Americold Realty Trust: Form 10-Q for the period ended Sep 30, 2024

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 in Part I of this report under 'Cautionary Statement Regarding Forward-Looking Statements' and 'Risk Factors' in our Annual Report on Form 10-K for the year ended December 31, 2023.

Management’s Overview

Americold Realty Trust, Inc. together with its subsidiaries (“ART”, “Americold”, the “Company”, “us” or “we”) is a Maryland corporation that operates as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. The Company is a global leader in temperature-controlled storage, logistics, real estate and value added services, and is focused on the ownership, operation, acquisition and development of temperature-controlled warehouses. The Company operates 239 warehouses globally, totaling approximately 1.4 billion cubic feet, with 195 in North America, 25 in Europe, 17 in Asia-Pacific, and two in South America as of September 30, 2024.

Our business includes three primary business segments: warehouse, transportation and third-party managed. We have minority interests in two joint ventures: SuperFrio (operates 35 temperature-controlled warehouses in Brazil) and RSA (operates two temperature-controlled warehouses in Dubai).

Focus on Our Operational Effectiveness and Cost Structure

Our ongoing initiatives, some of which are detailed below, focus on streamlining business operations and reducing costs. This includes i) centralizing processes; ii) implementing operational standards; iii) adopting new technology; iv) enhancing health and safety programs; v) leveraging our networks’ purchasing power; and vi) fully integrating acquired assets and businesses. Such realignments have allowed us to acquire new talent and strengthen our service offerings.

Additionally, 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, and the exit of certain managed warehouse agreements. Through our process of active portfolio management, we continue to evaluate our markets and offerings.

Other costs reduction initiatives

To reduce facility costs, we have invested in energy efficiency projects, including LED lighting, thermal and solar energy storage, motion-sensor technology, variable frequency drives, third party efficiency reviews, real-time energy consumption monitoring, rapid open and close doors, and alternative-power generation technologies. We have also fine-tuned our refrigeration systems, implemented rain water harvesting and energy management practices, as well as 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.

Key Factors Affecting Our Business and Financial Results

Cybersecurity Incident

On April 26, 2023, the Company became aware of a cybersecurity incident impacting a certain number of our systems and partially impacting operations for a limited period of time (the “Cyber Incident”). The Company engaged an external cyber security expert to initiate responses to contain and remediate the incident, and conduct a forensic investigation. Actions taken included preventative measures such as shutting down certain operating systems, supplementing existing security monitoring with additional scanning and other protective measures. The Company also notified law enforcement and its customers, informing them of both the incident and management’s efforts to minimize its impact on the Company’s daily operations. Technology information systems were reintroduced in a controlled phased approach and all locations successfully resumed operations at pre-cyberattack levels by June 30, 2023.

As noted above, the Company engaged a leading cybersecurity defense firm that completed a forensic investigation of the incident and provided recommended actions in response to the findings. The Company has completed many of the recommended remediation activities associated with the Cyber Incident. We continue to enhance our policies and procedures meant to assess, identify, and effectively manage cybersecurity risks, threats, and incidents.

Incremental charges recorded in conjunction with remediation and response efforts associated with the Cyber Incident have been recorded net of insurance recoveries within “Acquisition, cyber incident, and other, net” in the Condensed Consolidated Statements of Operations. This amount was primarily comprised of incremental internal labor costs, professional fees, customer claims, and related insurance deductibles.

Sale of Outstanding Minority Ownership in LATAM JV

On May 31, 2022, we formed a joint venture, Americold LATAM Holdings Ltd (the “LATAM JV”), with Cold LATAM Limited (our “JV partner”). We contributed our Chilean business upon formation of the joint venture and retained the remaining 15% equity interests in the joint venture. The Company recorded an initial fair value of $37.0 million within “Investments in partially owned entities and other” on the Condensed Consolidated Balance Sheets. On May 30, 2023, our outstanding minority ownership was sold for proceeds of $36.9 million and a gain of $0.3 million.

Project Orion

In February 2023, we announced our transformation program “Project Orion” designed to drive future growth and achieve our long-term strategic objectives, through investment in our technology systems and business processes across our global platform. The project includes the implementation of a new, best-in-class, cloud-based enterprise resource planning (“ERP”) software system. The primary goals of this project are to streamline standard processes, reduce manual work and incrementally improve our business analytics capabilities. Highlights of the project include implementing centralized customer billing operations, a global payroll and human capital management platform, next-generation warehouse maintenance capabilities, global procurement functionality and shared-service operations in certain international regions, among others. We expect the benefits of these initiatives to include revenue and margin improvements through pricing data and analytics and heightened customer contract governance, finance and human resources cost reductions, information technology applications and infrastructure rationalization, reduced employee turnover, working capital efficiency and reduced IT maintenance capital expenditures. The activities associated with Project Orion are expected to be substantially complete within three years from the project’s start date. Since inception, the Company has incurred $138.3 million of implementation costs related to Project Orion, including expenses reported in “Acquisition, cyber incident, and other, net” on the Condensed Consolidated Statements of Operations and costs deferred in “Other assets”,on the Condensed Consolidated Balance Sheets. The unamortized balance of the Project Orion deferred costs was $76.0 million as of September 30, 2024.

During the three months ended June 30, 2024, the Company deployed the first phase of Project Orion. The implementation costs deferred within “Other assets” on the Condensed Consolidated Balance Sheets are now being amortized through “Selling, general, and administrative” expense on the Condensed Consolidated Statements of Operations. The useful lives of the Company’s internal-use software and capitalized cloud computing implementation costs are generally three to five years. However, the useful lives of major information system installations, such as implementations of ERP systems and certain related software, are determined on an individual basis and may exceed five years depending on the estimated period of use. The Company has determined the useful life of the new ERP system to be ten years and is amortizing the costs associated with the ERP implementation on a straight line basis over such period. The amortization expense recognized during the three and nine months ended September 30, 2024 related to the Project Orion ERP implementation was $1.8 million and $2.4 million, respectively.

For further information regarding Project Orion, refer to the Consolidated Financial Statements included in our 2023 Annual Report on Form 10-K as filed with the SEC.

Loss on Debt Extinguishment

During the nine months ended September 30, 2024, the Company purchased eleven facilities in the Company’s lease portfolio that were previously accounted for as failed sale-leaseback financing obligations. Total cash outflows related to these purchases of $191.0 million are included within “Termination of sale-leaseback financing obligations” on the Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2024.

These purchases resulted in the recognition of a $115.1 million loss on debt extinguishment during the nine months ended September 30, 2024. These amounts are recognized within “Loss on debt extinguishment and termination of derivative instruments” on the Condensed Consolidated Statements of Operations included herein.

Significant Risks and Uncertainties

Refer to “Item 1A - Risk Factors” of our 2023 Annual Report on Form 10-K as filed with the SEC.

Seasonality

We specialize in providing services to businesses within the food industry whose businesses are often seasonal or cyclical. On average the first and second quarter segment contributions, as defined below, are relatively consistent. On a portfolio-wide basis, physical occupancy rates are generally the lowest during May and June and gradually increase thereafter, due to annual harvests and our customers’ focus on building inventories for end-of-year holidays, which generally peak between mid-September and early December. The external temperature reaches annual peaks for a majority of our portfolio during the third and fourth quarter of the year resulting in increased power expenses.

To manage earnings volatility due to seasonality, we have implemented fixed commitment contracts with certain customers. These fixed commitment contracts obligate our customers to pay for guaranteed warehouse space to maintain required inventory levels, particularly during peak occupancy periods. Our diverse customer base also mitigates 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). Additionally, our southern hemisphere operations in Australia, New Zealand and South America complement the growing and harvesting cycles in North America and Europe, further balancing seasonality’s impact on our operations.

Foreign Currency Translation Impact on Our Operations

Our consolidated revenues and expenses are impacted by foreign currency fluctuations, which can significantly affect our results. However, revenues and expenses from our international operations are typically denominated in the local currency of the country in which they are derived, which partially mitigates the impact of foreign currency fluctuations.

The following table shows a comparison of underlying spot and average exchange rates for the three and nine months ended September 30, 2024 and 2023. 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. 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 operations excluding changes in foreign exchange rates. 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.

(1) Prior period exchange rates used to adjust current period operating results for constant currency metrics used herein.

How We Assess the Performance of Our Business

Segment Contribution Net Operating Income (“NOI”)

We evaluate the performance of our primary business segments based on their NOI contribution to our overall results of operations which aligns with how our decision makers evaluate performance.

• Warehouse segment contribution NOI is calculated as warehouse segment revenues less its cost of operations (excluding any Depreciation and amortization, impairment charges, corporate-level Selling, general, and administrative expenses, corporate-level Acquisition, cyber incident, and other, net, and Loss (gain) from sale of real estate).
• Warehouse rent and storage contribution NOI is calculated as warehouse rent and storage revenues less power and other facilities cost.
• Warehouse services contribution NOI is calculated as warehouse services revenues less labor and other service costs.
• Transportation segment contribution NOI is calculated as transportation segment revenues less its cost of operations (excluding any Depreciation and amortization, impairment charges, corporate-level Selling, general, and administrative expenses, corporate-level Acquisition, cyber incident, and other, net, and Loss (gain) from sale of real estate).
• Third-Party Managed contribution NOI is calculated as third-party managed segment revenues less its cost of operations (excluding any Depreciation and amortization, impairment charges, corporate-level Selling, general, and administrative expenses, corporate-level Acquisition, cyber incident, and other, net, and Loss (gain) from sale of real estate).
• Contribution NOI margin for each of these operations is calculated as the applicable NOI measure divided by the applicable revenue measure.

Segment NOI and NOI margin contribution metrics help investors understand revenue, costs, and earnings among service types. These NOI contribution measures are supplemental and are not measurements of financial performance under U.S. GAAP. We provide reconciliations of these measures in the results of operations sections below.

Same Store Analysis

We believe that same store metrics are key performance indicators commonly used in the real estate industry. Evaluating the performance of our real estate portfolio on a same store basis allows investors to evaluate performance in a way that is consistent period to period. We define our “same store” population once annually at the beginning of the current calendar year. Our population includes properties owned or leased for the entirety of two comparable periods with at least twelve consecutive months of normalized operations prior to January 1 of the current calendar year. We define “normalized operations” as properties that have been open for operation or lease, after development, expansion, or significant modification (e.g., rehabilitation subsequent to a natural disaster). Acquired properties are included in the “same store” population if owned by us as of the first business day of the prior calendar year (e.g. January 1, 2023) and are 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 are being exited (e.g. non-renewal of warehouse lease or held for sale to third parties), were sold, or entered development subsequent to the beginning of the current calendar year.

Beginning in January of 2024, changes in ownership structure (e.g., purchase of a previously leased warehouse) no longer resulted in a facility being excluded from the same store population, as management believes that actively managing its real estate is normal course of operations. Additionally, management began to classify new developments (both conventional and automated facilities) as a component of the same store pool once the facility is considered fully operational and is both inbounding and outbounding product for at least twelve consecutive months prior to January 1 of the then current calendar year. These changes reflect a better alignment of our disclosures with industry practices.

For all same store properties (as defined above), we calculate “same store contribution NOI”, “same store rent and storage contribution NOI”, “same store services contribution NOI”, and the related margins in the same manner as described above. To ensure comparability in our period-to-period operating results, we also calculate same store contribution NOI measures on a constant currency basis, removing the impact of foreign exchange rate fluctuations by using prior period exchange rates to translate current period results into US dollars. These metrics isolate the operating performance of a consistent set of properties and thus eliminates the effects of changes in portfolio composition and currency fluctuations.

The following table shows the number of same-store and non-same store warehouses in our portfolio as of September 30, 2024. The non-same store warehouse count in the table below includes the partial period impact of sites exited during the periods presented.

(1) The non-same store facility count consists of: 5 sites in the expansion and development phase, 2 facilities that we purchased in 2023, 2 facilities whose operations have ceased and the Company is evaluating alternative use including, third party lease and or sale.

Same store financial metrics are 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 financial metrics in a manner consistent with our definitions and calculations. Same store financial measures 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.

Economic Occupancy of our Warehouses

We define average economic occupancy as the aggregate number of physically occupied pallets and contractually committed pallets for a given period, without duplication. We estimate the number of contractually committed pallet positions by subtracting the physical pallet positions from the contractually committed pallet positions specified in each customer’s contract.

Economic occupancy is a key 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 now aim to establish contracts with fixed storage commitments for new customer relationships and transition existing customers to such contracts in conjunction with contract renewals or changes in customer profiles. This strategy mitigates the impact of seasonal changes on physical occupancy and ensures our customers have the necessary space to support their business needs.

Throughput at our Warehouses

The level and nature of throughput at our warehouses significantly impacts our warehouse services revenues. Throughput refers to the volume of pallets entering and exiting our warehouses, with higher levels of throughput driving warehouse services revenues as customers are typically billed based on throughput. The nature of throughput can be influenced by various factors including product turnover and shifts in consumer demand.

Food manufacturers’ production levels are influenced by market conditions, labor availability, supply chain dynamics and consumer preferences, which impact inbound pallets. Shifts in consumer demand may also impact outbound pallets.

Components of Our Results of Operations

Warehouse

Rent, storage, and warehouse services. Our primary source of revenues are rent, storage, and warehouse services fees. Rent and storage revenues are related to the storage of frozen, perishable or other products in our warehouses. We also offer a wide array of value added services including: i) receipt, labeling and storage of goods, ii) customized order retrieval and packaging, iii) blast freezing and ripening, iv) government approved periodic inspections, fumigation, and other treatment services, v) e-commerce fulfillment and many more.

Rent, storage, and warehouse services cost of operations consist of labor, power, other facilities costs, and other service costs.

Labor, the most significant part of warehouse expenses, covers wages, benefits, workers' compensation, and can vary due to factors like workforce size, customer needs, compensation levels, third-party labor usage, collective bargaining agreements, customer requirements, productivity, labor availability, government policies, medical insurance costs, safety programs, and discretionary bonuses.

The cost of power fluctuates based on the price of power in the regions that our facilities operate and the required temperature zone or freezing required. We may, from time to time, economically 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.

Other facilities costs include utilities other than power, property taxes and insurance, sanitation, repairs and maintenance, operating leases rent charges, security, and other related facilities costs.

Other services costs include equipment costs, warehouse consumables (e.g. shrink-wrap), employee protective equipment, warehouse administration and other related services costs.

Transportation

Transportation services revenue is derived from fees charged for transportation of our customers products, often including fuel and capacity surcharges.

Transportation services cost of operations are primarily affected by third-party carrier costs, which are influenced by carrier factors like driver and equipment availability. In select markets, we use our drivers and assets, incurring costs like wages, fuel, tolls, insurance, and maintenance to operate these assets.

Third-Party Managed

Third-party managed services revenue. Reimbursements that we receive for expenses incurred for warehouses that we manage on behalf of third party owners are recognized as third-party managed services revenues. We also earn management fees, incentive fees upon achieving negotiated performance and cost-savings results, or an applicable mark-up on costs.

Third-party managed services cost of operations, which are recognized on a pass through basis, primarily consist of labor charges similar to those described above as a component of the warehouse costs of operations.

Consolidated Operating Expenses

Depreciation and amortization charges relate to the depreciation of buildings and equipment related improvements, leasehold improvements, material handling equipment, furniture, fixtures, and our computer equipment. Amortization relates primarily to intangible assets for customer relationships.

Selling, general, and administrative expenses consist primarily of non-warehouse related labor, administrative, business development, marketing, engineering, human resources, information technology (including amortization expenses associated with the implementation of Project Orion), performance and time based incentive compensation, communications, travel, professional fees, bad debt, training, and office supplies.

Acquisition, cyber incident, and other, net, consists of non-recurring or non-routine costs including acquisition related costs, costs related to Project Orion, litigation and settlement costs outside of the normal course of business, severance, terminated site operations costs, and cyber incident related costs, net of insurance recoveries all of which are not representative of our normal course of operations.

Loss (gain) from sale of real estate represents gains recognized from the sale of Company owned real estate.

Interest expense is associated with interest charged on unsecured revolving credit facilities, term loans, and notes.

Loss on debt extinguishment and termination of derivative instruments is representative of charges associated with debt extinguishments and termination of derivative instruments.

Loss from investments in partially owned entities is representative of our share of gains and losses associated with our minority ownership interests in joint ventures.

Impairment of related party loan receivable represents impairment charges associated with the loan issued to the Comfrio joint venture.

Loss on put option represents the fair value of put option associated with the Comfrio joint venture.

Other, net primarily includes foreign currency remeasurement, interest income, gains and losses on asset disposals, certain legal settlements, real estate related impairment charges and other miscellaneous items.

RESULTS OF OPERATIONS

Comparison of Results for the Three Months Ended September 30, 2024 and 2023

Warehouse Segment

The following table presents the operating results of our warehouse segment for the three months ended September 30, 2024 and 2023.

(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 $8.5 million and $9.3 million, on an actual basis, for the three months ended September 30, 2024 and 2023, respectively.

(3) Includes non-real estate rent expense (equipment lease and rentals) of $3.0 million and $3.9 million, on an actual basis, for the three months ended September 30, 2024 and 2023, respectively.

On a constant currency basis, our warehouse segment revenues increased $16.4 million, or 2.7%, compared to the same period in the prior year. This growth was primarily driven by $17.8 million of growth in our same store pool and offset by a decrease of $1.4 million in our non-same store pool both on a constant currency basis, further discussed below.

On a constant currency basis, our warehouse segment cost of operations decreased $6.8 million, or 1.6%, during the three months ended September 30, 2024, as compared to the same period of the prior year. This is primarily driven by a decrease of $4.8 million in our non-same store pool and a decrease of $2.0 million in same store pool both on a constant currency basis, further discussed below.

On a constant currency basis, warehouse segment NOI increased 13.0% during the three months ended September 30, 2024, as compared to the same period of the prior year. This is primarily due to increased NOI in our same store portfolio of $19.8 million on a constant currency basis, attributable to factors described below.

Same Store and 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 September 30, 2024 and 2023.

(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.

(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.

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

n/r - not relevant

Same store storage revenue decreased $8.6 million on a constant currency basis. This was primarily due to a decrease in economic occupancy of 590 bps. Economic occupancy decreased primarily due to our customers’ slow down in food production levels, which is impacted by the economic strains felt by the end-consumer resulting in basket sizes shrinking and less pantry stocking. This was partially offset by an increase in fixed committed contracts and customer pricing and rate escalation initiatives. Specifically, our constant currency same store rent and storage revenue per average economic occupied pallet increased 3.8% during the three months ended September 30, 2024 as compared to the same period in the prior year.

Same store warehouse services revenue increased $26.4 million on a constant currency basis, primarily due to pricing initiatives, improved revenue capture, and incremental value added services. Specifically, our constant currency same store services revenues per throughput pallet increased 11.0% during the three month period ending September 30, 2024 as compared to the same period of the prior year. This was partially offset by a decrease in throughput of 2.4% related to a decline in end-consumer demand and spending primarily due to the impact of inflation on the costs of food.

Same store warehouse costs of operations decreased on a constant currency basis by $2.0 million primarily driven by lower labor and other service costs. Labor costs decreased as a result of lower throughput volume resulting in less overtime and contracted labor, in addition to labor efficiencies. Other service costs decreased due to lower throughput volumes resulting in lower costs associated with supply purchases, equipment maintenance, productivity improvements as well as lower customer claims reserve expense. This was partially offset by an increase in power and other facilities costs, primarily facility maintenance, due to ongoing inflationary pressures.

Transportation Segment

The following table presents the operating results of our transportation segment for the three months ended September 30, 2024 and 2023.

(Dollars in thousands)

(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.

On a constant currency basis transportation revenues decreased $2.8 million, or 5.1%, compared to the same period in the prior year. The decrease was primarily due to lower volumes associated with certain warehouses in the UK which resulted in a strategic transition of the transportation business to a third-party logistics model, the loss of volume from a customer in the United States during the second quarter of 2024 (which resumed during the third quarter of 2024), and the softening of transportation demand in the general macro-environment.

On a constant currency basis transportation cost of operations decreased $1.9 million, or 4.0%, compared to the same period in the prior year. The decrease was due to the same factors contributing to the decline in revenue mentioned above.

On a constant currency basis the transportation segment contribution NOI decreased $1.0 million or 9.9%, compared to the same period in the prior year due to the factors mentioned above.

Third-Party Managed Segment

The following table presents the operating results of our third-party managed segment for the three months ended September 30, 2024 and 2023:

(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.

n/a - not applicable

On a constant currency basis, third-party managed revenues increased $0.4 million, or 4.0%, as compared to the same period in the prior year.

On a constant currency basis, third-party managed cost of operations decreased $0.1 million, or 1.2%, as compared to the same period in the prior year.

On a constant currency basis, third-party managed segment contribution (NOI) increased $0.5 million, or 29.6% as compared to the same period in the prior year. The improvement in margin is primarily due to operational and customer pricing improvements in Australia and certain North America locations. This is offset by the ceased operation of a certain third party managed site during the three months ended June 30, 2024.

Other Consolidated Operating Expenses

Depreciation and amortization. Depreciation and amortization expense decreased $0.4 million, or 0.4%, during the three months ended September 30, 2024 as compared to the same period in the prior year.

Selling, general, and administrative. During the three months ended September 30, 2024, corporate-level selling, general, and administrative expenses increased $11.3 million, or 21.5%, compared to $52.4 million for the same period in the prior year. This was primarily driven by the go live of Project Orion during the three months ended June 30, 2024, which resulted in less capitalized labor and higher software related expenses (primarily subscription charges and amortization of deferred costs). This increase also includes general increases in office administrative expenses, most notably data communications, and information security related investments.

Acquisition, cyber incident, and other, net. Corporate-level acquisition, cyber incident and other, net include the following:

(Dollars in thousands)

Corporate-level Acquisition, cyber incident, and other, net was $26.0 million for the three months ended September 30, 2024, an increase of $12.1 million compared to the three months ended September 30, 2023.

Project Orion expenses represent the non-capitalizable portion of our Project Orion costs, which is an investment in and transformation of our technology systems, business processes and customer solutions. The project includes the implementation of a new, best-in-class, cloud-based “ERP” software system. These costs have increased by $18.4 million primarily due to increased contract labor, professional fees, and other non-capitalizable implementation costs.

Cyber incident related costs, net of insurance recoveries, decreased by $4.7 million during the three months ended September 30, 2024 compared to the same period in the prior year. Costs for the three months ended September 30, 2023 were comprised primarily of incremental claim reserves and professional and legal fees related to the 2023 Cyber incident further described in Note 1 - General to these Condensed Consolidated Financial Statements.

(Gain) loss from sale of real estate. The Company’s gain or loss activity related to the sale of real estate was not significant during the three months ended September 30, 2024 or 2023.

Other Income and Expense

The following table presents items of other income and expense for the three months ended September 30, 2024 and 2023.

(Dollars in thousands)

Interest expense. Interest expense decreased $1.3 million, or 3.7%, compared to the three months ended September 30, 2023. This was primarily due the Company’s purchase of eleven facilities previously accounted for as failed sale-leasebacks transactions, thus resulting in lower interest expense. Additionally, there was more capitalized interest in the current period, which also contributed to the decrease. This was partially offset by the effective interest rate on our outstanding debt increasing from 4.02% to to 4.10% as of September 30, 2023 and September 30, 2024, respectively.

Loss on debt extinguishment and termination of derivative instruments. Loss on debt extinguishment and termination of derivative instruments decreased $0.5 million, compared to the three months ended September 30, 2023. This is primarily related to the full amortization of the previously terminated interest rate swaps further described in Note 5 - Derivatives to these Condensed Consolidated Financial Statements.

Loss from investments in partially owned entities. Loss from investments in partially owned entities increased $0.8 million, compared to the three months ended September 30, 2023. This is primarily due to a decrease in earnings from Superfrio due to lower occupancy rates and higher interest expense.

Other, net. Other, net was a benefit of $0.8 million for the three months ended September 30, 2024, compared to a benefit of $0.7 million for the three months ended September 30, 2023. The components of Other, net are included in the table below.

(Dollars in thousands)

Income Tax Benefit (Expense)

Income tax benefit for the three months ended September 30, 2024 was $0.8 million, an increase of $0.3 million from an income tax benefit of $0.5 million for the three months ended September 30, 2023. The increase is primarily the result of changes in the blend of pre-tax book income and losses generated year over year by jurisdiction.

Comparison of Results for the Nine Months Ended September 30, 2024 and 2023

Warehouse Segment

The following table presents the operating results of our warehouse segment for the nine months ended September 30, 2024 and 2023.

(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 $26.9 million and $28.2 million, on an actual basis, for the nine months ended September 30, 2024 and 2023, respectively.

(3) Includes non-real estate rent expense (equipment lease and rentals) of $9.5 million and $11.0 million, on an actual basis, for the nine months ended September 30, 2024 and 2023, respectively.

On a constant currency basis, our warehouse segment revenues increased $58.3 million, or 3.3%, during the nine months ended September 30, 2024, compared to the same period in the prior year. This growth was driven by an increase of $52.5 million in our same store pool, and an increase of $5.9 million in our non same store pool, both on a constant currency basis, due to factors further discussed below.

On a constant currency basis, our warehouse segment cost of operations decreased $25.2 million, or 2.0%, during the nine months ended September 30, 2024, compared to the same period in the prior year. The cost of operations for our same store pool decreased $20.1 million, and decreased $5.2 million in our non same store pool, both on a constant currency basis, due to factors further described below.

On a constant currency basis, warehouse segment NOI increased 15.9% during the nine months ended September 30, 2024, compared to the same period in the prior year. The NOI for our same store pool increased $72.5 million, or 13.4%, and our non same store pool increased $11.0 million, both on a constant currency basis, primarily attributable to factors described below.

Same Store and Non-Same Store Analysis

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 nine months ended September 30, 2024 and 2023.

51

(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.

n/r - not relevant

The following table provides certain operating metrics to explain the drivers of our same store and non-same store performance.

Units in thousands except per pallet and site number data - unaudited

n/r - not relevant

Same store storage revenue decreased $11.4 million on a constant currency basis, primarily due to a decrease in economic occupancy of 490 bps. The economic occupancy decrease was primarily due to our customers’ slow down in food production levels, which is impacted by the economic strains felt by the end-consumer resulting in basket sizes shrinking and less pantry stocking. This decrease was partially offset by an increase in fixed commitments. Specifically, our constant currency same store rent and storage revenues per average economic occupied pallet increased 5.0% during the nine months ended September 30, 2024 as compared to the same period in the prior year.

Same store services revenue increased $63.8 million on a constant currency basis, primarily due to our pricing initiatives, improved revenue capture, and incremental value added services. Specifically, our constant currency same store services revenue per throughput pallet increased 11.3% during the nine months ended September 30, 2024 as compared to the same period in the prior year. This was partially offset by a decrease in throughput of 4.0% related to a decline in end-consumer demand and spending primarily due to the impact of inflation on the costs of food.

Same store warehouse costs of operations decreased by $20.1 million on a constant currency basis, primarily driven by lower labor and other service costs. Labor costs decreased as a result of lower throughput volume of 4.0% resulting in less overtime and needed contract labor, in addition to labor efficiencies. Other service costs also decreased from lower throughput volumes of 4.0%. Other service costs decreased due to lower throughput volumes resulting in lower costs associated with supply purchases, equipment maintenance, productivity improvements as well as lower customer claims reserve expense. This was partially offset by an increase in power and other variable facilities costs, primarily facility maintenance, due to ongoing inflationary pressures.

Transportation Segment

The following table presents the operating results of our transportation segment for the nine months ended September 30, 2024 and 2023.

(Dollars in thousands)

(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.

On a constant currency basis transportation revenues decreased $18.3 million, or 10.0%. The decrease was primarily due to lower volumes associated with certain warehouses in the UK which resulted in a strategic transition of the transportation business to a third-party logistics model, the loss of a major customer in the United States that is expected to return later this year, and the softening of transportation demand in the general macro-environment.

On a constant currency basis transportation cost of operations decreased $16.8 million, or 11.1%. The decrease was due to the same factors contributing to the decline in revenue mentioned above.

On a constant currency basis the transportation segment contribution NOI decreased $1.5 million or 4.8%, compared to the same period in the prior year due to the factors mentioned above.

Third-Party Managed Segment

The following table presents the operating results of our third-party managed segment for the nine months ended September 30, 2024 and 2023.

(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.

On a constant currency basis, third-party managed revenues decreased $2.7 million, or 8.0%, during the nine months ended September 30, 2024, as compared to the same period in the prior year.

On a constant currency basis, third-party managed cost of operations decreased $5.0 million, or 17.2%, during the nine months ended September 30, 2024 as compared to the same period in the prior year.

On a constant currency basis, third-party managed segment contribution (NOI) increased $2.4 million, or 57.5% as compared to the same period in the prior year. The improvement in margin is primarily due to customer pricing and operational improvements in Australia and certain North America locations. Additionally, the third party managed segment costs are largely passed to the consumer, thus the decline in overall costs associated with the wind down of previously exited sites aligns with the corresponding decline in segment revenues. Lastly, the Company ceased operations of a certain third party managed site during the three months ended June 30, 2024, however, the impact of this exit was not significant.

Other Consolidated Operating Expenses

Depreciation and amortization. Depreciation and amortization expense increased $11.5 million, or 4.4%, during the nine months ended September 30, 2024 compared to the same period in the prior year. This increase was primarily due to the impact of our recently completed expansion and development projects. This is offset by less depreciation associated with certain automation assets.

Selling, general, and administrative. During the nine months ended September 30, 2024, corporate-level selling, general and administrative expenses increased $19.5 million, or 11.5%, compared to the same period in the prior year. This was primarily driven by general increases in office administrative expenses, most notably including data communications, information security related investments, and legal and professional fees. This increase also includes the impact of the go live of Project Orion during the three months ended June 30, 2024 which resulted in higher software related expenses (primarily subscription and deferred costs amortization).

Acquisition, cyber incident, and other, net. Corporate-level acquisition, cyber incident and other, net include the following:

(Dollars in thousands)

Corporate-level Acquisition, cyber incident, and other, net was $44.0 million for the nine months ended September 30, 2024, a decrease of $4.3 million compared to the nine months ended September 30, 2023.

Project Orion expenses represent the non-capitalizable portion of our Project Orion costs, which is an investment in and transformation of our technology systems, business processes and customer solutions. The project includes the implementation of a new, best-in-class, cloud-based “ERP” software system. These costs have increased by $33.7 million primarily due to increased contract labor, professional fees, and other non-capitalizable implementation costs.

Cyber incident related costs, net of insurance recoveries, decreased by $31.8 million partially related to a $10.0 million payment received during the three months ended June 30, 2024 for business interruption insurance. Costs for the nine months ended September 30, 2023 were comprised primarily of incremental claim reserves and professional and legal fees related to the 2023 Cyber incident further described in Note 1 - General to these Condensed Consolidated Financial Statements.

(Gain) loss from sale of real estate. (Gain) loss from sale of real estate during the nine months ended September 30, 2024 included a $3.5 million gain related to the strategic sale of a facility in our warehouse portfolio. During the nine months ended September 30, 2023, the Company recorded a $2.3 million gain from the sale of real estate related to the sale of a facility in Canada. The proceeds of the sale were used to repay outstanding Canadian-denominated Revolver short-term borrowings.

Other Income and Expense

The following table presents items of other income and expense for the nine months ended September 30, 2024 and 2023.

(Dollars in thousands)

Interest expense. Interest expense decreased $5.6 million, or 5.2%, compared to the nine months ended September 30, 2023. This was primarily due the Company’s purchase of eleven previously leased facilities accounted for as failed sale-leaseback transactions resulting in lower interest expense during the period, capitalized interest for developments, and lower average revolver balances.

Loss on debt extinguishment and termination of derivative instruments. Loss on debt extinguishment and termination of derivative instruments increased $114.2 million, compared to the nine months ended September 30, 2023. The increase was primarily due to the purchase of eleven failed sale-leaseback facilities, resulting in a loss on debt extinguishment of $115.1 million.

Loss from investments in partially owned entities. Loss from investments in partially owned entities increased $1.4 million, or 86.9%, compared to the nine months ended September 30, 2023. This is primarily due to a decrease in earnings from Superfrio due to lower occupancy rates and increased interest expense.

Impairment of related party loan receivable. Impairment of related party loan receivable was $22.0 million for the nine months ended September 30, 2023. During the fourth quarter of 2022, the Company entered into a loan agreement with Comfrio, in which Comfrio borrowed $25.0 million from Americold at a 10% annual fixed interest rate. During the nine months ended September 30, 2023, the Company fully impaired the remaining balance.

Loss on put option. Loss on put option was $56.6 million for the nine months ended September 30, 2023, which represents the estimated loss recognized when the exercise of the Comfrio put was deemed probable. See Note 2 - Acquisitions and Discontinued Operations to the Condensed Consolidated Financial Statements herein for further details on the loss on put option.

Loss from discontinued operations, net of tax Loss from discontinued operations, net of tax was $10.5 million for the nine months ended September 30, 2023. See Note 2 - Acquisitions and Discontinued Operations to the Condensed Consolidated Financial Statements herein for further details on the components of this loss.

Other, net. Other, net was a benefit of $24.9 million for the nine months ended September 30, 2024, an increase of $23.2 million compared to a benefit of $1.7 million for the nine months ended September 30, 2023. This is primarily due to an $11.4 million gain related to the removal of hedge designation for the Company’s British pound revolver (of which $10.4 million was previously classified in Accumulated Other Comprehensive Income), in addition to an $8.4 million million settlement related to a representations and warranty claim related to a prior acquisition, both of which occurred during the nine months ended September 30, 2024.

(Dollars in thousands)

Income Tax Benefit

Income tax benefit for the nine months ended September 30, 2024 was $1.3 million, compared to an income tax benefit of $1.7 million for the nine months ended September 30, 2023. The change is primarily from improved operating results from foreign operations.

Non-GAAP Financial Measures

We use the following non-GAAP financial measures as supplemental performance measures of our business: NAREIT FFO, Core FFO, Adjusted FFO, NAREIT EBITDAre, and Core EBITDA all of which are further defined below. Additionally we use NOI, Constant Currency metrics and Same Store metrics further described above.

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 and other assets, plus specified non-cash items, such as real estate asset depreciation, amortization and impairment, as well as 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 or real estate related assets, 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 NAREIT FFO adjusted for the effects of Net (gain) loss on sale of non-real estate assets; Acquisition, cyber incident, and other, net; Loss on debt extinguishment and termination of derivative instruments; Foreign currency exchange loss (gain); Gain on legal settlement related to prior period operations; Project Orion deferred costs amortization; Our share of reconciling items related to partially owned entities; (Gain) loss from discontinued operations, net of tax; Impairment of related party loan receivable; Loss on put option; and Gain on sale of LATAM JV. 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 NAREIT 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 usefulness of NAREIT 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 below/above market leases; Straight-line rental expense adjustment; Deferred income tax benefit; Stock-based compensation expense; Non-real estate depreciation and amortization; Maintenance capital expenditures; and Our share of reconciling items related to partially owned entities. We believe that Adjusted FFO is helpful to investors as a meaningful supplemental comparative performance measure of our ability to make incremental capital investments in our business and to assess our ability to fund distribution requirements from our operating activities.

FFO, Core FFO and Adjusted FFO are used by management, investors and industry analysts as supplemental measures of operating performance of equity REITs. FFO, Core FFO and Adjusted FFO should be evaluated along with U.S. GAAP net income (loss) and net income or loss 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 condensed 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 (loss) 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.

59

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

(In thousands)

(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.

(b) Stock-based compensation expense excludes the stock compensation expense associated with employee awards granted in conjunction with Project Orion, which are recognized within Acquisition, cyber incident, and other, net.

(c) During the three months ended September 30, 2023, management excluded losses from discontinued operations from Core FFO applicable to common stockholders, and Adjusted FFO applicable to common stockholders and included certain losses from discontinued

operations for NAREIT FFO. For purposes of comparability using this same approach, the following adjusted historical results are

recasted as follows:

(in thousands)

60

We calculate NAREIT EBITDA for Real Estate, or EBITDAre, in accordance with the standards established by the Board of Governors of NAREIT, defined as, Net loss before Depreciation and amortization; Interest expense; Income tax benefit; Loss (gain) from sale of real estate; 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, cyber incident, and other, net; Loss from investments in partially owned entities; Impairment of indefinite and long-lived assets;Foreign currency exchange loss (gain); Stock-based compensation expense; Loss on debt extinguishment and termination of derivative instruments; (Gain) loss on other asset disposals; Gain on legal settlement related to prior period operations; Project Orion deferred costs amortization; Reduction in EBITDAre from partially owned entities; Gain on sale of LATAM JV; (Gain) loss from discontinued operations, net of tax; Impairment of related party loan receivable; and Loss on put option. 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.

Reconciliation of Net Loss to NAREIT EBITDAre and Core EBITDA

(In thousands)

(a) Stock-based compensation expense excludes the stock compensation expense associated with employee awards granted in conjunction with Project Orion, which are recognized within Acquisition, cyber incident, and other, net.

(b) During the three months ended September 30, 2023, management included certain losses from discontinued operations in NAREIT EBITDAre. For purposes of comparability using this same approach, the following adjusted historical results recasted are as follows:

(in thousands)

62

1LIQUIDITY AND CAPITAL RESOURCES21

Our principal sources of funding for our financial commitments include:

• current cash balances;
• cash flows from operations;
• our Senior Unsecured Revolving Credit Facility;
• our ATM Equity Program; 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 and long-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;
• quarterly stockholder distributions; and
• future development, expansion, and acquisition related activities.

Universal Shelf Registration Statement

On March 17, 2023, the Company and the Operating Partnership filed with the SEC an automatic shelf registration statement on Form S-3 (Registration No. 333-270664 and 333-270664-01) (as amended from time to time, the “Registration Statement”), registering an indeterminate amount of (i) the Company’s common stock, $0.01 par value per share, (ii) the Company’s preferred stock, $0.01 par value per share, (iii) depositary shares representing entitlement to all rights and preferences of fractions of the Company’s preferred shares of a specified series and represented by depositary receipts, (iv) warrants to purchase the Company’s common stock or preferred stock or depositary shares and (v) debt securities of the Operating Partnership, which may be fully and unconditionally guaranteed by the Company and certain subsidiaries of the Company. The Registration Statement was amended on September 3, 2024 to add certain direct and indirect subsidiaries of the Company as co-registrants to the Registration Statement, since each such co-registrant may be a guarantor of some or all of the debt securities of the Operating Partnership with respect to which offers and sales are registered under the Registration Statement.

At the Market (ATM) Equity Program

On March 17, 2023, the Company entered into an equity distribution agreement pursuant to which we could sell, from time to time, up to an aggregate sales price of $900.0 million of our common stock through an ATM Equity Program (the “Prior ATM Equity Program”). Sales of our common stock made pursuant to the Prior ATM Equity Program could 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 the Company. Sales could also be made on a forward basis pursuant to separate forward sale agreements.

During August 2023, we sold 13,244,905 common shares under the Prior ATM Equity Program for net proceeds of $412.6 million. The net proceeds from sales of our common stock pursuant to the Prior ATM Equity Program were used to repay a portion of the revolver borrowings.

On November 9, 2023, we entered into an equity distribution agreement that was substantially identical to and replaced the prior equity distribution agreement, pursuant to which we may sell, from time to time, up to an additional $900.0 million of our common shares through our ATM Equity Program (the “Current ATM Equity Program”). During the three and nine months ended September 30, 2024, we did not sell any shares of our common stock under the Current ATM Equity Program.

Public Senior Unsecured Notes Offering

On September 12, 2024, we completed an underwritten public offering of $500.0 million aggregate principal amount of the Operating Partnership’s senior unsecured 5.409% notes (the “Public Senior Unsecured Notes”) due September 12, 2034. The Public Senior Unsecured Notes were offered pursuant to the Registration Statement further described in Note 1 - General l to these Condensed Consolidated Financial Statements. The Public Senior Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, by each of the Company, Americold Realty Operations, Inc., a wholly-owned subsidiary of the Company and a limited partner of the Operating Partnership, and certain subsidiaries of the Operating Partnership. The Public Senior Unsecured Notes bear interest at a rate of 5.409% per year, and interest is payable on March 12 and September 12 of each year, with the first payment occurring March 12, 2025.

In connection with the issuance of the Public Senior Unsecured Notes, we incurred approximately $5.9 million of debt issuance costs related to the issuance. The Company determined that the difference between amortizing such fees using the effective interest rate method and the straight line method was immaterial. Therefore, the fees will be recognized on a straight line basis over the term of the Public Senior Unsecured Notes as “Interest expense” on the Condensed Consolidated Statement of Operations. The proceeds from the issuance of the Public Senior Unsecured Notes were used to repay a portion of borrowings previously outstanding.

The indenture governing the Public Senior Unsecured Notes and guarantees (which includes the base indenture, dated September 12, 2024, as supplemented by the first supplemental indenture, dated September 12, 2024, and which are together referred to herein as the "indenture") includes an optional redemption provision. Prior to June 12, 2034, the Public Senior Unsecured Notes may be redeemed at our option, in whole or in part, at a redemption price equal to the greater of (i) 100% of the principal amount of the Public Senior Unsecured Notes being redeemed, or (ii) a make-whole premium calculated in accordance with the indenture. On or after June 12, 2034, the Public Senior Unsecured Notes may be redeemed at our option, in whole or in part, at a redemption price equal to 100% of the principal amount of the Public Senior Unsecured Notes to be redeemed. In both cases, the prepayment amount must also include any unpaid interest accrued thereon to, but excluding, the redemption date

Summarized financial information of the aforementioned guarantors associated with the Public Senior Unsecured Notes is included herein within the Summarized Guarantor Financial Information section of Item 2. Management Discussion and Analysis to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q

Security Interests in Customers’ Products

By operation of law and in accordance with our customer contracts (other than leases), we typically receive warehouseman’s liens on products held in our warehouses to secure customer payments. Such liens permit us to take control of the products and sell them to third parties in order to recover any monies receivable on a delinquent account, but such products may be perishable or otherwise not readily salable by us. Historically, in instances where we have warehouseman’s liens and our customer sought bankruptcy protection, we have been successful in receiving “critical vendor” status, which has allowed us to fully collect on our accounts receivable during the pendency of the bankruptcy proceeding.

Our bad debt expense was $1.6 million and $1.0 million for the three months ended September 30, 2024 and 2023, and $3.0 million and $3.0 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we maintained bad debt allowances of approximately $22.2 million, which we believe to be adequate.

Dividends and Distributions

As a REIT, we must distribute 90.0% of our taxable income (excluding capital gains) annually. 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. Historically, we have distributed at least 100.0% of our taxable income annually, since inception, to minimize corporate-level federal income taxes.

The REIT distribution requirement limits our ability to rely on retained earnings to fund our ongoing operations compared to non-REIT companies. To meet financial commitments, capital needs, and REIT distribution requirements, we may raise capital through debt and equity markets and use our revolving credit facility.

For further information regarding dividends and distributions, refer to our Consolidated Financial Statements included in our 2023 Annual Report on Form 10-K as filed with the SEC.

Outstanding Indebtedness

The following table summarizes our outstanding indebtedness as of September 30, 2024 (in thousands):

(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, CORRA, BBSW, EURIBOR, and BKBM rates, depending on the respective agreement governing the debt, including our global revolving credit facilities. As of September 30, 2024, our debt had a weighted average term to maturity of approximately 5.4 years, assuming exercise of extension options.

During the three months ended June 30, 2024, the Company determined that its previous designation of £78.0 million of debt and accrued interest as a hedge of its net investment in its United Kingdom-based subsidiary did not qualify for hedge accounting, and the cumulative foreign exchange gain associated with this transaction of $10.4 million previously classified within Accumulated Other Comprehensive Income, has been recorded as a gain on foreign exchange within “Other, net”on the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2024. The Company has determined that the impacts of this adjustment are immaterial to the current and prior period interim and annual financial statements and disclosures. Furthermore, the Company fully paid off the balance of this revolving debt during the nine months ended September 30, 2024.

For further information regarding outstanding indebtedness, please see Note 4 - Debt and Note 5 - Derivative Financial Instruments to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and Note 9 - Accumulated Other Comprehensive Income (Loss) to our Condensed Consolidated Financial Statements.

Aggregate Future Repayments of Indebtedness

The aggregate maturities of indebtedness (including extensions in which we are reasonably assured to exercise), excluding sale-leaseback financing obligations and financing lease obligations, as of September 30, 2024 for each of the next five years and thereafter, are as follows (in thousands):

Credit Ratings

Our capital structure and financial practices have earned us investment grade credit ratings from three nationally recognized credit rating agencies as follows:

• BBB with a (Stable Outlook) from Fitch
• BBB with a (Positive Trend) outlook from DBRS Morningstar
• 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 2023 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. Such expenditures examples include roof and refrigeration equipment replacement, IT system updates, handling equipment upgrades, amongst others. Maintenance capital expenditures do not include acquisition costs contemplated with the purchase of a building.

The following table sets forth our maintenance capital expenditures for the three and nine months ended September 30, 2024 and 2023.

(In thousands, except per cubic foot amounts)

Repair and Maintenance Expenses

We incur repair and maintenance expenses for normal maintenance, repairs, and replacements at our warehouses that do not materially extend the life of the property or provide future economic benefits. Such expenses are recognized as operating expenses on our Condensed Consolidated Statement of Operations. Examples of repair and maintenance expenses include roof, wall, and other handling equipment repairs.

The following table sets forth our repair and maintenance expenses for the three and nine months ended September 30, 2024 and 2023.

(In thousands, except per cubic foot amounts)

External Growth, Expansion and Development Capital Expenditures

External growth expenditures represent asset acquisitions or business combinations. Expansion and development capital expenditures support customers and our warehouse expansions, including improvements to our information technology platform.

Examples of capital expenditures associated with expansion and development initiatives include funding of construction costs, warehouse capacity and pallet position expansion, implementing energy efficiency projects, such as thermal energy storage, and the delivery of new systems, software and customer interface functionality.

Acquisitions and Dispositions

For information regarding acquisitions and dispositions completed during 2023, refer to our 2023 Annual Report on Form 10-K.

During the nine months ended September 30, 2024, the Company purchased eleven facilities in the Company’s lease portfolio with a lessor that were previously accounted for as failed sale-leaseback financing obligations. Total cash outflows related to these purchases of $191.0 million are included within “Termination of sale-leaseback financing obligations” on the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024.These purchases resulted in the recognition of a $115.1 million loss on debt extinguishment during the nine months ended September 30, 2024. These amounts are recognized within “Loss on debt extinguishment and termination of derivative instruments” on the Condensed Consolidated Statements of Operations included herein.

During the nine months ended September 30, 2024, the Company sold a facility for proceeds of $9.0 million, resulting in the recognition of a gain of $3.6 million, which is included in “Loss (gain) from sale of real estate” on the Condensed Consolidated Statements of Operations.

Expansion and development

The expansion and development expenditures (inclusive of capitalized interest, compensation, and travel expenses) for the nine months ended September 30, 2024 include $30.2 million related to our two fully-automated, build-to-suit, development sites in Connecticut and Pennsylvania; $16.1 million related to the Allentown, Pennsylvania facility; $13.4 million related to our Kansas City, Missouri facility; $1.6 million related to our Atlanta, Georgia Major Market Strategy - Phase 2; $7.1 million related to our Russellville, Arkansas expansion; $1.5 million related to our Sydney, Australia expansion; and $23.4 million of corporate initiatives and smaller customer driven growth projects, which are designed to reduce future spending over the course of time. This includes return on investment projects, conversion of leases to owned assets, and other cost-saving initiatives. Additionally, we incurred approximately $34.5 million for contemplated future expansion or development projects and $8.5 million for information technology related assets.

During the nine months ended September 30, 2024, we incurred capitalized interest of $12.1 million related to our ongoing expansion and development projects, which is included in the summarized expansion and development expenditures mentioned above.

The following table sets forth our acquisition, expansion and development capital expenditures for the three and nine months ended September 30, 2024 and 2023.

(In thousands)

69

Historical Cash Flows

(In thousands)

Operating Activities

For the nine months ended September 30, 2024, our net cash provided by operating activities was $249.3 million, an increase of $56.1 million compared to $193.2 million for the nine months ended September 30, 2023. The increase is primarily attributable to the impact of improved NOI.

Investing Activities

Our net cash used in investing activities was $206.4 million for the nine months ended September 30, 2024 compared to $258.4 million for the nine months ended September 30, 2023. Additions to property, buildings and equipment were $204.3 million, reflecting maintenance capital expenditures and investments in our various expansion and development projects. Additionally, we invested $11.4 million in a loan to the RSA joint venture. This was partially offset by proceeds from a sold facility of $9.3 million.

Net cash used in investing activities was $258.4 million for the nine months ended September 30, 2023. Additions to property, buildings and equipment were $188.3 million, reflecting maintenance capital expenditures and investments in our various expansion and development projects. Additionally, we purchased the remaining outstanding equity ownership of the Comfrio joint venture for $46.7 million, which we subsequently sold in August of 2023, and completed an asset acquisition and a lease buyout for a facility for $43.6 million. Finally, we invested $20.0 million in additional loans to joint ventures, approximately $15.0 million of which was subsequently impaired, as well as a minority equity interest in the RSA joint venture. This was partially offset by proceeds from the sale of our share of the LATAM joint venture of $36.9 million.

Financing Activities

Net cash used in financing activities was $41.8 million for the nine months ended September 30, 2024 compared to net cash provided by financing activities of $69.1 million for the nine months ended September 30, 2023. Cash used in financing activities for the current period primarily consisted of $885.3 million in repayments on our Senior Unsecured Revolving Credit Facility, $191.0 million related to the purchase of failed sale-leaseback facilities, $189.2 million of quarterly dividend payments, and $33.9 million in aggregate lease repayments. Cash provided by financing activities during the current period included $759.2 million in proceeds from our Senior Unsecured Revolving Credit Facility and $500.0 million in proceeds from our Public Senior Unsecured Notes offering, which were used to repay a portion of the borrowings outstanding under the Senior Unsecured Revolving Credit Facility and to fund issuance costs related to the offering.

Net cash provided by financing activities was $69.1 million for the nine months ended September 30, 2023. Cash provided by financing activities primarily consisted of $545.4 million in proceeds from our Senior Unsecured Revolving Credit Facility and $412.9 million in net proceeds from the issuance of common stock under the 2023

ATM Equity Program, offset by $679.2 million in repayments on our Senior Unsecured Revolving Credit Facility, $179.6 million of quarterly dividend distributions paid, and $33.1 million in aggregate lease repayments.

CRITICAL ACCOUNTING ESTIMATES

Refer to 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. There were no material changes during the period covered by this Quarterly Report to the critical accounting estimates and assumptions previously disclosed in our 2023 Annual Report on Form 10-K.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 1 - General to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

On September 12, 2024 we completed an underwritten public offering of $500.0 million aggregate principal amount of the Operating Partnership’s 5.409% (the “Public Senior Unsecured Notes”) due September 12, 2034. Interest is payable on March 12 and September 12 of each year, with the first payment occurring March 12, 2025.

On the date of issuance of the Public Senior Unsecured Notes, each of the Company and Americold Operations (together, the “Parent Guarantors”), and each of Nova Cold Logistics, Americold Australian Holdings and Icecap Properties NZ Limited (the “Subsidiary Guarantors” and together with the Parent Guarantors, the “Initial Guarantors”), jointly and severally, fully and unconditionally guaranteed the Operating Partnership’s obligations under the Public Senior Unsecured Notes, including the due and punctual payment of principal of, and premium, if any, and interest on, the Public Senior Unsecured Notes.

The following table contains the summarized financial information of the Initial Guarantors and the operating partnership (collectively, the “Obligor Group”) on a combined basis after the elimination of intercompany balances and transactions between entities in the Obligor Group as of September 30, 2024 and December 31, 2023 and for the nine months ended September 30, 2024 and the year ended December 31, 2023 (in thousands):

Separate Consolidated Financial Statements of the Operating Partnership have not been presented in accordance with Rule 3-10 of Regulation S-X and Rule 12h-5 under the Securities and Exchange Act of 1934

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 September 30, 2024, we had $645.0 million of outstanding USD-denominated variable-rate debt and C$250.0 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 Adjusted Term SOFR for the USD tranches and daily adjusted CORRA for the CAD tranche. These rates are also subject to contractual margins up to 0.94% and index adjustments of 0.10% on SOFR and 0.30% on CORRA. We have entered into interest rate swaps to effectively lock in the floating rates on all of our USD-denominated term loans at a weighted average rate of 4.20% and all of our outstanding CAD-denominated term loan at a rate of 4.53%.

Additionally, as of September 30, 2024, we had C$35.0 million, €70.5 million, A$197.0 million, and NZD44.0 million outstanding of Senior Unsecured Revolving Credit Facility draws. At September 30, 2024 daily adjusted CORRA was approximately 4.29%, one-month AUD BBSW was approximately 4.31%, one-month EURIBOR was approximately 3.38%, and one-month BKBM was approximately 5.18%. These rates are also subject to contractual margins of 0.84% and an index of adjustment of 0.30% on CORRA. The interest rate paid on borrowings can never drop below 0.0%, although the associated benchmark rate does. 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 $2.7 million, and a 100 basis point decrease in market interest rates would result in a $2.7 million decrease in annual interest expense. Our interest rate risk exposure at September 30, 2024 was not materially different than what we disclosed in our 2023 Annual Report on Form 10-K as filed with the SEC.

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 September 30, 2024 was not materially different than what we disclosed in our 2023 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 2023 Annual Report on Form 10-K, is hereby incorporated by reference in this Quarterly Report on Form 10-Q.

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 at a reasonable assurance level as of September 30, 2024.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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.

Investing in our securities involves risks and uncertainties. You should consider and read the information contained in our 2023 Annual Report on Form 10-K, including the risk factors identified in Item 1A of Part I thereof (Risk Factors). Any of the risks discussed in our 2023 Annual Report on Form 10-K and in other reports we file with the SEC, and other risks we have not anticipated or discussed, could have a material adverse impact on our business, financial condition or results of operations. As of September 30, 2024, no material changes had occurred to the risk factors previously disclosed in our 2023 Annual Report on Form 10-K.