Americold Realty Trust Announces Second Quarter 2020 Results

Americold Realty Trust (NYSE: COLD) (the “Company”), the world’s largest publicly traded REIT focused on the ownership, operation, acquisition and development of temperature-controlled warehouses, today announced financial and operating results for the second quarter ended June 30, 2020.

Fred Boehler, President and Chief Executive Officer of Americold Realty Trust, stated, “While uncertainty and volatility exists in the market due to the COVID-19 pandemic, we are very pleased with our second quarter results, which continue to prove out the stability and durability of our business model to own and operate mission critical temperature-controlled warehouse infrastructure. We delivered total company revenue growth and NOI growth of 10.0% and 6.0%, respectively, driven by our strategic acquisitions, growth in our same store portfolio, our recently delivered developments and the ongoing elevated retail activity. This growth was further supported by our leadership position in the temperature-controlled warehouse supply chain and the diversity of our portfolio by geography, customer, commodity, sector, facility type and node in the supply chain, despite seeing the expected slow down in volume following the first quarter surge in retail activity. Within our warehouse segment, we delivered same store revenue and NOI growth of 3.0% and 0.7%, both on a constant currency basis. These results include a front-line appreciation bonus, which represents our gratitude for their dedication and efforts amid this COVID-19 pandemic. Adjusting for this bonus, our same store NOI growth would have been 4.0% on a constant currency basis.”

Mr. Boehler continued, “Also during the quarter, we continued to grow externally and optimize our portfolio, with the commencement of two retail distribution, build-to-suit facilities and continued progress toward reaching stabilization for recently delivered expansion and development projects, including strong customer demand for our newly delivered space. We also opportunistically sold our Boston facility at a 4.8% cap rate and, subsequent to quarter end, we entered into a definitive purchase agreement to buy AM-C Warehouses, in the Dallas-Fort Worth market, which further enhances our penetration into this key logistics corridor. Finally, our balance sheet remains in a strong position to continue to drive growth in our business. While this year has been unprecedented in nature and the path for the full reopening of the countries we serve remains unclear, we remain true to our mission to support our customers as we seek to ensure the integrity and efficiency of the food supply chain. We know our continued success in these efforts will drive outsized shareholder value for the long term.”

Second Quarter 2020 Highlights

• Total revenue increased 10.0% to $482.5 million for the second quarter 2020.
• Total NOI increased 6.0% to $128.3 million for the second quarter 2020.
• The Company paid an appreciation bonus of $4.3 million to front-line associates for their dedication and efforts through the COVID-19 pandemic late in the second quarter.
• Core EBITDA increased 7.4% to $100.5 million, or 8.6% on a constant currency basis, for the second quarter 2020.
• Net income of $32.7 million, or $0.16 per diluted common share for the second quarter 2020.
• Core FFO of $55.1 million, or $0.27 per diluted common share for the second quarter 2020.
• AFFO of $61.1 million, or $0.30 per diluted common share for the second quarter 2020. Excluding the front-line appreciation bonus, our AFFO per diluted common share would have been $0.32.
• Global Warehouse segment revenue increased 10.1% to $372.4 million for the second quarter 2020.
• Global Warehouse segment NOI increased 5.5% to $120.1 million for the second quarter 2020.
• Global Warehouse segment same store revenue grew 1.5%, or 3.0% on a constant currency basis, with same store segment NOI declining by 0.5%, or increasing by 0.7% on a constant currency basis for the second quarter 2020. Excluding the front-line appreciation bonus of $3.1 million for our same store sites, our NOI growth would have been 4.0%.
• Under its 2020 ATM Equity Program, the Company issued 3,094,431 shares for gross proceeds of $110.4 million during the second quarter of 2020, and entered into a forward sale agreement to sell 472,551 common shares for gross proceeds of $17.2 million, which must be settled by July 1, 2021.
• Received certificate of occupancy and continued to onboard customers at its completed Savannah facility.
• Announced and broke ground on two fully-automated facilities for a leading global grocery retailer.
• Completed the sale of its Boston facility for $27.0 million, resulting in a gain on sale of real estate of $19.4 million.
• Recognized a second quarter impairment charge of $3.7 million on our Quarry segment assets, as the fair market value was lower than the carrying value. This charge was in anticipation of the sale of the Quarry segment for $9.0 million, which subsequently closed on July 1, 2020.

Year to Date 2020 Highlights

• Total revenue increased 16.2% to $966.6 million.
• Total NOI increased 20.0% to 263.7 million.
• Core EBITDA increased 24.3% to $204.6 million, or 25.4% on a constant currency basis.
• Net income of $56.2 million, or $0.27 per diluted common share.
• Core FFO of $115.2 million, or $0.56 per diluted common share.
• AFFO of $128.3 million, or $0.63 per diluted common share.
• Global Warehouse segment revenue increased 20.0% to $753.5 million.
• Global Warehouse segment NOI increased 20.7% to $246.9 million.
• Global Warehouse segment same store revenue grew 3.3%, or 4.9% on a constant currency basis, with same store segment NOI improving 4.6%, or 5.8% on a constant currency basis. Excluding the impact of the front-line appreciation bonus, same-store segment NOI growth would have been 7.5% on a constant currency basis.

Second Quarter 2020 Total Company Financial Results

Total revenue for the second quarter of 2020 was $482.5 million, a 10.0% increase from the same quarter of the prior year. This growth was driven by the incremental revenue from the recently completed acquisitions, increased economic occupancy, continued strength in the retail sector and contractual rate escalations. These factors were partially offset by the translation impact of the strengthening US dollar, by the temporary closing of certain protein production plants and lower food service volumes.

As previously highlighted, a front-line appreciation bonus was paid of $4.3 million, which is not expected to recur. In addition to the bonus, the Company incurred incremental expenses to address the risks and challenges of COVID-19. These incremental COVID-19 expenses include higher sanitation costs of $1.3 million and higher personal protective equipment (“PPE”) costs of $0.4 million. The Company has experienced certain inefficiencies due to social distancing, staggered schedules, and other changes to processes, all of which it expects to incur going forward. The Company expects to recover these costs through ongoing revenue as it signs new business and renews existing business. The Company’s results include the impact of these items, as well as the front-line appreciation bonus.

For the second quarter of 2020, the Company reported net income of $32.7 million, or $0.16 per diluted share, compared to net income of $4.9 million, or $0.03 per diluted share, for the same quarter of the prior year.

Total NOI for the second quarter of 2020 was $128.3 million, an increase of 6.0% from the same quarter of the prior year. Excluding the front-line appreciation bonus, total NOI would have been $132.6 million, a 9.5% increase year over year.

Core EBITDA was $100.5 million for the second quarter of 2020, compared to $93.6 million for the same quarter of the prior year. This reflects a 7.4% increase over prior year, or 8.6% on a constant currency basis, largely impacted by increased Core EBITDA from acquisitions and organic growth. This growth was also driven by previously discussed items. These increases were partially offset by the translation impact of the strengthening US dollar, the previously mentioned incremental costs incurred in response to COVID-19, and the front-line appreciation bonus of $4.3 million. Excluding this bonus, Core EBITDA would have been $104.8 million, an increase of 12.0% year-over-year. Core EBITDA margin decreased by 52 basis points to 20.8%, or would have increased by 37 basis points to 21.7%, excluding the front-line appreciation bonus.

For the second quarter of 2020, Core FFO was $55.1 million, or $0.27 per diluted share, compared to $56.1 million, or $0.30 per diluted share, for same quarter of the prior year. The year-over-year decrease in Core FFO is driven by incremental COVID-19 expenses and the front-line appreciation bonus, partially offset by the recent acquisitions described above. Excluding the impact of the appreciation bonus, Core FFO per diluted share would have been $0.29.

For the second quarter of 2020, AFFO was $61.1 million, or $0.30 per diluted share, compared to $58.1 million, or $0.31 per diluted share, for the same quarter of the prior year. Excluding the impact of the front-line appreciation bonus, AFFO per diluted share would have been $0.32.

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

Second Quarter 2020 Global Warehouse Segment Results

For the second quarter of 2020, Global Warehouse segment revenue was $372.4 million, an increase of $34.2 million, or 10.1%, compared to $338.2 million for the second quarter of 2019. This growth was driven by the same revenue growth factors mentioned above.

Warehouse segment NOI was $120.1 million for the second quarter of 2020, which reflects growth of 5.5%. Global Warehouse segment margin was 32.3% for the second quarter of 2020, an 139 basis point decrease compared to the same quarter of the prior year. The year-over-year growth in segment NOI was driven by the previously mentioned revenue trends. These increases were partially offset by the translation impact of the strengthening US dollar, the incremental costs incurred in response to COVID-19 including sanitation, supplies and inefficiencies resulting from social distancing requirements, and the front-line appreciation bonus. Excluding the front-line appreciation bonus, Global Warehouse segment NOI would have been $124 million, which reflects growth of 9.3%. Excluding this bonus, our Global Warehouse segment NOI margin would have been 33.4%, a 24 basis point decrease.

The following tables summarize the global warehouse and same store financial results and metrics for the three and six months ended June 30, 2020 and 2019:

(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)

Fixed Commitment Rent and Storage Revenue

As of June 30, 2020, $270.0 million of the Company’s annualized rent and storage revenue were derived from customers with fixed commitment storage contracts. This compares to $258.5 million at the end of the first quarter of 2020 and $231.6 million at the end of the second quarter of 2019. The Company’s recent acquisitions had a lower percentage of fixed committed contracts as a percentage of rent and storage revenue. On a combined pro forma basis, assuming a full twelve months of acquisitions revenue, 41.4% of rent and storage revenue were generated from fixed commitment storage contracts, which is a 130 basis point increase over the first quarter of 2020.

Economic and Physical Occupancy

Contracts that contain fixed commitments are designed to ensure the Company’s customers have space available when needed. For the second quarter of 2020, economic occupancy for the total warehouse segment was 78.2% and warehouse segment same store pool was 78.9%, representing a 676 basis point and 810 basis point increase above physical occupancy, respectively. For the second quarter of 2020, physical occupancy for the total warehouse segment was 71.4% and warehouse segment same store pool was 70.8%.

Real Estate Portfolio

As of June 30, 2020, the Company’s portfolio consists of 183 facilities, the same as what was reported as of the quarter ended March 31, 2020. The Company ended the second quarter of 2020 with 172 facilities in its Global Warehouse segment portfolio and 11 facilities in its Third-party managed segment. During the second quarter of 2020, the Company completed the construction of its Savannah site which was built upon land acquired in connection with the PortFresh acquisition and was added to the non-same store population. Additionally, the Company completed the sale of a facility which was previously included in the same store population. The same store population consists of 135 facilities for the quarter ended June 30, 2020. The remaining 37 non-same store population includes the 31 facilities that were acquired since the beginning of 2019 and six legacy facilities.

Balance Sheet Activity and Liquidity

As of June 30, 2020, the Company had total liquidity of approximately $1.2 billion, including cash and capacity on its revolving credit facility and $150.6 million of net proceeds available from equity forward contracts. Total debt outstanding was $2.0 billion (inclusive of $186.5 million of financing leases/sale lease-backs and exclusive of unamortized deferred financing fees), of which 77% was in an unsecured structure. The Company has no material debt maturities until 2023. At quarter end, its net debt to pro forma Core EBITDA was approximately 4.1x. Of the Company’s total debt outstanding, $1.8 billion relates to real estate debt, which excludes sale-leaseback and capitalized lease obligations. The Company’s real estate debt has a remaining weighted average term of 6.3 years and carries a weighted average contractual interest rate of 3.60%. As of June 30, 2020, 86% of the Company’s total debt outstanding was at a fixed rate, inclusive of interest rate swaps.

Dividend

On May 27, 2020, the Company’s Board of Trustees declared a dividend of $0.21 per share for the second quarter of 2020, which was paid on July 15, 2020 to common shareholders of record as of June 30, 2020.

Subsequent Events

• Signed definitive purchase agreement to acquire AM-C Warehouses business, located in the Dallas-Fort Worth market, for $85.0 million, which is expected to close in early September 2020.
• On July 16, 2020, we purchased two facilities which we previously leased in Auckland, New Zealand for an aggregate $12.3 million New Zealand dollars.
• Quarry segment sale completed on July 1, 2020, for $9.0 million.

2020 Outlook

The Company is revising its AFFO per share guidance from $1.22 - $1.30 to $1.24 - $1.30 for 2020. Certain components are updated as follows:

• Deferred income tax benefit of $2 million - $4 million.
• Non-real estate amortization and depreciation expense of $70 million - $72 million.
• Maintenance capital expenditures of $65 million - $73 million.
• Development starts of $400 million - $500 million.
• Please refer to its supplemental for currency translation rates embedded in this guidance.

The Company’s guidance is provided for informational purposes based on current plans and assumptions as is subject to change. The ranges for these metrics do not include the impact of acquisitions, dispositions, or capital markets activity beyond that which has been previously announced.

Investor Webcast and Conference Call

The Company will hold a webcast and conference call on Thursday, August 6, 2020 at 5:00 p.m. Eastern Time to discuss second quarter 2020 results. A live webcast of the call will be available via the Investors section of Americold Realty Trust’s website at www.americold.com. To listen to the live webcast, please go to the site at least five minutes prior to the scheduled start time in order to register, download and install any necessary audio software. Shortly after the call, a replay of the webcast will be available for 90 days on the Company’s website.

The conference call can also be accessed by dialing 1-877-407-3982 or 1-201-493-6780. The telephone replay can be accessed by dialing 1-844-512-2921 or 1-412-317-6671 and providing the conference ID# 13706764. The telephone replay will be available starting shortly after the call until August 20, 2020.

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

About the Company

Americold is the world’s largest publicly traded REIT focused on the ownership, operation, acquisition and development of temperature-controlled warehouses. Based in Atlanta, Georgia, Americold owns and operates 183 temperature-controlled warehouses, with over 1 billion refrigerated cubic feet of storage, in the United States, Australia, New Zealand, Canada, and Argentina. Americold’s facilities are an integral component of the supply chain connecting food producers, processors, distributors and retailers to consumers.

Non-GAAP Financial Measures

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

Forward-Looking Statements

This document contains statements about future events and expectations that constitute forward-looking statements. Forward-looking statements are based on our beliefs, assumptions and expectations of our future financial and operating performance and growth plans, taking into account the information currently available to us. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements, and you should not place undue reliance on such statements. Factors that could contribute to these differences include the following: adverse economic or real estate developments in our geographic markets or the temperature-controlled warehouse industry; general economic conditions; uncertainties and risks related to natural disasters, global climate change and public health crises, including ongoing COVID-19 pandemic; risks associated with the ownership of real estate and temperature-controlled warehouses in particular; defaults or non-renewals of contracts with customers; potential bankruptcy or insolvency of our customers; or the inability of our customers to otherwise perform under their contracts, including as a result of the ongoing COVID-19 pandemic; uncertainty of revenues, given the nature of our customer contracts; increased interest rates and operating costs, including as a result of the COVID-19 pandemic; our failure to obtain necessary outside financing; risks related to, or restrictions contained in, our debt financings; decreased storage rates or increased vacancy rates; risks related to current and potential international operations and properties; our failure to realize the intended benefits from our recent acquisitions including synergies, or disruptions to our plans and operations or unknown or contingent liabilities related to our recent acquisitions; our failure to successfully integrate and operate acquired properties or businesses, including but not limited to: Cloverleaf Cold Storage, Lanier Cold Storage, MHW Group, Inc., Nova Cold Logistics, Newport Cold Storage and PortFresh Holdings, LLC; acquisition risks, including the failure of such acquisitions to perform in accordance with projections; risks related to expansions of existing properties and developments of new properties, including failure to meet budgeted or stabilized returns within expected time frames, or at all, in respect thereof; difficulties in expanding our operations into new markets, including international markets; risks related to the partial ownership of properties, including as a result of our lack of control over such investments and the failure of such entities to perform in accordance with projections; our failure to maintain our status as a REIT; our Operating Partnership’s failure to qualify as a partnership for federal income tax purposes; possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently or previously owned by us; financial market fluctuations; actions by our competitors and their increasing ability to compete with us; labor and power costs; changes in applicable governmental regulations and taxation schemes; changes in real estate and zoning laws and increases in real property tax rates; the competitive environment in which we operate; our relationship with our employees, including the occurrence of any work stoppages or any disputes under our collective bargaining agreements and employment related litigation; liabilities as a result of our participation in multi-employer pension plans; losses in excess of our insurance coverage; the cost and time requirements as a result of our operation as a publicly traded REIT; changes in foreign currency exchange rates; the impact of anti-takeover provisions in our constituent documents and under Maryland law, which could make an acquisition of us more difficult, limit attempts by our shareholders to replace our trustees and affect the price of our common shares of beneficial interest, $0.01 par value per share, of our common shares; the potential dilutive effect of our common share offerings; and risks related to any forward sale agreement, including the forward sale agreement we entered into with an affiliate of BofA Securities, Inc. in September 2018, as amended, or the 2018 forward sale agreement, and the forward sale agreements we entered into in connection with our ATM Equity Program in June 2020, including substantial dilution to our earnings per share or substantial cash payment obligations.

Words such as “anticipates,” “believes,” “continues,” “estimates,” “expects,” “goal,” “objectives,” “intends,” “may,” “opportunity,” “plans,” “potential,” “near-term,” “long-term,” “projections,” “assumptions,” “projects,” “guidance,” “forecasts,” “outlook,” “target,” “trends,” “should,” “could,” “would,” “will” and similar expressions are intended to identify such forward-looking statements. Examples of forward-looking statements included in this document include, among others, statements about our expected acquisition and expected expansion and development pipeline and our targeted return on invested capital on expansion and development opportunities. We qualify any forward-looking statements entirely by these cautionary factors. Other risks, uncertainties and factors, including those discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, in our Quarterly Report for the quarter ended March 31, 2020 and in our Form 8-K filed April 16, 2020, could cause our actual results to differ materially from those projected in any forward-looking statements we make. We assume no obligation to update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.