Americold Realty Trust Announces First Quarter 2018 Results

  Americold Realty Trust Announces First Quarter 2018 Results

   - Global Warehouse Segment Revenue Growth of 3.9% and Contribution (NOI)
                               Growth of 7.2% -

   - Reports Core FFO of $0.27 and AFFO of $0.31 Per Diluted Common Share -

                    - Completed Initial Public Offering -

Business Wire

ATLANTA -- May 10, 2018

Americold Realty Trust (NYSE:COLD) (the "Company"), the world’s largest owner
and operator of temperature-controlled warehouses, today announced financial
and operating results for the first quarter ended March 31, 2018.

“Our first quarter 2018 results demonstrate the ongoing strength of our
business, including same store Global Warehouse segment revenue and
contribution (NOI) increases of 4.0% and 6.5%, respectively. The same store
contribution (NOI) growth was primarily driven by favorable customer mix,
increase in number of fixed commitment contracts, and productivity
improvements across our network. We continue to make progress within our
development pipeline as we work to support our customers and market growth
opportunities. In the first quarter 2018, we completed our initial public
offering and simultaneously closed on our $925.0 million dollar credit
facility. As the first publicly traded REIT in the temperature-controlled
infrastructure and supply chain industry, we believe we are well positioned
for continued growth and creating long-term shareholder value” stated Fred
Boehler, President and Chief Executive Officer of Americold Realty Trust.

First Quarter 2018 Highlights

  * Total revenue was $391.1 million, a 4.9% increase over the same quarter
    last year; Global Warehouse segment revenue was $286.5 million, a 3.9%
    increase over the same quarter last year
  * Total contribution (NOI) was $97.3 million, a 7.0% increase over the same
    quarter last year; Global Warehouse segment contribution (NOI) was $89.6
    million, a 7.2% increase over the same quarter last year
  * Net loss of $8.6 million, or $0.08 per diluted common share, compared to
    net income of $4.4 million from the same quarter last year; excluding
    $21.1 million of non-cash deferred financing costs, net income for the
    quarter would have been $12.5 million, or $0.10 per diluted common share
  * Core EBITDA of $71.7 million, a 6.5% increase over the same quarter last
    year
  * Core Funds from Operations ("Core FFO") of $34.8 million, or $0.27 per
    diluted common share
  * Adjusted Funds from Operations (“AFFO”) of $39.9 million, or $0.31 per
    diluted common share
  * Global Warehouse segment same store revenue grew 4.0% to $280.5 million,
    with segment contribution (NOI) improving 6.5% to $89.1 million, both over
    prior year
  * Completed initial public offering ("IPO") in January 2018, generating net
    proceeds of $494 million to the Company
  * Closed $925 million senior secured credit facility

First Quarter 2018 Total Company Financial Results

Total revenue for the first quarter ended March 31, 2018 was $391.1 million, a
4.9% increase from the same quarter of the prior year. This growth was largely
driven by a more favorable customer mix, a shift to a greater number of fixed
commitment storage contracts, and contractual rate escalations within the
Global Warehouse segment.

For the first quarter of 2018, the Company reported a net loss of $8.6
million, or $0.08 per diluted share, compared to net income of $4.4 million
for the same quarter of the prior year. This decrease was primarily driven by
the write-off of $21.1 million of non-cash deferred financing costs associated
with the refinancing of debt in conjunction with the Company's January 2018
initial public offering ("IPO"). Excluding this charge, net income for the
quarter would have been $12.5 million, or $0.10 per diluted common share.

Total contribution (NOI) for the first quarter ended March 31, 2018 increased
7.0% to $97.3 million, compared to $91.0 million for the same quarter of the
prior year.

Core EBITDA was $71.7 million for the first quarter of 2018, compared to $67.3
million for the same quarter of the prior year. This reflects a 6.5% increase
over prior year while absorbing approximately $1.5 million of additional
recurring public company expenses incurred in the first quarter of 2018.

For the first quarter of 2018, Core FFO was $34.8 million, or $0.27 per
diluted share, compared to $22.7 million for same quarter of the prior year.

For the first quarter of 2018, AFFO was $39.9 million, or $0.31 per diluted
share, compared to $26.8 million for same quarter of the prior year. AFFO
excludes certain expenses and income items that do not represent core expenses
and income streams.

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.

As a result of the Company going public subsequent to January 1, 2018, the
weighted average share count used to derive the first quarter 2018 per share
metrics reflects the timing of the offering.

First Quarter 2018 Global Warehouse Segment Results

For the first quarter of 2018, Global Warehouse segment revenues were $286.5
million, an increase of $10.7 million, or 3.9%, compared to $275.8 million for
the first quarter of 2017. This growth was primarily driven by a more
favorable customer mix, a shift to a greater number of fixed commitment
storage contracts, and contractual rate escalations.

Warehouse segment contribution (NOI) was $89.6 million, or 31.3% of segment
revenue for the first quarter of 2018, compared to $83.5 million, or 30.3% of
revenue, for the prior year. This represents 7.2% improvement in segment
profitability over the first quarter 2017 and an expansion of 100 basis points
in segment margin period-over-period. The year over year profit growth was
driven primarily by a more favorable customer mix, a shift to a greater number
of fixed commitment storage contracts, and labor and other productivity
improvements. The Company continues to generate productivity improvements with
its ongoing focus on continuous improvement initiatives driven by further
adoption of its Americold Operating System ("AOS").

The Company ended the first quarter of 2018 with 146 total facilities in its
Global Warehouse segment portfolio. Of the 146 total facilities, 138 meet the
Company’s definition of facilities with at least 24 months of consecutive
"normalized operations" and are reported as "same store." The remaining eight
facilities are in various stages of operations and are classified as "non-same
store."

The tables below summarize the first quarter 2018 Global Warehouse full
segment and same store metrics compared to the same period a year ago:

                                                                     
Global Warehouse - Total               Three Months Ended March 31,   Change
Dollars in thousands                   2018             2017
Global Warehouse revenues:
Rent and storage                       $  125,727       $ 119,666     5.1   %
Warehouse services                     160,790          156,141       3.0   %
Total Warehouse revenues               286,517          275,807       3.9   %
Global Warehouse contribution          $  89,570        $ 83,520      7.2   %
(NOI)
Global Warehouse margin                31.3        %    30.3      %   100 bps
                                                                       
Units in thousands except per
pallet data
Global Warehouse rent and
storage:
Occupancy
Average occupied pallets               2,447            2,469         (0.9  )%
Average physical pallet                3,212            3,184         0.9   %
positions
Occupancy percentage                   76.2        %    77.6      %   -140 bps
Same store rent and storage            $  51.38         $ 48.47       6.0   %
revenues per occupied pallet
Global Warehouse services:
Throughput pallets                     6,645            6,799         (2.3  )%
Same store warehouse services          $  24.20         $ 22.97       5.4   %
revenues per throughput pallet
                                                                             

                                                                     
Global Warehouse - Same Store          Three Months Ended March 31,   Change
Dollars in thousands                   2018             2017
Global Warehouse same store
revenues:
Rent and storage                       $  122,977       $ 116,661     5.4   %
Warehouse services                     157,502          152,999       2.9   %
Total same store revenues              280,479          269,660       4.0   %
Global Warehouse same store            $  89,126        $ 83,706      6.5   %
contribution (NOI)
Global Warehouse same store            31.8        %    31.0      %   80 bps
margin
                                                                       
Units in thousands except per
pallet data
Global Warehouse same store rent
and storage:
Occupancy
Average occupied pallets               2,375            2,416         (1.7  )%
Average physical pallet                3,112            3,096         0.5   %
positions
Occupancy percentage                   76.3        %    78.0      %   -170 bps
Same store rent and storage            $  51.77         $ 48.30       7.2   %
revenues per occupied pallet
Global Warehouse same store
services:
Throughput pallets                     6,499            6,657         (2.4  )%
Same store warehouse services          $  24.24         $ 22.98       5.5   %
revenues per throughput pallet
                                                                             

Fixed Commitment Rent and Storage Revenue

Annualized committed rent and storage revenue was $197.7 million, which
represented 38.9% of total Warehouse segment rent and storage
revenue for the quarter ended March 31, 2018.

Capital and Balance Sheet Activity

In January 2018, the Company completed its IPO and issued 33.4 million common
shares at $16.00 per share, including the full exercise of the underwriters’
option to purchase additional shares, raising aggregate net proceeds to the
Company of approximately $494.0 million after deducting the underwriting
discount and offering expenses. In connection with the IPO, the Company closed
on its new $925.0 million senior secured credit facility, consisting of a
five-year, $525.0 million senior secured term loan A facility and a
three-year, $400.0 million senior secured revolving credit facility.
Subsequently, the Company used the proceeds to repay its term loan B facility
and outstanding construction loan debt aggregating $827.5 million and repaid
$50 million of its outstanding term loan A facility while increasing its
revolver capacity by $50 million.

At March 31, 2018, the Company had total liquidity of approximately $610.0
million, including cash and capacity on its revolving credit facility. Total
debt outstanding was $1.57 billion (including $157.0 million of capital
leases/sale leasebacks), with a weighted average term of 4.4 years. The
Company has no material debt maturities during the remainder of 2018 and all
of 2019. At March 31, 2018, 64% of the Company's total debt outstanding was at
a fixed rate and on a trailing twelve month basis, its net debt to Core EBITDA
was approximately 4.7x. The Company's weighted average effective interest rate
on outstanding indebtedness was 5.39%.

Investor Webcast and Conference Call

The Company will hold a webcast and conference call on Thursday, May 10, 2018
at 5:00 p.m. Eastern Time to discuss first quarter 2018 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 1-877-407-4018 or
1-201-689-8471. The telephone replay can be accessed by dialing 1-844-512-2921
or 1-412-317-6671 and providing the conference ID# 13679036. The telephone
replay will be available starting shortly after the call until May 24, 2018.

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

About the Company

Americold is the world’s largest owner and operator of temperature-controlled
warehouses. Based in Atlanta, Georgia, Americold owns and operates 158
temperature-controlled warehouses, with approximately 934 million 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. Americold serves approximately 2,400 customers and employs
approximately 11,000 associates worldwide.

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
stockholders to FFO, a reconciliation from FFO to core FFO and AFFO, and
definitions of FFO, and core FFO are included below. A reconciliation from
U.S. GAAP net income available to common stockholders to EBITDAre, Core
EBITDA, a definition of Core EBITDA and definitions of net debt to Core EBITDA
are included below.

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 adverse economic or real estate developments in our
geographic markets or the temperature-controlled warehouse industry; general
economic conditions; risks associated with the ownership of real estate and
temperature-controlled warehouses in particular; defaults or non-renewals of
contracts with customers; potential bankruptcy or insolvency of our customers;
uncertainty of revenues, given the nature of our customer contracts; increased
interest rates and operating costs; our failure to obtain necessary outside
financing; risks related to, or restrictions contained in, our debt financing;
decreased storage rates or increased vacancy rates; difficulties in
identifying properties to be acquired and completing acquisitions; risks
related to expansions of existing properties and developments of new
properties, including failure to meet budgeted or stabilized returns in
respect thereof; acquisition risks, including the failure of such acquisitions
to perform in accordance with projections; difficulties in expanding our
operations into new markets, including international markets; our failure to
maintain our status as a REIT; uncertainties and risks related to natural
disasters and global climate change; 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 real
estate and zoning laws and increases in real property tax rates; the
competitive environment in which we operate; our relationship with our
employees, including the occurrence of any work stoppages or any disputes
under our collective bargaining agreements; liabilities as a result of our
participation in multi-employer pension plans; the cost and time requirements
as a result of our operation as a publicly traded REIT; the concentration of
ownership by funds affiliated with The Yucaipa Companies, The Goldman Sachs
Group, Inc., and Fortress Investment Group, LLC; changes in foreign currency
exchange rates; and 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. 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 documents
include, among others, statements about our expected expansion and development
pipeline and our targeted return on invested capital on expansion and
development opportunities. We qualify any forward-looking statements entirely
by these cautionary factors. Other risks, uncertainties and factors, including
those discussed under “Risk Factors” in our Annual Report on Form 10-K for the
year ended December 31, 2017 and our other reports filed with the Securities
and Exchange Commission, 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.

 
Condensed Consolidated Balance Sheets
(In thousands, except shares and per share amounts)
                                                 March 31,       December 31,
                                                 2018            2017
                                                 Unaudited        
Assets
Property, plant, and equipment:
Land                                             $ 389,565       $ 389,443
Buildings and improvements                       1,887,206       1,865,727
Machinery and equipment                          549,908         555,453      
                                                 2,826,679       2,810,623
Accumulated depreciation and depletion           (1,030,240  )   (1,010,903  )
Property, plant, and equipment – net             1,796,439       1,799,720
Capitalized leases:
Buildings and improvements                       16,827          16,827
Machinery and equipment                          59,619          59,389       
                                                 76,446          76,216
Accumulated depreciation                         (42,996     )   (41,051     )
Capitalized leases – net                         33,450          35,165
Cash and cash equivalents                        193,868         48,873
Restricted cash                                  19,394          21,090
Accounts receivable – net of allowance of
$5,804 and $5,309 at March 31, 2018 and          178,649         200,006
December 31, 2017, respectively
Identifiable intangible assets – net             26,239          26,645
Goodwill                                         188,096         188,169
Investments in partially owned entities          15,935          15,942
Other assets                                     41,685          59,287       
Total assets                                     $ 2,493,755     $ 2,394,897  
Liabilities, Series B Preferred Shares and
shareholders’ equity (deficit)
Liabilities:
Borrowings under revolving line of credit        $ —             $ —
Accounts payable and accrued expenses            232,737         241,259
Construction loan - net of deferred
financing costs of $179 at December 31,          —               19,492
2017
Mortgage notes and term loans - net of
discount and deferred financing costs of
$15,935 and $31,996, in the aggregate, at        1,398,227       1,721,958
March 31, 2018 and December 31, 2017,
respectively
Sale-leaseback financing obligations             120,911         121,516
Capitalized lease obligations                    36,078          38,124
Unearned revenue                                 18,200          18,848
Pension and postretirement benefits              16,105          16,756
Deferred tax liability - net                     20,423          21,940
Multi-Employer pension plan withdrawal           9,086           9,134        
liability
Total liabilities                                1,851,767       2,209,027
Commitments and Contingencies
Preferred shares of beneficial interest,
$0.01 par value – authorized 375,000
Series B Cumulative Convertible Voting and
Participating Preferred Shares; aggregate        —               372,794
liquidation preference of $375,000; zero
and 375,000 shares issued and outstanding
at March 31, 2018 and December 31, 2017,
respectively
Shareholders’ equity (deficit):
Preferred shares of beneficial interest,
$0.01 par value – authorized 1,000 Series
A Cumulative Non-Voting Preferred Shares;
aggregate liquidation preference of $125;        —               —
zero and 125 shares issued and outstanding
at March 31, 2018 and December 31, 2017,
respectively
Common shares of beneficial interest,
$0.01 par value – authorized 250,000,000
shares; 142,513,448 and 69,370,609 shares        1,425           694
issued and outstanding at March 31, 2018
and December 31, 2017, respectively
Paid-in capital                                  1,255,094       394,082
Accumulated deficit and distributions in         (613,363    )   (581,470    )
excess of net earnings
Accumulated other comprehensive loss             (1,168      )   (230        )
Total shareholders’ equity (deficit)             641,988         (186,924    )
Total liabilities, Series B Preferred            $ 2,493,755     $ 2,394,897  
Shares and shareholders’ equity (deficit)
                                                                              

 
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)
                                                  Three Months Ended March 31,
                                                  2018             2017
Revenues:
Rent, storage, and warehouse services             $  286,517       $ 275,807
revenues
Third-party managed services                      63,876           58,367
Transportation services                           38,345           36,181
Other revenues                                    2,403            2,559      
Total revenues                                    391,141          372,914
Operating expenses:
Rent, storage, and warehouse services cost        196,947          192,287
of operations
Third-party managed services cost of              60,099           55,379
operations
Transportation services cost of operations        34,751           32,628
Cost of operations related to other               2,057            1,656
revenues
Depreciation, depletion, and amortization         29,408           29,408
Selling, general and administrative               31,947           24,770     
Total operating expenses                          355,209          336,128    
                                                                    
Operating income                                  35,932           36,786
                                                                    
Other (expense) income:
Loss from partially owned entities                (139        )    (27       )
Interest expense                                  (24,495     )    (27,727   )
Interest income                                   623              257
Loss on debt extinguishment and                   (21,385     )    (171      )
modification
Foreign currency exchange gain (loss)             680              (2,773    )
Other income (expense), net                       56               (467      )
(Loss) income before income tax                   (8,728      )    5,878
Income tax (expense) benefit:
Current                                           (1,067      )    (2,242    )
Deferred                                          1,156            748        
Total income tax benefit (expense)                89               (1,494    )
                                                                    
Net (loss) income                                 $  (8,639   )    $ 4,384    
Less distributions on preferred shares of         (1          )    —
beneficial interest - Series A
Less distributions on preferred shares of         (1,817      )    (7,109    )
beneficial interest - Series B
Less accretion on preferred shares of             —                (220      )
beneficial interest – Series B
Net loss attributable to common shares of         $  (10,457  )    $ (2,945  )
beneficial interest
                                                                    
Weighted average common shares outstanding        124,433          69,931     
– basic
Weighted average common shares outstanding        124,433          69,931     
– diluted
                                                                    
Net loss per common share of beneficial           $  (0.08    )    $ (0.04   )
interest - basic
Net loss per common share of beneficial           $  (0.08    )    $ (0.04   )
interest - diluted
                                                                    
Distributions declared per common share of        $  0.15          $ 0.07     
beneficial interest
                                                                              

                                                                             
Reconciliation of Net Earnings to NAREIT FFO, Core FFO and AFFO
(In thousands)
                                               Three Months Ended
                                               March 31, 2018   March 31, 2017
Net (loss) income                              $   (8,639  )    $   4,384
Adjustments:
Real estate related depreciation and           22,174           21,433
depletion
Net (gain) loss on sale of depreciable         —                —
real estate
Impairment charges on certain real             —                —
estate assets
Real estate depreciation on China JV           270              268          
NAREIT Funds from operations                   13,805           26,085
Less distributions on preferred shares         (1,818      )    (7,109      )
of beneficial interest
NAREIT Funds from operations                   $   11,987       $   18,976   
attributable to common shareholders
Adjustments:
Net (gain) loss on sale of non-real            (148        )    (99         )
estate assets
Non-offering related IPO expenses (a)          1,245            —
Stock-based compensation expense, IPO          965              —
grants
Severance and reduction in workforce           11               —
costs (b)
Terminated site operations costs (c)           —                (3          )
Strategic alternative costs                    —                842
Impairment of partially owned entities         —                —
(d)
Loss on debt extinguishment and                21,385           171
modification
Inventory asset impairment                     —                —
Foreign currency exchange (gain) loss          (680        )    2,773
Excise tax settlement                          —                —
Multi-Employer pension plan withdrawal         —                —            
expense
Core FFO applicable to common                  $   34,765       $   22,660   
shareholders
Adjustments:
Amortization of deferred financing costs       1,674            2,023
and debt discount
Amortization of below/above market             38               38
leases
Straight-line net rent                         (5          )    (12         )
Deferred income taxes (benefit) expense        (1,156      )    (748        )
Stock-based compensation expense,              3,553            587
excluding IPO grants
Non-real estate depreciation and               7,234            7,975
amortization
Non-real estate depreciation and               156              151
amortization on China JV
Recurring maintenance capital                  (6,383      )    (5,905      )
expenditures (e)
Adjusted FFO applicable to common              $   39,876       $   26,769   
shareholders
                                                                             
Reconciliation of weighted average and
fully diluted shares:
Weighted average basic shares for net          124,433          n/a
income calculation
Dilutive stock options and unvested            2,668            n/a
restricted stock units
Weighted average dilutive shares for net       127,101          n/a
income calculation
Common shares equivalents (d)                  20,032           n/a
Fully diluted common shares outstanding        147,133          n/a
at quarter-end (e)
                                                                             
NAREIT FFO available to common                 $   0.10         n/a
shareholders - basic per share
NAREIT FFO available to common                 $   0.09         n/a
shareholders - diluted per share
NAREIT FFO available to common
shareholders - fully diluted per share         $   0.08         n/a
at quarter end (e)
                                                                             
Core FFO available to common                   $   0.28         n/a
shareholders - basic per share
Core FFO available to common                   $   0.27         n/a
shareholders - diluted per share
Core FFO available to common
shareholders - fully diluted per share         $   0.24         n/a
at quarter end (e)
                                                                             
Adjusted FFO available to common               $   0.32         n/a
shareholders - basic per share
Adjusted FFO available to common               $   0.31         n/a
shareholders - diluted per share
Adjusted FFO available to common
shareholders - fully diluted per share         $   0.27         n/a
at quarter end (e)
                                                                             

(a)   Represents one-time costs and professional fees associated with becoming
      a public company.
(b)   Represents one-time severance from and reduction in workforce costs
      associated with exiting or selling non-strategic warehouses.
      Recurring maintenance capital expenditures include capital expenditures
(c)   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.
(d)   Fully diluted common share equivalents outstanding at March 31, 2018.
      Assumes i) all post-IPO commons shares were outstanding for the entire
(e)   quarter, and ii) the exercise of all outstanding stock options and
      conversion of all outstanding restricted stock units at the beginning of
      the quarter.
       

 
Reconciliation of Net Earnings to EBITDAre and Core EBITDA
(In thousands)
                                                  Three Months Ended March 31,
                                                  2018             2017
Net (loss) income                                 $  (8,639  )     $  4,384
Adjustments:
Depreciation, depletion and amortization          29,408           29,408
Interest expense                                  24,495           27,727
Income tax (benefit) expense                      (89        )     1,494
Adjustment to reflect share of EBITDAre of        557              571        
unconsolidated affiliates
EBITDAre (a)                                      $  45,732        $  63,584  
Adjustments:
Severance and reduction in workforce costs        11               —
(b)
Terminated site operations cost (c)               —                (3        )
Non-offering related IPO expenses (d)             1,245            —
Strategic alternative costs                       —                842
Loss from partially owned entities                139              27
(Gain) loss on foreign currency exchange          (680       )     2,773
Stock-based compensation expense                  4,518            587
Loss on debt extinguishment and                   21,385           171
modification
Gain on real estate and other asset               (137       )     (102      )
disposals
Reduction in EBITDAre from partially owned        (557       )     (571      )
entities
Core EBITDA                                       $  71,656        $  67,308  
                                                                              

      Refers to EBITDA for Real Estate in accordance with the standards
(a)   established by the Board of Governors of NAREIT adopted in the first
      quarter of 2018.
      Represents one-time severance from prior management team and reduction
(b)   in workforce costs associated with exiting or selling non-strategic
      warehouses.
      Represents repair expenses incurred to return leased sites to their
      original physical state at lease inception in connection with the
      termination of the applicable underlying lease. These terminations were
(c)   part of our strategic efforts to exit or sell non-strategic warehouses
      as opposed to ordinary course lease expirations. Repair and maintenance
      expenses associated with our ordinary course operations are reflected as
      operating expenses on our statement of operations.
(d)   Represents one-time costs and professional fees associated with becoming
      a public company.
       

 
Revenue and Contribution by Segment (Unaudited)
(In thousands)
                                                  Three Months Ended March 31,
                                                  2018             2017
Segment revenues:
Warehouse                                         $  286,517       $ 275,807
Third-Party Managed                               63,876           58,367
Transportation                                    38,345           36,181
Quarry                                            2,403            2,559      
Total revenues                                    391,141          372,914
                                                                    
Segment contribution:
Warehouse                                         89,570           83,520
Third-Party Managed                               3,777            2,988
Transportation                                    3,594            3,553
Quarry                                            346              903        
Total segment contribution                        97,287           90,964
                                                                    
Reconciling items:
Depreciation, depletion, and amortization         (29,408     )    (29,408   )
Selling, general and administrative               (31,947     )    (24,770   )
Loss from partially owned entities                (139        )    (27       )
Interest expense                                  (24,495     )    (27,727   )
Interest income                                   623              257
Loss on debt extinguishment and                   (21,385     )    (171      )
modification
Foreign currency exchange gain (loss)             680              (2,773    )
Other income (expense), net                       56               (467      )
(Loss) income before income tax                   $  (8,728   )    $ 5,878    
                                                                              

We view and manage our business through three primary business
segments—warehouse, third-party managed and transportation. Our core business
is our warehouse segment, where we provide temperature-controlled warehouse
storage and related handling and other warehouse services. In our warehouse
segment, we collect rent and storage fees from customers to store their frozen
and perishable food and other products within our real estate portfolio. We
also provide our customers with handling and other warehouse services related
to the products stored in our buildings that are designed to optimize their
movement through the cold chain, such as the placement of food products for
storage and preservation, the retrieval of products from storage upon customer
request, blast freezing, case-picking, kitting and repackaging and other
recurring handling services.

Under our third-party managed segment, we manage warehouses on behalf of third
parties and provide warehouse management services to several leading food
retailers and manufacturers in customer-owned facilities, including some of
our largest and longest-standing customers. We believe using our third-party
management services allows our customers to increase efficiency, reduce costs,
reduce supply-chain risks and focus on their core businesses. We also believe
that providing third-party management services to many of our key customers
underscores our ability to offer a complete and integrated suite of services
across the cold chain.

In our transportation segment, we broker and manage transportation of frozen
and perishable food and other products for our customers. Our transportation
services include consolidation services (i.e., consolidating a customer’s
products with those of other customers for more efficient shipment), freight
under management services (i.e., arranging for and overseeing transportation
of customer inventory) and dedicated transportation services, each designed to
improve efficiency and reduce transportation and logistics costs to our
customers. We provide these transportation services at cost plus a service fee
or, in the case of our consolidation services, we charge a fixed fee.

We also operate a limestone quarry on the land we own around our Carthage,
Missouri warehouse, which contains substantial limestone deposits. We do not
view the operation of the quarry as an integral part of our business.

Notes and Definitions

We calculate funds from operations, or FFO, in accordance with the standards
established by the Board of Governors of the National Association of Real
Estate Investment Trusts, or NAREIT. NAREIT defines FFO as net income or loss
determined in accordance with U.S. GAAP, excluding extraordinary items as
defined under U.S. GAAP and gains or losses from sales of previously
depreciated operating real estate assets, plus specified non-cash items, such
as real estate asset depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. We believe that FFO is helpful
to investors as a supplemental performance measure because it excludes the
effect of depreciation, amortization and gains or losses from sales of real
estate, all of which are based on historical costs, which implicitly assumes
that the value of real estate diminishes predictably over time. Since real
estate values instead have historically risen or fallen with market
conditions, FFO can facilitate comparisons of operating performance between
periods and among other equity REITs.

We calculate core funds from operations, or Core FFO, as FFO adjusted for the
effects of gain or loss on the sale of non-real estate assets, non-offering
related IPO expenses, stock-based compensation expense for the IPO retention
grants, severance and reduction in workforce costs, acquisition, diligence and
other pursuit costs, loss on debt extinguishment and modification, and foreign
currency exchange gain or loss. We believe that Core FFO is helpful to
investors as a supplemental performance measure because it excludes the
effects of certain items which can create significant earnings volatility, but
which do not directly relate to our core business operations. We believe Core
FFO can facilitate comparisons of operating performance between periods, while
also providing a more meaningful predictor of future earnings potential.

However, because FFO and Core FFO add back real estate depreciation and
amortization and do not capture the level of recurring maintenance capital
expenditures necessary to maintain the operating performance of our
properties, both of which have material economic impacts on our results from
operations, we believe the utility of FFO and Core FFO as a measure of our
performance may be limited.

We calculate adjusted funds from operations, or Adjusted FFO, as Core FFO
adjusted for the effects of amortization of loan costs, debt discounts and
above or below market leases, straight-line rent, provision or benefit from
deferred income taxes, stock-based compensation expense from grants of stock
options and restricted stock units under our equity incentive plans, non-real
estate depreciation, depletion or amortization (including in respect of the
China JV), and recurring maintenance capital expenditures. We believe that
Adjusted FFO is helpful to investors as a meaningful supplemental comparative
performance measure of our ability to make incremental capital investments in
our business and to assess our ability to fund distribution requirements from
our operating activities.

FFO, Core FFO and Adjusted FFO are used by management, investors and industry
analysts as supplemental measures of operating performance of equity REITs.
FFO, Core FFO and Adjusted FFO should be evaluated along with U.S. GAAP net
income and net income per diluted share (the most directly comparable
U.S. GAAP measures) in evaluating our operating performance. FFO, Core FFO and
Adjusted FFO do not represent net income or cash flows from operating
activities in accordance with U.S. GAAP and are not indicative of our results
of operations or cash flows from operating activities as disclosed in our
consolidated statements of operations included in our quarterly report on Form
10-Q. FFO, Core FFO and Adjusted FFO should be considered as supplements, but
not alternatives, to our net income or cash flows from operating activities as
indicators of our operating performance. Moreover, other REITs may not
calculate FFO in accordance with the NAREIT definition or may interpret the
NAREIT definition differently than we do. Accordingly, our FFO may not be
comparable to FFO as calculated by other REITs. In addition, there is no
industry definition of Core FFO or Adjusted FFO and, as a result, other REITs
may also calculate Core FFO or Adjusted FFO, or other similarly-captioned
metrics, in a manner different than we do. The table above reconciles FFO,
Core FFO and Adjusted FFO to net income, which is the most directly comparable
financial measure calculated in accordance with U.S. GAAP.

We calculate EBITDA for Real Estate, or EBITDAre, in accordance with the
standards established by the Board of Governors of NAREIT, defined as,
earnings before interest expense, taxes, depreciation, depletion and
amortization, gains or losses on disposition of depreciated property,
including gains or losses on change of control, impairment write-downs of
depreciated property and of investments in unconsolidated affiliates caused by
a decrease in value of depreciated property in the affiliate, and adjustment
to reflect share of EBITDAre of unconsolidated affiliates. 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 impairment
charges on intangible and long-lived assets, gain or loss on depreciable real
property asset disposals, severance and reduction in workforce costs,
non-offering related IPO expenses, loss on debt extinguishment and
modification, stock-based compensation expense, foreign currency exchange gain
or loss, loss on partially owned entities, and reduction in EBITDAre from
partially owned entities. We believe that the presentation of Core EBITDA
provides a measurement of our operations that is meaningful to investors
because it excludes the effects of certain items that are otherwise included
in EBITDAre but which we do not believe are indicative of our core business
operations. EBITDAre and Core EBITDA are not measurements of financial
performance under U.S. GAAP, and our EBITDAre and Core EBITDA may not be
comparable to similarly titled measures of other companies. You should not
consider our EBITDAre and Core EBITDA as alternatives to net income or cash
flows from operating activities determined in accordance with U.S. GAAP. Our
calculations of EBITDAre and Core EBITDA have limitations as analytical tools,
including:

  * these measures do not reflect our historical or future cash requirements
    for recurring maintenance capital expenditures or growth and expansion
    capital expenditures;
  * these measures do not reflect changes in, or cash requirements for, our
    working capital needs;
  * these measures do not reflect the interest expense, or the cash
    requirements necessary to service interest or principal payments, on our
    indebtedness;
  * these measures do not reflect our tax expense or the cash requirements to
    pay our taxes; and
  * although depreciation, depletion and amortization are non-cash charges,
    the assets being depreciated, depleted and amortized will often have to be
    replaced in the future and these measures do not reflect any cash
    requirements for such replacements.

We use EBITDAre and Core EBITDA as measures of our operating performance and
not as measures of liquidity. The tables on page 10 an 11 reconcile EBITDA,
EBITDAre and Core EBITDA to net income, which is the most directly comparable
financial measure calculated in accordance with U.S. GAAP.

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https://www.businesswire.com/news/home/20180510006195/en/

Contact:

Americold Realty Trust
Investor Relations
Telephone: 678-459-1959
investor.relations@americold.com
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