# Americold Realty Trust: Form 10-Q for the period ended Mar 31, 2023

- Company: [Americold Realty Trust](/companies/cold.md) (CIK 1455863)
- Form: 10-Q
- Filed: 2023-05-04
- Accepted by EDGAR: May 4, 2023, 16:03 ET
- Period: 2023-03-31
- Accession: 0001628280-23-015697
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1455863/000162828023015697/art-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1455863/000162828023015697/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $664.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months, 2023-01-01 to 2023-03-31 | $62.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | $32.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | −$1.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$2.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 270,230,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $41.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $69.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-01-01 to 2023-03-31 | $60.1m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2023-03-31 | $47.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-03-31 | $8.07bn | us-gaap:Assets |
| Total liabilities | at 2023-03-31 | $4.35bn | us-gaap:Liabilities |
| Shareholders' equity | at 2023-03-31 | $3.71bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 89,933 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, 2022.*

### Management’s Overview

We are a global leader in temperature-controlled logistics, real estate and value added services, and are 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, 2023, we operated a global network of 243 temperature-controlled warehouses encompassing approximately 1.5 billion cubic feet, with 196 warehouses in North America, 27 in Europe, 18 warehouses in Asia-Pacific, and two warehouses in South America. We view and manage our business through three primary business segments: warehouse, third-party managed and transportation. In addition, we hold four minority interests in joint ventures, one with SuperFrio which owns or operates 37 temperature-controlled warehouses in Brazil, one with Comfrio which owns or operates 28 temperature-controlled warehouses in Brazil, one with LATAM which owns two temperature-controlled warehouses in Chile, and one with the RSA JV, which owns one temperature-controlled warehouse in Dubai.

### 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 incorporated certain activities such as staggered break schedules, social distancing, and other changes to process that can create inefficiencies. 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, 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.

*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.

*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. During the fourth quarter of 2022, we strategically transitioned the management of our largest third-party managed customer’s warehouses to a new third-party provider, and those operations ceased. As part of this transition, we agreed to continue to process certain costs for the related employee benefits for this customer, and will receive reimbursement for all such costs.

*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.

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 and integration related costs, Project Orion costs, litigation costs incurred in order to defend ourselves from litigation charges outside of the normal course of business and related settlement costs, certain severance costs, terminated site operations costs, cyber incident related costs and other costs relate to insurance claims, including deductibles, and related recoveries.

### Key Factors Affecting Our Business and Financial Results

### Formation of Middle Eastern Joint Venture

On February 28, 2023, the Company purchased a 49% equity interest in a newly formed entity, RSA Cold Holdings Limited (the “RSA JV”), in a transaction that is accounted for as a joint venture. In exchange for our equity interest, the Company paid $4.0 million in total. RSA Cold Holdings Limited contributed their Dubai cold storage business, which consists of a single cold storage warehouse, in exchange for the remaining 51% equity interest in the joint venture. As a result of this transaction, we recognized our subsidiary’s 49% equity investment in the RSA JV at its estimated fair value of $4.0 million within “Investments in partially owned entities” on the Condensed Consolidated Balance Sheets. Under the terms of the JV agreement, the Company has a call right that enables it to purchase all remaining issued and outstanding shares of the RSA JV starting August 28, 2025, with the exercise price to be set as the fair market value of the shares on the exercise date.

### Market Conditions and COVID-19

The three months ended March 31, 2022 were negatively impacted by the contributory effects of the COVID-19 pandemic and the resulting disruptions in (i) the food supply chain; (ii) our customers’ production of goods; (iii) the labor market, which impacts associate turnover, availability and cost; and (iv) the level of inflation on the cost to provide our services. Over the last twelve months, there have been gradual improvements in food production and the food supply chain has begun to recover storage levels, reaching pre-COVID-19 pandemic levels. While our business continues to be impacted by rising inflationary pressures, we believe we are well-situated due to our strong financial position, our contractual rate escalations paired with our ability to pass along the impacts of inflationary pressures and costs outside of our control to our customers.

Refer to “Item 1A - Risk Factors” of our 2022 Annual Report on Form 10-K as filed with the SEC.

### 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 external temperature reaches annual peaks for a majority of our portfolio during the third quarter of the year resulting in increased 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.

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, 2023 | Average foreign exchange rates used to translate actual operating results for the three months ended March 31, 2023 | Foreign exchange rates as of March 31, 2022 | Prior period average foreign exchange rates used to adjust actual operating results for the three months ended March 31, 2023(1) |
| --- | ---: | ---: | ---: | ---: |
| Argentinian peso | 0.005 | 0.005 | 0.009 | 0.009 |
| Australian dollar | 0.669 | 0.684 | 0.748 | 0.724 |
| Brazilian real | 0.198 | 0.193 | 0.211 | 0.192 |
| British Pound | 1.234 | 1.215 | 1.314 | 1.342 |
| Canadian dollar | 0.740 | 0.740 | 0.800 | 0.789 |
| Chilean Peso | 0.001 | 0.001 | 0.001 | 0.001 |
| Euro | 1.084 | 1.073 | 1.107 | 1.122 |
| New Zealand dollar | 0.626 | 0.630 | 0.695 | 0.676 |
| Poland Zloty | 0.232 | 0.228 | 0.238 | 0.243 |

32

(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

During 2022, we initiated Project Orion in order to further enhance our operational effectiveness, and to integrate the acquisitions completed over the last several years. For further information regarding Project Orion, refer to our consolidated financial statements included in our 2022 Annual Report on Form 10-K as filed with the SEC. 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.

Additionally, temperature-controlled warehouses utilize refrigeration condensers to maintain their environments, which rely on a steady supply of water. We have implemented rainwater harvesting in certain locations as a sustainable method for reducing municipal water demand. Rainwater harvesting also reduces wastewater treatment costs as well as storm water runoff.

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. 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. We intend to continue executing this strategy in the future.

### Historically Significant Customer

For the three months ended March 31, 2022, one customer accounted for more than 10% of our total revenues. The substantial majority of this customer’s business related to our third-party managed segment. The Company and this customer transitioned the management of this customer’s warehouses to a new third-party provider during the fourth quarter of 2022, and we are no longer serving this customer in the third-party managed segment. For the three months ended March 31, 2022, revenues attributable to this customer were $78.1 million. Of the revenues received from this customer, $75.2 million represented reimbursements for certain expenses we incurred during the three months ended March 31, 2022, 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 consumer 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 a change in the nature of expenditures 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 (e.g. January 1, 2022) 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, 2023 includes all properties that we owned or leased at January 2, 2023 which had both been owned or leased and had reached “normalized operations” by January 2, 2023.

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, 2023. The number of warehouses owned or operated in as of March 31, 2023 and excluded as same-store warehouses for the period ended March 31, 2023 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 | 243 |
| Same Store Warehouses | 221 |
| Non-Same Store Warehouses (1) | 17 |
| Third-Party Managed Warehouses | 5 |

(1) The non-same store facility count of 17 includes a facility acquired through the De Bruyn Cold Storage acquisition on July 1, 2022, a facility previously leased that we bought during the third quarter of 2022, one recently leased warehouse in Australia, one facility previously leased that we bought during the second quarter of 2022, one warehouse which we ceased operations within as it is being prepared for lease to a third-party, a leased facility in which we ceased operations during the fourth quarter of 2022 in anticipation of the upcoming lease maturity, a facility pending sale negotiations, and 10 warehouses in expansion or redevelopment.

As of March 31, 2023, our portfolio consisted of 243 total warehouses, including 238 within the warehouse segment and five in the third-party managed segment. In addition, we hold minority interests in four joint ventures, one with Superfrio, which owns or operates 37 temperature-controlled warehouses in Brazil, one with Comfrio, which owns or operates 28 temperature-controlled warehouses in Brazil, one with LATAM, which owns two temperature-controlled warehouses in Chile, and one with the RSA JV, which owns one temperature-controlled warehouse in Dubai. These joint ventures are not included in the table above.

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.

### RESULTS OF OPERATIONS

### Comparison of Results for the Three Months Ended March 31, 2023 and 2022

### Warehouse Segment

The following table presents the operating results of our warehouse segment for the three months ended March 31, 2023 and 2022.

*(Dollars in thousands)*

|  | Three Months Ended March 31, 2023 Actual | 2023 Constant Currency(1) | 2022 Actual | Change Actual | Constant Currency |
| --- | ---: | ---: | ---: | ---: | ---: |
| Rent and storage | $271,407 | $275,912 | $229,757 | 18.1% | 20.1% |
| Warehouse services | 323,645 | 328,600 | 311,168 | 4.0% | 5.6% |
| Total warehouse segment revenues | 595,052 | 604,512 | 540,925 | 10.0% | 11.8% |
| Power | 36,048 | 37,099 | 33,035 | 9.1% | 12.3% |
| Other facilities costs (2) | 60,800 | 61,773 | 56,572 | 7.5% | 9.2% |
| Labor | 258,541 | 262,523 | 244,160 | 5.9% | 7.5% |
| Other services costs (3) | 64,836 | 65,754 | 60,900 | 6.5% | 8.0% |
| Total warehouse segment cost of operations | $420,225 | $427,149 | $394,667 | 6.5% | 8.2% |
| Warehouse segment contribution (NOI) | 174,827 | 177,363 | 146,258 | 19.5% | 21.3% |
| Warehouse rent and storage contribution (NOI) (4) | 174,559 | 177,040 | 140,150 | 24.6% | 26.3% |
| Warehouse services contribution (NOI) (5) | 268 | 323 | 6,108 | (95.6)% | (94.7)% |
| Total warehouse segment margin | 29.4% | 29.3% | 27.0% | 234 bps | 230 bps |
| Rent and storage margin(6) | 64.3% | 64.2% | 61.0% | 332 bps | 317 bps |
| Warehouse services margin(7) | 0.1% | 0.1% | 2.0% | -188 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.

(2) Includes real estate rent expense of $9.4 million and $10.6 million, on an actual basis, for the first quarter of 2023 and 2022, respectively.

(3) Includes non-real estate rent expense (equipment lease and rentals) of $3.6 million and $3.1 million, on an actual basis, for the first quarter of 2023 and 2022, 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 $595.1 million for the three months ended March 31, 2023, an increase of $54.1 million, or 10.0%, compared to $540.9 million for the three months ended March 31, 2022. On a constant currency basis, our warehouse segment revenues were $604.5 million for the three months ended March 31, 2023, an increase of $63.6 million, or 11.8%, from the three months ended March 31, 2022. This growth was driven by $63.9 million of growth in our same store pool on a constant currency basis primarily due to our pricing initiatives, rate escalations, and improvements in economic occupancy, partially offset by a slight decline in throughput. Non-same store revenue was flat on a constant currency basis, due to exits of leased facilities during 2022, offset by an increase in occupancy, recently completed expansion and developments, and the De Bruyn acquisition. The foreign currency translation of revenues earned by our foreign operations had a $9.5 million unfavorable impact during the three months ended March 31, 2023, which was mainly driven by the strengthening of the U.S. dollar against our foreign subsidiaries’ currencies.

Warehouse segment cost of operations was $420.2 million for the three months ended March 31, 2023, an increase of $25.6 million, or 6.5%, compared to the three months ended March 31, 2022. On a constant currency basis, our warehouse segment cost of operations was $427.1 million for the three months ended March 31, 2023, an increase of $32.5 million, or 8.2%, from the three months ended March 31, 2022. The cost of operations for our same store pool increased $25.8 million on a constant currency basis, primarily driven by higher labor, power and other facilities costs, reflective of inflationary pressure. Approximately $6.7 million of the increase, on a constant currency basis, was related to growth in our recently completed expansions and developments and the De Bruyn acquisition in our non-same store pool. These increases are offset by the foreign currency translation of expenses incurred by our foreign operations which had an $6.9 million favorable impact during the three months ended March 31, 2023.

For the three months ended March 31, 2023, warehouse segment contribution (NOI), increased $28.6 million, or 19.5%, to $174.8 million for the first quarter of 2023 compared to $146.3 million for the first quarter of 2022. On a constant currency basis, warehouse segment NOI increased 21.3% from the three months ended March 31, 2022. The NOI for our same store pool increased $38.1 million on a constant currency basis, attributable to revenue and cost of operations factors previously described. Warehouse segment NOI was negatively impacted by the start-up costs incurred in connection with our expansion and development projects in the non-same store pool as they incur pre-launch costs or costs as they ramp to stabilization, partially offset by the NOI from the De Bruyn acquisition and lease buyouts. The foreign currency translation of our results of operations had a $2.5 million unfavorable impact to warehouse segment NOI period-over-period due to the strengthening of the U.S. dollar.

#### Same Store and Non-Same Store Results

We had 221 same stores for the three months ended March 31, 2023. 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 our recently completed expansion and development projects not yet stabilized, the acquisition of De Bruyn Cold Storage, one temporarily leased warehouse, previously leased facilities purchased during 2022 and idled facilities 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, 2023 and 2022.

|  | Three Months Ended March 31, 2023 Actual 2023 Constant Currency(1) 2022 Actual | Change Actual | Constant Currency |
| --- | ---: | ---: | ---: |
| Number of same store sites | 221 221 | n/a | n/a |
| **Same store revenues:** | **(Dollars in thousands)** |  |  |
| Rent and storage | $258,694 $262,734 $219,329 | 17.9% | 19.8% |
| Warehouse services | 315,033 319,579 299,118 | 5.3% | 6.8% |
| Total same store revenues | 573,727 582,313 518,447 | 10.7% | 12.3% |
| **Same store cost of operations:** |  |  |  |
| Power | 33,253 34,185 30,244 | 9.9% | 13.0% |
| Other facilities costs | 56,477 57,336 51,844 | 8.9% | 10.6% |
| Labor | 245,260 248,899 232,970 | 5.3% | 6.8% |
| Other services costs | 57,175 58,011 57,618 | (0.8)% | 0.7% |
| Total same store cost of operations | $392,165 $398,431 $372,676 | 5.2% | 6.9% |
| Same store contribution (NOI) | $181,562 $183,882 $145,771 | 24.6% | 26.1% |
| Same store rent and storage contribution (NOI)(2) | $168,964 $171,213 $137,241 | 23.1% | 24.8% |
| Same store services contribution (NOI)(3) | $12,598 $12,669 $8,530 | 47.7% | 48.5% |
| Total same store margin | 31.6% 31.6% 28.1% | 353 bps | 346 bps |
| Same store rent and storage margin(4) | 65.3% 65.2% 62.6% | 274 bps | 259 bps |
| Same store services margin(5) | 4.0% 4.0% 2.9% | 115 bps | 111 bps |

|  | Three Months Ended March 31, 2023 Actual 2023 Constant Currency(1) 2022 Actual | Change Actual | Constant Currency |
| --- | ---: | --- | --- |
| Number of non-same store sites(6) | 17 19 | n/a | n/a |
| Non-same store revenues: | **(Dollars in thousands)** |  |  |
| Rent and storage | $12,713 $13,178 $10,428 | n/r | n/r |
| Warehouse services | 8,612 9,021 12,050 | n/r | n/r |
| Total non-same store revenues | 21,325 22,199 22,478 | n/r | n/r |
| Non-same store cost of operations: |  |  |  |
| Power | 2,795 2,914 2,791 | n/r | n/r |
| Other facilities costs | 4,323 4,437 4,728 | n/r | n/r |
| Labor | 13,281 13,624 11,190 | n/r | n/r |
| Other services costs | 7,661 7,743 3,282 | n/r | n/r |
| Total non-same store cost of operations | $28,060 $28,718 $21,991 | n/r | n/r |
| Non-same store contribution (NOI) | $(6,735) $(6,519) $487 | n/r | n/r |
| Non-same store rent and storage contribution (NOI)(2) | $5,595 $5,827 $2,909 | n/r | n/r |
| Non-same store services contribution (NOI)(3) | $(12,330) $(12,346) $(2,422) | n/r | n/r |
| Total non-same store margin | (31.6)% (29.4)% 2.2% | n/r | n/r |
| Non-same store rent and storage margin(4) | 44.0% 44.2% 27.9% | n/r | n/r |
| Non-same store services margin(5) | (143.2)% (136.9)% (20.1)% | n/r | n/r |

39

|  | Three Months Ended March 31, 2023 Actual | 2023 Constant Currency(1) | 2022 Actual | Change Actual | Constant Currency |
| --- | ---: | ---: | ---: | ---: | ---: |
| Total warehouse segment revenues | $595,052 | $604,512 | $540,925 | 10.0% | 11.8% |
| Total warehouse cost of operations | $420,225 | $427,149 | $394,667 | 6.5% | 8.2% |
| Total warehouse segment contribution | $174,827 | $177,363 | $146,258 | 19.5% | 21.3% |

(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) Refer to our Same Store Analysis previously disclosed that includes the composition of our Non-same store warehouse pool.

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, 2023 | 2022 | Change |
| --- | ---: | ---: | --- |
| Number of same store sites | 221 | 221 | n/a |
| **Same store rent and storage:** |  |  |  |
| Economic occupancy(1) |  |  |  |
| Average occupied economic pallets | 4,359 | 4,012 | 8.6% |
| Economic occupancy percentage | 84.6% | 77.1% | 748 bps |
| Same store rent and storage revenues per economic occupied pallet | $59.35 | $54.66 | 8.6% |
| Constant currency same store rent and storage revenues per economic occupied pallet | $60.28 | $54.66 | 10.3% |
| Physical occupancy(2) |  |  |  |
| Average physical occupied pallets | 4,018 | 3,649 | 10.1% |
| Average physical pallet positions | 5,154 | 5,205 | (1.0)% |
| Physical occupancy percentage | 78.0% | 70.1% | 786 bps |
| Same store rent and storage revenues per physical occupied pallet | $64.38 | $60.10 | 7.1% |
| Constant currency same store rent and storage revenues per physical occupied pallet | $65.39 | $60.10 | 8.8% |
| **Same store warehouse services:** |  |  |  |
| Throughput pallets (in thousands) | 9,234 | 9,382 | (1.6)% |
| Same store warehouse services revenues per throughput pallet | $34.12 | $31.88 | 7.0% |
| Constant currency same store warehouse services revenues per throughput pallet | $34.61 | $31.88 | 8.6% |
| Number of non-same store sites(3) | 17 | 19 | n/a |
| **Non-same store rent and storage:** |  |  |  |
| Economic occupancy(1) |  |  |  |
| Average economic occupied pallets | 194 | 162 | n/r |
| Economic occupancy percentage | 73.6% | 69.8% | n/r |
| Non-same store rent and storage revenues per economic occupied pallet | $65.57 | $64.29 | n/r |
| Constant currency non-same store rent and storage revenues per economic occupied pallet | $67.97 | $64.29 | n/r |
| Physical occupancy(2) |  |  |  |
| Average physical occupied pallets | 172 | 155 | n/r |
| Average physical pallet positions | 263 | 232 | n/r |
| Physical occupancy percentage | 65.2% | 66.9% | n/r |
| Non-same store rent and storage revenues per physical occupied pallet | $74.04 | $67.15 | n/r |
| Constant currency non-same store rent and storage revenues per physical occupied pallet | $76.75 | $67.15 | n/r |
| **Non-same store warehouse services:** |  |  |  |
| Throughput pallets (in thousands) | 419 | 478 | n/r |
| Non-same store warehouse services revenues per throughput pallet | $20.56 | $25.23 | n/r |
| Constant currency non-same store warehouse services revenues per throughput pallet | $21.54 | $25.23 | 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) Refer to our Same Store Analysis previously disclosed that includes the composition of our Non-same store warehouse pool.

Economic occupancy for our same store pool was 84.6% for the three months ended March 31, 2023, an increase of 748 basis points compared to 77.1% for the quarter ended March 31, 2022. Economic occupancy growth as compared to the prior year was due to improvements in customer service initiatives, as well as our customers increase in food production levels, which is benefiting from the improved labor market. Same store rent and storage revenues per economic occupied pallet increased 8.6% period-over-period, primarily driven by our pricing initiative, contractual rate escalations and business mix. On a constant currency basis, our same store rent and storage revenues per occupied pallet increased 10.3% period-over-period. Our economic occupancy for our same store pool for the three months ended March 31, 2023 was 661 basis points higher than our corresponding average physical occupancy of 78.0%.

Throughput pallets for our same store pool was 9.2 million pallets for the three months ended March 31, 2023, a decrease of 1.6% from 9.4 million pallets for the three months ended March 31, 2022. This decrease was the result of a slight decline in end-consumer demand as basket sizes decreased due to the broader economic slowdown and a slight change in business mix. Same store warehouse services revenue per throughput pallet increased 7.0% compared to the prior year primarily as a result of our pricing initiative and contractual rate escalations, offset by unfavorable foreign currency translation as previously discussed. On a constant currency basis, our same store services revenue per throughput pallet increased 8.6% compared to the prior year.

### Transportation Segment

The following table presents the operating results of our transportation segment for the three months ended March 31, 2023 and 2022.

*(Dollars in thousands)*

|  | Three Months Ended March 31, 2023 Actual | 2023 Constant Currency(1) | 2022 Actual | Change Actual | Constant Currency |
| --- | ---: | ---: | ---: | ---: | ---: |
| Transportation revenues | $68,078 | $71,255 | $78,910 | (13.7)% | (9.7)% |
| Transportation cost of operations | 56,418 | 59,305 | 70,381 | (19.8)% | (15.7)% |
| Transportation segment contribution (NOI) | $11,660 | $11,950 | $8,529 | 36.7% | 40.1% |
| Transportation margin | 17.1% | 16.8% | 10.8% | 632 bps | 596 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 $68.1 million for the three months ended March 31, 2023, a decrease of $10.8 million, or 13.7%, compared to $78.9 million for the three months ended March 31, 2022. The decrease was primarily due to the softening of transportation demand in the general macro-environment and the unfavorable impact of foreign currency translation, partially offset by higher rates in our consolidation business, acquisitions and expansions in Australia, and the higher revenue associated with brokered transportation costs, and inflation in wage and fuel rates.

Transportation cost of operations was $56.4 million for the three months ended March 31, 2023, a decrease of $14.0 million, or 19.8%, compared to $70.4 million for the three months ended March 31, 2022. The decrease was due to the softening of transportation demand in the general macro-environment which has also resulted in lower carrier costs, lower volume in certain foreign market operations and the favorable impact of foreign currency translation, partially offset by the acquisitions mentioned above.

Transportation segment contribution (NOI) was $11.7 million for the three months ended March 31, 2023, an increase of 36.7% compared to the three months ended March 31, 2022. Transportation segment margin increased 632 basis points from the three months ended March 31, 2022, to 17.1%. The increase in margin was primarily due to rate increases.

### Third-Party Managed Segment

The following table presents the operating results of our third-party managed segment for the three months ended March 31, 2023 and 2022:

|  | Three Months Ended March 31, 2023 Actual | 2023 Constant Currency(1) | 2022 Actual | Change Actual | Constant Currency |
| --- | ---: | ---: | ---: | ---: | ---: |
| Number of managed sites | 5 |  | 9 | n/a | n/a |
|  | **(Dollars in thousands)** |  |  |  |  |
| Third-party managed revenues | $13,359 | $13,769 | $85,860 | (84.4)% | (84.0)% |
| Third-party managed cost of operations | 12,280 | 12,620 | 82,359 | (85.1)% | (84.7)% |
| Third-party managed segment contribution | $1,079 | $1,149 | $3,501 | (69.2)% | (67.2)% |
| Third-party managed margin | 8.1% | 8.3% | 4.1% | 400 bps | 427 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 $13.4 million for the three months ended March 31, 2023, a decrease of $72.5 million, or 84.4%, compared to $85.9 million for the three months ended March 31, 2022. On a constant currency basis, third-party managed revenues were $13.8 million for the three months ended March 31, 2023, a decrease of $72.1 million, or 84.0%, from the three months ended March 31, 2022.

Third-party managed cost of operations was $12.3 million for the three months ended March 31, 2023, a decrease of $70.1 million, or 85.1%, compared to $82.4 million for the three months ended March 31, 2022.

Third-party managed segment contribution (NOI) was $1.1 million for the three months ended March 31, 2023, a decrease of $2.4 million, or 69.2%, compared to $3.5 million for the three months ended March 31, 2022. The decreases in revenue, cost, and NOI were primarily due to the strategic exit of operations of our historically largest domestic customer in this segment.

### Other Consolidated Operating Expenses

*Depreciation and amortization.* Depreciation and amortization expense was $85.0 million for the three months ended March 31, 2023, an increase of $2.4 million, or 2.9%, compared to $82.6 million for the three months ended March 31, 2022. This increase was primarily due to the impact of our recently completed expansion and developments and partially offset by the favorable impact of foreign currency translation.

*Selling, general and administrative*. Corporate-level selling, general and administrative expenses were $62.9 million for the three months ended March 31, 2023, an increase of $5.3 million, or 9.1%, compared to $57.6 million for the three months ended March 31, 2022. 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 travel and conference expenses that resumed in 2023 and timing of professional fees, which is partially offset by a decrease in stock-based compensation in connection with the November 2021 retention grant, a significant portion of which vested in November 2022.

*Acquisition, litigation and other, net*. Corporate-level acquisition, litigation and other, net expenses were $7.1 million for the three months ended March 31, 2023, a decrease of $2.9 million compared to the three months ended March 31, 2022. During the three months ended March 31, 2023, we incurred $3.4 million of severance primarily due to the realignment of certain international operations, $1.9 million of implementation costs related to Project Orion, and $1.8 million of acquisition and integration related costs. Refer to Note 3 of the Condensed Consolidated Financial Statements for details. 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.

### Other Expense and Income

The following table presents other items of expense and income for the three months ended March 31, 2023 and 2022.

|  | Three Months Ended March 31, Change |
| --- | ---: |
|  | **2023** **2022%** |
| Other (expense) income: | **(Dollars in thousands)** |
| Interest expense | $(34,423) $(25,773) 33.6% |
| Loss on debt extinguishment, modifications and termination of derivative instruments | $(545) $(616) (11.5)% |
| Other, net | $1,433 $2,357 (39.2)% |
| Loss from investments in partially owned entities | $(3,029) $(2,112) 43.4% |
| n/r=not relevant |  |

*Interest expense*. Interest expense was $34.4 million for the three months ended March 31, 2023, an increase of $8.7 million, or 33.6%, compared to $25.8 million for the three months ended March 31, 2022. Our effective interest rate of our outstanding debt increased from 3.06% in the first quarter of 2022 to 4.08% in the first quarter of 2023, primarily due to the rising interest rates associated with our floating rate borrowings under our Senior Unsecured Credit Facility, as well as higher outstanding borrowings, partially offset by the impact of our interest rate swaps.

*Loss on debt extinguishment, modifications and termination of derivative instruments.* Loss on debt extinguishment, modifications, and termination of derivative instruments was $0.5 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively. The three months ended March 31, 2023 and 2022 is related to the amortization of fees paid for the termination of interest rate swaps in each of the periods. These interest rate swaps were terminated in 2020 and will amortize through 2024.

*Other, net.* Other, net income was $1.4 million for the three months ended March 31, 2023, a decrease of $0.9 million, compared to $2.4 million for the three months ended March 31, 2022. This is primarily due to an increase in non-service pension costs due to a reduction in the assumed long-term rate of return on the pension asset, and an increase in loss on asset disposals compared to 2022. This is partially offset by an increase in interest income earned from the loan to our Comfrio joint venture.

*Loss from investments in partially owned entities.* Loss from investments in partially owned entities was $3.0 million and $2.1 million for the three months ended March 31, 2023 and 2022, respectively. The increase is primarily driven by higher interest expense incurred by our joint ventures driven by rising interest rates.

### Income Tax Benefit (Expense)

Income tax benefit for the three months ended March 31, 2023 was $1.6 million, an increase of $0.9 million from an income tax benefit of $0.7 million for the three months ended March 31, 2022. The change in income tax benefit was primarily attributable to the losses generated by our foreign operations for the three months ended March 31, 2023.

### 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, Core EBITDA and net debt to pro-forma 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, goodwill and other non-core impairment (when applicable), 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 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, non-real estate asset impairment, straight-line net rent, benefit or expense from deferred income taxes, stock-based compensation expense, 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 and operating results from business segments which are not core to our long term business strategy and we intend to divest. 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.

46

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

*(in thousands)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net loss | $(2,571) | $(17,445) |
| Adjustments: |  |  |
| Real estate related depreciation | 54,541 | 52,200 |
| Loss on sale of real estate | 191 | — |
| Net loss on asset disposals | — | 63 |
| Our share of reconciling items related to partially owned entities | 903 | 1,033 |
| NAREIT Funds from operations applicable to common stockholders | $53,064 | $35,851 |
| Adjustments: |  |  |
| Net loss (gain) on sale of non-real estate assets | 420 | (235) |
| Acquisition, litigation and other, net | 7,147 | 10,075 |
| Loss on debt extinguishment, modifications and termination of derivative instruments | 545 | 616 |
| Foreign currency exchange gain | (458) | (325) |
| Our share of reconciling items related to partially owned entities | 128 | 347 |
| Core FFO applicable to common stockholders | 60,846 | 46,329 |
| Adjustments: |  |  |
| Amortization of deferred financing costs and pension withdrawal liability | 1,240 | 1,146 |
| Amortization of below/above market leases | 402 | 508 |
| Straight-line net rent | (491) | 204 |
| Deferred income taxes benefit | (3,621) | (1,889) |
| Stock-based compensation expense | 6,970 | 8,349 |
| Non-real estate depreciation and amortization | 30,483 | 30,420 |
| Maintenance capital expenditures (a) | (16,244) | (16,106) |
| Our share of reconciling items related to partially owned entities | 304 | (107) |
| Adjusted FFO applicable to common stockholders | $79,889 | $68,854 |

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

- these measures do not reflect our historical or future cash requirements for 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.

Net debt to proforma Core EBITDA is calculated using total debt, plus capital lease obligations, less cash and cash equivalents, divided by pro-forma Core EBITDA. We calculate pro-forma Core EBITDA as Core EBITDA further adjusted for acquisitions, dispositions and for rent expense associated with lease buy-outs and lease exits. The pro-forma adjustment for acquisitions reflects the Core EBITDA for the period of time prior to acquisition. The pro-forma adjustment for leased facilities exited or purchased reflects the add-back for the related lease expense from the last year. The pro-forma adjustment for dispositions reduces Core EBITDA for the earnings of facilities disposed of or exited during the year, including the strategic exit of certain third-party managed business.

48

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

*(In thousands)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net loss | $(2,571) | $(17,445) |
| Adjustments: |  |  |
| Depreciation and amortization | 85,024 | 82,620 |
| Interest expense | 34,423 | 25,773 |
| Income tax benefit | (1,644) | (708) |
| Loss on sale of real estate | 191 | — |
| Adjustment to reflect share of EBITDAre of partially owned entities | 2,883 | 3,198 |
| NAREIT EBITDAre | $118,306 | $93,438 |
| Adjustments: |  |  |
| Acquisition, litigation, and other, net | 7,147 | 10,075 |
| Loss on partially owned entities | 3,029 | 2,112 |
| Foreign currency exchange gain | (458) | (325) |
| Stock-based compensation expense | 6,970 | 8,349 |
| Loss on debt extinguishment, modifications, and termination of derivative instruments | 545 | 616 |
| Loss (gain) on other asset disposals | 420 | (172) |
| Reduction in EBITDAre from partially owned entities | (2,883) | (3,198) |
| Core EBITDA | $133,076 | $110,895 |

49

### 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 stockholders will include:

- current cash balances;
- cash flows from operations;
- our Senior Unsecured Revolving Credit Facility;
- our ATM Equity Programs; and
- other forms of debt financings and equity offerings, including capital raises through joint ventures.

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 stockholder 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 stockholder distributions, and our future development and acquisition activities.

We are a well-known seasoned issuer with an effective shelf registration statement filed on March 17, 2023, 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 March 17, 2023, 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. Sales of our common stock made pursuant to the 2023 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 stock pursuant to the 2023 ATM Equity Program for general corporate purposes, which may include funding acquisitions and development projects. There was no activity under the 2023 ATM Equity Program during the three months ended March 31, 2023.

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 $0.7 million and $1.3 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, we maintained bad debt allowances of approximately $17.4 million, which we believed to be adequate.

### 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 stockholders from cash flows from our operating activities. While historically we have satisfied this distribution requirement by making cash distributions to our stockholders, 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 Directors. 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 stockholders are invested primarily in interest-bearing accounts 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, refer to our consolidated financial statements included in our 2022 Annual Report on Form 10-K as filed with the SEC.

### Outstanding Indebtedness

The following table summarizes our outstanding indebtedness as of March 31, 2023 (in thousands):

| Debt Summary: |  |
| --- | ---: |
| Fixed rate(1) | $2,592,875 |
| Variable rate - unhedged | 610,500 |
| Total mortgage notes, senior unsecured notes, term loans and borrowings under revolving line of credit | 3,203,375 |
| Sale-leaseback financing obligations | 168,919 |
| Financing lease obligations | 78,421 |
| Total debt and debt-like obligations | $3,450,715 |
| **Percent of total debt and debt-like obligations:** |  |
| Fixed rate | 82% |
| Variable rate | 18% |
| Effective interest rate as of March 31, 2023 | 4.08% |

(1) The total includes borrowings with a variable interest rate that have been effectively hedged through interest rate swaps.

The variable rate debt shown above bears interest at interest rates based on various one-month SOFR, CDOR, SONIA, BBSW, EURIBOR, and BKBM rates, depending on the respective agreement governing the debt, including our global revolving credit facilities. As of March 31, 2023, our debt had a weighted average term to maturity of approximately 5.9 years, assuming exercise of extension options.

For further information regarding outstanding indebtedness, please see Note 3 and 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 2022 Annual Report on Form 10-K as filed with the SEC.

### Aggregate future repayments of indebtedness

The aggregate maturities of indebtedness as of March 31, 2023 for each of the next five years and thereafter, are as follows (in thousands):

| Twelve Months Ending March 31: |  |
| --- | ---: |
| 2024 | $— |
| 2025 | — |
| 2026 | 200,000 |
| 2027 | 985,500 |
| 2028 | 454,950 |
| Thereafter | 1,562,925 |
| Aggregate principal amount of indebtedness | 3,203,375 |
| Less: unamortized deferred financing costs | (12,434) |
| **Total indebtedness, net of deferred financing costs** | $3,190,941 |

### 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 negative outlook from Fitch, BBB with a Stable 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, 2023 and 2022.

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

| 2023 | Three Months Ended March 31, 2022 |  |
| --- | ---: | ---: |
| Real estate | $14,899 | $13,864 |
| Personal property | 325 | 974 |
| Information technology | 1,020 | 1,268 |
| Maintenance capital expenditures(1) | $16,244 | $16,106 |
| Maintenance capital expenditures per cubic foot | $0.011 | $0.011 |

(1) Excludes $2.2 million and $1.8 million of deferred acquisition maintenance capital expenditures incurred for the three months ended March 31, 2023 and 2022, respectively.

### 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 increase in costs is due to rising inflationary pressures. The following table sets forth our repair and maintenance expenses for the three months ended March 31, 2023 and 2022.

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

| 2023 | Three Months Ended March 31, 2022 |  |
| --- | ---: | ---: |
| Real estate | $8,802 | $8,843 |
| Personal property | 19,966 | 14,446 |
| Repair and maintenance expenses | $28,768 | $23,289 |
| Repair and maintenance expenses per cubic foot | $0.020 | $0.016 |

### 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

For information regarding acquisitions completed during 2022, refer to our 2022 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, 2023 are primarily driven by $2.7 million related to our two fully-automated, build-to-suit, development sites in Connecticut and Pennsylvania, $5.1 million for the Spearwood, Australia expansion, $4.8 million related to our Russellville expansion and $3.7 million related to Atlanta Major Market Strategy Phase 2. During the three months ended March 31, 2023, we also incurred capitalized interest of $3.4 million and capitalized insurance, property taxes, and compensation and travel expense aggregating to $1.9 million related to our ongoing expansion and development projects.

Expansion and development initiatives also include $2.2 million of corporate initiatives and smaller customer driven growth projects, which are 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 $4.9 million during the three months ended March 31, 2023 for contemplated future expansion or development projects.

The decrease in costs from the three months ended March 31, 2022 to the three months ended March 31, 2023 is due to fewer outstanding expansion and development projects as compared to the prior year.

The following table sets forth our acquisition, expansion and development capital expenditures for the three months ended March 31, 2023 and 2022.

*(In thousands)*

| 2023 | Three Months Ended March 31, 2022 |  |
| --- | ---: | ---: |
| Expansion and development initiatives | 28,723 | 57,918 |
| Information technology | 1,613 | 741 |
| Growth and expansion capital expenditures | $30,336 | $58,659 |

### Historical Cash Flows

*(In thousands)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $41,481 | $15,586 |
| Net cash used in investing activities | $(87,592) | $(94,244) |
| Net cash provided by financing activities | $38,867 | $46,256 |

55

### Operating Activities

For the three months ended March 31, 2023, our net cash provided by operating activities was $41.5 million, an increase of $25.9 million, compared to $15.6 million for the three months ended March 31, 2022. The increase is primarily due to an increase in segment contribution, partially offset by higher selling, general and administrative expenses.

### Investing Activities

Our net cash used in investing activities was $87.6 million for the three months ended March 31, 2023 compared to $94.2 million for the three months ended March 31, 2022. Additions to property, buildings and equipment were $69.3 million, reflecting maintenance capital expenditures and investments in our various expansion and development projects. Additionally, we invested $18.4 million in a loan to the Comfrio joint venture as well as minority equity interest in the RSA joint venture.

Net cash used in investing activities was $94.2 million for the three months ended March 31, 2022 related to cash used for additions to property, buildings and equipment of $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 of cash in the SuperFrio joint venture.

### Financing Activities

Net cash provided by financing activities was $38.9 million for the three months ended March 31, 2023 compared to $46.3 million for the three months ended March 31, 2022. Cash provided by financing activities for the current period primarily consisted of $110.1 million in proceeds from our Senior Unsecured Revolving Credit Facility, net of repayments, offset by $60.1 million of quarterly dividend distributions paid and $11.8 million aggregate lease repayments.

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

### SIGNIFICANT ACCOUNTING POLICIES UPDATE

Critical accounting policies are those that are both important to the accurate portrayal of a company’s financial condition and results, and require subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. To prepare financial statements that conform to generally accepted accounting principles, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Certain estimates are particularly sensitive due to their significance to the financial statements and the possibility that future events may be significantly different from our expectations.

Refer to Note 1 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K for a discussion of our critical accounting estimates and assumptions.

### 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, 2,441 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, 2023, we had $645.0 million of outstanding USD-denominated variable-rate debt and $250 million of outstanding CAD-denominated variable-rate debt under the Senior Unsecured Term Loan Facility. This consisted of our Senior Unsecured Term Loan A Facility bearing interest at one-month SOFR for the USD tranche and one-month CDOR for the CAD tranche, plus a margin of up to 0.94%. We have entered into interest rate swaps to effectively lock in the floating rates on all of our USD-denominated term loan at a weighted average rate of 4.39% and $250 million of our outstanding CAD-denominated term loan at a weighted average rate of 4.53%. After incorporating the effects of the interest rate swaps, we have no outstanding variable-rate term loan debt.

Additionally, we had C$45.0 million, £78.0 million, A$152.0 million, $323.0 million USD, €44.5 million, and $13.0 million NZD outstanding of Senior Unsecured Revolving Credit Facility draws. At March 31, 2023, one-month term and daily SOFR was approximately 4.80%, one-month CDOR was approximately 4.94%, one-month SONIA was at 4.18%, one-month AUD BBSW was approximately 3.68%, one-month EURIBOR was approximately 2.91%, and one-month BKBM was approximately 4.37%. The interest rate paid on borrowings can never drop below 0%, although the associated benchmark rate does. 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 $6.1 million, and a 100 basis point decrease in market interest rates would result in a $6.1 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, 2023 was not materially different than what we disclosed in our 2022 Annual Report on Form 10-K as filed with the SEC. The information concerning market risk in Item 7A under the caption “Quantitative and Qualitative Disclosures about Market Risk” of our 2022 Annual Report on Form 10-K, 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, 2023.

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, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 5,873 characters.

The following risk factor provides a supplement and update to the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 in response to Item 1A of Part I of such Form 10-K, in order to provide information regarding a recent cybersecurity incident.

***A failure of our information technology systems, cybersecurity attacks or a breach of our information security systems, networks or processes could cause business disruptions and the loss of confidential information and may materially adversely affect our business.***

We rely extensively on our computer systems to process transactions, operate and manage our business. Despite efforts to avoid or mitigate such risks, external and internal risks, such as malware, ransomware, insecure coding, data leakage and human error pose direct threats to the stability and effectiveness of our information technology systems. The failure of our information technology systems to perform as anticipated, and the failure to integrate disparate systems effectively or to collect data accurately and consolidate it a useable manner efficiently could adversely affect our business through transaction errors, billing and invoicing errors, processing inefficiencies or errors and loss of sales, receivables, collections and customers, in each case, which could result in reputational damage and have an ongoing adverse effect on our business, results of operation and financial condition.

We may also be subject to cybersecurity attacks and other intentional hacking. These attacks could include attempts to gain unauthorized access to our data and computer systems. In particular, as discussed further below, our operations have been, and may in the future be, subject to ransomware or cyber-extortion attacks, which could significantly disrupt our operations. Generally, such attacks involve restricting access to computer systems or vital data. We employ a number of measures to prevent, detect and mitigate these threats, which include password protection, frequent password changes, firewall detection systems, frequent backups, a redundant data system for core applications and annual penetration testing; however, there is no guarantee such efforts will be successful in preventing a cybersecurity attack. A cybersecurity attack or breach could compromise the confidential information of our associates, customers and vendors. A successful attack could result in service interruptions, operational difficulties, loss of revenue or market share, liability to our customers or others, diversion of corporate resources and injury to our reputation and increased costs. In such cases, we may have to operate manually, which may result in considerable delays in our handling of and damage to perishable products or interruption to other key business processes. Addressing such issues could prove difficult or impossible and be very costly. Responding to claims or liability could similarly involve substantial costs. In addition, our customers rely extensively on computer systems to process transactions and manage their business and thus their businesses are also at risk from, and may be impacted by, cybersecurity attacks. An interruption in the business operations of our customers or a deterioration in their reputation resulting from a cybersecurity attack could indirectly impact our business operations.

Our computer network has been subjected to cyber attacks from time to time. We previously suffered a cyber attack in November 2020 and more recently identified a separate cyber incident in April 2023. In late April 2023, we determined that our information technology system had experienced a cybersecurity incident. We immediately implemented containment measures and took operations offline to secure our systems and reduce disruption to our business and customers. We have launched a review of the nature and scope of the incident, are working closely with cybersecurity experts and legal counsel, and have reported the matter to law enforcement.

As a result of the April 2023 cyber incident, our operations have been impacted. In particular, the incident resulted in a significant number of our facilities being unable to receive or deliver products for a period of time. Such operational impacts have resulted in, and may continue to result in, considerable delays in the delivery of our products to our customers or interruption to other key business processes.

While our full investigation into the April 2023 cyber incident is still ongoing, our initial examination revealed unauthorized access to personal information. We are currently working to identify populations of impacted individuals in order to make notifications to impacted individuals and to regulators, in accordance with applicable law. As a result of this unauthorized access, we may be subject to subsequent investigations, claims or actions in addition to other costs, fines, penalties, or other obligations related to impacted data. In addition, the misuse, or perceived misuse, of sensitive or confidential information regarding our business could cause harm to our reputation and result in the loss of business with existing or potential customers, which could adversely impact our business, results of operations and financial condition.

Based on the information currently known, we cannot yet determine whether the April 2023 cybersecurity attack will have a material impact on our business, results of operations or financial condition, and no assurances can be given as we continue to assess the full impact from the incident. We may also be subject to future incidents that could have a material adverse effect on our business, results of operations or financial condition or may result in operational impairments and financial losses, as well as significant harm to our reputation.

Filed May 4, 2023.
Source: SEC EDGAR, the filing index for accession 0001628280-23-015697. Last ingested by Listed: Nov 5, 2026, 20:22 ET. No prices; not investment advice.