# Americold Realty Trust: Form 10-Q for the period ended Mar 31, 2022

- Company: [Americold Realty Trust](/companies/cold.md) (CIK 1455863)
- Form: 10-Q
- Filed: 2022-05-06
- Accepted by EDGAR: May 6, 2022, 15:59 ET
- Period: 2022-03-31
- Accession: 0001628280-22-013029
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1455863/000162828022013029/art-20220331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1455863/000162828022013029/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-01-01 to 2022-03-31 | $694.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months, 2022-01-01 to 2022-03-31 | $57.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | $8.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-01-01 to 2022-03-31 | $25.8m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | −$708.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | −$17.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-01-01 to 2022-03-31 | −$0.06 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-01-01 to 2022-03-31 | −$0.06 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-01-01 to 2022-03-31 | 269,164,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | $15.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-01-01 to 2022-03-31 | $93.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2022-01-01 to 2022-03-31 | $59.9m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2022-03-31 | $51.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2022-03-31 | $8.21bn | us-gaap:Assets |
| Total liabilities | at 2022-03-31 | $4.24bn | us-gaap:Liabilities |
| Shareholders' equity | at 2022-03-31 | $3.96bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 96,146 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. 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 Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.*

### 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 March 31, 2022, we operated a global network of 249 temperature-controlled warehouses encompassing approximately 1.5 billion cubic feet, with 201 warehouses in North America, 27 in Europe, 18 warehouses in Asia-Pacific, and three warehouses in South America. In addition, we hold two minority interests in Brazilian-based joint ventures, one with SuperFrio, which owns or operates 33 temperature-controlled warehouses and one with Comfrio, which owns or operates 27 temperature-controlled warehouses.

### 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, perishable or 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, (10) government-approved temperature-controlled storage and inspection services, (11) fumigation, (12) pre-cooling and cold treatment services, (13) produce grading and bagging, (14) protein boxing, (15) e-commerce fulfillment, and (16) ripening. We refer to these handling and other warehouse services as our value-added services.

Cost of operations for our warehouse segment consist of power, other facilities costs, labor, and other service 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, changes in compensation levels and associated performance incentives, the use of third-party labor to support our operations, changes in terms of collective bargaining agreements, changes in customer requirements and associated work content, workforce productivity, labor availability, governmental policies and regulations, variability in costs associated with medical insurance and the impact of workplace safety programs, inclusive of the number and severity of workers’ compensation claims. Labor expense can also be impacted as a result of discretionary bonuses. In response to the COVID-19 pandemic, we have incorporated certain activities such as staggered break schedules, social distancing, and other changes to process that can create inefficiencies, all of which we expect to continue to incur going forward. Our second largest cost of operations from our warehouse segment is power utilized in the operation of our temperature-controlled warehouses. As a result, fluctuations 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, business mix impacts power expense depending on the temperature zone or type of freezing required. Other facilities costs include utilities other than power, property insurance, property taxes, sanitation (which include incremental supplies as a result of COVID-19), repairs and maintenance on real estate, rent under real property operating leases, where applicable, security, and other related facilities costs. Other services costs include equipment costs, warehouse consumables (e.g., shrink-wrap and uniforms), personal protective equipment to maintain the health and safety of our associates, 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, which may also include fuel and capacity 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, including driver and equipment availability in certain markets. Additionally, in certain markets we employ drivers and assets to serve our customers. Costs to operate these assets include, wages, fuel, tolls, insurance and maintenance.

*Other Consolidated Operating Expenses*. We also incur depreciation and amortization expenses, corporate-level selling, general and administrative expenses and corporate-level acquisition, litigation and other, net expenses.

Our depreciation 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. 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, project 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, 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 and achievement of incentive compensation targets. 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. We have begun to integrate our recent acquisitions into this shared services structure.

Our corporate-level acquisition, litigation and other, net consists 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 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 ourselves 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.
- Terminated site operations costs represent 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 condensed consolidated statement of operations.
- Cyber incident related costs include third-party fees incurred in connection with the cyber incident that occurred in November 2020, as well as any incremental costs, internal and external, incurred to restore operations at our facilities and damage claims. Any subsequent reimbursements from insurance coverage for expenses incurred in connection with the event are also reflected within this category.
- Other costs relate to insurance claim deductibles and related recoveries (2021) and additional superannuation pension costs related to prior years upon review by the Australian Tax Office (2020).

### Key Factors Affecting Our Business and Financial Results

### Market Conditions and COVID-19

During the three months ended March 31, 2022 and the year ended December 31, 2021, our business and financial results were negatively impacted by COVID-19 related disruptions in (1) the food supply chain; (ii) our customers’ production and transportation of goods; (iii) the labor market impacting availability and cost; and (iv) the macroeconomic environment including the impact of inflation on the cost to provide our services. We are continuing to closely monitor the impact of the COVID-19 pandemic and any variants on all aspects of our business and geographies, including how it will impact our customers and business partners. The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with any degree of confidence, including the scope, severity, duration and geographies of the outbreak, the occurrence of additional waves or spikes in infection rates (including the spread of variant strains), the actions taken to contain the COVID-19 pandemic or mitigate its impact as requested or mandated by governmental authorities or otherwise voluntarily taken by individuals or businesses, and the direct and indirect economic effects of the outbreak and containment measures, among others.

We expect that end-consumer demand for food will remain consistent with historic levels over the long-term. However, current end-consumer demand coupled with food production and transportation challenges since the outset of the pandemic has driven down holdings in our facilities. As a result, occupancy and throughput volume continue at lower than historical levels experienced prior to COVID-19. We expect this to continue until our customers are able to ramp production back up to pre-pandemic levels for an extended period of time and rebuild inventory in the supply chain.

The unprecedented labor environment continues to be challenging for many companies, including our food manufacturing customers. Labor availability continues to be the primary constraint on food production, along with the continuing spread of COVID-19 and related variants, which also impacts the labor market.

Our business has also been impacted due to inflation during the back half of 2021 and during the three months ended March 31, 2022. We believe we are positioned to address continued inflationary pressure as it arises; however, many of our contracts require that we experience sustained cost increases for an extended period of time ranging up to 60 days before we are able to initiate rate increases or seek remedies under our contracts. As a result of the significant impact of inflation on the cost of providing our storage, services and transportation to customers, during the second half of 2021 we initiated out-of-cycle rate increases in our customer contracts (many of which contain provisions for inflationary price escalators), and expect to continue to monitor further inflation and pricing increases required into 2022. We can give no assurance that we will be able to offset the entire impact of inflation or future inflationary cost increases through increased storage or service charges or by operational efficiencies.

Additionally, global supply chains have been volatile following the invasion of Ukraine by Russia which has resulted in sanctions from the U.S. and a number of European countries. While we do not expect our global operations and specifically our European operations to be directly impacted by this event currently, changes could occur that could impact our operations.

Refer to “Item 1A - Risk Factors” of our 2021 Annual Report on Form 10-K as filed with the SEC, as well as Item 1A. Risk Factors on this Quarterly Report on Form 10-Q for additional information.

### Acquisitions and Joint Ventures

There have been no acquisitions during the three months ended March 31, 2022. Refer to Note 2 of the Notes to the Condensed Consolidated Financial Statements and Note 3 of our 2021 Annual Report on Form 10-K for further information.

### Seasonality

We are involved in providing services to food producers, distributors, retailers and e-tailers whose businesses, in some cases, are seasonal or cyclical. In order to mitigate the volatility in our revenue and earnings caused by seasonal business, we have implemented fixed commitment contracts with certain of our customers. Our customers with fixed commitment contracts pay for guaranteed warehouse space in order to maintain their required inventory levels, which is especially helpful to them during periods of peak physical occupancy. The timing of Easter fluctuates between the first and second quarter of the year, however, on average the first and second quarter revenue and NOI are relatively consistent. On a portfolio-wide basis, physical occupancy rates are generally the lowest during May and June. Physical occupancy rates typically exhibit a gradual increase after May and June 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. The hottest weather for our portfolio occurs during the third quarter of the year resulting in increase power expense that negatively impacts NOI, and moderates during the fourth quarter. Typically, we have higher than average physical occupancy levels in October or November, which also tends to result in higher revenues. In light of the ongoing

COVID-19 pandemic, we have seen variability in physical occupancy levels as compared to the typical seasonality trends.

Additionally, 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 South America also help balance the impact of seasonality in our global operations, as their growing and harvesting cycles are complementary to North America and Europe. 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.

### 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 Condensed 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 typically 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 exchange rates as of March 31, 2022 | Average foreign exchange rates used to translate actual operating results for the three months ended March 31, 2022 | Foreign exchange rates as of March 31, 2021 | Prior period average foreign exchange rate used to adjust actual operating results for the three months ended March 31, 2022(1) |
| --- | ---: | ---: | ---: | ---: |
| Argentinian peso | 0.009 | 0.009 | 0.011 | 0.011 |
| Australian dollar | 0.748 | 0.724 | 0.760 | 0.773 |
| Brazilian real | 0.211 | 0.192 | 0.178 | 0.183 |
| British Pound | 1.314 | 1.342 | 1.378 | 1.379 |
| Canadian dollar | 0.800 | 0.789 | 0.796 | 0.790 |
| Chilean Peso | 0.001 | 0.001 | 0.001 | 0.001 |
| Euro | 1.107 | 1.122 | 1.173 | 1.205 |
| New Zealand dollar | 0.695 | 0.676 | 0.699 | 0.719 |
| Poland Zloty | 0.238 | 0.243 | 0.253 | 0.265 |

(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, 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, the exit of the China JV during 2019, and the sale of our quarry business during 2020. Through our process of active portfolio management, we continue to evaluate our markets and offerings.

### Strategic Shift within Our Transportation Segment

Several years ago, we initiated a strategic shift in our transportation segment services and solutions. The intention of this strategic shift was to better focus our business on the operation of our temperature-controlled warehouses. Specifically, we have gradually exited certain commoditized, non-scalable, or low margin services we historically offered to our customers, in favor of more profitable and value-added programs, such as regional, national, truckload and retailer-specific multi-vendor consolidation services. We designed each value-added program 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 client retention, as well as maintain high occupancy levels in our temperature-controlled warehouses. Over the last several years, we have made significant progress in implementing our strategic initiative of growing our transportation service offering in a way that complements our temperature-controlled warehouse business, such as adding a dedicated fleet service offering through acquisitions such as Agro and Hall’s. We intend to continue executing this strategy in the future.

### Historically Significant Customer

For the three months ended March 31, 2022 and 2021, one customer accounted for more than 10% of our total revenues. For the three months ended March 31, 2022 and 2021, revenues attributable to this customer were $78.1 million and $65.8 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 these reimbursements 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, $75.2 million and $61.3 million represented reimbursements for certain expenses we incurred during the three months ended March 31, 2022 and 2021, respectively, and 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 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 while ensuring our customers have the necessary space they need to support their business.

### 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. Throughput pallets can be influenced both by the food manufacturers as well as shifts in demand preferences. Food manufacturers’ production levels, which respond to market conditions, labor availability, supply chain dynamics and consumer preferences, may impact inbound pallets. Similarly, a change in inventory turnover due to shift in customer demand may impact outbound pallets.

### How We Assess the Performance of Our Business

### Segment Contribution (Net Operating Income or “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 and amortization, impairment charges, corporate-level selling, general and administrative expenses and corporate-level acquisition, litigation and other, net). 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.

### Same Store Analysis

We define our “same store” population once a year at the beginning of the current calendar year. Our same store population includes properties that were owned or leased for the entirety of two comparable periods and that have reported at least twelve months of consecutive normalized operations prior to January 1 of the prior calendar year. We define “normalized operations” as properties that have been open for operation or lease after development or significant modification, including the expansion of a warehouse footprint or a warehouse rehabilitation subsequent to an event, such as a natural disaster or similar event causing disruption to operations. In addition, our definition of “normalized operations” takes into account changes in the ownership structure (e.g., purchase of a previously leased warehouse would result in different charges in the compared periods), which would impact comparability in our warehouse segment contribution (NOI).

Acquired properties will be included in the “same store” population if owned by us as of the first business day of each year, of the prior calendar year and still owned by us as of the end of the current reporting period, unless the property is under development. The “same store” pool is also adjusted to remove properties that were sold or entering development subsequent to the beginning of the current calendar year. As such, the “same store” population for the period ended March 31, 2022 includes all properties that we owned at January 3, which had both been owned and had reached “normalized operations” by January 3, 2022.

We calculate “same store contribution (NOI)” as revenues for the same store population less its cost of operations (excluding any depreciation and amortization, impairment charges, corporate-level selling, general and administrative expenses, corporate-level acquisition, litigation and other, net 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 as of March 31, 2022. The number of warehouses owned or operated in as of March 31, 2022 and excluded as same-store warehouses for the period ended March 31, 2022 is listed below. 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 sites that were exited during the periods presented.

|  |  |
| --- | ---: |
| Total Warehouses | 249 |
| Same Store Warehouses | 215 |
| Non-Same Store Warehouses (1) | 25 |
| Third-Party Managed Warehouses | 9 |

36

(1) During the first quarter of 2022, we ceased operations at a facility which we are preparing to lease, which is now included in the non-same store population as a result. Additionally, we exited a leased facility that had been recently acquired in connection with the Lago Cold Stores acquisition.

As of March 31, 2022, our portfolio consisted of 249 total warehouses, including 240 within the warehouse segment and nine in the third-party managed segment. In addition, we hold minority interests in two Brazilian joint ventures, Superfrio, which owns or operates 33 temperature-controlled warehouses, and Comfrio, which owns or operates 27 temperature-controlled warehouses.

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.

### Comparison of Results for the Three Months Ended March 31, 2022 and 2021

### Warehouse Segment

The following table presents the operating results of our warehouse segment for the three months ended March 31, 2022 and 2021.

*(Dollars in thousands)*

|  | Three Months Ended March 31, 2022 actual | 2022 constant currency(1) | 2021 actual | Change Actual | Constant currency |
| --- | ---: | ---: | ---: | ---: | ---: |
| Rent and storage | $229,757 | $232,445 | $205,275 | 11.9% | 13.2% |
| Warehouse services | 311,168 | 316,277 | 280,176 | 11.1% | 12.9% |
| Total warehouse segment revenues | 540,925 | 548,722 | 485,451 | 11.4% | 13.0% |
| Power | 33,035 | 33,626 | 26,204 | 26.1% | 28.3% |
| Other facilities costs (2) | 56,572 | 57,359 | 50,532 | 12.0% | 13.5% |
| Labor | 244,160 | 247,869 | 214,547 | 13.8% | 15.5% |
| Other services costs (3) | 60,900 | 61,910 | 47,987 | 26.9% | 29.0% |
| Total warehouse segment cost of operations | $394,667 | $400,764 | $339,270 | 16.3% | 18.1% |
| Warehouse segment contribution (NOI) | $146,258 | $147,958 | $146,181 | 0.1% | 1.2% |
| Warehouse rent and storage contribution (NOI) (4) | $140,150 | $141,460 | $128,539 | 9.0% | 10.1% |
| Warehouse services contribution (NOI) (5) | $6,108 | $6,498 | $17,642 | (65.4)% | (63.2)% |
| Total warehouse segment margin | 27.0% | 27.0% | 30.1% | -307 bps | -315 bps |
| Rent and storage margin(6) | 61.0% | 60.9% | 62.6% | -162 bps | -176 bps |
| Warehouse services margin(7) | 2.0% | 2.1% | 6.3% | -433 bps | -424 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.

(2) Includes real estate rent expense of $10.6 million and $9.3 million, on an actual basis, for the three months ended March 31, 2022 and 2021, respectively.

(3) Includes non-real estate rent expense (equipment lease and rentals) of $3.1 million and $2.9 million, on an actual basis, for the three months ended March 31, 2022 and 2021, respectively.

(4) Calculated as rent and storage revenues less power and other facilities costs.

(5) Calculated as warehouse services revenues less labor and other services costs.

(6) Calculated as warehouse rent and storage contribution (NOI) divided by warehouse rent and storage revenues.

(7) Calculated as warehouse services contribution (NOI) divided by warehouse services revenues.

Warehouse segment revenues were $540.9 million for the three months ended March 31, 2022 an increase of $55.5 million, or 11.4%, compared to $485.5 million for the three months ended March 31, 2021. On a constant currency basis, our warehouse segment revenues were $548.7 million for the three months ended March 31, 2022, an increase of $63.3 million, or 13.0%, from the three months ended March 31, 2021. Approximately $29.6 million of the increase, on an actual currency basis, was driven by acquisitions completed during 2021, including the growth experienced period-over-period during overlapping periods of ownership. We acquired four facilities on March 1, 2021 as a result of the Liberty acquisition, two facilities on May 5, 2021 as a result of the KMT Brrr! acquisition, one facility on May 28, 2021 as a result of the Bowman Stores acquisition, two facilities on August 2, 2021 as a result of the ColdCo acquisition, one facility on September 1, 2021 as a result of the Newark Facility Management acquisition and two facilities on November 15, 2021 as a result of the Lago Cold Stores acquisition (one leased facility exited upon expiration during the first quarter of 2022), and therefore we did not have ownership of these facilities for the entirety of the prior comparable period. Revenue growth was also due to contractual and market-driven rate escalations in the same store population and our recently completed developments. This was partially offset by the timing of throughput associated with the Easter holiday and COVID-19 and the related labor challenges which continued to impact food production. The foreign currency translation of revenues earned by our foreign operations had a $7.8 million unfavorable impact during the three months ended March 31, 2022, which was mainly driven by the weakening of the U.S. dollar over the local currencies in our foreign subsidiaries.

Warehouse segment cost of operations was $394.7 million for the three months ended March 31, 2022, an increase of $55.4 million, or 16.3%, compared to the three months ended March 31, 2021. On a constant currency basis, our warehouse segment cost of operations was $400.8 million for the three months ended March 31, 2022, an increase of $61.5 million, or 18.1%, from the three months ended March 31, 2021. Approximately $22.0 million of the increase, on an actual basis, was driven by the additional facilities in the warehouse segment we acquired in connection with the aforementioned acquisitions. In addition, we incurred increases in our cost of operations, specifically including power, labor and travel, property tax, supplies and equipment maintenance, all of which are reflective of elevated inflation. Labor was also impacted by employee absenteeism and associated disruption throughout the first quarter of 2022 due to the Omicron variant. We also incurred higher costs related to our recently completed expansion and development projects. Additionally, the foreign currency translation of expenses incurred by our foreign operations had a net $6.1 million favorable impact during the three months ended March 31, 2022.

For the three months ended March 31, 2022, warehouse segment contribution (NOI), increased $0.1 million, or 0.1%, to $146.3 million for the three months ended March 31, 2022, compared to $146.2 million for the three months ended March 31, 2021. The foreign currency translation of our results of operations had a $1.7 million unfavorable impact to the warehouse segment contribution period-over-period. On a constant currency basis, warehouse segment NOI increased $1.8 million period-over-period. Approximately $7.7 million of the increase, on an actual basis, was driven by the additional facilities in the warehouse segment as a result of the aforementioned acquisitions, including the growth and synergies experienced period-over-period during overlapping periods of ownership. The increase was also driven by contractual and market-driven rate escalations, offset by cost increases driven primarily by inflation, higher costs related to our recently completed expansion and development projects, and lower throughput due to the timing of throughput associated with the Easter holiday and the ongoing supply chain disruption. Our NOI was also unfavorably impacted by the currency translation impact of the weakening of the U.S. dollar.

#### Same Store and Non-Same Store Analysis

We had 215 same stores for the three months ended March 31, 2022. Please see “How We Assess the Performance of Our Business—Same Store Analysis” above for a reconciliation of the change in the same store portfolio from period to period. Amounts related to the acquisitions of Bowman Stores, ColdCo, KMT Brrr!, Lago Cold Stores, Liberty, Newark, one recently leased warehouse in Australia, a recently constructed facility in Denver purchased in November 2021, as well as certain expansion and development projects not yet stabilized are reflected within non-same store results.

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 three months ended March 31, 2022 and 2021.

|  | Three Months Ended March 31, 2022 actual 2022 constant currency(1) 2021 actual | Change Actual | Constant currency |
| --- | ---: | ---: | ---: |
| Number of same store sites | 215 215 | n/a | n/a |
| **Same store revenues:** | **(Dollars in thousands)** |  |  |
| Rent and storage | $204,273 $206,643 $194,203 | 5.2% | 6.4% |
| Warehouse services | 279,116 283,913 268,591 | 3.9% | 5.7% |
| Total same store revenues | 483,389 490,556 462,794 | 4.5% | 6.0% |
| **Same store cost of operations:** |  |  |  |
| Power | 28,719 29,239 24,776 | 15.9% | 18.0% |
| Other facilities costs | 49,139 49,818 46,727 | 5.2% | 6.6% |
| Labor | 214,425 217,895 200,950 | 6.7% | 8.4% |
| Other services costs | 52,050 53,000 44,448 | 17.1% | 19.2% |
| Total same store cost of operations | $344,333 $349,952 $316,901 | 8.7% | 10.4% |
| Same store contribution (NOI) | $139,056 $140,604 $145,893 | (4.7)% | (3.6)% |
| Same store rent and storage contribution (NOI)(2) | $126,415 $127,586 $122,700 | 3.0% | 4.0% |
| Same store services contribution (NOI)(3) | $12,641 $13,018 $23,193 | (45.5)% | (43.9)% |
| Total same store margin | 28.8% 28.7% 31.5% | -276 bps | -286 bps |
| Same store rent and storage margin(4) | 61.9% 61.7% 63.2% | -130 bps | -144 bps |
| Same store services margin(5) | 4.5% 4.6% 8.6% | -411 bps | -405 bps |

|  | Three Months Ended March 31, 2022 actual 2022 constant currency(1) 2021 actual | Change Actual | Constant currency |
| --- | ---: | --- | --- |
| Number of non-same store sites | 25 18 | n/a | n/a |
| **Non-same store revenues:** | **(Dollars in thousands)** |  |  |
| Rent and storage | $25,484 $25,802 $11,072 | n/r | n/r |
| Warehouse services | 32,052 32,364 11,585 | n/r | n/r |
| Total non-same store revenues | 57,536 58,166 22,657 | n/r | n/r |
| **Non-same store cost of operations:** |  |  |  |
| Power | 4,316 4,388 1,428 | n/r | n/r |
| Other facilities costs | 7,433 7,541 3,805 | n/r | n/r |
| Labor | 29,735 29,974 13,597 | n/r | n/r |
| Other services costs | 8,850 8,909 3,539 | n/r | n/r |
| Total non-same store cost of operations | $50,334 $50,812 $22,369 | n/r | n/r |
| Non-same store contribution (NOI) | $7,202 $7,354 $288 | n/r | n/r |
| Non-same store rent and storage contribution (NOI)(2) | $13,735 $13,873 $5,839 | n/r | n/r |
| Non-same store services contribution (NOI)(3) | $(6,533) $(6,519) $(5,551) | n/r | n/r |
| Total non-same store margin | 12.5% 12.6% 1.3% | n/r | n/r |
| Non-same store rent and storage margin(4) | 53.9% 53.8% 52.7% | n/r | n/r |
| Non-same store services margin(5) | (20.4)% (20.1)% (47.9)% | n/r | n/r |

40

|  | Three Months Ended March 31, 2022 actual | 2022 constant currency(1) | 2021 actual | Change Actual | Constant currency |
| --- | ---: | ---: | ---: | ---: | ---: |
| Total warehouse segment revenues | $540,925 | $548,722 | $485,451 | 11.4% | 13.0% |
| Total warehouse cost of operations | $394,667 | $400,764 | $339,270 | 16.3% | 18.1% |
| Total warehouse segment contribution | $146,258 | $147,958 | $146,181 | 0.1% | 1.2% |

(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 revenues.

(5) Calculated as warehouse services contribution (NOI) divided by warehouse services revenues.

(6) Non-same store warehouse count of 25 includes one recently leased warehouse in Australia, one recently constructed facility in Denver we purchased in November 2021, three facilities acquired through the Lago Cold Stores acquisition on November 15, 2021, one warehouse acquired through the Newark Facility Management acquisition on September 1, 2021, two facilities acquired through the ColdCo acquisition on August 2, 2021, one warehouse acquired through the Bowman stores acquisition on May 28, 2021, two warehouses acquired through the KMT Brrr! acquisition on May 5, 2021, four warehouses acquired through the Liberty Freezers acquisition on March 1, 2021, and 11 facilities under development or expansion. During the third quarter of 2021, a leased facility from the Liberty Freezers acquisition was exited upon expiration of the lease. During the first quarter of 2022, a leased facility from the Lago Cold Stores acquisition was exited upon expiration of the lease, and we ceased operations within a facility that is being prepared for lease to a third-party. The results of the facilities exited are included in the results above, and the results of these acquisitions are reflected in the results above since date of ownership.

n/a - not applicable, the change in actual and constant currency metrics does not apply to site count

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*

|  | Three Months Ended March 31, 2022 | 2021 | Change |
| --- | ---: | ---: | --- |
| Number of same store sites | 215 | 215 | n/a |
| **Same store rent and storage:** |  |  |  |
| Economic occupancy(1) |  |  |  |
| Average occupied economic pallets | 3,797 | 3,768 | 0.8% |
| Economic occupancy percentage | 77.6% | 77.4% | 22 bps |
| Same store rent and storage revenues per economic occupied pallet | $53.80 | $51.55 | 4.4% |
| Constant currency same store rent and storage revenues per economic occupied pallet | $54.43 | $51.55 | 5.6% |
| Physical occupancy(2) |  |  |  |
| Average physical occupied pallets | 3,456 | 3,442 | 0.4% |
| Average physical pallet positions | 4,892 | 4,869 | 0.5% |
| Physical occupancy percentage | 70.7% | 70.7% | -4 bps |
| Same store rent and storage revenues per physical occupied pallet | $59.10 | $56.43 | 4.7% |
| Constant currency same store rent and storage revenues per physical occupied pallet | $59.79 | $56.43 | 6.0% |
| **Same store warehouse services:** |  |  |  |
| Throughput pallets (in thousands) | 8,893 | 8,947 | (0.6)% |
| Same store warehouse services revenues per throughput pallet | $31.38 | $30.02 | 4.5% |
| Constant currency same store warehouse services revenues per throughput pallet | $31.92 | $30.02 | 6.3% |
| Number of non-same store sites(3) | 25 | 18 | n/a |
| **Non-same store rent and storage:** |  |  |  |
| Economic occupancy(1) |  |  |  |
| Average economic occupied pallets | 377 | 205 | n/r |
| Economic occupancy percentage | 69.2% | 70.7% | n/r |
| Non-same store rent and storage revenues per economic occupied pallet | $67.62 | $53.97 | n/r |
| Constant currency non-same store rent and storage revenues per economic occupied pallet | $68.46 | $53.97 | n/r |
| Physical occupancy(2) |  |  |  |
| Average physical occupied pallets | 348 | 186 | n/r |
| Average physical pallet positions | 545 | 290 | n/r |
| Physical occupancy percentage | 63.9% | 64.0% | n/r |
| Non-same store rent and storage revenues per physical occupied pallet | $73.19 | $59.64 | n/r |
| Constant currency non-same store rent and storage revenues per physical occupied pallet | $74.11 | $59.64 | n/r |
| **Non-same store warehouse services:** |  |  |  |
| Throughput pallets (in thousands) | 966 | 584 | n/r |
| Non-same store warehouse services revenues per throughput pallet | $33.19 | $19.83 | n/r |
| Constant currency non-same store warehouse services revenues per throughput pallet | $33.51 | $19.83 | 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 commitments specified in each customer’s 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.

(3) Non-same store warehouse count of 25 includes one recently leased warehouse in Australia, one recently constructed facility in Denver we purchased in November 2021, three facilities acquired through the Lago Cold Stores acquisition on November 15, 2021, one warehouse acquired through the Newark Facility Management acquisition on September 1, 2021, two facilities acquired through the ColdCo acquisition on August 2, 2021, one warehouse acquired through the Bowman stores acquisition on May 28, 2021, two warehouses acquired through the KMT Brrr! acquisition on May 5, 2021, four warehouses acquired through the Liberty Freezers acquisition on March 1, 2021, and 11 facilities under development or expansion. During the third quarter of 2021, a leased facility from the Liberty Freezers acquisition was exited upon expiration of the lease. During the first quarter of 2022, a leased facility from the Lago Cold Stores acquisition was exited upon expiration of the lease, and we ceased operations within a facility that is being prepared for lease to a third-party. The results of the facilities exited are included in the results above, and the results of these acquisitions are reflected in the results above since date of ownership.

(4) n/r - not relevant

Economic occupancy at our same stores was 77.6% for the three months ended March 31, 2022, a increase of 22 basis points compared to 77.4% for the three months ended March 31, 2021. Storage levels were consistent with prior year levels partially due to the timing of the seasonal build of inventory prior to the Easter holiday. Easter fell on April 17th of 2022 and April 4th of 2021, which increased occupancy for March but was still offset by continued food production challenges but stable end consumer demand throughout the first quarter of 2022. COVID-related supply chain and labor disruptions continue to impact the global food supply chain. Throughout the first quarter of 2022, our customers’ production was impacted by absenteeism due to a surge in COVID-19 cases due to the Omicron variant. Even after the Omicron wave receded, the labor market remains very challenging, which continues to strain our customers’ ability to produce at pre-COVID levels. Our first quarter 2022 economic occupancy at our same stores was 696 basis points higher than our corresponding average physical occupancy of 70.7%. The decrease of 4 basis points in average physical occupancy compared to 70.7% for the three months ended March 31, 2021 was driven by supply chain disruptions. Same store rent and storage revenues per economic occupied pallet increased 4.4% period-over-period, primarily driven by improvements in our commercial terms and contractual and market-driven rate escalations, partially offset by unfavorable foreign currency translation. On a constant currency basis, our same store rent and storage revenues per occupied pallet increased 5.6% period-over-period.

Throughput pallets at our same stores were 8.9 million pallets for the three months ended March 31, 2022, a decrease of 0.6% from the three months ended March 31, 2021. This decrease was the result of the timing of throughput associated with the Easter holiday and the COVID-19 related impacts. As food manufacturers production has not reached full pre-pandemic capacity, throughput has been impacted. Food manufacturers have been unable to rebuild holdings in the supply chain due to challenges in the labor market and higher absences due to the Omicron variant during the first quarter of 2022. Same store warehouse services revenues per throughput pallet increased 4.5% period-over-period, as a result of contractual and market-driven rate escalations and an increase in higher priced value-added services within the retail sector such as case-picking, blast freezing and repackaging and contractual rate escalations, partially offset by unfavorable foreign currency translation as previously discussed. On a constant currency basis, our same store services revenues per throughput pallet increased 6.3% from the three months ended March 31, 2021.

### Third-Party Managed Segment

The following table presents the operating results of our third-party managed segment for the three months ended March 31, 2022 and 2021.

|  | Three Months Ended March 31, 2022 actual | 2022 constant currency(1) | 2021 actual | Change Actual | Constant currency |
| --- | ---: | ---: | ---: | ---: | ---: |
| Number of managed sites | 9 |  | 9 | n/a | n/a |
|  | **(Dollars in thousands)** |  |  |  |  |
| Third-party managed revenues | $85,860 | $86,199 | $73,072 | 17.5% | 18.0% |
| Third-party managed cost of operations | 82,359 | 82,631 | 68,690 | 19.9% | 20.3% |
| Third-party managed segment contribution | $3,501 | $3,568 | $4,382 | (20.1)% | (18.6)% |
| Third-party managed margin | 4.1% | 4.1% | 6.0% | -192 bps | -186 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 revenues were $85.9 million for the three months ended March 31, 2022, an increase of $12.8 million, or 17.5%, compared to $73.1 million for the three months ended March 31, 2021. On a constant currency basis, third-party managed revenues were $86.2 million for the three months ended March 31, 2022, an increase of $13.1 million, or 18.0%, from the three months ended March 31, 2021. The increase was a result of higher business volume in our domestic managed operations paired with higher pass-through costs associated with this business, primarily labor and related costs due to inflation and the challenging labor market.

Third-party managed cost of operations was $82.4 million for the three months ended March 31, 2022, an increase of $13.7 million, or 19.9%, compared to $68.7 million for the three months ended March 31, 2021. On a constant currency basis, third-party managed cost of operations was $82.6 million for the three months ended March 31, 2022, an increase of $13.9 million, or 20.3%, from the three months ended March 31, 2021. Third-party managed cost of operations increased as a result of the revenue trends described above.

Third-party managed segment contribution (NOI) was $3.5 million for the three months ended March 31, 2022, a decrease of $0.9 million, or 20.1%, compared to $4.4 million for the three months ended March 31, 2021. On a constant currency basis, third-party managed segment contribution (NOI) was $3.6 million for the three months ended March 31, 2022, a decrease of $0.8 million, or 18.6%.

### Transportation Segment

The following table presents the operating results of our transportation segment for the three months ended March 31, 2022 and 2021.

*(Dollars in thousands)*

|  | Three Months Ended March 31, 2022 actual | 2022 constant currency(1) | 2021 actual | Change Actual | Constant currency |
| --- | ---: | ---: | ---: | ---: | ---: |
| Transportation revenues | $78,910 | $80,952 | $76,272 | 3.5% | 6.1% |
| Total transportation cost of operations | 70,381 | 72,238 | 69,569 | 1.2% | 3.8% |
| Transportation segment contribution (NOI) | $8,529 | $8,714 | $6,703 | 27.2% | 30.0% |
| Transportation margin | 10.8% | 10.8% | 8.8% | 202 bps | 198 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.

Transportation revenues were $78.9 million for the three months ended March 31, 2022, an increase of $2.6 million, or 3.5%, compared to $76.3 million for the three months ended March 31, 2021. On a constant currency basis, transportation revenues were $81.0 million for the three months ended March 31, 2022, an increase of $4.7 million, or 6.1%, from the three months ended March 31, 2021. The increase was primarily due to higher rates in our consolidation business, the KMT Brrr! acquisition which closed in early May 2021, acquisitions and expansions in Australia, and the higher revenue associated with brokered transporation costs, inflation in wage and fuel rates and capacity surcharges due to challenges with driver availability. This is partially offset by the net decrease in revenue from the rationalization of certain domestic market operations and the unfavorable impact of foreign currency translation.

Transportation cost of operations was $70.4 million for the three months ended March 31, 2022, an increase of $0.8 million, or 1.2%, compared to $69.6 million for the three months ended March 31, 2021. On a constant currency basis, transportation cost of operations was $72.2 million for the three months ended March 31, 2022, an increase of $2.7 million, or 3.8%, from the three months ended March 31, 2021. The increase was due to capacity constraints driving spot market higher than contract rate, which has caused an increase in carrier fees, higher wage and fuel costs impacted by inflation and the acquisitions mentioned above. This is partially offset by the net decrease of costs from the exit of certain domestic market operations and favorable impact of foreign currency translation.

Transportation segment contribution (NOI) was $8.5 million for the three months ended March 31, 2022, an increase of $1.8 million compared to the three months ended March 31, 2021. Transportation segment margin increased 202 basis points from the three months ended March 31, 2021, to 10.8% from 8.8%. On a constant currency basis, transportation segment contribution was $8.7 million for the three months ended March 31, 2022, an increase of $2.0 million compared to the three months ended March 31, 2021. The increase in margin was primarily due to the rate increases implemented during the first quarter of 2022.

### Other Consolidated Operating Expenses

*Depreciation and amortization.* Depreciation and amortization expense was $82.6 million for the three months ended March 31, 2022, an increase of $5.4 million, or 7.0%, compared to $77.2 million for the three months ended March 31, 2021. This increase was primarily due to the acquisitions and recently completed developments in 2021.

*Selling, general and administrative*. Corporate-level selling, general and administrative expenses were $57.6 million for the three months ended March 31, 2022, an increase of $12.6 million, or 27.9%, compared to $45.1 million for the three months ended March 31, 2021. Included in these amounts are business development expenses attributable to new business pursuits, supply chain solutions and underwriting, facility development, customer on-boarding, and engineering and consulting services to support our customers in the cold chain. We believe these costs are comparable to leasing costs for other publicly-traded REITs. The increase was driven by higher third-party legal and professional fees, the resumption of performance-based compensation expense in connection with the short-term incentive plan and higher share-based compensation expense in connection with the November 2021 retention grant.

*Acquisition, litigation and other, net*. Corporate-level acquisition, litigation and other, net expenses were $10.1 million for the three months ended March 31, 2022, a decrease of $10.7 million compared to the three months ended March 31, 2021. During the three months ended March 31, 2022, we incurred $6.3 million of acquisition and integration related expenses, an aggregate $2.6 million of severance related expenses due to the realignment of certain international operations and leadership changes and $1.2 million of litigation fees. During the three months ended March 31, 2021, we incurred $13.5 million of acquisition related expenses composed of professional fees and integration related costs in connection with completed and potential acquisitions, primarily related to the Agro acquisition. We also incurred $4.8 million of costs related to the cyber event that happened in late 2020 and $2.4 million of severance in our international operations and as a result of synergies from our recently completed acquisitions.

### Other Expense and Income

The following table presents other items of income and expense for the three months ended March 31, 2022 and 2021.

|  | Three Months Ended March 31, Change |
| --- | ---: |
|  | **2022** **2021%** |
| Other (expense) income: | **(Dollars in thousands)** |
| Interest expense | $(25,773) $(25,956) (0.7)% |
| Loss on debt extinguishment, modifications and termination of derivative instruments | $(616) $(3,499) (82.4)% |
| Other, net | $245 $176 39.2% |

*Interest expense*. Interest expense was $25.8 million for the three months ended March 31, 2022, a decrease of $0.2 million, or 0.7%, compared to $26.0 million for the three months ended March 31, 2021. The decrease was primarily due to a decrease in our overall effective interest rate. The effective interest rate of our outstanding debt has decreased from 3.31% for the three months ended March 31, 2021 to 3.06% for the three months ended March 31, 2022, however, outstanding principal has increased from $2.4 billion as of March 31, 2021 to $2.9 billion as of March 31, 2022.

*Loss on debt extinguishment, modifications and termination of derivative instruments.* Loss on debt extinguishment, modifications, and termination of derivative instruments of $0.6 million for the three months ended March 31, 2022 decreased as compared to the three months ended March 31, 2021 primarily due to the early repayment of $200 million of principal on the Senior Unsecured Term Loan A Facility during the first quarter of 2021, which resulted in a charge of $2.9 million for the write-off of unamortized deferred financing costs. Additionally, during each of the three months ended March 31, 2022 and 2021, we recorded a $0.6 million charge for the amortization of fees paid for the interest rate swaps terminated during 2020.

### Income Tax Benefit

Income tax benefit for the three months ended March 31, 2022 was $0.7 million, a decrease of $0.1 million when compared to $0.8 million for the three months ended March 31, 2021. The current tax expense and deferred income tax benefit is consistent due to comparable operating results in both periods.

### Non-GAAP Financial Measures

We use the following non-GAAP financial measures as supplemental performance measures of our business: FFO, Core FFO, Adjusted FFO, EBITDAre and Core EBITDA.

We calculate funds from operations, or FFO, in accordance with the standards established by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT defines FFO as net income or loss determined in accordance with U.S. GAAP, excluding extraordinary items as defined under U.S. GAAP and gains or losses from sales of previously depreciated operating real estate assets, plus specified non-cash items, such as real estate asset depreciation and amortization and our share of reconciling items for partially owned entities. 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, acquisition, litigation and other, net, share-based compensation expense for the IPO retention grants, loss on debt extinguishment, modifications and termination of derivative instruments and foreign currency exchange loss. We also adjust for the impact of Core FFO attributable to partially owned entities. We have elected to reflect our share of Core FFO attributable to partially owned entities since the Brazil joint ventures are strategic partnerships, which we continue to actively participate in on an ongoing basis. The previous joint venture, the China JV, was considered for disposition during the periods presented. 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 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 deferred financing costs and pension withdrawal liability, amortization of above or below market leases, straight-line net rent, benefit from deferred income taxes, share-based compensation expense from grants of stock options and restricted stock units under our equity incentive plans, excluding IPO grants, non-real estate depreciation and amortization and maintenance capital expenditures. We also adjust for AFFO attributable to our share of reconciling items of partially owned entities. 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 Quarterly Report on Form 10-Q. FFO, Core FFO and Adjusted FFO should be considered as supplements, but not alternatives, to our net income or cash flows from operating activities as indicators of our operating performance. Moreover, other REITs may not calculate FFO in accordance with the NAREIT definition or may interpret the NAREIT definition differently than we do. Accordingly, our FFO may not be comparable to FFO as calculated by other REITs. In addition, there is no industry definition of Core FFO or Adjusted FFO and, as a result, other REITs may also calculate Core FFO or Adjusted FFO, or other similarly-captioned metrics, in a manner different than we do. The table below reconciles FFO, Core FFO and Adjusted FFO to net (loss) income, which is the most directly comparable financial measure calculated in accordance with U.S. GAAP.

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*Reconciliation of Net Loss to NAREIT FFO, Core FFO, and Adjusted FFO*

*(in thousands)*

|  | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Net loss | $(17,445) | $(14,236) |
| Adjustments: |  |  |
| Real estate related depreciation | 52,200 | 52,280 |
| Net loss (gain) on asset disposals | 63 | (39) |
| Our share of reconciling items related to partially owned entities | 1,033 | 266 |
| NAREIT Funds from operations | $35,851 | $38,271 |
| Adjustments: |  |  |
| Net gain on sale of non-real asset assets | (235) | (119) |
| Acquisition, litigation, and other | 10,075 | 20,751 |
| Share-based compensation expense, IPO grants | — | 163 |
| Loss on debt extinguishment, modifications, and termination of derivative instruments | 616 | 3,499 |
| Foreign currency exchange gain | (325) | (173) |
| Our share of reconciling items related to partially owned entities | 347 | 154 |
| Core FFO applicable to common shareholders | 46,329 | 62,546 |
| Adjustments: |  |  |
| Amortization of deferred financing costs and pension withdrawal liability | 1,146 | 1,148 |
| Amortization of below/above market leases | 508 | 39 |
| Straight-line net rent | 204 | (155) |
| Deferred income taxes benefit | (1,889) | (2,002) |
| Share-based compensation, excluding IPO grants | 8,349 | 4,867 |
| Non-real estate depreciation and amortization | 30,420 | 24,931 |
| Maintenance capital expenditures (a) | (16,106) | (15,731) |
| Our share of reconciling items related to partially owned entities | (107) | 278 |
| Adjusted FFO applicable to common shareholders | $68,854 | $75,921 |

(a) 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.

We calculate EBITDA for Real Estate, or EBITDAre, in accordance with the standards established by the Board of Governors of NAREIT, defined as, earnings before interest expense, taxes, depreciation and amortization, and adjustment to reflect share of EBITDAre of partially owned entities. EBITDAre is a measure commonly used in our industry, and we present EBITDAre to enhance investor understanding of our operating performance. We believe that EBITDAre provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and useful life of related assets among otherwise comparable companies.

We also calculate our Core EBITDA as EBITDAre further adjusted for acquisition, litigation and other, net, loss from investments in partially owned entities, foreign currency exchange gain, share-based compensation expense, loss on debt extinguishment, modifications and termination of derivative instruments, net gain on other asset disposals and reduction in EBITDAre from partially owned entities. We believe that the presentation of Core EBITDA provides a measurement of our operations that is meaningful to investors because it excludes the effects of certain items that are otherwise included in EBITDAre but which we do not believe are indicative of our core business operations. EBITDAre and Core EBITDA are not measurements of financial performance under U.S. GAAP, and our EBITDAre and Core EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDAre and Core EBITDA as alternatives to net income or cash flows from operating activities determined in accordance with U.S. GAAP. Our calculations of EBITDAre and Core EBITDA have limitations as analytical tools, including:

49

- these measures do not reflect our historical or future cash requirements for 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 and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and these measures do not reflect any cash requirements for such replacements.

We use EBITDAre and Core EBITDA as measures of our operating performance and not as measures of liquidity. The table below reconciles EBITDAre and Core EBITDA to net (loss) income, which is the most directly comparable financial measure calculated in accordance with U.S. GAAP.

*Reconciliation of Net Loss to NAREIT EBITDAre and Core EBITDA*

*(In thousands)*

|  | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Net loss | $(17,445) | $(14,236) |
| Adjustments: |  |  |
| Interest expense | 25,773 | 25,956 |
| Income taxes benefit | (708) | (791) |
| Depreciation and amortization | 82,620 | 77,211 |
| Adjustment to reflect share of EBITDAre of partially owned entities | 3,198 | 649 |
| NAREIT EBITDAre | $93,438 | $88,789 |
| Adjustments: |  |  |
| Acquisition, litigation and other, net | 10,075 | 20,751 |
| Loss on partially owned entities | 2,112 | 700 |
| Foreign currency exchange gain | (325) | (173) |
| Share-based compensation expense | 8,349 | 5,030 |
| Loss on debt extinguishment, modifications, and termination of derivative instruments | 616 | 3,499 |
| Net gain on other asset disposals | (172) | (158) |
| Reduction in EBITDAre from partially owned entities | (3,198) | (649) |
| Core EBITDA | $110,895 | $117,789 |

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### LIQUIDITY AND CAPITAL RESOURCES

The Company and the Operating Partnership have filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of the Operating Partnership, which will be fully and unconditionally guaranteed by the Company. Separate consolidated financial statements of the Operating Partnership have not been presented in accordance with the amendments to Rule 3-10 of Regulation S-X. Furthermore, as permitted under Rule 13-01(a)(4)(vi), the Company has excluded the summarized financial information for the Operating Partnership as the assets, liabilities and results of operations of the Company and the Operating Partnership are not materially different than the corresponding amounts presented in the consolidated financial statements of the Company, and management believes such summarized financial information would be repetitive and not provide incremental value to investors.

We currently expect that our principal sources of funding for working capital, facility acquisitions, business combinations, 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 2020 Senior Unsecured Revolving Credit Facility;
- our ATM Equity Programs; 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;
- capital contributions and investments in joint ventures;
- 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.

We are a well-known seasoned issuer with an effective shelf registration statement filed on April 16, 2020, which registered an indeterminate amount of common shares, preferred shares, depositary shares and warrants, as well as debt securities of the Operating Partnership, which will be fully and unconditionally guaranteed by us. As circumstances warrant, we may issue equity securities from time to time on an opportunistic basis, dependent upon market conditions and available pricing. We may use the proceeds for general corporate purposes, which may include the repayment of outstanding indebtedness, the funding of development, expansion and acquisition opportunities and to increase working capital.

On May 10, 2021, we entered into an equity distribution agreement pursuant to which we may sell, from time to time, up to an aggregate sales price of $900.0 million of our common shares through an ATM equity program (the “2021 ATM Equity Program”). Sales of our common shares made pursuant to the 2021 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 2021 ATM Equity Program for general corporate purposes, which may include funding acquisitions and development projects. There was no activity under the 2021 ATM Equity Program during the three months ended March 31, 2022, and we have approximately $809.4 million availability remaining for distribution under the 2021 ATM Equity Program as of March 31, 2022.

### 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 salable 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 $1.3 million and $0.9 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, we maintained bad debt allowances of approximately $20.7 million, which we believed to be adequate.

### Collective Bargaining Agreements

As of March 31, 2022, approximately 37% of the Company’s labor force is covered by collective bargaining agreements. Collective bargaining agreements covering less than 8% of the labor force are set to expire during the remaining three months ended December 31, 2022.

### Dividends and Distributions

We are required to distribute 90% of our taxable income (excluding capital gains) on an annual basis in order to continue to qualify as a REIT for federal income tax purposes. Accordingly, we intend to make, but are not contractually bound to make, regular quarterly distributions to shareholders from cash flows from our operating activities. While historically we have satisfied this distribution requirement by making cash distributions to our shareholders, we may choose to satisfy this requirement by making distributions of cash or other property. All such distributions are at the discretion of our Board of Trustees. We consider market factors and our performance in addition to REIT requirements in determining distribution levels. We have distributed at least 100% of our 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 status as a REIT.

As a result of this distribution requirement, we cannot rely on retained earnings to fund our ongoing operations to the same extent that other companies which are not REITs can. We may need to continue to raise capital in the debt and equity markets to fund our working capital needs, as well as potential developments in new or existing properties, acquisitions or investments in existing or newly created joint ventures. In addition, we may be required to use borrowings under our revolving credit facility, if necessary, to meet REIT distribution requirements and maintain our REIT status.

For further information regarding dividends and distributions, see Note 14 to our consolidated financial statements included in our 2021 Annual Report on Form 10-K as filed with the SEC.

### Outstanding Indebtedness

The following table summarizes our outstanding indebtedness as of March 31, 2022:

| Debt Summary: |  |
| --- | ---: |
| Fixed rate | $2,058,187 |
| Variable rate - unhedged | 888,699 |
| Total mortgage notes, senior unsecured notes, term loans and borrowings under revolving line of credit | 2,946,886 |
| Sale-leaseback financing obligations | 177,305 |
| Financing lease obligations | 91,436 |
| Total debt and debt-like obligations | 3,215,627 |
| **Percent of total debt and debt-like obligations:** |  |
| Fixed rate | 72% |
| Variable rate | 28% |
| Effective interest rate as of March 31, 2022 | 3.06% |

The variable rate debt shown above bears interest at interest rates based on various one-month LIBOR, CDOR, BBSW, and SONIA rates, depending on the respective agreement governing the debt, including our global revolving credit facilities. As of March 31, 2022, our debt had a weighted average term to initial maturity of approximately 5.8 years, assuming exercise of extension options.

For further information regarding outstanding indebtedness, please see Note 4 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and Note 9 to our consolidated financial statements included in our 2021 Annual Report on Form 10-K as filed with the SEC.

### Credit Ratings

Our capital structure and financial practices have earned us investment grade credit ratings from three nationally recognized credit rating agencies. We have investment grade ratings of BBB with a stable outlook from Fitch, BBB with a Positive Trends outlook from DBRS Morningstar, and 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”* in our Annual Report on Form 10-K.

### Maintenance Capital Expenditures and Repair and Maintenance Expenses

We utilize a strategic and preventative approach to 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.

### Maintenance Capital Expenditures

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 maintenance capital expenditures related to our existing temperature-controlled warehouse network include replacing roofs and refrigeration equipment, and upgrading our racking systems. Examples of maintenance capital expenditures related to personal property include expenditures on material handling equipment (*e.g.*, fork lifts and pallet jacks) and related batteries. Examples of maintenance capital expenditures related to information technology include expenditures on existing servers, networking equipment and current software. Maintenance capital expenditures do not include acquisition costs contemplated when underwriting the purchase of a building or costs which are incurred to bring a building up to Americold’s operating standards. The following table sets forth our maintenance capital expenditures for the three months ended March 31, 2022 and 2021.

*(In thousands, except per cubic foot amounts)*

| 2022 | Three Months Ended March 31, 2021 |  |
| --- | ---: | ---: |
| Real estate | $13,864 | $12,928 |
| Personal property | 974 | 1,782 |
| Information technology | 1,268 | 1,021 |
| Maintenance capital expenditures | $16,106 | $15,731 |
| Maintenance capital expenditures per cubic foot | $0.011 | $0.011 |

### Repair and Maintenance Expenses

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 three months ended March 31, 2022 and 2021.

*(In thousands, except per cubic foot amounts)*

| 2022 | Three Months Ended March 31, 2021 |  |
| --- | ---: | ---: |
| Real estate | $8,843 | $8,376 |
| Personal property | 14,446 | 11,454 |
| Repair and maintenance expenses | $23,289 | $19,830 |
| Repair and maintenance expenses per cubic foot | $0.016 | $0.014 |

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### External Growth, Expansion and Development Capital Expenditures

External growth expenditures represent asset acquisitions or business combinations. Expansion and development capital expenditures are capitalized 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.

#### Acquisitions

There were no acquisitions completed during the first quarter of 2022. For information regarding acquisitions completed during 2021, refer to our 2021 Annual Report on Form 10-K which includes details of the purchase price allocation for each acquisition.

#### Expansion and development

The expansion and development expenditures for the three months ended March 31, 2022 are primarily driven by $17.6 million related to our two fully-automated, build-to-suit, development sites in Connecticut and Pennsylvania, $8.1 million for the Spearwood, Australia expansion, $7.8 million million related to the Dunkirk, NY development, $5.1 million in our Dublin expansion, $1.9 million for the Barcelona expansion, $1.5 million related to our Russellville expansion and $1.4 million related to Atlanta Major Market Strategy Phase 2.

Expansion and development initiatives also include $1.3 million of corporate initiatives, which are projects designed to reduce future spending over the course of time. This category reflects return on investment projects, conversion of leases to owned assets, and other cost-saving initiatives.

Finally, we incurred approximately $13.8 million during the three months ended March 31, 2021 for contemplated future expansion or development projects.

The following table sets forth our acquisition, expansion and development capital expenditures for the three months ended March 31, 2022 and 2021.

*(In thousands)*

| 2022 | Three Months Ended March 31, 2021 |  |
| --- | ---: | ---: |
| Acquisitions, net of cash acquired and adjustments | $(603) | $41,956 |
| Expansion and development initiatives | 58,521 | 83,268 |
| Information technology | 741 | 1,528 |
| Growth and expansion capital expenditures | $58,659 | $126,752 |

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### Historical Cash Flows

*(In thousands)*

|  | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $15,586 | $46,531 |
| Net cash used in investing activities | $(94,244) | $(143,737) |
| Net cash provided by (used in) financing activities | $46,256 | $(235,530) |

### Operating Activities

For the three months ended March 31, 2022, our net cash provided by operating activities was $15.6 million, a decrease of $30.9 million, compared to $46.5 million for the three months ended March 31, 2021. The decrease is primarily due to an increase in accounts receivable due to slower collections, as well as higher selling, general and administrative expense.

### Investing Activities

Our net cash used in investing activities was $94.2 million for the three months ended March 31, 2022 compared to $143.7 million for the three months ended March 31, 2021. Additions to property, buildings and equipment were $93.0 million, reflecting maintenance capital expenditures and investments in the Ahold, Atlanta, Dunkirk, Dublin, Barcelona, Spearwood and Russellville expansion and development projects. Additionally, we invested $1.9 million in the SuperFrio joint venture for the three months ended March 31, 2022.

Net cash used in investing activities of $143.7 million for the three months ended March 31, 2021 related to cash used for the acquisition of Liberty Freezers totaling $42.0 million and cash used for additions to property, buildings and equipment of $100.5 million reflecting maintenance capital expenditures and investments in the Ahold, Atlanta, Calgary, New Zealand and Russellville expansion and development projects.

### Financing Activities

Net cash provided by financing activities was $46.3 million for the three months ended March 31, 2022 compared to cash used in financing activities of $235.5 million for the three months ended March 31, 2021. Cash provided by financing activities for the current period primarily consisted of $115.0 million in proceeds from our 2020 Senior Unsecured Credit Facility, offset by $59.9 million of quarterly dividend distributions paid.

Net cash used in financing activities was $235.5 million for the three months ended March 31, 2021. Cash used in financing activities consisted of $201.8 million of repayments on our term loan and mortgage notes, $55.0 million of quarterly dividends paid, $14.9 million in payment of withholding taxes related to share-based payment arrangements and $7.2 million of financing lease payments. These cash outflows were partially offset by $43.5 million in proceeds from our revolving line of credit and $4.3 million of proceeds received upon exercise of stock options.

### SIGNIFICANT ACCOUNTING POLICIES UPDATE

See Note 1 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

### NEW ACCOUNTING PRONOUNCEMENTS

See Note 1 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

## Market risk

As filed, 1,816 characters.

### 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 March 31, 2022, we had $174.9 million of outstanding USD-denominated variable-rate debt and $250 million of outstanding CAD-denominated variable-rate debt. This consisted of our Senior Unsecured Term Loan A Facility bearing interest at one-month LIBOR for the USD tranche and one-month CDOR for the CAD tranche, plus a margin of up to 0.95%. Additionally, we had C$55.0 million, £68.5 million, AUD$80 million, and $320 million USD outstanding of Senior Unsecured Revolving Credit Facility draws. At March 31, 2022, one-month LIBOR was at approximately 0.46%, one-month CDOR was at 0.93%, and one-month SONIA was at 0.69%, and one-month AUD BBSW was approximately 0.07%, therefore a 100 basis point increase in market interest rates would result in an increase in annual interest expense to service our variable-rate debt of approximately $8.9 million. A 100 basis point decrease in market interest rates would result in a $5.2 million decrease in annual interest expense.

### Foreign Currency Risk

As it relates to the currency of countries where we own and operate warehouse facilities and provide logistics services, our foreign currency risk exposure at March 31, 2022 was not materially different than what we disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. The information concerning market risk in Item 7A under the caption “Quantitative and Qualitative Disclosures about Market Risk” of our Annual Report on Form 10-K for the year ended December 31, 2021, is hereby incorporated by reference in this Quarterly Report on Form 10-Q.

## Controls and procedures

As filed, 1,967 characters.

### Evaluation of Controls and Procedures

In accordance with Rule 13a-15(b) of the Exchange Act, the Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of the Company’s “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2022.

Our management is responsible for establishing and maintaining adequate “internal control over financial reporting,” as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our management, including the Chief Executive Officer and Chief Financial Officer do not expect that our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

### Changes in Internal Control over Financial Reporting

There were no 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 quarter ended March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 2,961 characters.

Investing in our common shares involves risks and uncertainties. You should consider and read the information contained in this report and in our 2021 Annual Report on Form 10-K, including the risk factors identified in Item 1A of Part I thereof (Risk Factors). Any of the risks discussed in our 2021 Annual Report on Form 10-K, in this report, in other reports we file with the SEC, and other risks we have not anticipated or discussed, could have a material adverse impact on our business, financial condition or results of operations.

***Geopolitical conflicts, including the conflict between Russia and Ukraine, may adversely affect our business and results of operations.***

We have operations or activities in numerous countries and regions outside the United States, including throughout Europe and Asia-Pacific. As a result, our global operations are affected by economic, political and other conditions in the foreign countries in which we do business as well as U.S. laws regulating international trade. Specifically, the current conflict between Russia and Ukraine is creating substantial uncertainty about the future impact on the global economy. Countries across the globe are instituting sanctions and other penalties against Russia. The retaliatory measures that have been taken, and could be taken in the future, by the U.S., NATO, and other countries have created global security concerns that could result in broader European military and political conflicts and otherwise have a substantial impact on regional and global economies, any or all of which could adversely affect our business, particularly our European operations.

While the broader consequences are uncertain at this time, the continuation and/or escalation of the Russian and Ukraine conflict, along with any expansion of the conflict to surrounding areas, create a number of risks that could adversely impact our business and results of operations, including:

- increased inflation and significant volatility in commodity prices;
- disruptions to our global technology infrastructure, including through cyberattacks, ransom attacks or cyber-intrusion;
- adverse changes in international trade policies and relations;
- our ability to maintain or increase our prices, including freight in response to rising fuel costs;
- disruptions in global supply chains, specifically within the food supply chain and construction materials,;
- increased exposure to foreign currency fluctuations; and
- constraints, volatility or disruption in the credit and capital markets.

To the extent the current conflict between Russia and Ukraine adversely affects our business, it may also have the effect of heightening many other risks disclosed in our Annual Report on Form 10-K, any of which could materially and adversely affect our business and results of operations. We are continuing to monitor the situation in the Ukraine and globally and assess its potential impact on our business.

Filed May 6, 2022.
Source: SEC EDGAR, the filing index for accession 0001628280-22-013029. Last ingested by Listed: Nov 5, 2026, 20:22 ET. No prices; not investment advice.