
/s/ Ernst & Young LLP
Atlanta, Georgia
March 2, 2020
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) OF THE EXCHANGE ACT, AS AMENDED,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Fred Boehler, certify that:
1. I have reviewed this Annual Report on Form 10-K of Americold Realty Trust;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Date: March 2, 2020
/s/ Fred W. Boehler
Fred W. Boehler
Chief Executive Officer, President and Trustee
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) OF THE EXCHANGE ACT, AS AMENDED,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Marc Smernoff, certify that:
1. I have reviewed this Annual Report on Form 10-K of Americold Realty Trust;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Date: March 2, 2020
/s/ Marc J. Smernoff
Marc J. Smernoff
Chief Financial Officer and Executive Vice President
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) OF THE EXCHANGE ACT, AS AMENDED,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.3
I, Fred Boehler, certify that:
1. I have reviewed this Annual Report on Form 10-K of Americold Realty Operating Partnership, L.P.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) [omitted pursuant to Exchange Act Rules 13a-14(a) and 15d-15(a)];
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Date: March 2, 2020
/s/ Fred W. Boehler
Fred W. Boehler
Chief Executive Officer, President and Trustee
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) OF THE EXCHANGE ACT, AS AMENDED,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.4
I, Marc Smernoff, certify that:
1. I have reviewed this Annual Report on Form 10-K of Americold Realty Operating Partnership, L.P.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) [omitted pursuant to Exchange Act Rules 13a-14(a) and 15d-15(a)];
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Date: March 2, 2020
/s/ Marc J. Smernoff
Marc J. Smernoff
Chief Financial Officer and Executive Vice President
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with this Annual Report on Form 10-K of Americold Realty Trust (the “Company”) for the fiscal period ended December 31, 2019 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Fred Boehler, President, Chief Executive Officer and Trustee of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: March 2, 2020
/s/ Fred W. Boehler
Fred W. Boehler
President, Chief Executive Officer and Trustee
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with this Annual Report on Form 10-K of Americold Realty Trust (the “Company”) for the fiscal period ended December 31, 2019 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Marc Smernoff, Chief Financial Officer and Executive Vice President of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: March 2, 2020
/s/ Marc J. Smernoff
Marc J. Smernoff
Chief Financial Officer and Executive Vice President
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.3
In connection with this Annual Report on Form 10-K of Americold Realty Operating Partnership, L.P. (the Operating Partnership) for the fiscal period ended
December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fred Boehler, President, Chief Executive Officer
and Trustee of the Operating Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating
Partnership.
Dated: March 2, 2020
/s/ Fred W. Boehler
Fred W. Boehler
President, Chief Executive Officer and Trustee
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.4
In connection with this Annual Report on Form 10-K of Americold Realty Operating Partnership, L.P. (the Operating Partnership) for the fiscal period ended
December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Marc Smernoff, Chief Financial Officer and
Executive Vice President of the Operating Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating
Partnership.
Dated: March 2, 2020
/s/ Marc J. Smernoff
Marc J. Smernoff
Chief Financial Officer and Executive Vice President
Exhibit 95.1
DODD-FRANK ACT DISCLOSURE OF MINE SAFETY AND HEALTH ADMINISTRATION SAFETY DATA
The following disclosures are provided pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Act”) and Item 104 of Regulation S-K, which requires certain disclosures by companies required to file periodic reports under the Securities
Exchange Act of 1934, as amended, that operate mines regulated under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”).
Mine Safety Information
The operation of our limestone quarry in Carthage, Missouri is inspected by the Federal Mine Safety and Health Administration (“MSHA”)
on an ongoing basis. Whenever MSHA believes a violation of the Mine Act, any health or safety standard or any regulation has occurred, it
may issue a citation which describes the alleged violation and fixes a time within which the U.S. mining operator must abate the alleged
violation. In some situations, such as when MSHA believes that conditions pose a hazard to miners, MSHA may issue an order removing
miners from the area of the mine affected by the condition until the alleged hazards are corrected. When MSHA issues a citation or order, it
generally proposes a civil penalty, or fine, as a result of the alleged violation, that the operator is ordered to pay. Citations and orders can be
contested and appealed, and as part of that process, may be reduced in severity and amount, and are sometimes dismissed. The number of
citations, orders and proposed assessments vary depending on the size and type (underground or surface) of the mine as well as by the MSHA
inspector(s) assigned.
The following table includes information required by the Act for the quarter ended December 31, 2019.
Section
104 S&S
Citations
Section
104(b)
Orders
Section
104(d)
Citations
and
Orders
Section
110(b)(2)
Violations
Section
107(a)
Orders
Total Dollar
Value of
MSHA
Assessments
Proposed
Total
Number of
Mining
Related
Fatalities
Received
Notice of
Pattern of
Violations
Under
Section
104(e)
Received
Notice of
Potential
to Have
Pattern
Under
Section
104(e)
Legal
Actions
Pending as
of Last
Day of
Period (1)
Legal
Actions
Initiated
During
Period
Legal
Actions
Resolved
During
Period
2
—
—
—
—
$302.00
—
No
No
—
1
1
Mine or
Operating
Name
(MSHA
Identification
Number)
Carthage
Crushed
Limestone
(23-00028)
(1) See table below for additional detail regarding Legal Actions Pending as of December 31, 2019. With respect to Contests of Proposed Penalties, we have
included the number of dockets (as opposed to citations) when counting the number of Legal Actions Pending as of December 31, 2019.
Mine or Operating Name (MSHA
Identification Number)
Carthage Crushed Limestone
(23-00028)
Contests of proposed penalties (b)
Contests of
citations and
orders (a)
Dockets
Citations
Complaints for
compensation (c)
Complaints of
discharge,
discrimination or
interference (d)
Applications
for temporary
relief (e)
Appeals of
judges'
decisions or
orders (f)
—
—
—
—
—
—
—
(a) Represents (if any) contests of citations and orders, which typically are filed prior to an operator's receipt of a proposed penalty assessment from
MSHA or relate to orders for which penalties are not assessed (such as imminent danger orders under Section 107 of the Mine Act). This category
includes: (i) contests of citations or orders issued under section 104 of the Mine Act, (ii) contests of imminent danger withdrawal orders under section
107 of the Mine Act, and (iii) Emergency response plan dispute proceedings (as required under the Mine Improvement and New Emergency
Response Act of 2006, Pub. L. No. 109-236, 120 Stat. 493).
(b) Represents (if any) contests of proposed penalties, which are administrative proceedings before the Federal Mine Safety and Health Review
Commission (“FMSHRC”) challenging a civil penalty that MSHA has proposed for the violation contained in a citation or order. This column
includes zero actions involving civil penalties against agents of the operator that has been contested and zero appeals of a decision or order.
(c) Represents (if any) complaints for compensation, which are cases under section 111 of the Mine Act that may be filed with the FMSHRC by miners
idled by a closure order issued by MSHA who are entitled to compensation.
(d) Represents (if any) complaints of discharge, discrimination or interference under section 105 of the Mine Act, which cover: (i) discrimination
proceedings involving a miner's allegation that he or she has suffered adverse employment action because he or she engaged in activity protected
under the Mine Act, such as making a safety complaint, and (ii) temporary reinstatement proceedings involving cases in which a miner has filed a
complaint with MSHA stating that he or she has suffered such discrimination and has lost his or her position. Complaints of Discharge,
Discrimination, or Interference are also included in Contests of Proposed Penalties, column (b).
(e) Represents (if any) applications for temporary relief, which are applications under section 105(b)(2) of the Mine Act for temporary relief from any
modification or termination of any order or from any order issued under section 104 of the Mine Act (other than citations issued under section 104(a)
or (f) of the Mine Act).
(f) Represents (if any) appeals of judges' decisions or orders to the FMSHRC, including petitions for discretionary review and review by the FMSHRC
on its own motion.