AMERICOLD REALTY TRUST (COLD) FY 2022 MD&A

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements included in this Annual Report on Form 10-K. In addition, the following discussion contains forward-looking statements, such as statements regarding our expectation for future performance, liquidity and capital resources, that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our expectations. Our actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause such differences include those identified below and those described under Item 1A of this Annual Report on Form 10-K. Refer to our Annual Report on Form 10-K as filed on March 1, 2022, for a discussion of the comparative results of operations for the years ended December 31, 2021 and 2020.

Management’s Overview

We are the world’s largest publicly traded REIT focused on the ownership, operation, acquisition and development of temperature-controlled warehouses. We are organized as a self-administered and self-managed REIT with proven operating, development and acquisition expertise. As of December 31, 2022, we operated a global network of 242 temperature-controlled warehouses encompassing approximately 1.4 billion cubic feet, with 195 warehouses in North America, 27 in Europe, 18 warehouses in Asia-Pacific, and two warehouses in South America. We view and manage our business through three primary business segments: warehouse, third–party managed and transportation. In addition, we hold three minority interests in joint ventures, one with SuperFrio which owns or operates 38 temperature-controlled warehouses in Brazil, one with Comfrio which owns or operates 28 temperature-controlled warehouses in Brazil, and one with LATAM which owns one temperature-controlled warehouse in Chile.

Components of Our Results of Operations

Warehouse. Our primary source of revenues consists of rent, storage and warehouse services fees. Our rent, storage and warehouse services revenues are the key drivers of our financial performance. Rent and storage revenues consist of recurring, periodic charges related to the storage of frozen and perishable food and other products in our warehouses by our customers. We also provide these customers with a wide array of handling and other warehouse services, such as (1) receipt, handling and placement of products into our warehouses for storage and preservation, (2) retrieval of products from storage upon customer request, (3) blast freezing, which involves the rapid freezing of non-frozen products, including individual quick freezing for agricultural produce and seafood, (4) case-picking, which involves selecting product cases to build customized pallets, (5) kitting and repackaging, which involves assembling custom product packages for delivery to retailers and consumers, and labeling services, (6) order assembly and load consolidation, (7) exporting and importing support services, (8) container handling, (9) cross-docking, which involves transferring inbound products to outbound trucks utilizing our warehouse docks without storing them in our warehouses, (10) government-approved temperature-controlled storage and inspection services, (11) fumigation, (12) pre-cooling and cold treatment services, (13) produce grading and bagging, (14) protein boxing, (15) e-commerce fulfillment, and (16) ripening. We refer to these handling and other warehouse services as our value-added services.

Cost of operations for our warehouse segment consists of power, other facilities costs, labor, and other services costs. Labor, the largest component of the cost of operations from our warehouse segment, consists primarily of employee wages, benefits, and workers’ compensation. Trends in our labor expense are influenced by changes in headcount, changes in compensation levels and associated performance incentives, the use of third-party labor to support our operations, changes in terms of collective bargaining agreements, changes in customer requirements and associated work content, workforce productivity, labor availability, governmental policies and

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regulations, variability in costs associated with medical insurance and the impact of workplace safety programs, inclusive of the number and severity of workers’ compensation claims. Labor expense can also be impacted as a result of discretionary bonuses. In response to the COVID-19 pandemic, we incorporated certain activities such as staggered break schedules, social distancing, and other changes to process that can create inefficiencies. Our second largest cost of operations from our warehouse segment is power utilized in the operation of our temperature-controlled warehouses. As a result, fluctuations in the price for power in the regions where we operate may have a significant effect on our financial results. We may from time to time hedge our exposure to changes in power prices through fixed rate agreements or, to the extent possible and appropriate, through rate escalations or power surcharge provisions within our customer contracts. Additionally, business mix impacts power expense depending on the temperature zone or type of freezing required. Other facilities costs include utilities other than power, property insurance, property taxes, sanitation (which include incremental supplies as a result of COVID-19), repairs and maintenance on real estate, rent under real property operating leases, where applicable, security, and other related facilities costs. Other services costs include equipment costs, warehouse consumables (e.g., shrink-wrap and uniforms), personal protective equipment to maintain the health and safety of our associates, warehouse administration and other related services costs.

Transportation. We charge transportation fees, which may also include fuel and capacity surcharges, to our customers for whom we arrange the transportation of their products. Cost of operations for our transportation segment consists primarily of third-party carrier charges, which are impacted by factors affecting those carriers, including driver and equipment availability in certain markets. Additionally, in certain markets we employ drivers and assets to serve our customers. Costs to operate these assets include, wages, fuel, tolls, insurance and maintenance.

Third-Party Managed. We receive a reimbursement of substantially all expenses for warehouses that we manage on behalf of third-party owners, with all reimbursements recognized as revenues under the relevant accounting guidance. We also earn management fees, incentive fees upon achieving negotiated performance and cost-savings results, or an applicable mark-up on costs. Cost of operations for our third-party managed segment is reimbursed on a pass-through basis. During the fourth quarter of 2022, we strategically transitioned the management of our largest third-party managed customer’s warehouses to a new third-party provider, and our operations ceased. As part of this transition, we agreed to continue to process certain costs for the related employee benefits for this customer, and will receive reimbursement for all such costs.

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

Our depreciation and amortization charges result primarily from the capital-intensive nature of our business. The principal components of depreciation relate to our warehouses, including buildings and improvements, refrigeration equipment, racking, leasehold improvements, material handling equipment, furniture and fixtures, and our computer hardware and software. Amortization relates primarily to intangible assets for customer relationships.

Our corporate-level selling, general and administrative expenses consist primarily of wages and benefits for management, administrative, business development, account management, project management, marketing, engineering, supply-chain solutions, human resources and information technology personnel, as well as expenses related to equity incentive plans, communications and data processing, travel, professional fees, bad debt, training, office equipment and supplies. Trends in corporate-level selling, general and administrative expenses are influenced by changes in headcount and compensation levels and achievement of incentive compensation targets. To position ourselves to meet the challenges of the current business environment, we have implemented a shared

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services support structure to better manage costs and enhance the efficiency of our operations. We have begun to integrate our recent acquisitions into this shared services structure.

Our corporate-level acquisition, litigation and other expenses consist of costs that we view outside of selling, general and administrative expenses with a high level of variability from period-to-period, and include the following: acquisition and integration related costs, litigation costs incurred in order to defend ourselves from litigation charges outside of the normal course of business and related settlement costs, severance costs, terminated site operations costs, cyber incident related costs and related recoveries, other costs which relate to insurance claim deductibles and related recoveries.

Key Factors Affecting Our Business and Financial Results

Market Conditions

During the years ended December 31, 2022 and 2021, our business and financial results were negatively impacted by macro-economic headwinds and disruptions in (1) the food supply chain; (ii) our customers’ production and transportation of goods; (iii) the labor market impacting associate turnover, availability and cost; and (iv) the macroeconomic environment including the impact of inflation on the cost to provide our services. During the year ended December 31, 2022, there have been gradual improvements in food production and the food supply chain has begun to recover storage levels, nearing pre-COVID 19 pandemic levels by the end of the year. There is no assurance that the inventory levels reported as of December 31, 2022 will be maintained or increase due to the previously mentioned risks and uncertainties, among others. Overall, we expect that end-consumer demand for food will remain consistent with historic levels over the long-term.

The unprecedented labor environment continues to impact many companies, including our food manufacturing customers and our own. Labor availability strained food production during 2021 and the early parts of 2022, but began to improve gradually through the duration of 2022. Additionally, the tenure of associates has declined as a result of higher than average turnover, leading to inefficiencies in our operations. We expect that this will improve with our efforts to focus on associate retention.

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

Additionally, global supply chains have been volatile following the invasion of Ukraine by Russia which has resulted in sanctions against Russia from the U.S. and a number of European countries. While we do not have warehouses or operations in Russia or Ukraine, our global operations and specifically our European operations may be impacted as a result of the ongoing conflict, including increased power costs and disruptions in inventory transportation, logistics systems and supply chain management. To date, our operations have not been materially impacted by the ongoing conflict.

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Refer to “Item 1A - Risk Factors” in this Annual Report on Form 10-K for additional information.

Foreign Currency Translation Impact on Our Operations

Our consolidated revenues and expenses are subject to variations caused by the net effect of foreign currency translation on revenues and expenses incurred by our operations outside the United States. Future fluctuations of foreign currency exchange rates and their impact on our Consolidated Statements of Operations are inherently uncertain. As a result of the relative size of our international operations, these fluctuations may be material on our results of operations. Our revenues and expenses from our international operations are typically denominated in the local currency of the country in which they are derived or incurred. Therefore, the impact of foreign currency fluctuations on our results of operations and margins is partially mitigated.

The following table shows a comparison of underlying average exchange rates of the foreign currencies that impacted our U.S. dollar-reported revenues and expenses during the periods discussed herein together with a comparison against the exchange rates of such currencies at the end of the applicable periods presented herein. The rates below represent the U.S. dollar equivalent of one unit of the respective foreign currency. Amounts presented in constant currency within our results of operations are calculated by applying the average foreign exchange rate from the comparable prior year period to actual local currency results in the current period, rather than the actual exchange rates in effect during the respective period. While constant currency metrics are a non-GAAP calculation and do not represent actual results, the comparison allows the reader to understand the impact of the underlying operations in addition to the impact of changing foreign exchange rates.

(1)Represents the relevant average foreign exchange rates in effect in the comparable prior period applied to the activity for the current period. The average foreign currency exchange rates we apply to our operating results are derived from third party reporting sources for the periods indicated.

Focus on Our Operational Effectiveness and Cost Structure

As previously mentioned, we have initiated Project Orion during 2023 in order to further enhance our operational effectiveness, and to integrate the acquisitions completed over the last several years. We continuously seek to execute on various initiatives aimed at streamlining our business processes and reducing our cost structure, including: realigning and centralizing key business processes and fully integrating acquired assets and businesses; implementing standardized operational processes; integrating and launching new information technology tools and platforms; instituting key health, safety, leadership and training programs; and capitalizing on the purchasing power of our network. Through the realignment of our business processes, we have acquired new talent and strengthened our service offerings. In order to reduce costs in our facilities, we have invested in

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energy efficiency projects, including LED lighting, thermal energy storage, motion-sensor technology, variable frequency drives for our fans and compressors, third party efficiency reviews and real-time monitoring of energy consumption, rapid open and close doors, and alternative-power generation technologies to improve the energy efficiency of our warehouses. We have also performed fine-tuning of our refrigeration systems, deployed efficient energy management practices, such as time-of-use and awareness, and have increased our participation in Power Demand Response programs with some of our power suppliers. These initiatives have allowed us to reduce our consumption of kilowatt hours and energy spend.

As part of our initiatives to streamline our business processes and to reduce our cost structure, we have evaluated and exited less strategic and profitable markets or business lines, including the sale of certain warehouse assets, the exit of certain leased facilities, the exit of certain managed warehouse agreements and the sale of our quarry business during 2020. Through our process of active portfolio management, we continue to evaluate our markets and offerings.

Strategic Shift within Our Transportation Segment

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

Historically Significant Customer

For the years ended December 31, 2022, 2021, and 2020 one customer accounted for more than 10% of our total revenues, with revenues received of $264.2 million, $285.6 million and $257.3 million, respectively. The substantial majority of this customer’s business relates to our third-party managed segment. The Company and this customer transitioned the management of this customer’s warehouses to a new third-party provider during the fourth quarter of 2022, and we will no longer serve this customer in the third-party managed segment going forward. We are reimbursed for substantially all expenses we incur in managing warehouses on behalf of third-party owners. We recognize these reimbursements as revenues under applicable accounting guidance, but they generally do not affect our financial results because they are offset by the corresponding expenses that we recognize in our third-party managed segment cost of operations. Of the revenues received from this customer, $255.2 million, $273.1 million, and $241.8 million represented reimbursements for certain expenses we incurred during the years ended December 31, 2022, 2021 and 2020, respectively, that were offset by matching expenses included in our third-party managed cost of operations.

Economic Occupancy of our Warehouses

We define average economic occupancy as the aggregate number of physically occupied pallets and any additional pallets otherwise contractually committed for a given period, without duplication. We estimate the number of contractually committed pallet positions by taking into account the actual pallet commitment specified

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in each customers’ contract, and subtracting the physical pallet positions. We regard economic occupancy as an important driver of our financial results. Historically, providers of temperature-controlled warehouse space have offered storage services to customers on an as-utilized, on-demand basis. We actively seek to enter into contracts that implement our commercial business rules which contemplate, among other things, fixed storage commitments in connection with establishing new customer relationships. Additionally, we actively seek opportunities to transition our current customers to contracts that feature a fixed storage commitment when renewing existing agreements or upon the change in the anticipated profile of our customer. This strategy mitigates the impact of changes in physical occupancy throughout the course of the year due to seasonality, as well as other factors that can impact physical occupancy while ensuring our customers have the necessary space they need to support their business.

Throughput at our Warehouses

The level and nature of throughput at our warehouses is an important factor impacting our warehouse services revenues in our warehouse segment. Throughput refers to the volume of pallets that enter and exit our warehouses. Higher levels of throughput drive warehouse services revenues in our warehouse segment as customers are typically billed on a basis that takes into account the level of throughput of the goods they store in our warehouses. The nature of throughput may be driven by the expected turn of the underlying product or commodity. Throughput pallets can be influenced both by the food manufacturers as well as shifts in demand preferences. Food manufacturers’ production levels, which respond to market conditions, labor availability, supply chain dynamics and consumer preferences, may impact inbound pallets. Similarly, a change in inventory turnover due to shift in consumer demand may impact outbound pallets.

How We Assess the Performance of Our Business

Segment Contribution (Net Operating Income or “NOI”)

We evaluate the performance of our primary business segments based on their contribution (NOI) to our overall results of operations. We use the term “segment contribution (NOI)” to mean a segment’s revenues less its cost of operations (excluding any depreciation and amortization, impairment charges, corporate-level selling, general and administrative expenses and corporate-level acquisition, litigation and other expenses). We use segment contribution (NOI) to evaluate our segments for purposes of making operating decisions and assessing performance in accordance with FASB ASC, Topic 280, Segment Reporting.

We also analyze the “segment contribution (NOI) margin” for each of our business segments, which we calculate as segment contribution (NOI) divided by segment revenues.

In addition to our segment contribution (NOI) and segment contribution (NOI) margin, we analyze the contribution (NOI) of our warehouse rent and storage operations and our warehouse services operations within our warehouse segment. We calculate the contribution (NOI) of our warehouse rent and storage operations as rent and storage revenues less power and other facilities cost. We calculate the contribution (NOI) of our warehouse services operations as warehouse services revenues less labor and other service costs. We calculate the contribution (NOI) margin for each of these operations as the applicable contribution (NOI) measure divided by the applicable revenue measure. We believe the presentation of these contribution (NOI) and contribution (NOI) margin measures helps investors understand the relative revenues, costs and earnings resulting from each of these separate types of services we provide to our customers in the same manner reviewed by our management in connection with the operation of our business. These contribution (NOI) measures within our warehouse segment are not measurements of financial performance under U.S. GAAP, and these measures should be considered as

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supplements, but not as alternatives, to our results calculated in accordance with U.S. GAAP. We provide reconciliations of these measures in the discussions of our comparative results of operations below.

Same Store Analysis

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

Acquired properties will be included in the “same store” population if owned by us as of the first business day of each year, of the prior calendar year and still owned by us as of the end of the current reporting period, unless the property is under development. The “same store” pool is also adjusted to remove properties that were sold or entering development subsequent to the beginning of the current calendar year. As such, the “same store” population for the period ended December 31, 2022 includes all properties that we owned at January 2, which had both been owned and had reached “normalized operations” by January 2, 2022.

We calculate “same store contribution (NOI)” as revenues for the same store population less its cost of operations (excluding any depreciation and amortization, impairment charges and corporate-level selling, general and administrative expenses, corporate-level acquisition, litigation and other expenses and gain or loss on sale of real estate). In order to derive an appropriate measure of period-to-period operating performance, we also calculate our same store contribution (NOI) on a constant currency basis to remove the effects of foreign currency exchange rate movements by using the comparable prior period exchange rate to translate from local currency into U.S. dollars for both periods. We evaluate the performance of the warehouses we own or lease using a “same store” analysis, and we believe that same store contribution (NOI) is helpful to investors as a supplemental performance measure because it includes the operating performance from the population of properties that is consistent from period to period and also on a constant currency basis, thereby eliminating the effects of changes in the composition of our warehouse portfolio and currency fluctuations on performance measures.

The following table shows the number of same-store warehouses in our portfolio and the number of warehouses excluded as same-store warehouses for the year ended December 31, 2022. While not included in the non-same store warehouse count in the table below, the results of operations for the non-same store warehouses includes the partial period impact of the sites that were exited during the year ended December 31, 2022, as described in footnote 1 following the table. In addition, we hold three minority interests in joint ventures, one with SuperFrio, which owns or operates 38 temperature-controlled warehouses in Brazil, one with Comfrio, which owns or operates 28 temperature-controlled warehouses in Brazil, and one with LATAM, which owns one temperature-controlled warehouse in Chile; these joint ventures are not included in the table below.

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(1) The non-same store facility count of 29 includes a facility acquired through the De Bruyn Cold Storage acquisition on July 1, 2022, a facility previously leased that we bought during the third quarter of 2022, one recently leased warehouse in Australia, one recently constructed facility in Denver that we purchased in November 2021, one facility previously leased that we bought during the second quarter of 2022, three warehouses acquired through the Lago Cold Stores acquisition on November 15, 2021 (including one leased facility that was exited upon expiration during the first quarter of 2022 and another leased facility early terminated in the third quarter of 2022), one warehouse acquired through the Newark Facility Management acquisition on September 1, 2021, two facilities acquired through the ColdCo acquisition on August 2, 2021 (including one leased facility from the ColdCo acquisition that was exited upon expiration during the fourth quarter of 2022), one warehouse acquired through the Bowman stores acquisition on May 28, 2021, two warehouses acquired through the KMT Brrr! acquisition on May 5, 2021, four remaining warehouses acquired through the Liberty Freezers acquisition on March 1, 2021 (including one leased facility that was exited during the third quarter of 2021), 13 warehouses in expansion or redevelopment and one warehouse which we ceased operations within as it is being prepared for lease to a third-party.

Same store contribution (NOI) is not a measurement of financial performance under U.S. GAAP. In addition, other companies providing temperature-controlled warehouse storage and handling and other warehouse services may not define same store or calculate same store contribution (NOI) in a manner consistent with our definition or calculation. Same store contribution (NOI) should be considered as a supplement, but not as an alternative, to our results calculated in accordance with U.S. GAAP. We provide reconciliations of these measures in the discussions of our comparative results of operations below.

Constant Currency Metrics

As discussed above under “Key Factors Affecting Our Business and Financial Results—Foreign Currency Translation Impact on Our Operations,” our consolidated revenues and expenses are subject to variations outside our control that are caused by the net effect of foreign currency translation on revenues generated and expenses incurred by our operations outside the United States. As a result, in order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we analyze our business performance based on certain constant currency reporting that represents current period results translated into U.S. dollars at the relevant average foreign exchange rates applicable in the comparable prior period. We believe that the presentation of constant currency results provides a measurement of our ongoing operations that is meaningful to investors because it excludes the impact of these foreign currency movements that we cannot control. Constant currency results are not measurements of financial performance under U.S. GAAP, and our constant currency results should be considered as a supplement, but not as an alternative, to our results calculated in accordance with U.S. GAAP. The constant currency performance measures should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with U.S. GAAP. We provide reconciliations of these measures in the discussions of our comparative results of operations below. Our discussion of the drivers of our performance below are based upon U.S. GAAP.

Presentation

A detailed discussion of the 2022 year-over-year changes can be found below and a detailed discussion of the 2021 year-over-year changes can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” on Form 10-K filed with the SEC on March 1, 2022.

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Results of Operations

Comparison of Results for the Years Ended December 31, 2022 and 2021

Warehouse Segment

The following table presents the operating results of our warehouse segment for the years ended December 31, 2022 and 2021.

(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 $42.0 million and $41.8 million for the year ended December 31, 2022 and 2021, respectively.

(3)Includes non-real estate rent expense (equipment lease and rentals) of $12.9 million and $11.7 million for the year ended December 31, 2022 and 2021, respectively.

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

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

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

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

Warehouse segment revenue was $2.30 billion for the year ended December 31, 2022, an increase of $217.6 million, or 10.4%, compared to $2.09 billion for the year ended December 31, 2021. On a constant currency basis, our warehouse segment revenue was $2.35 billion for the year ended December 31, 2022, an increase of $267.3 million, or 12.8%, compared to the prior year. This growth was driven by $161.7 million of growth in our same store pool on a constant currency basis primarily due to our pricing initiative and rate escalations and an improvement in economic occupancy, partially offset by COVID-19 and the related labor challenges which continued to negatively impact food production during the first half of 2022 and slightly lower throughput. Approximately $79.5 million of the increase, on a constant currency basis, was driven by acquisitions completed during 2021 and 2022, including the growth experienced period-over-period during overlapping periods of ownership. Refer to the Same Store Analysis above for details of our acquisitions during 2022 and 2021. Revenue growth was also due to our recently completed expansion and developments in our non-same store pool, which increased approximately $26.1 million, on a constant currency basis. The foreign currency

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translation of revenues earned by our foreign operations had a $49.7 million unfavorable impact during the year ended December 31, 2022, which was mainly driven by the strengthening of the U.S. dollar against our foreign subsidiaries’ currencies.

Warehouse segment cost of operations was $1.67 billion for the year ended December 31, 2022, an increase of $167.8 million, or 11.2%, compared to $1.50 billion for the year ended December 31, 2021. On a constant currency basis, our warehouse segment cost of operations was $1.70 billion for the year ended December 31, 2022, an increase of $205.8 million, or 13.7%, compared to the prior year. The cost of operations for our same store pool increased $123.2 million on a constant currency basis, across most of our cost categories, reflective of the inflationary pressure and operational inefficiencies. Labor was also impacted by employee absenteeism and associated disruption throughout the first quarter of 2022 due to the COVID-19 Omicron variant. Approximately $59.7 million of the increase, on a constant currency basis, was driven by the additional facilities in the warehouse segment we acquired in connection with the aforementioned acquisitions. We also incurred higher costs of $22.9 million related to our recently completed and in progress expansion and development projects, inclusive of incremental start-up costs of $13.7 million during the year ended 2022, which have not yet stabilized. These increases are offset by the foreign currency translation of expenses incurred by our foreign operations, which had a $38.0 million favorable impact during the year ended December 31, 2022.

Warehouse segment contribution (NOI) was $636.2 million for the year ended December 31, 2022, an increase of $49.8 million, or 8.5%, compared to $586.4 million for the year ended December 31, 2021. On a constant currency basis, warehouse segment contribution was $647.9 million for the year ended December 31, 2022, an increase of $61.4 million, or 10.5%, compared to the prior year. Approximately $19.9 million of the increase, on a constant currency basis, was driven by the additional facilities in the warehouse segment as a result of the aforementioned acquisitions, including the growth and synergies experienced period-over-period during overlapping periods of ownership. The NOI for our same store pool increased $38.5 million on a constant currency basis, attributable to revenue and cost of operations factors previously described. Additionally, warehouse segment NOI was negatively impacted by the start-up costs incurred in connection with our expansion and development projects in the non-same store pool as they continue to ramp up prior to stabilization. The foreign currency translation of our results of operations had a $11.7 million unfavorable impact to the warehouse segment contribution period-over-period.

Same Store and Non-Same Store Results

We had 208 same stores for the years ended December 31, 2022 and 2021. 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 years ended December 31, 2022 and December 31, 2021. Amounts related to the acquisitions of Bowman Stores, ColdCo, De Bruyn Cold Storage, KMT Brrr!, Lago Cold Stores, Liberty, Newark, one recently leased warehouse in Australia, a recently constructed facility in Denver purchased in November 2021, a leased facility which we purchased during the second quarter of 2022, as well as certain expansion and development projects not yet stabilized are reflected within non-same store results.

The following table presents revenues, cost of operations, contribution (NOI) and margins for our same stores and non-same stores with a reconciliation to the total financial metrics of our warehouse segment for the years ended December 31, 2022 and 2021.

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(1)The adjustments from our U.S. GAAP operating results to calculate our operating results on a constant currency basis is the effect of changes in foreign currency exchange rates relative to the comparable prior period.

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

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

(4)Calculated as rent and storage contribution (NOI) divided by rent and storage revenue.

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

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

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

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

(1)We define average economic occupancy as the aggregate number of physically occupied pallets and any additional pallets otherwise contractually committed for a given period, without duplication. We estimate the number of contractually committed pallet positions by taking into account actual pallet commitment specified in each customers’ contract, and subtracting the physical pallet positions.

(2)We define average physical occupancy as the average number of occupied pallets divided by the estimated number of average physical pallet positions in our warehouses for the applicable period. We estimate the number of physical pallet positions by taking into account actual racked space and by estimating unracked space on an as-if racked basis. We base this estimate on a formula utilizing the total cubic feet of each room within the warehouse that is unracked divided by the volume of an assumed rack space that is consistent with the characteristics of the relevant warehouse. On a warehouse by warehouse basis, rack space generally ranges from three to four feet depending upon the type of facility and the nature of the customer goods stored therein. The number of our pallet positions is reviewed and updated quarterly, taking into account changes in racking configurations and room utilization.

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

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Economic occupancy at our same stores was 80.5% for the year ended December 31, 2022, a increase of 345 basis points compared to 77.0% for the year ended December 31, 2021. Economic occupancy was higher than the prior year due to gradual improvements in food production levels particularly during the second half 2022. Same store rent and storage revenues per economic occupied pallet increased 5.4% period-over-period, primarily driven by our pricing initiative and contractual rate escalations, partially offset by unfavorable foreign currency translation. On a constant currency basis, our same store rent and storage revenues per occupied pallet increased 7.3% period-over-period. Our economic occupancy at our same stores was 597 basis points higher than our corresponding average physical occupancy of 74.5%.

Throughput pallets at our same stores were 35.7 million pallets for the year ended December 31, 2022, a decrease of 1.5% from 36.3 million pallets for the year ended December 31, 2021. This decrease was the result of a slight decline in end-consumer demand as basket sizes decreased due to the broader economic slowdown and a slight change in business mix. Same store warehouse services revenue per throughput pallet increased 5.4% compared to the prior year primarily as a result of by our our pricing initiative and contractual rate escalations, partially offset by unfavorable foreign currency translation as previously discussed. On a constant currency basis, our same store services revenue per throughput pallet increased 7.7% compared to the prior year.

Transportation Segment

The following table presents the operating results of our transportation segment for the years ended December 31, 2022 and 2021.

(1)The adjustments from our U.S. GAAP operating results to calculate our operating results on a constant currency basis are the effect of changes in foreign currency exchange rates relative to the comparable prior period.

Transportation revenue was $313.4 million for the year ended December 31, 2022, an increase of $1.3 million, or 0.4%, compared to $312.1 million for the year ended December 31, 2021. On a constant currency basis, transportation revenue was $331.6 million for the year ended December 31, 2022, an increase of $19.5 million, or 6.2%, compared to the prior year. The increase was primarily due to higher rates in our consolidation business, the associated transportation revenue from recently completed acquisitions, and the higher revenue associated with brokered transportation cost. This is partially offset by the net decrease in revenue from the rationalization of certain domestic market operations and the unfavorable impact of foreign currency translation.

Transportation cost of operations was $266.0 million for the year ended December 31, 2022, a decrease of $16.8 million, or 5.9%, compared to $282.7 million for the year ended December 31, 2021. On a constant currency basis, transportation cost of operations was $283.2 million for the year ended December 31, 2022, an increase of $0.5 million, or 0.2%, compared to the prior year. The decrease was primarily due to the decrease of costs from the exit of certain domestic market operations, improved transportation procurement and the favorable impact of foreign currency translation.

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Transportation segment contribution (NOI) was $47.4 million for the year ended December 31, 2022, an increase of $18.0 million, or 61.4%, compared to $29.4 million for the year ended December 31, 2021. Transportation segment margin increased 571 basis points from the prior year, to 15.1% from 9.4%. On a constant currency basis, transportation segment contribution was $48.4 million for the year ended December 31, 2022, an increase of $19.0 million, or 64.7%, compared to the prior year. The increase in margin was primarily due to the rate increases implemented and improved transportation procurement during 2022.

Third-Party Managed Segment

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

(1)The adjustments from our U.S. GAAP operating results to calculate our operating results on a constant currency basis are the effect of changes in foreign currency exchange rates relative to the comparable prior period.

Third-party managed revenue was $298.4 million for the year ended December 31, 2022, a decrease of $18.9 million, or 6.0%, compared to $317.3 million for the year ended December 31, 2021. On a constant currency basis, third-party managed revenue was $300.3 million for the year ended December 31, 2022, a decrease of $17.0 million, or 5.4%, compared to the prior year. This decrease was due to the wind down of operations for our largest domestic third-party managed customer, lower volumes and a reduction in certain costs that are a direct pass-through to the customer, discussed below.

Third-party managed cost of operations was $286.1 million for the year ended December 31, 2022, a decrease of $17.3 million, or 5.7%, compared to $303.3 million for the year ended December 31, 2021. On a constant currency basis, third-party managed cost of operations was $287.6 million for the year ended December 31, 2022, a decrease of $15.7 million, or 5.2%, compared to the prior year. Third-party managed cost of operations decreased as a result of the wind down of operations for our largest domestic third-party managed customer, lower volumes and lower costs including health care and travel expenses.

Third-party managed segment contribution (NOI) was $12.3 million for the year ended December 31, 2022, a decrease of $1.6 million, or 11.7%, compared to $14.0 million for the year ended December 31, 2021. The decline was driven by the reasons previously described. On a constant currency basis, third-party managed segment contribution (NOI) was $12.7 million for the year ended December 31, 2022, a decrease of $1.3 million, or 9.3%, compared to the prior year.

Other Consolidated Operating Expenses

Depreciation and amortization. Depreciation and amortization expense was $331.4 million for the year ended December 31, 2022, an increase of $11.6 million, or 3.6%, compared to $319.8 million for the year ended December 31, 2021. This increase was primarily due to the 2021 acquisitions, expansions and developments, partially offset by the favorable impact of foreign currency translation.

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Selling, general and administrative. Corporate-level selling, general and administrative expenses were $231.1 million for the year ended December 31, 2022, an increase of $49.0 million, or 26.9%, compared to $182.1 million for the year ended December 31, 2021. Included in these amounts are business development expenses attributable to new business pursuits, supply chain solutions and underwriting, facility development, customer onboarding, and engineering and consulting services to support our customers in the cold chain. We believe these costs are comparable to leasing costs for other publicly-traded REITs. Business development expenses represented approximately 17% and 17% of corporate-level selling, general and administrative expenses for the year ended December 31, 2022 and 2021, respectively. The increase in selling, general and administrative expenses was due to the resumption of performance-based compensation expense in connection with the short-term incentive plan, higher third-party professional and consulting fees and higher share-based compensation expense from the November 2021 retention grant. For the years ended December 31, 2022 and 2021, corporate-level selling, general and administrative expenses were 7.9% and 6.7% of total revenues, respectively.

Acquisition, litigation and other. Corporate-level acquisition, litigation and other expenses were $32.5 million for the year ended December 31, 2022, a decrease of $19.1 million compared to $51.6 million for the year ended December 31, 2021. During the year ended December 31, 2022, we incurred $24.0 million of acquisition and integration related expenses, an aggregate $6.5 million of severance related expenses due to the realignment of certain international operations and senior leadership changes, $4.2 million of terminated site operating costs, partially offset by $2.2 million of insurance recoveries related to cyber incidents. During the year ended December 31, 2021, we incurred $39.3 million of acquisition related expenses primarily composed of professional fees and integration related costs, including severance and employee retention expenses, in connection with completed and potential acquisitions, primarily related to the Agro acquisition. We also incurred aggregate severance of $8.9 million, of which $4.6 million related to severance of our former CEO and $4.3 million related to the realignment of our international operations.

Impairment of indefinite and long-lived assets. For the years ended December 31, 2022 and 2021, we recorded impairment charges of $7.4 million and $3.3 million, respectively. The charges incurred during the year ended December 31, 2022 include $3.2 million of goodwill impairment as we are strategically shifting our focus to our core warehouse portfolio and are no longer serving one of our largest historical customers in the third-party managed segment, an impairment charge of “Assets under construction” of $2.2 million associated with a development project which management determined it would no longer pursue, and aggregate charges of $1.7 million of “Buildings, property and equipment” associated with the anticipated exit of certain leased facilities. The charges incurred during the year ended December 31, 2021 include $1.7 million related to costs associated with development projects which management determined it would no longer pursue, and $1.6 million for certain software costs that were supplanted with upgrades or replacements.

Loss from sale of real estate. For the year ended December 31, 2022, we recorded a $5.7 million loss from the sale of real estate related to a facility where a customer exercised its option to purchase the facility and we recorded a loss for the excess book value.

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Other Expense

The following table presents other items of income and expense for the years ended December 31, 2022 and 2021.

Interest expense. Interest expense was $116.1 million for the year ended December 31, 2022, an increase of $17.0 million, or 17.1%, compared to $99.2 million for the year ended December 31, 2021. The average effective interest rate of our outstanding debt increased from 3.14% for the year ended December 31, 2021 to 3.65% for the year ended December 31, 2022 due to higher average borrowings paired with rising interest rates associated with our Senior Unsecured Credit Facility. In August 2022, we completed a refinancing of our Senior Unsecured Credit Facility and entered into interest rate swaps to fix the interest rate on a substantial portion of this facility. In December 2022, we entered into additional interest rate swaps to fix the interest rate on the remainder of our term loan. Our revolving credit facility borrowings continue to incur interest under the applicable variable, floating rate. Refer to Notes 9 and Note 10 of the Consolidated Financial Statements for additional information regarding these transactions.

Interest income. Interest income of $1.6 million for the year ended December 31, 2022 increased $0.8 million when compared to $0.8 million for the year ended December 31, 2021. The increase was driven by higher interest billings to customers with past due amounts as compared to the prior year.

Loss on debt extinguishment, modifications and termination of derivative instruments. Loss on debt extinguishment, modifications, and termination of derivative instruments of $3.2 million for the year ended December 31, 2022 decreased as compared to the year ended December 31, 2021 primarily due to the early repayment of $200 million of principal on the Senior Unsecured Term Loan A Facility during the first quarter of 2021, which resulted in a charge of $2.9 million, partially offset by a charge of $0.6 million due to the refinancing that occurred during 2022. Additionally, during the years ended 2022 and 2021, we recorded $2.5 million and $2.7 million, respectively, for the amortization of fees paid for the interest rate swaps terminated during 2020.

Foreign currency exchange loss, net. We reported a foreign currency exchange loss of $1.0 million for the year ended December 31, 2022 compared to a $0.6 million loss for the year ended December 31, 2021. The increase in foreign currency exchange loss due to unfavorable foreign currency exchange rates because of the relative strength of the US dollar against foreign currencies that we transact in.

Other income (expense) - net. Other income, net was $1.8 million for each of the years ended December 31, 2022 and 2021. For the year ended December 31, 2022, this includes a $3.4 million gain related to the dissolution of the New Market Tax Credit entities during 2022, $2.2 million credit in non-service pension costs and $3.2 million of income from various tax credits. These gains were partially offset by $3.5 million in aggregate net loss from asset disposals, as well as a $4.1 million loss in connection with the deconsolidation of

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our Chilean operations upon contribution to the LATAM JV. For the year ended December 31, 2021, Other income, net of $1.8 million consisted of income of $1.3 million from various tax credits, a $0.7 million credit in non-service pension costs, partially offset by $0.3 million in aggregate net loss from asset disposals.

Loss from partially owned entities. We reported a loss of $9.3 million for the year ended December 31, 2022 compared to a loss of $2.0 million for the year ended December 31, 2021. The increase is primarily driven by higher interest expense incurred by our joint ventures given rising interest rates.

Income Tax Benefit

Income tax benefit for the year ended December 31, 2022 was $18.8 million, which represented an increase of $17.2 million, from an income tax benefit of $1.6 million for the year ended December 31, 2021. The tax benefit was principally created by $17.2 million in foreign losses generated in 2022, compared to a benefit of $7.4 million for foreign losses in 2021. We also recognized a $1.3 million tax benefit in 2022 for the release of valuation allowance as compared to a $7.1 million benefit for the release of valuation allowance in 2021. Certain non-recurring adjustments included a $6.5 million tax benefit in 2022 for the deconsolidation of our Chilean subsidiary and an $11.8 million deferred tax expense in 2021 to remeasure our net deferred tax liability in the United Kingdom due to the tax rate increase from 19% to 25%. Other adjustments consisted of $6.2 million tax expense in 2022 compared to $1.1 million tax expense in 2021; other adjustments primarily consisted of shared based compensation and non-deductible items.

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Non-GAAP Financial Measures

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

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(a)Net loss (gain) on sale of real estate, net of withholding tax include withholding tax on the sale of Sydney land which is included in income tax expense on the Consolidated Statement of Operations during 2020.

(b)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.

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•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.

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Liquidity and Capital Resources

We currently expect that our principal sources of funding for working capital, facility acquisitions, business combinations, expansions, maintenance and renovation of our properties, developments projects, debt service and distributions to our stockholders will include:

•current cash balances;

•cash flows from operations;

•our Senior Unsecured Revolving Credit Facility;

•our ATM Equity 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 liquidity requirements and capital commitments. These liquidity requirements and capital commitments include:

•operating activities and overall working capital;

•capital expenditures;

•capital contributions and investments in joint ventures;

•debt service obligations; and

•quarterly stockholder distributions.

We expect to utilize the same sources of capital we will rely on to meet our short-term liquidity requirements to also meet our long-term liquidity requirements, which include funding our operating activities, our debt service obligations and stockholder distributions, and our future development and acquisition activities.

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

On May 10, 2021, we entered into an equity distribution agreement pursuant to which we may sell, from time to time, up to an aggregate sales price of $900.0 million of our common shares through an ATM Equity Program (the “2021 ATM Equity Program”). Sales of our common stock made pursuant to the 2021 ATM Equity Program may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act, including sales made directly on the NYSE, or sales made to or through a market maker other than on an exchange, or as otherwise agreed between the applicable Agent and us. Sales may also be made on a forward basis pursuant to separate forward sale agreements. The net proceeds from sales of our common stock pursuant to the 2021 ATM Equity Program were used for funding acquisitions and development projects. During the year ended December 31, 2021, there were 2,332,846 common shares sold under the 2021 ATM Equity Program under forward sale agreements for gross proceeds of $90.6 million. All of these shares were settled during the year ended December 31, 2021.

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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 available to us for re-sale. 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 $5.9 million and $3.1 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we maintained bad debt allowances of approximately $16.0 million, which we believed to be adequate. The increase in bad debt expense is driven primarily by the increase in revenue as well as a slight increase in the aged accounts receivable.

Dividends and Distributions

We are required to distribute 90% of our taxable income (excluding capital gains) on an annual basis in order to continue to qualify as a REIT for federal income tax purposes. Accordingly, we intend to make, but are not contractually bound to make, regular quarterly distributions to stockholders from cash flows from our operating activities. While historically we have satisfied this distribution requirement by making cash distributions to our stockholders, we may choose to satisfy this requirement by making distributions of cash or other property. All such distributions are at the discretion of our Board of Directors. We consider market factors and our performance in addition to REIT requirements in determining distribution levels. We have distributed at least 100% of our taxable income annually since inception to minimize corporate-level federal income taxes. Amounts accumulated for distribution to stockholders are invested primarily in interest-bearing accounts, which are consistent with our intention to maintain our status as a REIT.

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

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Outstanding Indebtedness

The following table summarizes our outstanding indebtedness as of December 31, 2022 (in thousands):

The variable rate debt shown above bears interest at interest rates based on various one-month SOFR, CDOR, SONIA, BBSW, EURIBOR, and BKBM rates, depending on the respective agreement governing the debt, including our global revolving credit facilities. As of December 31, 2022, our debt had a weighted average term to maturity of approximately 5.7 years , assuming exercise of extension options.

For further information regarding outstanding indebtedness, please see Note 9 and Note 10 to our consolidated financial statements included in this 2022 Annual Report on Form 10-K as filed with the SEC.

Credit Ratings

Our capital structure and financial practices have earned us investment grade credit ratings from three nationally recognized credit rating agencies. We have investment grade ratings of BBB with a negative outlook from Fitch, BBB with a Stable Trends outlook from DBRS Morningstar, and an investment grade rating of Baa3 with a stable outlook from Moody’s. These credit ratings are important to our ability to issue debt at favorable rates of interest, among other terms. Refer to our risk factor “Adverse changes in our credit ratings could negatively impact our financing activity” for further details regarding the potential impacts from changes to our credit ratings.

Maintenance Capital Expenditures and Repair and Maintenance Expenses

We utilize a strategic approach to recurring 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

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

(1) Excludes $18.4 million and $15.8 million of deferred acquisition maintenance capital expenditures incurred for the years ended December 31, 2022 and 2021, respectively.

Repair and Maintenance Expenses

We incur repair and maintenance expenses that include costs of normal maintenance and repairs and minor replacements that do not materially extend the life of the property or provide future economic benefits. Repair and maintenance expenses consist of expenses related to our existing temperature-controlled warehouse network and its existing supporting personal property and are reflected as operating expenses on our income statement. Examples of repair and maintenance expenses related to our warehouse portfolio include ordinary repair and maintenance on roofs, racking, walls, doors, parking lots and refrigeration equipment. Examples of repair and maintenance expenses related to personal property include ordinary repair and maintenance expenses on material handling equipment (e.g., fork lifts and pallet jacks) and related batteries. The following table sets forth our repair and maintenance expenses for the years ended December 31, 2022 and 2021.

External Growth, Expansion and Development Capital Expenditures

External growth expenditures represent asset acquisitions or business combinations. Expansion and development capital expenditures are investments made to support both our customers and our warehouse

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expansion and development initiatives. It also includes investments in enhancing our information technology platform. Examples of capital expenditures associated with expansion and development initiatives include funding of construction costs, increases to warehouse capacity and pallet positions, acquisitions of reusable incremental material handling equipment, and implementing energy efficiency projects, such as thermal energy storage, LED lighting, motion-sensor technology, variable frequency drives for our fans and compressors, rapid-close doors and alternative-power generation technologies. Examples of capital expenditures to enhance our information technology platform include the delivery of new systems and software and customer interface functionality.

Acquisitions

During the year ended December 31, 2022 we completed the acquisition of De Bruyn Cold Storage. During the year ended December 31, 2021, we completed the acquisitions of Bowman Stores, ColdCo, KMT Brrr!, Lago Cold Stores, Liberty Freezers, Newark Facility Management and a recently constructed facility in Denver. Refer to Note 3 of the Consolidated Financial Statements for details of the purchase price allocation for each acquisition.

Expansion and development

The expansion and development expenditures for the year ended December 31, 2022 are primarily driven by $37.5 million related to our two fully-automated, build-to-suit, development sites in Connecticut and Pennsylvania, $26.0 million for the Spearwood, Australia expansion, $13.5 million related to the Dunkirk, NY development, $18.8 million in our Dublin expansion, $8.8 million for the Barcelona expansion, $24.0 million related to our Russellville expansion, $12.4 million related to Atlanta Major Market Strategy Phase 2, and $8.4 million related to the Rochelle facility. During the year ended December 31, 2022, we also incurred capitalized interest of $11.8 million and capitalized insurance, property taxes, and compensation and travel expense aggregating to $5.5 million related to our ongoing expansion and development projects.

The expansion and development expenditures for the year ended December 31, 2021 are primarily driven by $111.2 million related to two fully-automated, build-to-suit, development sites in Connecticut and Pennsylvania, $23.9 million for the Atlanta major markets strategy project (Phase 1) and $21.0 million related to Phase 2, $37.5 million for the Russellville expansion, $9.5 million for the Calgary, Canada expansion, $20.4 million related to the Auckland, New Zealand expansion project, $24.0 million for the Dunkirk, NY development, $13.5 million for the Dublin expansion, $4.4 million for the Spearwood, Australia expansion and $4 million for the Lurgan expansion. During the year ended December 31, 2021, we also incurred capitalized interest of $11.6 million and capitalized insurance, property taxes, and compensation and travel expense aggregating to $3.5 million related to our ongoing expansion and development projects.

Expansion and development initiatives also include $22.5 million and $26.8 million of corporate initiatives and smaller customer driven growth projects incurred during 2022 and 2021, respectively, which are projects designed to reduce future spending over the course of time. This category reflects return on investment projects, conversion of leases to owned assets, and other cost-saving initiatives.

Finally, we incurred approximately $1.5 million and $13.2 million during 2022 and 2021, respectively, for contemplated future expansion or development projects.

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The following table sets forth our acquisitions, expansion and development capital expenditures for the years ended December 31, 2022 and 2021 (in thousands).

Historical Cash Flows

The following summary discussion of our cash flows is based on the Consolidated Statements of Cash Flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

Operating Activities

For the year ended December 31, 2022, our net cash provided by operating activities was $300.0 million, an increase of $26.9 million, or 9.9%, compared to $273.1 million for the year ended December 31, 2021. The increase is primarily due to higher segment contribution and lower acquisition and integration related costs. This was partially offset by higher selling, general and administrative expense.

Investing Activities

For the year ended December 31, 2022 cash used for additions to property, buildings and equipment was $308.4 million reflecting investments in our various expansion and development projects and maintenance capital expenditures. Additionally, we invested $15.8 million for the acquisition of De Bruyn Cold Storage and $14.6 million in acquisitions of property, buildings, and equipment for the buyout of two previously leased facilities. Finally, we invested $14.4 million primarily for the formation of the LATAM joint venture and immaterial capital contributions to the SuperFrio joint venture. This was partially offset by $4.7 million in proceeds from the sale of various assets.

For the year ended December 31, 2021 cash used for the acquisitions of Bowman, ColdCo, KMT Brrr!, Lago Cold Stores, Liberty and Newark Facility Management and accounted for as business combinations totaled $$741.4 million. Additions to property, buildings and equipment were $438.2 million reflecting investments in our various expansion and development projects and maintenance capital expenditures.

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Financing Activities

Our net cash provided by financing activities was $23.3 million for the year ended December 31, 2022. Cash provided by financing activities during 2022 consisted of $529.4 million in proceeds from our revolving line of credit and $470.0 million received in connection with the increase of our Senior Unsecured Term Loan Tranche A-1 and Deferred Draw A-3. These cash inflows were partially offset by $413.9 million of repayments on our revolving line of credit, $238.7 million of distributions paid, $269.7 million of repayments on our mortgage notes and $41.7 million of payments related to lease obligations.

Our net cash provided by financing activities was $431.5 million for the year ended December 31, 2021 and primarily consisted of $474.5 million net proceeds from equity forward contracts settled upon the issuance of common shares, $811.0 million in proceeds from our revolving line of credit and $50.0 million received in connection with the increase of our Senior Unsecured Term Loan Tranche A-1. These cash inflows were partially offset by $405.0 million of repayments on our revolving line of credit, $227.5 million of distributions paid, $208.0 million of repayments on our term loan and mortgage notes, $39.2 million of payments related to lease obligations and $16.9 million in payment of withholding taxes related to share-based payment arrangements.

Critical Accounting Policies and Estimates

Our discussion and analysis of our historical financial condition and results of operations for the periods described is based on our audited consolidated financial statements and our unaudited interim condensed consolidated financial statements, each of which has been prepared in accordance with U.S. GAAP. The preparation of these historical financial statements in conformity with U.S. GAAP requires management to make estimates, assumptions and judgments in certain circumstances that affect the reported amounts of assets, liabilities and contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We evaluate our assumptions and estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For more information on our significant accounting policies, see Note 2 to our Consolidated Financial Statements included in this Annual Report on Form 10-K. The following critical accounting discussion pertains to accounting policies management believes are most critical to the portrayal of our historical financial condition and results of operations and that require significant, difficult, subjective or complex judgments. Other companies in similar businesses may use different estimation policies and methodologies, which may impact the comparability of our financial condition, results of operations and cash flows to those of other companies.

Goodwill Impairment Evaluation

We perform impairment testing of goodwill as of October 1 of each year, and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Such events or changes in circumstances may include a significant deterioration in overall economic conditions, changes in the business climate of our industry, a decline in our market capitalization, operating performance indicators and competition. As of October 1, 2022, our reporting units included the following: North American warehouse, North America transportation, North America third-party managed, Europe warehouse, Europe transportation, Asia-Pacific warehouse, Asia-Pacific transportation, Asia-Pacific third-party managed, and South America warehouse.

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We may use both qualitative and quantitative approaches when testing goodwill for impairment. For selected reporting units where we use the qualitative approach, we perform a qualitative evaluation of events and circumstances impacting the reporting unit to determine the likelihood of goodwill impairment. Based on that qualitative evaluation, if we determine it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary. Otherwise, we perform a quantitative impairment test. We may also perform a quantitative evaluation periodically, even if there is no change of events or circumstances.

To perform the quantitative impairment test, we compare the fair value of a reporting unit to its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired. If the carrying value of the reporting unit, including goodwill, exceeds its fair value, a goodwill impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. We generally estimate the fair value of each reporting unit using a methodology or combination of methodologies, including a discounted cash flow analysis and market-based valuation such as comparable public company trading values and values observed in recent business acquisitions. The assumptions used in the quantitative impairment test are estimates and use Level 3 inputs. The estimation of the net present value of future cash flows is based upon varying economic assumptions, including assumptions such as revenue growth rates, operating costs and margins, capital expenditures, tax rates, long-term growth rates and discount rates. Of these assumptions, the operating costs and margins and the discount rates are the most subjective and/or complex. These assumptions are based on risk-adjusted growth rates and discount factors accommodating viewpoints that consider the full range of variability contemplated in the current and potential future economic situations. The discount rates utilized in the discounted cash flow analysis are based on the respective reporting units weighted average cost of capital, which takes into account the relative weights of each component of capital structure (equity and debt) and represents the expected cost of new capital, adjusted as appropriate to consider the risk inherent in future cash flows of the respective reporting unit. The carrying value of each reporting unit includes the assets and liabilities employed in its operations, goodwill and allocations of amounts held at the business segment and corporate levels. We also assess market-based multiples of other market-participant companies, further corroborating that our discounted cash flow models reflect fair value assumptions that are appropriately aligned with market-participant valuation multiples.

During the third quarter of 2022, the Company strategically shifted its focus to the core warehouse portfolio, terminating and winding down business with one of the largest customers in the North America third-party managed reporting unit resulting in a goodwill impairment charge of $3.2 million. There is no remaining goodwill related to the North America third-party managed reporting unit following this impairment, as the remaining business is immaterial. Historically, our reporting units have generated sufficient returns to recover the value of goodwill. The results of our 2022 impairment test indicated that the estimated fair value of each of our reporting units was in excess of the corresponding carrying amount as of October 1, and no impairment of goodwill existed.

Business Combinations

From time to time, we may enter into business combinations. In accordance with ASC 805, “Business Combinations”, we generally recognize the identifiable assets acquired and the liabilities assumed at their fair values as of the date of acquisition. We measure goodwill as the excess of consideration transferred over the net of the acquisition date fair values of the identifiable assets acquired and liabilities assumed. Goodwill is assigned to each reporting unit based upon the relative fair value of tangible assets acquired. The acquisition method of accounting requires us to make significant estimates and assumptions regarding the fair values of the elements of a business combination as of the date of acquisition, including the fair values of identifiable intangible assets, land and buildings. Significant estimates and assumptions impacting the fair value of the acquired intangible assets include subjective and/or complex judgments regarding items such as operating costs and margins, and discount

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rates, including estimating future cash flows that we expect to generate from the acquired assets. Certain other estimates and assumptions impacting the fair value of the acquired intangible assets involving less subjective and/or less complex judgments include: short-term and long-term revenue growth rates, capital expenditures, tax rates, customer attrition rates, economic lives and other factors impacting the discounted cash flows. The significant assumptions impacting the fair value of the acquired buildings include estimates of indirect costs and entrepreneurial profit on the transaction, which were added to the replacement cost of the acquired assets in order to estimate their fair value in the market. The significant assumptions impacting the fair value of the acquired land include estimates of the price per acre in comparable transactions in the market.

The acquisition method of accounting also requires us to refine these estimates over a measurement period not to exceed one year to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. If we are required to adjust provisional amounts that we have recorded for the fair values of assets and liabilities in connection with acquisitions, these adjustments could have a material impact on our financial condition and results of operations. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could record future impairment charges. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense.

We describe our accounting policy for business combinations in Note 2 to the Consolidated Financial Statements. Additionally, we have disclosed all business combinations completed during 2020 and 2021, including material measurement period adjustments for these acquisitions, in Note 3 to the Consolidated Financial Statements. For those business combinations which the acquisition accounting is preliminary as of December 31, 2022, we have disclosed the estimates, assumptions used and areas for which the acquisition accounting is not finalized.

Revenue Recognition

Our primary revenue source consists of rent, storage and warehouse services revenues. Additionally, we charge transportation fees to those customers who use our transportation services, where we act as the principal in the arrangement of the services. We also receive a reimbursement of substantially all expenses for warehouses that we manage on behalf of third-party owners, with all reimbursements recognized as revenues under the relevant accounting guidance. We also earn management fees, incentive fees upon achieving negotiated performance and cost-savings results, or an applicable mark-up on costs. Revenues from storage and handling are recognized over the period consistent with the transfer of the service to the customer. Multiple contracts with a single counterparty are accounted for as separate arrangements. We recognize transportation fees and expenses on a gross basis upon delivery of products on behalf of our customers. We also recognize management fees and related expense reimbursements as revenues as we perform management services and incur the expense.

New Accounting Pronouncements

See Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K.

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