AMERICOLD REALTY TRUST - Quarter Report: 2018 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2018



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to ,

Commission File Number: 001-34723

(Exact name of registrant as specified in its charter)



Maryland	93-0295215
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

10 Glenlake Parkway, Suite 600, South Tower Atlanta, Georgia	30328
(Address or principal executive offices)	(Zip Code)

(678) 441-1400

(Registrant’s telephone number, including area code)

_________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website; if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter periods that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):



o Large accelerated filer	o Accelerated filer
þ Non-accelerated filer (do not check if a smaller reporting company)	o Smaller reporting company
	o Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Yes o No þ

As of August 3, 2018, there were 143,461,339 common shares of beneficial interest, $0.01 par value per share, outstanding.



TABLE OF CONTENTS
	Page
PART I
Item 1. Financial Statements	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3. Quantitative and Qualitative Disclosures About Market Risk	76
Item 4. Controls and Procedures	76

PART II
Item 1. Legal Proceedings	77
Item 1A. Risk Factors	77
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	77
Item 3. Defaults Upon Senior Securities	77
Item 4. Mine Safety Disclosures	77
Item 5. Other Information	77
Item 6. Exhibits	78

SIGNATURES	79

CAUTIONARY STATEMENT REGADING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements about future events and expectations that constitute forward-looking statements. Forward-looking statements are based on our beliefs, assumptions and expectations of our future financial and operating performance and growth plans, taking into account the information currently available to us. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements, and you should not place undue reliance on such statements. Factors that could contribute to these differences include the following:


•	adverse economic or real estate developments in our geographic markets or the temperature-controlled warehouse industry;


•	general economic conditions;


•	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;


•	acquisition risks, including the failure of such acquisitions to perform in accordance with projections;


•	risks related to expansions of existing properties and developments of new properties, including failure to meet budgeted or stabilized returns in respect thereof;


•	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 the 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 prospectus 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, 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.

As used in this report, unless the context otherwise requires, references to “we,” “us,” “our” and “the Company” refer to Americold Realty Trust, a Maryland real estate investment trust, and its consolidated subsidiaries, including Americold Realty Operating Partnership, L.P., a Delaware limited partnership and the subsidiary through which we conduct our business, which we refer to as “our operating partnership,” and references to “common shares” refer to our common shares of beneficial interest, $0.01 par value per share.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements



Americold Realty Trust and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except shares and per share amounts)
	June 30, 2018			December 31, 2017
	Unaudited
Assets
Property, plant, and equipment:
Land	$	385,713		$	389,443
Buildings and improvements	1,894,824			1,865,727
Machinery and equipment	549,083			555,453
	2,829,620			2,810,623
Accumulated depreciation and depletion	(1,044,371		)	(1,010,903		)
Property, plant, and equipment – net	1,785,249			1,799,720
Capitalized leases:
Buildings and improvements	16,827			16,827
Machinery and equipment	63,832			59,389
	80,659			76,216
Accumulated depreciation	(44,181		)	(41,051		)
Capitalized leases – net	36,478			35,165
Cash and cash equivalents	153,200			48,873
Restricted cash	37,575			21,090
Accounts receivable – net of allowance of $5,505 and $5,309 at June 30, 2018 and December 31, 2017, respectively	182,517			200,006
Identifiable intangible assets – net	25,839			26,645
Goodwill	186,890			188,169
Investments in partially owned entities	16,289			15,942
Other assets	51,438			59,287
Total assets	$	2,475,475		$	2,394,897
Liabilities, Series B Preferred Shares and shareholders’ equity (deficit)
Liabilities:
Borrowings under revolving line of credit	$	—		$	—
Accounts payable and accrued expenses	224,749			241,259
Construction loan - net of deferred financing costs of $179 at December 31, 2017	—			19,492
Mortgage notes and term loans - net of unamortized discount and deferred financing costs of $14,704 and $31,997, in the aggregate, at June 30, 2018 and December 31, 2017, respectively	1,385,682			1,721,958
Sale-leaseback financing obligations	120,289			121,516
Capitalized lease obligations	38,890			38,124
Unearned revenue	20,145			18,848
Pension and postretirement benefits	15,392			16,756
Deferred tax liability - net	18,474			21,940
Multi-Employer pension plan withdrawal liability	9,037			9,134
Total liabilities	1,832,658			2,209,027
Commitments and Contingencies (Note 13)
Preferred shares of beneficial interest, $0.01 par value – authorized 375,000 Series B Cumulative Convertible Voting and Participating Preferred Shares; aggregate liquidation preference of $375,000; zero and 375,000 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	—			372,794
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 June 30, 2018 and December 31, 2017, respectively	—			—
Common shares of beneficial interest, $0.01 par value – authorized 250,000,000 shares; 143,459,052 and 69,370,609 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	1,435			694
Paid-in capital	1,257,779			394,082
Accumulated deficit and distributions in excess of net earnings	(611,208		)	(581,470		)
Accumulated other comprehensive loss	(5,189		)	(230		)
Total shareholders’ equity (deficit)	642,817			(186,924		)
Total liabilities, Series B Preferred Shares and shareholders’ equity (deficit)	$	2,475,475		$	2,394,897

See accompanying notes to condensed consolidated financial statements.



Americold Realty Trust and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)
	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Revenues:
Rent, storage, and warehouse services revenues	$	287,712		$	281,663		$	574,229		$	557,471
Third-party managed services	65,755			59,638			129,632			118,005
Transportation services	38,889			35,796			77,234			71,977
Other revenues	2,311			2,354			4,714			4,913
Total revenues	394,667			379,451			785,809			752,366
Operating expenses:
Rent, storage, and warehouse services cost of operations	196,877			196,859			393,824			389,146
Third-party managed services cost of operations	61,896			56,155			121,995			111,534
Transportation services cost of operations	35,303			32,707			70,054			65,335
Cost of operations related to other revenues	2,391			3,790			4,448			5,445
Depreciation, depletion, and amortization	29,051			28,913			58,459			58,320
Selling, general and administrative	27,482			23,546			59,431			48,303
Impairment of long-lived assets	747			8,773			747			8,773
Total operating expenses	353,747			350,743			708,958			686,856

Operating income	40,920			28,708			76,851			65,510

Other income (expense):
Income (loss) from investments in partially owned entities	252			(1,324		)	112			(1,351		)
Impairment of investments in partially owned entities	—			(6,496		)	—			(6,496		)
Interest expense	(22,929		)	(28,288		)	(47,424		)	(56,015		)
Interest income	1,109			310			1,733			567
Loss on debt extinguishment and modification	—			(430		)	(21,385		)	(600		)
Foreign currency exchange gain (loss)	1,511			(52		)	2,191			(2,825		)
Other income (expense), net	33			(728		)	89			(1,212		)
Income (loss) before income tax and gain from sale of real estate, net of tax	20,896			(8,300		)	12,167			(2,422		)
Income tax benefit (expense):
Current	(1,323		)	(3,368		)	(2,390		)	(5,610		)
Deferred	1,449			3,283			2,605			4,031
Total income tax benefit (expense)	126			(85		)	215			(1,579		)
Gain from sale of real estate, net of tax	8,384			—			8,384			—
Net income (loss)	$	29,406		$	(8,385	)	$	20,766		$	(4,001	)
Less distributions on preferred shares of beneficial interest - Series A	—			(8		)	(1		)	(8		)
Less distributions on preferred shares of beneficial interest - Series B	—			(7,108		)	(1,817		)	(14,218		)
Less accretion on preferred shares of beneficial interest - Series B	—			(218		)	—			(438		)
Net income (loss) attributable to common shares of beneficial interest	$	29,406		$	(15,719	)	$	18,948		$	(18,665	)

Weighted average common shares outstanding – basic	143,499			70,049			133,965			69,990
Weighted average common shares outstanding – diluted	146,474			70,049			136,737			69,990

Net income (loss) per common share of beneficial interest - basic	$	0.20		$	(0.22	)	$	0.13		$	(0.27	)
Net income (loss) per common share of beneficial interest - diluted	$	0.20		$	(0.22	)	$	0.14		$	(0.27	)

Distributions declared per common share of beneficial interest	$	0.19		$	0.07		$	0.36		$	0.14

See accompanying notes to condensed consolidated financial statements.



Americold Realty Trust and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(In thousands)
	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net income (loss)	$	29,406		$	(8,385	)	$	20,766		$	(4,001	)
Other comprehensive income (loss) - net of tax:
Adjustment to accrued pension liability	498			499			997			1,228
Change in unrealized net (loss) gain on foreign currency	(4,723		)	395			(6,196		)	3,630
Unrealized gain (loss) on cash flow hedge derivatives	204			204			240			(144		)
Other comprehensive (loss) income	(4,021		)	1,098			(4,959		)	4,714

Total comprehensive income (loss)	$	25,385		$	(7,287	)	$	15,807		$	713

See accompanying notes to condensed consolidated financial statements.



Americold Realty Trust and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity (Deficit) (Unaudited)
(In thousands, except shares)

	Preferred Shares of
	Beneficial Interest				Common Shares of						Accumulated Deficit and Distributions in Excess of Net Earnings			Accumulated Other Comprehensive Loss
	Series A				Beneficial Interest
	Number of Shares		Par Value		Number of Shares	Par Value		Paid-in Capital
																	Total
Balance - December 31, 2017	125		$	—	69,370,609	$	694	$	394,082		$	(581,470	)	$	(230	)	$	(186,924	)
Net income	—		—		—	—		—			20,766			—			20,766
Other comprehensive loss	—		—		—	—		—			—			(4,959		)	(4,959		)
Redemption and distributions on preferred shares of beneficial interest – Series A	(125	)	—		—	—		(133		)	(1		)	—			(134		)
Distributions on preferred shares of beneficial interest – Series B	—		—		—	—		—			(1,817		)	—			(1,817		)
Distributions on common shares	—		—		—	—		—			(48,686		)	—			(48,686		)
Stock-based compensation expense (Stock Options and Restricted Stock Units)	—		—		—	—		4,095			—			—			4,095
Stock-based compensation expense (modification of Restricted Stock Units)	—		—		—	—		2,042			—			—			2,042
Common stock issued, net of shares withheld for employee taxes	—		—		1,071,367	11		728			—			—			739
Warrants exercise	—		—		6,426,818	64		(64		)	—			—			—
Issuance of common shares	—		—		33,350,000	334		484,571			—			—			484,905
Conversion of mezzanine Series B Preferred shares	—		—		33,240,258	332		372,458			—			—			372,790
Balance - June 30, 2018	—		$	—	143,459,052	$	1,435	$1,257,779			$	(611,208	)	$	(5,189	)	$	642,817

See accompanying notes to condensed consolidated financial statements.



Americold Realty Trust and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
	Six Months Ended June 30,
	2018			2017
Operating activities:
Net income (loss)	$	20,766		$	(4,001	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion, and amortization	58,459			58,320
Amortization of deferred financing costs and debt discount	3,230			4,186
Amortization of above/below market leases	76			76
Loss on debt extinguishment and modification, non-cash	21,105			400
Foreign exchange (gain) loss	(2,191		)	2,825
Income (loss) from investments in and impairment of partially owned entities	(112		)	7,847
Stock-based compensation expense (modification of Restricted Stock Units)	2,042			—
Stock-based compensation expense (Stock Options and Restricted Stock Units)	4,142			1,173
Deferred income tax benefit	(2,605		)	(4,031		)
Gain from sale of real estate, net of tax	(8,384		)	—
Gain on other asset disposals	(308		)	(43		)
Impairment of long-lived assets and inventory	747			10,881
Provision for doubtful accounts receivable	360			311
Changes in operating assets and liabilities:
Accounts receivable	15,548			22,601
Accounts payable and accrued expenses	(34,357		)	(16,693		)
Other	(1,631		)	(1,051		)
Net cash provided by operating activities	76,887			82,801
Investing activities:
Proceeds from the sale of property, plant, and equipment	18,104			209
Additions to property, plant, and equipment and intangible assets	(65,039		)	(71,059		)
Net cash used in investing activities	(46,935		)	(70,850		)
Financing activities:
Redemption and distributions paid on preferred shares of beneficial interest – Series A	(134		)	—
Distributions paid on preferred shares of beneficial interest – Series B	(1,817		)	(7,109		)
Distributions paid on common shares	(21,377		)	(5,053		)
Proceeds from stock options exercised	7,524			—
Share purchases for taxes, net of proceeds from employee share-based transactions	(7,021		)	—
Proceeds from revolving line of credit	—			34,000
Repayment on revolving line of credit	—			(62,000		)
Payment of underwriters' costs	(5,750		)	—
Reimbursement of underwriters' costs	5,750			—
Repayment of sale-leaseback financing obligations	(1,227		)	(987		)
Repayment of capitalized lease obligations	(4,796		)	(3,965		)
Payment of debt issuance costs	(8,727		)	(3,934		)
Repayment of term loan, mortgage notes and construction loans	(889,454		)	(41,296		)
Proceeds from term loans and mortgage notes	525,000			110,000
Net proceeds from initial public offering	493,557			—
Proceeds from construction loans	1,097			1,294
Net cash provided by financing activities	92,625			20,950
Net increase in cash, cash equivalents and restricted cash	122,577			32,901
Effect of foreign currency translation on cash, cash equivalents and restricted cash	(1,765		)	930
Cash, cash equivalents and restricted cash:
Beginning of period	69,963			62,930
End of period	$	190,775		$	96,761

See accompanying notes to condensed consolidated financial statements.



Americold Realty Trust and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)
(In thousands)
	Six Months Ended June 30,
Supplemental disclosures of cash flows information:	2018		2017
Acquisition of fixed assets under capitalized lease obligations	$	5,564	$	10,385
Interest paid – net of amounts capitalized	$	43,954	$	52,478
Income taxes paid – net of refunds	$	4,545	$	4,983
Acquisition of property, plant, and equipment on accrual	$	15,118	$	10,429

Reconciliation of cash, cash equivalents and restricted cash reported in the condensed consolidated balance sheets to the ending cash, cash equivalents and restricted cash balances above:	As of June 30,
	2018		2017
Cash and cash equivalents	$	153,200	$	76,294
Restricted cash	37,575		20,467
Total cash, cash equivalents and restricted cash	$	190,775	$	96,761

See accompanying notes to condensed consolidated financial statements.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

1. General

The Company

Americold Realty Trust is a real estate investment trust (REIT) organized under Maryland law.

During 2010, the Company formed a Delaware limited partnership, Americold Realty Operating Partnership, L.P. (the Operating Partnership), and transferred substantially all of its interests in entities and associated assets and liabilities to the Operating Partnership. This structure is commonly referred to as an umbrella partnership REIT or an UPREIT structure. The REIT is the sole general partner of the Operating Partnership, owning 100% of the common general partnership interest as of June 30, 2018. As the sole general partner of the Operating Partnership, the REIT has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership.

The Operating Partnership includes numerous qualified REIT subsidiaries (QRSs). Additionally, the Operating Partnership conducts various business activities in the United States (U.S.), Australia, New Zealand, Argentina, and Canada through several wholly owned taxable REIT subsidiaries (TRSs).

Ownership

On January 23, 2018, the Company completed an initial public offering of its common shares, or the IPO, in which the Company issued and sold 33,350,000 of its common shares at $16.00 per share, which generated net proceeds of approximately $493.6 million to the Company. Other significant transactions that occurred in connection with the IPO include the issuance of new senior secured credit facilities, or the 2018 Senior Secured Credit Facilities, which are described in Note 5, and the redemption of all outstanding Series A Preferred Shares and the conversion of all outstanding Series B Preferred Shares, which are described in Note 4.

Prior to the IPO, YF ART Holdings, a partnership among investment funds affiliated with The Yucaipa Companies (Yucaipa) and Fortress Investment Group, LLC (Fortress), owned approximately 100% of the Company’s common shares.

As of June 30, 2018, YF ART Holdings owned approximately 38.3% of the Company's common shares. On March 8, 2018, YF ART Holdings used the proceeds from a margin loan to pay in full the outstanding preferred investment, including the preferred return thereon, of Fortress, which ceased to be a limited partner in YF ART Holdings and no longer has any economic interest therein.

The second largest shareholder in the Company is a group of investment funds of the The Goldman Sachs Group, Inc. (Goldman), which owns approximately 16.6% of the Company's common shares as of June 30, 2018.

Customer Information

The Company’s customers consist primarily of national, regional, and local food manufacturers, distributors, retailers, and food service organizations. For the three and six months ended June 30, 2018 and 2017, one customer accounted for more than 10% of our total revenues. For the three months ended June 30, 2018 and 2017, sales to this customer were $54.0 million and $48.8 million, respectively. For the six months ended June 30, 2018 and 2017, sales to this customer were $106.3 million and $97.1 million, respectively. The substantial majority of this customer's business relates to our third-party managed segment. Of the revenues received from this customer, $49.8 million

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

and $45.2 million represented reimbursements for certain expenses we incurred during the three months ended June 30, 2018 and 2017, respectively, and $98.0 million and $89.8 million for the six months ended June 30, 2018 and 2017, respectively, that were offset by matching expenses included in our third-party managed cost of operations.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) for interim financial information, and with the rules and regulations of the U.S. Securities and Exchange Commission (SEC). These unaudited condensed consolidated financial statements do not include all disclosures associated with the Company’s consolidated annual financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2017, and, accordingly, should be read in conjunction with the referenced annual report. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included. All significant intercompany balances and transactions have been eliminated in consolidation. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year.

Certain prior period amounts have been reclassified to conform to the current period presentation. The Company has also made an immaterial classification correction by reclassifying certain prior period amounts from unearned revenue to the allowance for doubtful accounts.

Impairment of Long-Lived Assets

During the second quarter of 2018, the Company recorded an impairment charge of $0.7 million related to a domestic warehouse facility in anticipation of a potential future sale of the asset. The estimated fair value of this asset was determined based on ongoing negotiations with prospective buyers in August 2018. During the second quarter of 2017, the Company recorded an impairment charge of $8.8 million as a result of the planned disposal or exit of certain domestic warehouse facilities, including certain idle facilities, with a net book value in excess of their estimated fair value based on third-party appraisals or letters of intent executed with prospective buyers. These impaired assets are or were reported under the Warehouse segment, and the related impairment charges are included in the "Impairment of long-lived assets" line item of the condensed consolidated statements of operations for the three and six months ended June 30, 2018 and 2017, respectively.

2. Summary of Significant Accounting Policies

The following disclosure regarding certain of our significant accounting policies should be read in conjunction with Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017, which provides additional information with regard to the accounting policies set forth herein and other of our significant accounting policies.

Revenue Recognition

Revenues for the Company include rent, storage and warehouse services (collectively, Warehouse Revenue), third-party managed services for locations or logistics services managed on behalf of customers (Third-Party Managed Revenue), transportation services (Transportation Revenue), and revenue from the sale of quarry products (Other Revenue).

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Warehouse Revenue

The Company’s customer arrangements generally include rent, storage and service elements that are priced separately. In a few instances where the Company provides rental, storage and warehouse services under the terms of a bundled pricing structure, the Company uses a cost model to allocate the consideration related to the rental of temperature-controlled storage space and warehousing service deliverables.

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.

Third-Party Managed Revenue

The Company provides management services for which the contract compensation arrangement includes: reimbursement of operating costs, fixed management fee, and contingent performance-based fees (Managed Services). Managed Services fixed fees are recognized as revenue as the management services are performed ratably over the service period. Managed Services performance-based fees are recognized ratably over the service period based on the likelihood of achieving performance targets.

Cost reimbursements related to Managed Services arrangements are recognized as revenue as the services are performed and costs are incurred. Managed Services fees and related cost reimbursements are presented on a gross basis as the Company is the principal in the arrangement. Multiple contracts with a single counterparty are accounted for as separate arrangements.

Transportation Revenue

The Company records transportation revenue and expenses upon delivery of the product. Since the Company is the principal in the arrangement of transportation services for its customers, revenues and expenses are presented on a gross basis.

Other Revenue

Other Revenue primarily includes the sale of limestone produced by the Company’s quarry business. Revenues from the sale of limestone are recognized upon delivery to customers.

Contracts with Multiple Service Lines

When considering contracts containing more than one service to a customer, a contract's transaction price is pre-defined or allocated to each distinct performance obligation and recognized as revenue when, or as the performance obligation is satisfied, either over time as work progresses, or at a point in time. For contracts with multiple service lines or distinct performance obligations, the Company evaluates and allocates the contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which the Company forecasts expected costs of satisfying a performance obligation and then adds an appropriate margin for that distinct good or service.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Recently Adopted Accounting Standards

Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (AOCI). The ASU permits entities to reclassify tax effects stranded in AOCI as a result of tax reform to retained earnings. The guidance is effective for the Company in interim and annual periods beginning in 2019. Early adoption is permitted and can be applied retrospectively or in the period of adoption. The Company early adopted the ASU during the first quarter of 2018. Because the deferred tax asset in OCI is currently subject to a full valuation allowance, there was no net reclassification amount from AOCI to retained earnings during the three and six months ended June 30, 2018. However, our adoption of the principle will enable us to apply a 21% rate to the deferred tax asset when the valuation allowance no longer applies.

Compensation—Stock Compensation

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. This update provides guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. ASU 2017-09 was effective for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. The Company adopted ASU 2017-09 in the first quarter of 2018 and it did not have a material effect on its condensed consolidated financial statements.

Compensation - Retirement Benefits

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07). This update requires that the service cost component of net periodic pension and other postretirement benefits (OPEB) (income) expense be presented in the same income statement line item as other employee compensation costs, while the remaining components of net periodic pension and OPEB (income) expense are to be presented outside operating income. Retrospective application of the change in income statement presentation is required, while the change in capitalized benefit cost is to be applied prospectively. ASU 2017-01 was effective for public business entities for fiscal years beginning after December 15, 2017. The Company's adoption of this guidance resulted in the reclassification of non-service cost components in the amounts of $0.6 million for the three months ended June 30, 2017 and $1.6 million for the six months ended June 30, 2017 from "Selling, general and administrative" expense to "Other income (expense), net."

Statement of Cash Flows, Restricted Cash

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. Under this new guidance, entities will be required to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet is required. For public business entities, the guidance was effective for fiscal years beginning after December 15, 2017, and interim periods within those years. The Company adopted ASU 2016-18 in the first quarter of 2018

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

and disclosure revisions have been made retrospectively for the periods presented on the condensed consolidated statements of cash flows.

Statement of Cash Flows, Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force), which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. The guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. This new guidance was effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those years. Entities will have to apply the guidance retrospectively, but if it is impracticable to do so for any of the cash flow issues discussed in this ASU, the amendments related to those issues would be applied prospectively as of the earliest date practicable. The Company adopted ASU 2016-15 in the first quarter of 2018 and it did not have a material effect on its condensed consolidated statements of cash flows.

Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The update primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. For public companies, the amendments in this update were effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted ASU 2016-01 in the first quarter of 2018 and it did not have a material effect on its condensed consolidated financial statements.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), to clarify the principles used to recognize revenue for all entities. ASU 2014-09 provides new guidance related to the core principle that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance results in enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively, and improves guidance for multiple element arrangements. During 2016, the FASB issued additional ASUs to clarify certain aspects of ASU 2014-09, including ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), in March 2016, and ASU 2016-10, Identifying Performance Obligations and Licensing, in April 2016.

The Company adopted this standard effective January 1, 2018, applying the modified retrospective method, and determined that the standard did not have a material impact to the amount or timing of revenue recognized for its revenue arrangements. Additionally, the Company did not record any cumulative effect adjustment as of the date of adoption. The most significant impact of the standard relates to the addition of disclosures relating to contracts that contain performance obligations extending beyond the end of the reporting period, and quantifying and disclosing methods of transferring services as it pertains to satisfying performance obligations. See Note 18.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Adoption of the standards related to revenue recognition had no impact to cash from or used in operating, financing, or investing activities on the condensed consolidated statements of cash flows, and had no material impact on the Company's processes and controls.

Future Adoption of Accounting Standards

Lease Accounting

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The following are some of the key provisions of this update:

Lessees will need to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model (e.g., certain definitions, such as initial direct costs, have been updated) and the new revenue recognition standard. Similar to today, lessors will classify leases as operating, direct financing, or sales-type.

Existing sale-leaseback guidance, including guidance applicable to real estate, is replaced with a new model applicable to both lessees and lessors. A sale-leaseback transaction will qualify as a sale only if (1) it meets the sale guidance in the new revenue recognition standard, (2) the leaseback is not a finance lease or a sales-type lease, and (3) a repurchase option, if any, is priced at the asset’s fair value at the time of exercise and the asset is not specialized. If the transaction fails sale treatment, the buyer and seller will reflect it as a financing.

In July 2018, the FASB issue ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides the following practical expedients that will make the adoption of the new lease guidance easier:


•	Entities will not need to restate comparative periods in their financial statements in the year of adoption. Rather, entities will continue to present prior period financial statements under the existing lease guidance, and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption;


•	Lessors will have the option to not separate non-lease components from the associated lease components when certain criteria are met, and requires them to account for the combined component in accordance with the new revenue standard if the associated non-lease components are the predominant components.

For public business entities, the standard is still effective for fiscal years and interim periods beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition approach, and provides for certain practical expedients, as indicated in the most recent targeted improvements.

The Company is taking an inventory of all lease arrangements that fall within the scope of ASC 842, and it is implementing a lease administration solution that will streamline the accounting and disclosures for lease arrangements under this new codification. The Company is currently evaluating the impact of adopting ASC 842 and expects to complete its assessment during the fourth quarter of 2018.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

3. Equity-Method Investments

The Company has investments in certain ventures that are accounted for under the equity method of accounting. The following tables summarize the financial information of the Company's largest joint ventures (CMAL and CMAH, or the China JV, as defined in our Annual Report on Form 10-K 2017) for the interim periods presented.



	Three Months Ended June 30, 2018
Condensed consolidated results of operations	CMAL			CMAH		Total
	(In thousands)
Revenues	$	9,584		$	3,341	$	12,925
Operating (loss) income	$	(198	)	$	748	$	550
Net (loss) income	$	(263	)	$	1,061	$	798
Company’s (loss) income from investments in partially owned entities	$	(165	)	$	417	$	252



	Three Months Ended June 30, 2017
Condensed consolidated results of operations	CMAL			CMAH		Total
	(In thousands)
Revenues	$	8,913		$	2,954	$	11,867
Operating (loss) income	$	(2,886	)	$	717	$	(2,169	)
Net (loss) income	$	(3,000	)	$	531	$	(2,469	)
Company’s (loss) income from investments in partially owned entities	$	(1,527	)	$	203	$	(1,324	)



	Six Months Ended June 30, 2018
Condensed consolidated results of operations	CMAL			CMAH		Total
	(In thousands)
Revenues	$	19,325		$	6,208	$	25,533
Operating (loss) income	$	(175	)	$	832	$	657
Net (loss) income	$	(265	)	$	1,132	$	867
Company’s (loss) income from investments in partially owned entities	$	(286	)	$	398	$	112



	Six Months Ended June 30, 2017
Condensed consolidated results of operations	CMAL			CMAH		Total
	(In thousands)
Revenues	$	18,267		$	5,170	$	23,437
Operating (loss) income	$	(3,030	)	$	889	$	(2,141	)
Net (loss) income	$	(3,139	)	$	619	$	(2,520	)
Company’s (loss) income from investments in partially owned entities	$	(1,597	)	$	246	$	(1,351	)

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

In addition to the China JV, the Company also has an investment in a joint venture accounted for under the equity-method, with a carrying amount of $2.0 million as of June 30, 2018 and December 31, 2017.

4. Redeemable Preferred Shares

Series A Cumulative Non-Voting Preferred Shares

In January 2009, the Company issued 125 Series A Cumulative Non-Voting Preferred Shares of beneficial interest, par value $0.01 per share (Series A Preferred Shares) for proceeds of $0.1 million. The Series A Preferred Shares were redeemable by the Company at any time by notice for a price, payable in cash, equal to 100% of each share’s liquidation value of $1,000, plus all accrued and unpaid dividends, plus, if applicable, a redemption premium. Holders of the Series A Preferred Shares were entitled to receive dividends semiannually at a per annum rate equal to 12.5% of the liquidation value.

In connection with the IPO, all outstanding Series A Preferred Shares were redeemed resulting in a cash payment of approximately $0.1 million, including accrued and unpaid dividends.

Series B Cumulative Convertible Voting Preferred Shares

On December 15, 2010, the Company issued 375,000 Series B Cumulative Convertible Voting Preferred Shares of beneficial interest, par value $0.01 per share (Series B Preferred Shares), for proceeds of $368.5 million. Of the total issuance, 325,000 Series B Preferred Shares were issued to affiliates of Goldman and 50,000 were issued to an affiliate of China Merchant Holdings International, the majority partner in the China JV.

In connection with the IPO, Goldman and CMHI converted their Series B Preferred Shares into 28,808,224 and 4,432,034 common shares of the Company, respectively, after taking into account a cash payment of approximately $1.8 million of accrued and unpaid dividends. Goldman sold 5,163,716 common shares of the Company soon after the conversion of the Series B Preferred Shares.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

5. Debt

The Company’s outstanding and available borrowings as of June 30, 2018 and December 31, 2017 are as follows:



				June 30, 2018					December 31, 2017
	Stated maturity date	Contractual Interest Rate	Effective Interest Rate as of June 30, 2018	Carrying Amount			Fair Value		Carrying Amount			Fair Value
2010 Mortgage Loans cross-collateralized and cross-defaulted by 46 warehouses:				(In thousands)
Component A-1	1/2021	3.86%	4.40%	$	48,287		$	49,012	$	56,941		$	58,151
Component A-2-FX	1/2021	4.96%	5.38%	150,334			156,347		150,334			159,918
Component A-2-FL ⁽¹⁾	1/2021	L+1.51%	3.96%	48,654			49,019		48,654			49,019
Component B	1/2021	6.04%	6.48%	60,000			63,300		60,000			64,875
Component C	1/2021	6.82%	7.28%	62,400			66,924		62,400			68,718
Component D	1/2021	7.45%	7.92%	82,600			89,208		82,600			91,686
2013 Mortgage Loans cross-collateralized and cross-defaulted by 15 warehouses:
Senior note	5/2023	3.81%	4.14%	191,110			186,810		194,223			195,194
Mezzanine A	5/2023	7.38%	7.55%	70,000			67,200		70,000			68,950
Mezzanine B	5/2023	11.50%	11.75%	32,000			31,040		32,000			31,840
ANZ Term Loans secured by mortgages in properties owned by relevant subsidiaries:
Australia Term Loan ⁽¹⁾	6/2020	BBSY+1.40%	4.63%	150,200			151,514		158,645			160,628
New Zealand Term Loan ⁽¹⁾	6/2020	BKBM+1.40%	5.21%	29,801			30,062		31,240			31,631
2018 Senior Secured Term A Facility secured by stock pledge in qualified subsidiaries ⁽¹⁾	1/2023	L+2.35%	4.95%	475,000			473,813		—			—
2015 Senior Secured Term Loan B Facility ⁽¹⁾	12/2022	L+3.75%	5.79%	—			—		806,918			806,918
Total principal amount of mortgage notes and term loans				$	1,400,386		$	1,414,249	$	1,753,955		$	1,787,528
Less unamortized deferred financing costs				(14,395		)	n/a		(25,712		)	n/a
Less unamortized debt discount				(309		)	n/a		(6,285		)	n/a
Total mortgage notes and term loans, net of unamortized deferred financing costs and debt discount				$	1,385,682		$	1,414,249	$	1,721,958		$	1,787,528

2018 Senior Secured Revolving Credit Facility secured by stock pledge in qualified subsidiaries ⁽¹⁾	1/2021	L+2.35%	n/a	$	—		$	—	$	—		$	—

Construction Loan:
Warehouse Clearfield, UT secured by mortgage ⁽¹⁾	2/2019	L+3.25%	5.18%	$	—		$	—	$	19,671		$	19,671
Less unamortized deferred financing costs				—			n/a		(179		)	n/a
				$	—		$	—	$	19,492		$	19,671


(1)	L = one-month LIBOR; BBSY= Bank Bill Swap Bid Rate (applicable in Australia); BKBM = Bank Bill Reference Rate (applicable in New Zealand).

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

2018 Senior Secured Credit Facilities

Simultaneous with the IPO, we closed on a five-year, $525.0 million Senior Secured Term Loan A Facility and a three-year, $400.0 million Senior Secured Revolving Credit Facility, which we refer to as the 2018 Senior Secured Credit Facilities. Our 2018 Senior Secured Credit Facilities also have an additional $400.0 million accordion option. Our 2018 Senior Secured Revolving Credit Facilities has a one-year extension option subject to certain conditions. We used the net proceeds from the IPO, together with $517.0 million of net proceeds from our Senior Secured Term Loan A Facility, to repay the entire $806.9 million aggregate principal amount of indebtedness outstanding under our Senior Secured Term Loan B Facility, plus accrued and unpaid interest, to repay $20.9 million of indebtedness outstanding under our Clearfield, Utah and Middleboro, Massachusetts construction loans, and for working capital.

On February 6, 2018, we amended the credit agreement with the lenders of our 2018 Senior Secured Revolving Credit Facility (the 2018 Credit Agreement) to increase the aggregate revolving credit commitments on this facility by $50.0 million to $450.0 million. Concurrently, we utilized cash on hand to repay $50.0 million on our Senior Secured Term Loan A Facility. As a result of these modifications, our total aggregate commitments under the 2018 Senior Secured Credit Facilities remain unchanged at $925.0 million.

Borrowings under our 2018 Senior Secured Credit Facilities bear interest, at our election, at the then-applicable margin plus an applicable LIBOR or base rate interest rate. The base rate is the greatest of the bank prime rate, the one-month LIBOR rate plus one percent or the federal funds rate plus one-half of one percent. The applicable margin varies between (i) in the case of LIBOR-based loans, 2.35% and 3.00% and (ii) in the case of base rate loans, 1.35% and 2.00%, in each case, based on changes in our total leverage. In addition, any undrawn portion of our 2018 Senior Secured Revolving Credit Facility will be subject to an annual 0.30% commitment fee at times that we are utilizing at least 50% of our outstanding revolving credit commitments or an annual 0.40% commitment fee at times that we are utilizing less than 50% of our revolving credit commitments, in each case, based upon the actual daily unused portion of our 2018 Senior Secured Revolving Credit Facility.

At the completion of the IPO, borrowings under our 2018 Senior Secured Credit Facilities bore interest at a floating rate of one-month LIBOR plus 2.50%. In addition, at issuance we applied approximately $33.6 million of our 2018 Senior Secured Revolving Credit Facility to backstop certain outstanding letters of credit.

During the second quarter of 2018, due to a stronger borrowing base ratio, which reflects an improvement of our credit profile, the applicable margin in the case of LIBOR-based loans was reduced to 2.35% from 2.50%.

Our Operating Partnership is the borrower under our 2018 Senior Secured Credit Facilities, which are guaranteed by our company and certain eligible subsidiaries of our operating partnership and secured by a pledge in the stock of certain subsidiaries of our operating partnership. Our 2018 Senior Secured Revolving Credit Facility is structured to include a borrowing base, which will allow us to borrow against the lesser of our Senior Secured Term Loan A Facility balance outstanding and $450.0 million in revolving credit commitments, and the value of certain owned real estate assets, ground, capital and operating leased assets, with credit given for income from third-party managed warehouses. At June 30, 2018, the most recent period for which the we submitted our compliance certificate to the lenders of the 2018 Senior Secured Credit Facilities, the gross value of our assets included in the covenants calculations was in excess of $1.8 billion, and had an effective borrowing base collateral value (after concentration limits and advance rates as calculated under the anticipated terms of our 2018 Credit Agreement) in excess of $1.1 billion.

Our 2018 Senior Secured Credit Facilities contain representations, covenants and other terms customary for a publicly traded REIT. In addition, our 2018 Senior Secured Credit Facilities contain certain financial covenants, as defined in the credit agreement, including:

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements


•	a maximum leverage ratio of less than or equal to 60% of our total asset value;


•	a minimum borrowing base coverage ratio of greater than or equal to 1.00 to 1.00;


•	a minimum pro forma fixed charge coverage ratio of greater than or equal to 1.40 to 1.00, which increased to 1.50 to 1.00 in the first quarter of 2018;


•	a minimum borrowing base debt service coverage ratio of greater than or equal to 2.00 to 1.00;


•	a minimum tangible net worth requirement of greater than or equal to $900 million plus 70% of any future net equity proceeds following the completion of the IPO transactions; and


•	a maximum recourse secured debt ratio of less than or equal to 20% of our total asset value.

Our 2018 Senior Secured Credit Facilities are fully recourse to our Operating Partnership. As of June 30, 2018, the Company was in compliance with all debt covenants.

The aggregate maturities of the Company’s total indebtedness as of June 30, 2018, including amortization of principal amounts due under the Term Loan A and mortgage notes for each of the next five years and thereafter, are as follows:



As of June 30, 2018:	(In thousands)
Year 1	$	24,352
Year 2	205,499
Year 3	422,337
Year 4	7,171
Year 5	741,027
Thereafter	—
Aggregate principal amount of debt	1,400,386
Less unamortized discount and deferred financing costs	(14,704		)
Total debt net of unamortized discount and deferred financing costs	$	1,385,682

6. Derivative Financial Instruments

The Company’s objective for utilizing derivative instruments is to reduce its exposure to fluctuations in cash flows due to changes in the variable interest rates related to certain indebtedness of its foreign subsidiaries. The Company’s strategy to achieve that objective involves entering into interest rate swap contracts. There have been no significant changes in the Company's policy or strategy for utilizing derivative instruments from what was disclosed in its consolidated financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 2017.

As of June 30, 2018 and December 31, 2017, the aggregate fair values of these cash flow hedges were $2.0 million and $2.5 million, respectively, which are included in the "Accounts payable and accrued expenses" line of the accompanying condensed consolidated balance sheets. The Company determines the fair value of these derivative instruments using a present value calculation with significant observable inputs classified as Level 2 of the fair value hierarchy.

The following table summarizes the impact of the Company’s interest rate swaps designated as cash flow hedges on the results of operations and Other Comprehensive Income (OCI) during the three and six months ended June 30, 2018 and 2017:

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
							(In thousands)
(Gain) loss recognized as OCI, net of tax (effective portion)	$	(204	)	$	(204	)	$	(240	)	$	144
Loss reclassified from AOCI into interest expense, net of tax	308			376			674			752

The Company’s derivatives have been designated as cash flow hedges; therefore, the effective portion of the changes in the fair value of derivatives will be recognized in AOCI. As the critical terms of the interest rate swaps match the underlying debt being hedged, no ineffectiveness is recognized on these swaps and, therefore, all unrealized changes in fair value are recorded in AOCI. The Company classifies cash inflows and outflows from derivatives within operating activities on the statement of cash flows. Amounts reclassified from AOCI into earnings related to realized gains and losses on interest rate swaps are recognized when interest payments or receipts occur related to the swap contracts, which correspond to when interest payments are made on the Company’s hedged debt.

Refer to Note 14 for additional details regarding the impact of the Company's derivatives on AOCI for the three and six months ended June 30, 2018 and 2017.

7. Sale-Leasebacks of Real Estate

The Company’s outstanding sale-leaseback financing obligations of real estate-related long-lived assets as of June 30, 2018 and December 31, 2017 are as follows:



	Maturity	Interest Rate as of June 30, 2018	June 30, 2018		December 31, 2017
			(In thousands)
1 warehouse – 2010	7/2030	10.34%	$	19,374	$	19,457
11 warehouses – 2007	9/2017 to 9/2027	7.00%–19.59%	100,915		102,059
Total sale-leaseback financing obligations			$	120,289	$	121,516

8. Fair Value Measurements

The Company categorizes assets and liabilities that are recorded at fair values into one of three tiers based upon fair value hierarchy. These tiers include: Level 1, defined as quoted market prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, model-based valuation techniques for which all significant assumptions are observable in the market, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3, defined as unobservable inputs that are not corroborated by market data. The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued expenses and revolving line of credit approximate their fair values due to the short-term maturities of the instruments.

The Company's mortgage notes, term loan and construction loans are reported at their aggregate principal amount less unamortized original issue discount and deferred financing costs on the accompanying condensed consolidated balance sheets. The fair value of these financial instruments is estimated based on the present value of the expected

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

coupon and principal payments using a discount rate that reflects the projected performance of the collateral asset as of each valuation date. The inputs used to estimate the fair value of the Company's mortgage notes, term loans and construction loans are comprised of Level 2 inputs, including senior industrial commercial real estate loan spreads, corporate industrial loan indexes, risk-free interest rates, and Level 3 inputs, such as future coupon and principal payments, and projected future cash flows of the collateral asset.

The Company’s financial assets and liabilities recorded at fair value on a recurring basis include certain investments included in cash equivalent money market funds and restricted cash assets. The Company’s cash equivalent money market funds and restricted cash assets are valued at quoted market prices in active markets for identical assets (Level 1), which the Company receives from the financial institutions that hold such investments on its behalf. The fair value hierarchy discussed above is also applicable to the Company’s pension and other post-retirement plans. The Company uses the fair value hierarchy to measure the fair value of assets held by various plans. The Company recognizes transfers between levels within the hierarchy as of the beginning of the reporting period. There were no transfers between levels within the hierarchy as of June 30, 2018 and December 31, 2017, respectively.

The Company's assets and liabilities measured or disclosed at fair value are as follows:



		Fair Value
	Fair Value Hierarchy	June 30, 2018		December 31, 2017
		(In thousands)
Measured at fair value on a recurring basis:
Cash and cash equivalents	Level 1	$	153,200	$	48,873
Restricted cash	Level 1	37,575		21,090
Interest rate swap liability	Level 2	2,011		2,463
Measured at fair value on a non-recurring basis:
Long-lived assets written down:
Property, plant and equipment	Level 3	$	1,865	$	2,576
Disclosed at fair value:
Mortgage notes, term loans and construction loan	Level 3	$	1,414,249	$	1,807,199

9. Dividends and Distributions

In order to comply with the REIT requirements of the Internal Revenue Code, or the Code, the Company is generally required to make common share distributions (other than capital gain distributions) to its shareholders at least equal to 90% of its REIT taxable income, as defined in the Code, computed without regard to the dividends paid deduction and net capital gains. The Company’s common share dividend policy is to distribute a percentage of cash flow to ensure distribution requirements of the IRS are met while allowing the Company to retain cash to meet other needs, such as principal amortization, capital improvements and other investment activities.

Common share dividends are characterized for U.S. federal income tax purposes as ordinary income, qualified dividend, capital gains, non-taxable income return of capital, or a combination of the four. Common share dividends that exceed current and accumulated earnings and profits (calculated for tax purposes) constitute a return of capital rather than a dividend and generally reduce the shareholder’s basis in the common share. To the extent that a dividend exceeds both current and accumulated earnings and profits and the shareholder’s basis in the common share, it will generally be treated as a gain from the sale or exchange of that shareholder’s common share. At the beginning of

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

each year, we notify our shareholders of the taxability of the common share dividends paid during the preceding year. The payment of common share dividends is dependent upon our financial condition, operating results, and REIT distribution requirements and may be adjusted at the discretion of the Company’s Board of Trustees.

The following tables summarize dividends declared and distributions paid to the holders of common shares and Series B Preferred Shares for the six months ended June 30, 2018 and 2017.



Six Months Ended June 30, 2018
Month Declared/Paid	Dividend Per Share		Distributions Declared				Distributions Paid
			Common Shares		Series B Preferred Shares		Common Shares			Series B Preferred Shares
(In thousands, except per share amounts)
January	$	0.019	$	1,291	$	619	$	1,291		$	619	^(a)
March/April	0.140		20,145		—		20,145
			21,436				21,436			^(a)
							(79		)	—		Dividend equivalents accrued on unvested restricted stock units to be paid when the awards vest.
							20			—		Dividend equivalents paid on unvested restricted stock units that are not expected to vest (recognized as additional compensation).
June/July	0.190		27,250		—		—			—
			$	48,686			$	21,377

Series B Preferred Shares - Fixed Dividend
January					1,198					1,198		^(a)
Total distributions paid to holders of Series B Preferred Shares					$	1,817				$	1,817	^(b)


(a)	Stub period dividend paid to shareholders of record prior to the IPO.


(b)	Last Participating and Fixed Dividend paid to holders of Series B Preferred Shares in connection with the conversion to common shares on the IPO date.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements



Six Months Ended June 30, 2017
Month Declared/Paid	Dividend Per Share		Distributions Declared					Distributions Paid
			Common Shares		Series B Preferred Shares			Common Shares		Series B Preferred Shares
(In thousands, except per share amounts)
March/April	$	0.073	$	5,053	$	2,421	^(a)	$	5,053	$	2,421
June/July	0.073		5,054		2,422		^(a)	—		—
			$	10,107	4,843			$	5,053	2,421

Series B Preferred Shares - Fixed Dividend
March/April					$	4,688				$	4,688
June/July					4,687					—
Total distributions paid or accrued to holders of Series B Preferred Shares					$	14,218				$	7,109


(a)	Participating Dividend.

10. Share-Based Compensation

All share-based compensation cost is measured at the grant date, based on the estimated fair value of the award. The Company issues both time-based, performance-based and market-based equity awards. Time-based awards are recognized on a straight-line basis over the employees’ requisite service period, as adjusted for estimate of forfeitures. Performance-based and market-based awards are recognized on a tranche-by-tranche basis over the performance period, as adjusted for estimate of forfeitures.

Aggregate stock-based compensation charges were $1.6 million and $0.6 million during the three months ended June 30, 2018 and 2017, respectively, and $6.2 million and $1.2 million during the six months ended June 30, 2018 and 2017, respectively. These charges were included as a component of "Selling, General and Administrative" expense on the accompanying condensed consolidated statements of operations. As of June 30, 2018, there was $21.2 million of unrecognized stock‑based compensation expense related to stock options and restricted stock units, which will be recognized over a weighted-average period of 2.6 years.

Americold Realty Trust 2017 Equity Incentive Plan

On January 4, 2018, the Company's board of trustees adopted the Americold Realty Trust 2017 Equity Incentive Plan (2017 Plan), which permits the grant of various forms of equity- and cash-based awards from a reserved pool of 9,000,000 common shares of the Company. On January 17, 2018, the Company's then shareholders approved the 2017 Plan. Equity-based awards issued under the 2017 Plan have the rights to receive dividend equivalents on an accrual basis. Dividend equivalents accrued are paid upon the vesting of the awards, and for awards that are forfeited during the vesting period no dividend equivalents will be paid. Certain restricted stock units issued in connection with the IPO to retain key employees of the Company have the right to receive nonforfeitable dividend equivalent distributions on unvested units. As of June 30, 2018, the Company accrued $0.3 million of dividend equivalents on unvested units payable to employees and non-employee trustees.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Modification of Restricted Stock Units

On January 4, 2018, the Company’s board of trustees approved the modification of awards to allow the grant of dividend equivalents to all participants in the 2010 Plan with respect to any and all vested restricted stock units of the Company that have not been settled pursuant to the 2010 Plan. On the same day, the Company’s board of trustees resolved that no further awards may be granted under the 2010 Plan after the approval of the 2017 Plan. As a result, the Company recognized a stock-based compensation expense of $2.0 million to reflect the change in fair value associated with the modification of the dividend equivalents rights of the outstanding equity awards under the 2010 Plan. This expense is included in the aggregate stock-based compensation charge for the six months ended June 30, 2018.

Restricted Stock Units Activity

Restricted stock units are nontransferable until vested. Prior to the issuance of a common share, the grantees of restricted stock units are not entitled to vote the shares. Time-based restricted stock unit awards vest in equal annual increments over the vesting period. Performance-based and market-based restricted stock unit awards vest upon the achievement of the performance target.

The following tables summarize restricted stock unit grants under the 2017 Plan during the three and six months ended June 30, 2018 and under the 2010 Plan for the three and six months ended June 30, 2017:



Three Months Ended June 30,	Grantee Type	# of Restricted Stock Units Granted	Vesting Period	Grant Date Fair Value (in thousands)
2018	Employee group	58,625	1-4 years	$	1,004
2017	Employee group	65,575	5 years	$	881



Six Months Ended June 30,	Grantee Type	# of Restricted Stock Units Granted	Vesting Period	Grant Date Fair Value (in thousands)
2018	Trustee group	373,438	1-3 years	$	5,975
2018	Employee group	955,751	1-4 years	$	14,071
2017	Trustee group	18,348	2-3 years	$	199
2017	Employee group	137,003	5 years	$	1,840

Of the restricted stock units granted for the six months ended June 30, 2018, i) 431,751 were time-based restricted stock units with various vesting periods ranging from one to four years issued to certain employees, ii) 331,250 were time-based restricted stock units with a three-year vesting period issued to non-employee trustees in connection with the IPO, iii) 42,188 were time-based restricted stock units with a one-year vesting period issued to non-employee trustees as part of their annual compensation, and iv) 524,000 were market-based restricted stock units with a three-year vesting period issued to certain employees. The vesting of such market-based awards will be determined based on the Company's "total shareholder return", as described in the agreement granting such awards, computed for the performance period that began January 18, 2018 and will end December 31, 2020.

As of June 30, 2018, the Company's vested and outstanding restricted stock units had an intrinsic value of approximately $23.1 million using a price per share of $22.02.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Stock Options Activity

The following tables provide a summary of option activity for the period ended June 30, 2018 and 2017:



Options	Shares (In thousands)		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Terms (Years)
Outstanding as of December 31, 2017	5,478		$	9.72	6.0
Granted	—		—
Exercised	(1,735	)	9.65
Forfeited or expired	(91	)	9.81
Outstanding as of June 30, 2018	3,652		9.76		5.5

Exercisable as of June 30, 2018	3,111		$	9.72	4.9



Outstanding as of December 31, 2016	6,313		$	9.69	7.0
Granted	—		—
Exercised	—		—
Forfeited or expired	(536	)	8.79
Outstanding as of June 30, 2017	5,777		9.46		6.1

Exercisable as of June 30, 2017	3,539		$	9.68	4.8

As of June 30, 2018, the Company's exercisable and outstanding stock options had an intrinsic value of approximately $39.2 million using a price per share of $22.02.

11. Income Taxes

Income taxes are accounted for under the provisions of ASC 740 “Income Taxes”, which generally requires the Company to record deferred income taxes for the tax effect of differences between book and tax bases of its assets and liabilities.

Deferred income taxes reflect the available net operating losses and the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of the future tax benefits related to deferred tax assets is dependent on many factors, including the Company’s past earnings history, expected future earnings, the character and jurisdiction of such earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of its deferred tax assets, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset.

The Company recorded an income tax benefit of approximately $0.1 million and an income tax expense of approximately $0.1 million for the three months ended June 30, 2018 and 2017, respectively, and an income tax benefit of approximately $0.2 million and an income tax expense of approximately $1.6 million for the six months ended June 30, 2018 and 2017, respectively. As a REIT, the Company is entitled to a deduction for dividends paid,

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

resulting in a substantial reduction in the amount of federal income tax expense it recognizes. Substantially all of the Company’s income tax expense is incurred based on the earnings generated by its foreign operations, and a significant portion of those earnings is permanently reinvested. The Company’s consolidated effective tax rate could fluctuate in the future based on changes in estimates of taxable income generated by domestic and foreign taxable operations versus the REIT, the implementation of additional tax planning strategies, changes in federal or state tax rates or laws, changes in uncertain tax positions, or changes in the valuation allowance applied to the Company’s deferred tax assets.

Tax Cuts and Jobs Act

On December 22, 2017, the U.S. government enacted comprehensive tax legislation in the form of the Tax Cuts and Jobs Act (TCJA) that significantly revises the U.S. tax code effective January 1, 2018 by, among other things, lowering the corporate income tax rate from a top marginal rate of 35% to a flat rate of 21%, imposing a mandatory one-time deemed repatriation of unremitted foreign earnings (commonly referred to as the “transition tax”), limiting deductibility of interest expense and certain executive compensation, and implementing a territorial tax system. We are applying the guidance in SAB 118 when accounting for the enactment date effects of TCJA. At June 30, 2018, we have not completed our accounting for all of the tax effects of TCJA. However, we have made a reasonable estimate of certain effects. In other cases, we have not been able to make a reasonable estimate and continue to account for those items based on our existing accounting under ASC 740, Income Taxes, and the provisions of the tax laws that were in effect immediately prior to enactment. During the three-month period ended June 30, 2018, we did not recognize adjustments to the provisional amounts recorded at December 31, 2017; however, as discussed further below, we did include a reasonable estimate of the Global Intangible Low-Taxed Income (GILTI). In all cases, we will continue to make and refine our calculations as additional analysis is completed. Our estimates may also be affected as we gain a more thorough understanding of the tax law.

The TCJA subjects a U.S. shareholder to tax on GILTI earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for GILTI, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. Given the complexity of the GILTI provisions, we are still evaluating the effects of the GILTI provisions and have not yet determined our accounting policy. At June 30, 2018, because we are still evaluating the GILTI provisions and our analysis of future taxable income that is subject to GILTI, we have included GILTI related to current-year operations only in our estimated annual effective tax rate and have not provided additional GILTI on deferred items.

Income Tax Contingencies

ASC 740 prescribes a recognition threshold and measurement attribute for the financial statements recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance prescribed in ASC 740 establishes a recognition threshold of more likely than not that a tax position will be sustained upon examination. The measurement attribute requires that a tax position be measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

The Company had liabilities of $0.8 million recorded for uncertain tax positions as of June 30, 2018 and December 31, 2017. The Company accrues interest and penalties related to these positions as a component of income tax expense.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

12. Employee Benefit Plans

The components of net period benefit cost for the three and six months ended June 30, 2018 and 2017 are as follows:



	Three Months Ended June 30, 2018
	Retirement Income Plan			National Service-Related Pension Plan			Other Post-Retirement Benefits		Superannuation			Total
Components of net periodic benefit cost:	(In thousands)
Service cost	$	8		$	20		$	—	$	73		$	101
Interest cost	354			300			5		26			685
Expected return on plan assets	(512		)	(342		)	—		(44		)	(898		)
Amortization of net loss	312			179			—		—			491
Amortization of prior service cost	—			—			—		7			7
Net pension benefit cost	$	162		$	157		$	5	$	62		$	386



	Three Months Ended June 30, 2017
	Retirement Income Plan			National Service-Related Pension Plan			Other Post-Retirement Benefits		Superannuation			Total
Components of net periodic benefit cost:	(In thousands)
Service cost	$	17		$	126		$	—	$	58		$	201
Interest cost	395			314			5		29			743
Expected return on plan assets	(439		)	(294		)	—		(43		)	(776		)
Amortization of net loss	301			145			—		—			446
Amortization of prior service cost	—			53			—		—			53
Effect of settlement	104			59			—		—			163
Net pension benefit cost	$	378		$	403		$	5	$	44		$	830

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements



	Six Months Ended June 30, 2018
	Retirement Income Plan			National Service-Related Pension Plan			Other Post-Retirement Benefits		Superannuation			Total
Components of net periodic benefit cost:	(In thousands)
Service cost	$	15		$	39		$	—	$	131		$	185
Interest cost	709			600			10		53			1,372
Expected return on plan assets	(1,024		)	(685		)	—		(89		)	(1,798		)
Amortization of net loss	623			357			—		—			980
Amortization of prior service cost	—			—			—		18			18
Net pension benefit cost	$	323		$	311		$	10	$	113		$	757



	Six Months Ended June 30, 2017
	Retirement Income Plan			National Service-Related Pension Plan			Other Post-Retirement Benefits		Superannuation			Total
Components of net periodic benefit cost:	(In thousands)
Service cost	$	33		$	252		$	—	$	116		$	401
Interest cost	791			628			11		59			1,489
Expected return on plan assets	(878		)	(588		)	—		(86		)	(1,552		)
Amortization of net loss	774			348			—		—			1,122
Amortization of prior service cost	—			106			—		—			106
Effect of settlement	277			118			—		—			395
Net pension benefit cost	$	997		$	864		$	11	$	89		$	1,961

The Company expects to contribute an aggregate of $3.2 million to all plans in 2018.

Multi-Employer Plans

The Company contributes to a number of multi-employer benefit plans under the terms of collective bargaining agreements that cover union-represented employees. These plans generally provide for retirement, death, and/or termination benefits for eligible employees within the applicable collective bargaining units, based on specific eligibility/participation requirements, vesting periods, and benefit formulas. Details on multi-employer benefit plans can be found in the Annual Report on Form 10-K for the year ended December 31, 2017.

The New England Teamsters & Trucking Industry Multi-Employer Fund (Fund) is grossly underfunded in accordance with Employee Retirement Income Security Act of 1974 (ERISA) funding standards and, therefore, ERISA required the Fund to develop a Rehabilitation Plan, creating a new fund that minimizes the pension withdrawal liability. As a result, current employers participating in the Fund were given the opportunity to exit the Fund and convert to a new fund. The Company took the option to exit the Fund and convert to the new fund. The Company's portion of the unfunded liability, estimated at $13.7 million, will be repaid in equal monthly installments of approximately $38,000 over 30 years, interest free. Under the relevant U.S. GAAP standard, a participating employer withdrawing

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

from a multi-employer plan should account for a loss contingency equal to the present value of the withdrawal liability, and amortize difference between such present value and the estimated unfunded liability through interest expense over the repayment period.

13. Commitments and Contingencies

Letters of Credit

As of June 30, 2018, there were $33.6 million letters of credit issued on the Company’s 2018 Revolving Line of Credit and as of December 31, 2017, there were $33.8 million of outstanding letters of credit issued on the Company’s 2015 Revolving Line of Credit.

Bonds

The Company had outstanding surety bonds of $2.7 million as of June 30, 2018 and December 31, 2017, respectively. These bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.

Collective Bargaining Agreements

As of June 30, 2018, approximately 55% of the Company’s labor force is covered by collective bargaining agreements. Collective bargaining agreements covering approximately 14% of the labor force are set to expire in 2018.

Legal Proceedings

In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company and its legal counsel evaluate the merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency suggests that a loss is probable, and the amount can be reasonably estimated, then a loss is recorded.

In addition to the matters discussed below, the Company may be subject to litigation and claims arising from the ordinary course of business. In the opinion of management, after consultation with legal counsel, the outcome of such matters is not expected to have a material impact on the Company’s financial condition, results of operations, or cash flows.

Kansas Breach of Settlement Agreement Litigation

This case was served against the Company in Wyandotte County, Kansas, on January 17, 2013, alleging breach of a 1994 Settlement Agreement reached with customers of our predecessor company, Americold Corporation. The plaintiffs originally brought claims in 1992 arising from a fire the previous year in an underground warehouse facility.

In 1994, a settlement was reached whereby Americold Corporation agreed to the entry of a $58.7 million judgment against it and assigned its rights to proceed against its insurer to satisfy the judgment. The settlement agreement contained a standard “cooperation provision” where Americold Corporation agreed to execute any additional documents necessary to fulfill the intent of the settlement agreement. The plaintiffs then sued Americold Corporation’s insurance company to recover on the consent judgments. After decades of litigation, the case was ultimately dismissed in 2012, and the Kansas Supreme Court ruled that the 1994 consent judgment had expired and were unrevivable as a matter of law.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

On September 24, 2012, the plaintiffs filed a separate claim in the district court of Wyandotte County, Kansas, alleging that the Company and one of its subsidiaries, Americold Logistics, LLC, as successors to Americold Corporation, are liable for the full amount of the judgment, based upon the allegation that the Company failed to execute a document or take action to keep the judgment alive and viable.

On February 7, 2013, the Company removed the case to the U.S. federal court and ultimately filed a motion for summary judgment, which the plaintiffs vigorously opposed. On October 4, 2013, the court granted our motion and dismissed the case in full. Only one group of the plaintiffs appealed the dismissal to the U.S. Court of Appeals, where oral argument was heard in November 2014 before the Tenth Circuit in Denver. The Court of Appeals ordered that the case be remanded to the Kansas State Court and the judgment in favor of Americold be vacated, finding U.S. federal diversity jurisdiction did not exist over the Company. The Company petitioned the U.S. Supreme Court for certiorari and oral argument occurred on January 19, 2016.

On March 7, 2016, the United States Supreme Court handed down a decision in the Kansas Breach of Settlement Agreement Litigation case. The decision was contrary to the position that the Company argued. Following the decision, the United States District Court for the District of Kansas entered an Order vacating the judgment and remanding the case to Kansas state court for further proceedings. Regardless of the venue, the Company remains confident that its defenses on the merits of plaintiffs’ claims are strong under Kansas law.

Following remand to Kansas state court, plaintiffs initially petitioned the court to amend their complaint to drop their claim for damages and only seek an Order of Specific Performance-namely, to require Americold to sign a new document reinstating the consent judgment assigned in the 1994 Settlement Agreement. No amended complaint was filed, however, and plaintiffs filed a later motion to add back the damages claim, which was granted in February 2018. As of June 30, 2018, pending before the court are the Company’s motions to prevent Kraft and Safeway to remain in the lawsuit as plaintiffs on the theory that they did not appeal the District Court’s Order dismissing their claims and are bound by the judgment entered against them. plaintiffs have served limited discovery to us seeking communications with insurance counsel and representatives. We continue to assert a strong defensive posture and will be in a better position to evaluate exposure as discovery and case preparation continues.

Environmental Matters

The Company is subject to a wide range of environmental laws and regulations in each of the locations in which the Company operates. Compliance with these requirements can involve significant capital and operating costs. Failure to comply with these requirements can result in civil or criminal fines or sanctions, claims for environmental damages, remediation obligations, the revocation of environmental permits, or restrictions on the Company’s operations.

The Company records accruals for environmental matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. The Company adjusts these accruals periodically as assessment and remediation efforts progress or as additional technical or legal information become available. The Company recorded nominal environmental liabilities in accounts payable and accrued expenses as of June 30, 2018 and December 31, 2017. The Company believes it is in compliance with applicable environmental regulations in all material respects. Under various U.S. federal, state, and local environmental laws, a current or previous owner or operator of real estate may be liable for the entire cost of investigating, removing, and/or remediating hazardous or toxic substances on such property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the contamination. Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for the entire clean-up cost. There are no material unrecorded liabilities as of June 30, 2018. Most of the Company’s warehouses utilize ammonia as a refrigerant. Ammonia is classified as a hazardous chemical

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

regulated by the Environmental Protection Agency, and an accident or significant release of ammonia from a warehouse could result in injuries, loss of life, and property damage.

Occupational Safety and Health Act (OSHA)

The Company’s warehouses located in the U.S. are subject to regulation under OSHA, which requires employers to provide employees with an environment free from hazards, such as exposure to toxic chemicals, excessive noise levels, mechanical dangers, heat or cold stress, and unsanitary conditions. The cost of complying with OSHA and similar laws enacted by states and other jurisdictions in which we operate can be substantial, and any failure to comply with these regulations could expose us to substantial penalties and potentially to liabilities to employees who may be injured at our warehouses. The Company records accruals for OSHA matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. The Company believes that it is in substantial compliance with all OSHA regulations and that no material unrecorded liabilities exist as of June 30, 2018 and December 31, 2017.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

14. Accumulated Other Comprehensive (Loss) Income

The Company reports activity in AOCI for foreign currency translation adjustments of investments in foreign subsidiaries, unrealized gains and losses on cash flow hedge derivatives, and minimum pension liability adjustments, net of tax. The activity in AOCI for the three and six months ended June 30, 2018 and 2017 is as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(In thousands)						(In thousands)
Pension and other postretirement benefits:
Balance at beginning of period, net of tax	$	(6,627	)	$	(12,151	)	$	(7,126	)	$	(12,880	)
Gain arising during the period	491			446			979			1,122
Less: Tax expense	—			—			—			—
Net gain arising during the period	491			446			979			1,122
Amortization of prior service cost ⁽¹⁾	7			53			18			106
Less: Tax expense	—			—			—			—
Net amount reclassified from AOCI to net income/loss	7			53			18			106
Other comprehensive income, net of tax	498			499			997			1,228
Balance at end of period, net of tax	(6,129		)	(11,652		)	(6,129		)	(11,652		)
Foreign currency translation adjustments:
Balance at beginning of period, net of tax	6,845			7,109			8,318			3,874
(Loss) gain on foreign currency translation	(4,723		)	395			(6,196		)	3,630
Less: Tax expense/(Tax benefit)	—			—			—			—
Net (loss)/gain on foreign currency translation	(4,723		)	395			(6,196		)	3,630
Balance at end of period, net of tax	2,122			7,504			2,122			7,504
Cash flow hedge derivatives:
Balance at beginning of period, net of tax	(1,386		)	(1,886		)	(1,422		)	(1,538		)
Unrealized loss on cash flow hedge derivatives	(74		)	(93		)	(388		)	(962		)
Less: Tax expense/(Tax benefit)	30			79			46			(66		)
Net loss on cash flow hedge derivatives	(104		)	(172		)	(434		)	(896		)
Net amount reclassified from AOCI to net income/loss (interest expense)	308			376			674			752
Balance at end of period, net of tax	(1,182		)	(1,682		)	(1,182		)	(1,682		)

Accumulated other comprehensive loss	$	(5,189	)	$	(5,830	)	$	(5,189	)	$	(5,830	)


(1)	Amounts reclassified from AOCI for pension liabilities are recorded in selling, general, and administrative expenses in the condensed consolidated statements of operations.

15. Related-Party Transactions

Transactions with Goldman

Affiliates of Goldman are part of the lending group that has $45.0 million, or approximately 4.9%, of the total commitment under the 2018 Senior Secured Credit Facilities. Another affiliate of Goldman is one of the participating lenders in the ANZ Loans (with a 2.5% participation in the Australia Term Loan and 31.8% in the New Zealand Term Loan). Goldman is also the counterparty to the interest rate swap agreements described in Note 6.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

The Company is required to pay certain fees to Goldman, which may include interest on borrowings, unused facility fees, letter of credit participation fees, and letter of credit facility fees. The Company paid interest expense and fees to Goldman totaling approximately $0.7 million and $0.6 million for the three months ended June 30, 2018 and 2017, respectively, and approximately $1.6 million and $1.2 million for the six months ended June 30, 2018 and 2017, respectively. Interest payable to Goldman was nominal as of June 30, 2018 and December 31, 2017.

Transaction with YF ART Holdings

On March 8, 2018, YF ART Holdings entered into a margin loan agreement pledging 54,952,774 common shares of beneficial interest, $0.01 par value per share, representing approximately 38.6% of the Company’s issued and outstanding common shares as of June 30, 2018. YF ART Holdings used the proceeds from the financing agreement to pay in full the outstanding investment, including the preferred return thereon, of Fortress, which ceased to be a limited partner in YF ART Holdings and no longer has any economic interest therein.

In connection with the pledge by YF ART Holdings described above, the Company delivered a consent and acknowledgment to YF ART Holdings and the lenders under such margin loan agreement in which the Company, among other matters, agreed, subject to applicable law and stock exchange rules, not to take any actions that would adversely affect the enforcement of the rights of the lenders under the loan documents. The Company is not a party to the margin loan agreement and has no obligations thereunder. In consideration of our agreement to enter into such consent and acknowledgment, YF ART Holdings entered into a letter agreement with us that provides that, among other matters, YF ART Holdings may not, without our prior written consent, directly or indirectly transfer or dispose of an amount greater than approximately 27.5 million common shares, subject to certain exceptions (including as relating to the margin loan agreement and related documents), for a ninety-day period beyond the lock-up period applicable to YF ART Holdings’ common shares under the lock-up agreement it entered into with the representatives of the underwriters for the IPO. The Company also entered into an amendment of the shareholders agreement, which addresses certain matters related to the margin loan agreement and related documents.

16. Segment Information

Our principal operations are organized into four reportable segments: Warehouse, Third-Party Managed, Transportation and Quarry.

•

Warehouse. Our primary source of revenues consists of rent and storage and warehouse services fees. Our rent and 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. 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, and (10) government-approved temperature-controlled storage and inspection services. We may charge our customers in advance for storage and outbound handling fees. Cost of operations for our warehouse segment consists of power, other facilities costs, labor and other services costs.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

•

Third-Party Managed. We receive management and incentive fees, as well as reimbursement of substantially all expenses, for warehouses and logistics services that we manage on behalf of third-party owners/customers. Cost of operations for our third-party managed segment are reimbursed on a pass-through basis (typically within two weeks), with all reimbursements, plus an applicable mark-up, recognized as revenues under the relevant accounting guidance.


•	Transportation. We charge transportation fees, including fuel surcharges, to our customers for whom we arrange the transportation of their products. Cost of operations for our transportation segment consist primarily of third-party carrier charges, which are impacted by factors affecting those carriers.


•	Quarry. In addition to our primary business segments, we own a limestone quarry in Carthage, Missouri. Revenues are generated from the sale of limestone mined at our quarry. Cost of operations for our quarry consist primarily of labor, equipment, fuel and explosives.

Our reportable segments are strategic business units separated by product and service offerings. Each reportable segment is managed separately and requires different operational and marketing strategies. The accounting polices used in the preparation of our reportable segments financial information are the same as those used in the preparation of its consolidated financial statements.

Our chief operating decision maker uses revenues and segment contribution to evaluate segment performance. We calculate segment contribution as earnings before interest expense, taxes, depreciation and amortization, and excluding corporate selling, general and administrative expense, impairment charges, restructuring charges, acquisition related costs, other income and expense, and certain one-time charges. Corporate selling, general and administrative function supports all the business segments. Therefore, the related expense is not allocated to segments as the chief operating decision maker does not use it to evaluate segment performance.

Segment contribution is not a measurement of financial performance under GAAP, and may not be comparable to similarly titled measures of other companies. You should not consider our segment contribution as an alternative to operating income determined in accordance with GAAP.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

The following table presents segment revenues and contributions with a reconciliation to income (loss) before income tax and gain from sale of real estate, net of tax for the three and six months ended June 30, 2018 and 2017:



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(In thousands)
Segment revenues:
Warehouse	$	287,712		$	281,663		$	574,229		$	557,471
Third-Party Managed	65,755			59,638			129,632			118,005
Transportation	38,889			35,796			77,234			71,977
Quarry	2,311			2,354			4,714			4,913
Total revenues	394,667			379,451			785,809			752,366

Segment contribution:
Warehouse	90,835			84,804			180,405			168,325
Third-Party Managed	3,859			3,483			7,637			6,471
Transportation	3,586			3,089			7,180			6,642
Quarry	(80		)	(1,436		)	266			(532		)
Total segment contribution	98,200			89,940			195,488			180,906

Reconciling items:
Depreciation, depletion, and amortization	(29,051		)	(28,913		)	(58,459		)	(58,320		)
Selling, general and administrative expense	(27,482		)	(23,546		)	(59,431		)	(48,303		)
Impairment of long-lived assets	(747		)	(8,773		)	(747		)	(8,773		)
Income (loss) from investments in partially owned entities	252			(1,324		)	112			(1,351		)
Impairment of investments in partially owned entities	—			(6,496		)	—			(6,496		)
Interest expense	(22,929		)	(28,288		)	(47,424		)	(56,015		)
Interest income	1,109			310			1,733			567
Loss on debt extinguishment and modification	—			(430		)	(21,385		)	(600		)
Foreign currency exchange gain (loss)	1,511			(52		)	2,191			(2,825		)
Other income (expense), net	33			(728		)	89			(1,212		)
Income (loss) before income tax and gain from sale of real estate, net of tax	$	20,896		$	(8,300	)	$	12,167		$	(2,422	)

17. Earnings per Common Share

Basic and diluted earnings per common share are calculated by dividing the net income or loss attributable to common shareholders by the basic and diluted weighted-average number of common shares outstanding in the period, respectively, using the allocation method prescribed by the two-class method. The Company applies this method to compute earnings per share because it distributes non-forfeitable dividend equivalents on restricted stock units granted to certain employees and non-employee directors who have the right to participate in the distribution of common dividends while the restricted stock units are unvested. During the three and six months ended June 30, 2018, the

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

weighted-average number of unvested restricted stock units that participated in the distribution of common dividends was 1,400,966 and 1,392,229, respectively.

Prior to the IPO, holders of Series B Preferred Shares were entitled to cumulative dividends, which were added to the reported net loss whether or not declared or paid to determine the net loss attributable to common shareholders under the two-class method.

A reconciliation of the basic and diluted weighted-average number of common shares outstanding for the three and six months ended June 30, 2018 and 2017 is as follows:



	Three Months Ended June 30,		Six Months Ended June 30,
	2018	2017	2018	2017
	(In thousands)
Weighted average common shares outstanding – basic	143,499	70,049	133,965	69,990
Dilutive effect of share-based awards	2,975	—	2,772	—
Weighted average common shares outstanding – diluted	146,474	70,049	136,737	69,990

For the three and six months ended June 30, 2017, potential common shares under the treasury stock method and the if-converted method were antidilutive because the Company reported a net loss in prior periods. Consequently, the Company did not have any adjustments in these periods between basic and diluted loss per share related to stock options, restricted stock units, warrants and convertible preferred shares in those periods.

The table below presents the weighted-average number of antidilutive potential common shares that are not considered in the calculation of diluted income (loss) per share:



	Three Months Ended June 30,		Six Months Ended June 30,
	2018	2017	2018	2017
	(In thousands)
Series B Convertible Preferred Stock	—	33,240	—	33,240
Common share warrants	—	5,196	—	4,171
Employee stock options	—	6,014	—	6,116
Restricted stock units	—	679	—	622
	—	45,129	—	44,149

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

18. Revenue from Contracts with Customers

Disaggregated Revenue

The following tables represent a disaggregation of revenue from contracts with customers for the three and six months ended June 30, 2018 and 2017 by segment and geographic region:



	Three Months Ended June 30, 2018
	United States		Australia		New Zealand		Argentina		Canada		Total
	(In thousands)
Warehouse rent and storage	$	104,977	$	9,605	$	3,955	$	1,435	$	—	$	119,972
Warehouse services	128,057		29,329		4,099		895		—		162,380
Third-party managed	57,606		3,373		—		—		4,726		65,705
Transportation	23,934		14,061		169		725		—		38,889
Quarry	2,305		—		—		—		—		2,305
Total revenues ⁽¹⁾	316,879		56,368		8,223		3,055		4,726		389,251
Lease revenue ⁽²⁾	5,416		—		—		—		—		5,416
Total revenues from contracts with all customers	$	322,295	$	56,368	$	8,223	$	3,055	$	4,726	$	394,667



	Three Months Ended June 30, 2017
	United States		Australia		New Zealand		Argentina		Canada		Total
	(In thousands)
Warehouse rent and storage	$	100,858	$	9,590	$	4,583	$	2,212	$	—	$	117,243
Warehouse services	126,894		27,777		3,530		1,039		—		159,240
Third-party managed	52,724		2,279		—		—		4,584		59,587
Transportation	20,832		13,280		173		1,510		—		35,795
Quarry	2,349		—		—		—		—		2,349
Total revenues (1)	303,657		52,926		8,286		4,761		4,584		374,214
Lease revenue (2)	5,237		—		—		—		—		5,237
Total revenues from contracts with all customers	$	308,894	$	52,926	$	8,286	$	4,761	$	4,584	$	379,451


(1)	Revenues are within the scope of ASC 606: Revenue From Contracts With Customers. Elements of contracts or arrangements that are in the scope of other standards (e.g., leases) are separated and accounted for under those standards.


(2)	Revenues are within the scope of Topic 840, Leases.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements



	Six Months Ended June 30, 2018
	United States		Australia		New Zealand		Argentina		Canada		Total
	(In thousands)
Warehouse rent and storage	$	209,337	$	19,945	$	7,827	$	2,989	$	—	$	240,098
Warehouse services	253,305		59,766		8,216		1,882		—		323,169
Third-party managed	113,622		6,622		—		—		9,288		129,532
Transportation	46,998		28,260		373		1,603		—		77,234
Quarry	4,703		—		—		—		—		4,703
Total revenues ⁽¹⁾	627,965		114,593		16,416		6,474		9,288		774,736
Lease revenue ⁽²⁾	11,073		—		—		—		—		11,073
Total revenues from contracts with all customers	$	639,038	$	114,593	$	16,416	$	6,474	$	9,288	$	785,809



	Six Months Ended June 30, 2017
	United States		Australia		New Zealand		Argentina		Canada		Total
	(In thousands)
Warehouse rent and storage	$	199,563	$	18,974	$	9,008	$	4,570	$	—	$	232,115
Warehouse services	250,443		55,904		7,027		2,006		—		315,380
Third-party managed	105,210		3,783		—		—		8,912		117,905
Transportation	42,105		26,549		372		2,951		—		71,977
Quarry	4,902		—		—		—		—		4,902
Total revenues ⁽¹⁾	602,223		105,210		16,407		9,527		8,912		742,279
Lease revenue ⁽²⁾	10,087		—		—		—		—		10,087
Total revenues from contracts with all customers	$	612,310	$	105,210	$	16,407	$	9,527	$	8,912	$	752,366


(1)	Revenues are within the scope of ASC 606: Revenue From Contracts With Customers. Elements of contracts or arrangements that are in the scope of other standards (e.g., leases) are separated and accounted for under those standards.


(2)	Revenues are within the scope of Topic 840, Leases.

Performance Obligations

Substantially all our revenue for warehouse storage and handling services, and management and incentive fees earned under third-party managed and other contracts is recognized over time as the customer benefits throughout the period until the contractual term expires. Typically, revenue is recognized over time using an output measure (e.g. passage of time) to measure progress. Revenue recognized at a point in time upon delivery when the customer typically obtains control, include most accessorial services, transportation services, reimbursed costs and quarry product shipments.

For arrangements containing non-cancellable contract terms, any variable consideration related to storage renewals or incremental handling charges above stated minimums are 100% constrained and not included in aggregate amount of the transaction price allocated to the unsatisfied performance obligations disclosed below, given the degree in difficulty in estimation. Payment terms are generally 0 - 30 days upon billing, which is typically monthly, either in advance or subsequent to the performance of services. The same payment terms typically apply for arrangements containing variable consideration.

Americold Realty Trust and Subsidiaries

Notes to Condensed Consolidated Financial Statements

The Company has no material warranties or obligations for allowances, refunds or other similar obligations.

At June 30, 2018, the Company had $441.8 million of remaining unsatisfied performance obligations from contracts with customers subject to a non-cancellable term and within contracts that have an original expected duration exceeding one year. These obligations also do not include variable consideration beyond the non-cancellable term, which due to the inability to quantify by estimate, is fully constrained. The Company expects to recognize approximately 12% of these remaining performance obligations as revenue in 2018, an additional 21% by 2019 with the remaining 67% to be recognized over a weighted average period of 7.9 years through 2029.

As part of the Company’s adoption of ASU 2014-09 in the first quarter of 2018, the Company elected to use the practical expedient under ASC 606-10-65-1(f)(3), pursuant to which the Company has excluded disclosures of transaction prices allocated to remaining performance obligations and when the Company expects to recognize such revenue for all periods prior to the date of initial application of ASU 2014-09.

Contract Balances

The timing of revenue recognition, billings and cash collections results in accounts receivable (contract assets), and unearned revenue (contract liabilities) on the consolidated balance sheets. Generally, billing occurs monthly, subsequent to revenue recognition, resulting in contract assets. However, the Company may bill and receive advances or deposits from customers, particularly on storage and handling services, before revenue is recognized, resulting in contract liabilities. These assets and liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. Changes in the contract asset and liability balances during the three and six months ended June 30, 2018, were not materially impacted by any other factors.

Opening and closing receivables balances related to contracts with customers accounted for under ASC 606 were $180.8 million and $198.7 million at June 30, 2018 and December 31, 2017, respectively, and $176.8 million and $198.4 million at June 30, 2017 and December 31, 2016, respectively. All other trade receivable balances relate to contracts accounted for under ASC 840.

Opening and closing balances in unearned revenue related to contracts with customers were $20.1 million and $18.8 million at June 30, 2018 and December 31, 2017, respectively, and $17.0 million and $17.9 million at June 30, 2017 and December 31, 2016, respectively. Substantially all revenue that was included in the contract liability balances at the beginning of 2018 and 2017 has been recognized as of June 30, 2018 and June 30, 2017, respectively, and represents revenue from the satisfaction of monthly storage and handling services with inventory that turns on average every 30 days.

Item 2. 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 condensed consolidated financial statements included in this quarterly report on Form 10-Q. In addition, the following discussion contains forward-looking statements, such as statements regarding our expectation for future performance, liquidity and capital resources, that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our expectations. Our actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause such differences include those identified below and those described under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017.

MANAGEMENT'S OVERVIEW

We are the world’s largest owner and operator of temperature-controlled warehouses. We are organized as a self-administered and self-managed REIT with proven operating, development and acquisition expertise. As of June 30, 2018, we operated a global network of 156 temperature-controlled warehouses encompassing 924.1 million cubic feet, with 138 warehouses in the United States, six warehouses in Australia, seven warehouses in New Zealand, two warehouses in Argentina and three warehouses in Canada. We also own and operate a limestone quarry through a separate business segment. In addition, we hold a minority interest in the China JV, which owns or operates 13 temperature-controlled warehouses located in China. We view and manage our business through three primary business segments, warehouse, third–party managed and transportation.

During the three months ended June 30, 2018, we sold a warehouse facility in the southeast region of the United States for approximately $18.0 million, which resulted in the recognition of a $8.4 million gain from sale of real estate. In preparation of that warehouse disposal, we transferred most of our customers inventory to other owned warehouses within the same region.

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, and (10) government-approved temperature-controlled storage and inspection services. We refer to these handling and other warehouse services as our value-added services.

Cost of operations for our warehouse segment consist of power, other facilities costs, labor, and other costs. Labor, our largest 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 and compensation levels, changes in customer requirements, workforce productivity and variability in costs associated with medical insurance. Our second largest cost of operations from our warehouse segment is power utilized in

the operation of our temperature-controlled warehouses. As a result, trends 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 forward rate agreements or, to the extent possible and appropriate, increase the rates we charge our customers for storage in our warehouses. Other facilities costs include utilities other than power, property insurance, property taxes, sanitation, repairs and maintenance on real estate, rent under operating leases, where applicable, and other related facilities costs. Other services costs include equipment costs, warehouse consumables (e.g., shrink-wrap and uniforms), warehouse administration and other related services costs.

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 (typically within two weeks).

Transportation. We charge transportation fees, including fuel 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.

Quarry. In addition to our primary business segments, we own and operate a limestone quarry in Carthage, Missouri. Revenues are generated from the sale of limestone mined at our quarry. Cost of operations for our quarry consists primarily of labor, equipment, fuel and explosives.

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

Our depreciation, depletion 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. Depletion relates to the reduction of mineral resources resulting from the operation of our limestone quarry. Amortization relates primarily to intangible assets for customer relationships and below-market leases.

Our corporate-level selling, general and administrative expenses consist primarily of wages and benefits for management, administrative, business development, account 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 and public company costs, bad debts, training, office equipment and supplies. Trends in corporate-level selling, general and administrative expenses are influenced by changes in headcount and compensation levels, achievement of incentive compensation targets, and variability in costs associated with pension obligations. To position ourselves to meet the challenges of the current business environment, we have implemented a shared services support structure to better manage costs and enhance the efficiency of our operations.

Key Factors Affecting Our Business and Financial Results

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 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.



	June 30, 2018 compared to June 30, 2017
	Average foreign exchange rate used to adjust operating results for the three months ended June 30, 2018 ⁽¹⁾	Average foreign exchange rate used to adjust operating results for the six months ended June 30, 2018 ⁽¹⁾	Foreign exchange rates as of June 30, 2018	Foreign exchange rates as of June 30, 2017
Australian dollar	0.751	0.754	0.740	0.768
New Zealand dollar	0.703	0.707	0.677	0.732
Argentinian peso	0.064	0.064	0.034	0.060
Canadian dollar	0.742	0.748	0.761	0.770


(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

We continuously seek to implement various initiatives aimed at streamlining our business processes and reducing our cost structure. Commencing in 2013, we realigned and centralized key business processes; implemented standardized operational processes; integrated and launched new information technology tools and platforms; instituted key health, safety, leadership and training programs; and added a strategic sourcing function to capitalize on the purchasing power of our network. Through the realignment of our business processes, we have improved retention of our key talent and reduced employee turnover, acquired new talent and strengthened our service offerings. In order to reduce costs in our facilities, we have invested in energy efficiency projects, including LED lighting, 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. In 2016, we implemented a strategic effort to exit certain leased facilities and transition customers within our warehouse portfolio to consolidate occupancy, reduce costs and increase contribution from the warehouses

where these customers were transitioned. In executing these initiatives, we believe that we have enhanced our ability to serve our customers at the highest quality level and efficiently manage our warehouses.

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. Through our process of active portfolio management, we continue to evaluate our markets and offerings.

Strategic Shift within Our Transportation Segment

In order to better focus our business on the operation of our temperature-controlled warehouses, we have undertaken a strategic shift in the solutions we provide in our transportation segment. As a result of this strategic shift, we have gradually exited certain commoditized, non-scalable, or low margin services we historically offered to our customers, including traditional brokered transportation services. We continue to offer more profitable and value added programs, such as national and regional cross-dock, regional and multi-vendor consolidation service, and dedicated transportation services. We designed each of these programs 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 occupancy in our temperature-controlled warehouses.

Historically Significant Customer

For the three and six months ended June 30, 2018 and 2017, one customer accounted for more than 10% of our total revenues. For the three months ended June 30, 2018 and 2017, sales to this customer were $54.0 million and $48.8 million, respectively. For the six months ended June 30, 2018 and 2017, sales to this customer were $106.3 million and $97.1 million, respectively. The substantial majority of this customer's business relates to our third-party managed segment. 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 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, $49.8 million and $45.2 million represented reimbursements for certain expenses we incurred during the three months ended June 30, 2018 and 2017, respectively, and $98.0 million and $89.8 million for the six months ended June 30, 2018 and 2017, respectively, that were offset by matching expenses included in our third-party managed cost of operations.

Occupancy of our Warehouses

Occupancy in our warehouses is an important driver of our financial results. Physical occupancy of an individual warehouse is impacted by a number of factors, including the type of warehouse (i.e., distribution, public, production advantaged or leased facility), specific customer needs in the markets served by the warehouse, timing of harvests or protein production for customers of the warehouse, the existence of leased but unoccupied pallets and the adverse effect of weather or market conditions on the customers of the warehouse. On a portfolio-wide basis, physical occupancy rates and warehouse revenues generally peak between mid-September and early December in connection with the holiday season and the peak harvest season in the United States. Physical occupancy rates and warehouse revenues on a portfolio-wide basis are generally the lowest during May and June. Our target occupancy across our warehouse portfolio varies by warehouse and warehouse type because our warehouses are configured to accommodate the individual needs of our customers. We generally regard approximately 85% average physical occupancy across our temperature-controlled warehouse portfolio as optimal, subject to relevant local market conditions and individual customer needs. We do not believe that a 100% occupancy rate is an ideal target for utilization of our warehouses because optimizing pallet throughput and

efficient delivery of relevant value-added services require a certain amount of free pallet position capacity at all times in order to be able to efficiently place, store and retrieve products from pallet positions, particularly during periods of greatest occupancy or highest volume. Our occupancy metrics account for the physical occupancy of our warehouses. As customers continue to transition to contracts that feature a fixed storage commitment, our financial occupancy may be greater than our physical occupancy, as our customers may have committed to, and be paying for, space that they are currently not physically occupying, but intend to physically occupy in the future.

Throughput at our Warehouses

The level 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.

How We Assess the Performance of Our Business

Segment Contribution (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, depletion and amortization, impairment charges and corporate-level selling, general and administrative 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 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 refer to a “same store” as a warehouse we owned or leased for the entirety of two comparable periods and which has reported at least twelve months of consecutive normalized operations prior to the commencement of the earlier period being considered. We define “normalized operations” as a site open for operation or lease after a warehouse acquisition, development or significant modification, including the expansion of a warehouse footprint or a warehouse rehabilitation subsequent to an extraordinary event, such as natural disasters or similar events. In addition, our definition of “normalized operations” takes into account changes in the ownership structure (e.g., acquisition of a previously leased warehouse would result in different charges in the compared periods), which would impact comparability in our warehouse segment contribution (NOI). Warehouses are excluded from the same store population as of the beginning of the fiscal quarter following the occurrence of such events. We evaluate our same store portfolio on a quarterly basis.

We calculate “same store contribution (NOI)” as revenues for the same store population less its cost of operations (excluding any depreciation, depletion and amortization, impairment charges and corporate-level selling, general and administrative expenses). 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 during the second quarter of 2018.



	June 30, 2018
Total Warehouses	156
Same Store Warehouses ⁽¹⁾	137
Non-Same Store Warehouses	7
Managed Warehouses	12


(1)	During the second quarter of 2018, we disposed of one of our warehouses in the Southeast region of the Unites States that was previously classified in the same store population, and exited a leased facility in the West region of the United States that was previously classified as non-same store.

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 caused by the net effect of foreign currency translation on revenues generated and expenses incurred by our operations outside the United States, variations which we cannot control. 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. We provide reconciliations of these measures in the discussions of our comparative results of operations below. Our discussion of the drivers of our performance below are based upon U.S. GAAP.

RESULTS OF OPERATIONS

Comparison of Results for the Three Months Ended June 30, 2018 and 2017

Warehouse Segment

The following table presents the operating results of our warehouse segment for the three months ended June 30, 2018 and 2017.



	Three months ended June 30,									Change
	2018 actual			2018 constant currency⁽¹⁾			2017 actual			Actual		Constant currency
	(Dollars in thousands)
Rent and storage	$	125,333		$	125,942		$	122,423		2.4	%	2.9	%
Warehouse services	162,379			162,545			159,240			2.0	%	2.1	%
Total warehouse segment revenues	287,712			288,487			281,663			2.1	%	2.4	%

Power	18,631			18,781			18,580			0.3	%	1.1	%
Other facilities costs ⁽²⁾	26,131			26,316			25,319			3.2	%	3.9	%
Labor	126,140			126,450			126,032			0.1	%	0.3	%
Other services costs⁽³⁾	25,975			26,071			26,928			(3.5	)%	(3.2	)%
Total warehouse segment cost of operations	196,877			197,618			196,859			—	%	0.4	%
Warehouse segment contribution (NOI)	$	90,835		$	90,869		$	84,804		7.1	%	7.2	%

Warehouse rent and storage contribution (NOI) ⁽⁴⁾	$	80,571		$	80,845		$	78,524		2.6	%	3.0	%
Warehouse services contribution (NOI) ⁽⁵⁾	$	10,264		$	10,024		$	6,280		63.4	%	59.6	%

Total warehouse segment margin	31.6		%	31.5		%	30.1		%	150 bps		140 bps
Rent and storage margin⁽⁶⁾	64.3		%	64.2		%	64.1		%	20 bps		10 bps
Warehouse services margin⁽⁷⁾	6.3		%	6.2		%	3.9		%	240 bps		230 bps


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


(2)	Includes real estate rent expense of $3.8 million and $3.8 million for the second quarter of 2018 and 2017, respectively.


(3)	Includes non-real estate rent expense of $3.3 million and $3.5 million for the second quarter of 2018 and 2017, respectively.


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


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


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


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

Warehouse segment revenues were $287.7 million for the three months ended June 30, 2018, an increase of $6.0 million, or 2.1%, compared to $281.7 million for the three months ended June 30, 2017. On a constant currency basis, our warehouse segment revenues were $288.5 million for the three months ended June 30, 2018, an increase of $6.8 million, or 2.4%, from the three months ended June 30, 2017. These increases were primarily driven by a more favorable customer mix, net new business, improvements in our commercial terms and contractual rate escalations. Our domestic operations accounted for the majority of the change in customer composition and increase in fixed commitment storage contracts. The foreign currency translation of revenues incurred by our foreign operations had a $0.8 million unfavorable impact during the three months ended June 30, 2018, which was mainly driven by the strengthening of the U.S. dollar over the Argentinian peso.

Warehouse segment cost of operations of $196.9 million for the three months ended June 30, 2018 was virtually the same as in the same quarter of 2017. On a constant currency basis, our warehouse segment cost of operations was slightly higher mainly due to the appreciation of the U.S. dollar over the Argentinian peso. Our ongoing efforts on productivity improvements and energy efficiency initiatives is allowing us to maintain our cost of operations while increasing our warehouse segment revenues.

For the three months ended June 30, 2018, we reported an increase of $6.0 million, or 7.1% in warehouse segment contribution (NOI), which was $90.8 million for the second quarter of 2018 compared to $84.8 million for the second quarter of 2017. The foreign currency translation of our results of operations had a nominal impact to the warehouse segment contribution period-over-period. Again, a more favorable customer mix, net new business, improvements in our commercial terms and contractual rate escalations, combined with operating efficiency gains driven by labor productivity, the leveraging of our fixed expenses and lower worker's compensation expenses, allowed us to generate higher contribution margins in our warehouse segment during the second quarter of 2018 compared to the second quarter of 2017.

Same Store Analysis

We had 137 same stores for the three months ended June 30, 2018. Please see “How We Assess the Performance of Our Business—Same Store Analysis” above for a reconciliation of the change in the same store portfolio from year to year.

The following table presents revenues, cost of operations, contribution (NOI) and margins for our same stores and non-same stores with a reconciliation to the total financial metrics of our warehouse segment for the three months ended June 30, 2018 and 2017.



	Three Months Ended June 30,									Change
	2018 actual			2018 constant currency⁽¹⁾			2017 actual			Actual		Constant currency
Same store revenues:	(Dollars in thousands)
Rent and storage	$	122,492		$	123,100		$	118,308		3.5	%	4.1	%
Warehouse services	158,937			159,143			155,538			2.2	%	2.3	%
Total same store revenues	281,429			282,243			273,846			2.8	%	3.1	%
Same store cost of operations:
Power	17,935			18,087			17,531			2.3	%	3.2	%
Other facilities costs	24,631			24,818			23,548			4.6	%	5.4	%
Labor	123,178			123,522			123,004			0.1	%	0.4	%
Other services costs	25,153			25,256			25,983			(3.2	)%	(2.8	)%
Total same store cost of operations	$	190,897		$	191,683		$	190,066		0.4	%	0.9	%

Same store contribution (NOI)	$	90,532		$	90,560		$	83,780		8.1	%	8.1	%
Same store rent and storage contribution (NOI)⁽²⁾	$	79,926		$	80,195		$	77,229		3.5	%	3.8	%
Same store services contribution (NOI)⁽³⁾	$	10,606		$	10,365		$	6,551		61.9	%	58.2	%

Total same store margin	32.2		%	32.1		%	30.6		%	160 bps		150 bps
Same store rent and storage margin⁽⁴⁾	65.2		%	65.1		%	65.3		%	-10 bps		-20 bps
Same store services margin⁽⁵⁾	6.7		%	6.5		%	4.2		%	250 bps		230 bps

Non-same store revenues:
Rent and storage	$	2,841		$	2,841		$	4,115		(31.0	)%	(31.0	)%
Warehouse services	3,442			3,442			3,702			(7.0	)%	(7.0	)%
Total non-same store revenues	6,283			6,283			7,817			(19.6	)%	(19.6	)%
Non-same store cost of operations:
Power	696			696			1,049			(33.7	)%	(33.7	)%
Other facilities costs	1,499			1,499			1,771			(15.4	)%	(15.4	)%
Labor	2,963			2,963			3,028			(2.1	)%	(2.1	)%
Other services costs	822			822			945			(13.0	)%	(13.0	)%
Total non-same store cost of operations	$	5,980		$	5,980		$	6,793		(12.0	)%	(12.0	)%

Non-same store contribution (NOI)	$	303		$	303		$	1,024		(70.4	)%	(70.4	)%
Non-same store rent and storage contribution (NOI)⁽²⁾	$	646		$	646		$	1,295		(50.1	)%	(50.1	)%
Non-same store services contribution (NOI)⁽³⁾	$	(343	)	$	(343	)	$	(271	)	26.6	%	26.6	%

Total warehouse segment revenues	$	287,712		$	288,526		$	281,663		2.1	%	2.4	%
Total warehouse cost of operations	$	196,877		$	197,663		$	196,859		—	%	0.4	%
Total warehouse segment contribution	$	90,835		$	90,863		$	84,804		7.1	%	7.1	%


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


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


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


(4)	Calculated as same store rent and storage contribution (NOI) divided by same store rent and storage revenues.


(5)	Calculated as same store warehouse services contribution (NOI) divided by same store warehouse services revenues.

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



	Three Months Ended June 30,						Change
	2018			2017			Change
Same store rent and storage:
Occupancy⁽¹⁾
Average occupied pallets (in thousands)	2,312			2,354			(1.8	)%
Average physical pallet positions (in thousands)	3,089			3,091			(0.1	)%
Occupancy percentage	74.8		%	76.2		%	-140 bps
Same store rent and storage revenues per occupied pallet	$	52.99		$	50.27		5.4	%
Constant currency same store rent and storage revenues per occupied pallet	$	53.25		$	50.27		5.9	%

Same store warehouse services:
Throughput pallets (in thousands)	6,445			6,740			(4.4	)%
Same store warehouse services revenues per throughput pallet	$	24.66		$	23.08		6.8	%
Constant currency same store warehouse services revenues per throughput pallet	$	24.69		$	23.08		7.0	%

Non-same store rent and storage:
Occupancy⁽¹⁾
Average occupied pallets (in thousands)	70			94			(25.5	)%
Average physical pallet positions (in thousands)	122			148			(17.6	)%
Occupancy percentage	57.2		%	63.5		%

Non-same store warehouse services:
Throughput pallets (in thousands)	167			171			(2.3	)%

(1)

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.

Average occupancy at our same stores was 74.8% for the three months ended June 30, 2018, a decrease of 140 bps compared to 76.2% for the three months ended June 30, 2017. This change was primarily the result of a decrease of 1.8% in average occupied pallets, which was partially attributable to a decline in the number of occupied pallets in our West region of the United States caused by lower average inventory in our "harvest sites" that service some of our largest fruit and vegetables suppliers. In addition, certain other regions of our domestic warehouse segment reported lower storage volume as we continue to focus on profitable growth by optimizing our warehouse network and improving our customer mix. Finally, in the third quarter of 2017, we exited a leased facility in New Zealand and partially transferred the storage volume from that facility to other warehouses in that country.

Despite the reduction in average occupied pallets, same store rent and storage revenues per occupied pallet increased 5.4% period-over-period, primarily driven by a more favorable customer mix, net new business,

improvements in our commercial terms and contractual rate escalations. On a constant currency basis, our same store rent and storage revenues per occupied pallet increased 5.9% period-over-period largely driven by the strengthening of the U.S. dollar against the Argentinian peso.

Throughput pallets at our same stores were 6.4 million pallets for the three months ended June 30, 2018, a decrease of 4.4% from 6.7 million pallets for the three months ended June 30, 2017. This decrease was primarily attributable to a shift in the inbound/outbound profile of certain domestic customers from higher inventory turn customers to lower inventory turn customers with more profitable volumes. Same store warehouse services revenues per throughput pallet increased 6.8% period-over-period primarily as a result of an increase in higher priced repackaging, blast freezing, and case-picking warehouse services. On a constant currency basis, our same store services revenues per throughput pallet increased 7.0% from the three months ended June 30, 2017.

Third-Party Managed Segment

The following table presents the operating results of our third-party managed segment for the three months ended June 30, 2018 and 2017.



	Three Months Ended June 30,									Change
	2018 actual			2018 constant currency⁽¹⁾			2017 actual			Actual		Constant currency
Number of managed sites	12						12
	(Dollars in thousands)
Third-party managed revenues	$	65,755		$	65,528		$	59,638		10.3	%	9.9	%
Third-party managed cost of operations	61,896			61,729			56,155			10.2	%	9.9	%
Third-party managed segment contribution	$	3,859		$	3,799		$	3,483		10.8	%	9.1	%

Third-party managed margin	5.9		%	5.8		%	5.8		%	10 bps		0 bps


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

Third-party managed revenues were $65.8 million for the three months ended June 30, 2018, an increase of $6.1 million, or 10.3%, compared to $59.6 million for the three months ended June 30, 2017. On a constant currency basis, third-party managed revenues were $65.5 million for the three months ended June 30, 2018, an increase of $5.9 million, or 9.9%, from the three months ended June 30, 2017. These increases were attributable to higher business volume from our largest third-party managed customers in the United States and Australia.

Third-party managed cost of operations was $61.9 million for the three months ended June 30, 2018, an increase of $5.7 million, or 10.2%, compared to $56.2 million for the three months ended June 30, 2017. On a constant currency basis, third-party managed cost of operations was $61.7 million for the three months ended June 30, 2018, an increase of $5.6 million, or 9.9%, from the three months ended June 30, 2017.

Third-party managed segment contribution (NOI) was $3.9 million for the three months ended June 30, 2018, an increase of $0.4 million, or 10.8%, compared to $3.5 million for the three months ended June 30, 2017. On a constant currency basis, third-party managed segment contribution (NOI) was $3.8 million for the three months ended June 30, 2018, an increase of $0.3 million, or 9.1%, quarter-over-quarter. Improved margins in this segment were primarily driven by increased volume from our largest retail customer in Australia.

Transportation Segment

The following table presents the operating results of our transportation segment for the three months ended June 30, 2018 and 2017.



	Three Months Ended June 30,									Change
	2018 actual			2018 constant currency⁽¹⁾			2017 actual			Actual		Constant currency
	(Dollars in thousands)
Transportation revenues	$	38,889		$	39,131		$	35,796		8.6	%	9.3	%

Brokered transportation	28,840			29,083			25,736			12.1	%	13.0	%
Other cost of operations	6,463			6,431			6,971			(7.3	)%	(7.7	)%
Total transportation cost of operations	35,303			35,514			32,707			7.9	%	8.6	%
Transportation segment contribution (NOI)	$	3,586		$	3,617		$	3,089		16.1	%	17.1	%

Transportation margin	9.2		%	9.2		%	8.6		%	60 bps		60 bps


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

Our transportation segment continued its strategic shift to focus on more profitable solutions, which create value for our customers while driving and supporting our warehouse business including consolidation offerings. Transportation revenues were $38.9 million for the three months ended June 30, 2018, an increase of $3.1 million, or 8.6%, compared to $35.8 million for the three months ended June 30, 2017. On a constant currency basis, transportation revenues were $39.1 million for the three months ended June 30, 2018, an increase of $3.3 million, or 9.3%, from the three months ended June 30, 2017. The strategic shift in our transportation segment resulted in higher revenue of $3.1 million on new and incremental business primarily from our domestic operations, which now focus on providing multi-vendor consolidation programs and dedicated transportation services.

Transportation cost of operations was $35.3 million for the three months ended June 30, 2018, an increase of $2.6 million, or 7.9%, compared to $32.7 million for the three months ended June 30, 2017. On a constant currency basis, transportation cost of operations was $35.5 million for the three months ended June 30, 2018, an increase of $2.8 million, or 8.6%, from the three months ended June 30, 2017. Brokered transportation costs were higher than a year ago primarily as a result of an increase in domestic consolidation programs, higher volume and rates escalation. The strategic shift referenced above led to a decline in other cost of operations for the segment.

Transportation segment contribution (NOI) was $3.6 million for the three months ended June 30, 2018, an increase of 16.1% as compared to the three months ended June 30, 2017. Transportation segment margin increased 60 basis points from the three months ended June 30, 2017, to 9.2% from 8.6%. The increase in margin was primarily due to a strategic focus on more profitable customers. On a constant currency basis, transportation segment contribution was $3.6 million for the three months ended June 30, 2018, an increase of 17.1%, quarter-over-quarter.

Quarry Revenues and Cost of Operations

The following table presents the operating results of our quarry segment for the three months ended June 30, 2018 and 2017.



	Three Months Ended June 30,						Change
	2018			2017			Change
	(Dollars in thousands)
Quarry revenues	$	2,311		$	2,354		(1.8	)%
Quarry cost of operations	2,391			3,790			(36.9	)%
Quarry segment contribution (NOI)	$	(80	)	$	(1,436	)	(94.4	)%

Quarry margin	(3.5		)%	(61.0		)%	n/m

n/m: not meaningful

Quarry revenues were $2.3 million for the three months ended June 30, 2018, a decrease of $43.0 thousand or 1.8% compared to $2.4 million for the three months ended June 30, 2017. Lower revenues in our quarry operations were attributable to lower demand from our construction and industrial customers. Demand from these customers was higher in the comparable prior period as favorable weather conditions led to an early start of the 2017 construction season.

Quarry cost of operations was $2.4 million for the three months ended June 30, 2018, a decrease of $1.4 million, or 36.9%, compared to $3.8 million for the three months ended June 30, 2017. This decrease was primarily due to the recording of an impairment charge of $2.1 million in the second quarter of 2017. No such impairment charge was recorded in the second quarter of 2018. After excluding the prior year impact of this impairment charge, Quarry costs of operations were approximately $0.7 million higher period-over-period. For the three months ended June 30, 2018, our quarry recognized worker's compensation expense of approximately $0.5 million related to current realized claims. In addition, less of the limestone byproduct has been capitalized compared to 2017 due to excess surpluses.

Quarry segment loss (NOI) was $0.1 million for the three months ended June 30, 2018, as compared to a loss (NOI) of $1.4 million for the three months ended June 30, 2017, largely driven by the factors described above.

Other Consolidated Operating Expenses

Selling, general and administrative. Corporate-level selling, general and administrative expenses were $27.5 million for the three months ended June 30, 2018, an increase of $3.9 million, or 16.7%, compared to $23.5 million for the three months ended June 30, 2017. Included in these amounts are business development expenses attributable to our customer onboarding, 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. Approximately $1.0 million of the increase in corporate-level selling, general and administrative expenses related to higher stock-based compensation expense we incurred for the issuance of long-term incentive equity awards to certain employees. In addition, during the second half of 2017, we hired additional resources within our business development, finance, and human resources functions. Included in corporate-level selling, general and administrative expense for the second quarter of 2018 were also higher professional fees we have, and will continue to incur, in preparation for our annual assessment of internal control over financial reporting, higher audit fees as a public company, and other professional fees. For the three months ended June 30, 2018 and 2017, corporate-level selling, general and administrative expenses were 7.0% and 6.0%, respectively, of total revenues.

Impairment of long-lived assets. During the second quarter of 2018, we recorded an impairment charge of $0.7 million related to an idle domestic warehouse facility in anticipation of a potential future sale of the asset. The estimated fair value of this asset was determined based on ongoing negotiations with prospective buyers in August 2018. During the second quarter of 2017, we recorded an impairment charge of $8.8 million as a result of the planned disposal or exit of certain domestic warehouse facilities, including certain idle facilities, with a net book value in excess of their estimated fair value based on third-party appraisals or letters of intent executed with prospective buyers. These impaired assets are or were reported under the Warehouse segment, and the related impairment charges are included in the "Impairment of long-lived assets" line item of the condensed consolidated statements of operations for the related periods.

Other Income and Expense

Income (Loss) from Investments in Partially Owned Entities. For the three months ended June 30, 2018, income from our investments in partially owned entities was $0.3 million, a $1.6 million increase compared to a loss of $1.3 million for the second quarter of 2017. This change was primarily attributable to a $1.4 million charge our China JV recorded in 2017 to write-off a loan receivable from one of its bankrupt customers. There were no such impairment charges in the second quarter of 2018.

Impairment of Investments in Partially Owned Entities. In the second quarter of 2017, we recognized an impairment charge totalling $6.5 million related to our investment in the China JV accounted for under the equity method as we determined that the recorded investment was no longer recoverable from the projected future cash flows expected to be received from the China JV. The estimated fair value of this investment was determined based on an assessment of the proceeds expected to be received from the potential sale of our investment interests to the joint venture partner based on current negotiations. There were no such impairment charges in the second quarter of 2018.

The following table presents other items of income and expense for the three months ended June 30, 2018 and 2017.



	Three Months Ended June 30,						Change
	2018			2017			%
Other (expense) income:	(In thousands)
Interest expense	$	(22,929	)	$	(28,288	)	(18.9	)%
Interest income	1,109			310			257.7	%
Loss on debt extinguishment and modification	—			(430		)	n/m
Foreign currency exchange gain (loss)	1,511			(52		)	n/m
Other income (expense) - net	33			(728		)	n/m

n/m: not meaningful

Interest expense. Interest expense was $22.9 million for the three months ended June 30, 2018, a decrease of $5.4 million, or 18.9%, compared to $28.3 million for the three months ended June 30, 2017. In connection with the IPO, we used the net proceeds from the equity offering and the 2018 Senior Secured Term Loan A Facility to pay in full our 2015 Senior Secured Term Loan B Facility, which had a balance outstanding of approximately $810.0 million during the second quarter of 2017, as compared to a balance outstanding under the 2018 Senior Secured Term Loan A Facility of $475.0 million in the second quarter of 2018.

Interest income. Interest income of $1.1 million for the three months ended June 30, 2018 was substantially higher when compared to the amount reported for three months ended June 30, 2017. This quarter-over-quarter change was primarily driven by the increase in interest income associated with the increase in net cash provided by our financing activities in January 2018, which accounted for $0.7 million of the increase. In

addition, during the second quarter of 2018 we collected higher interest income from delinquent customers as compared to the same period in 2017.

Foreign currency exchange gain (loss). We reported a foreign currency exchange gain of $1.5 million for the three months ended June 30, 2018 as compared to a $0.1 million foreign currency exchange loss for the three months ended June 30, 2017. The periodic re-measurement of an intercompany loan denominated in Australian dollars, issued from our Australian subsidiary to one of our U.S. corporate subsidiaries, resulted in a foreign currency exchange gain in the second quarter of 2018 as the U.S. dollar strengthened against the Australian dollar as compared to the three months ended June 30, 2017. In addition, the balance outstanding under this intercompany loan was $5.6 million higher during the second quarter of 2017.

Income Tax Benefit (Expense)

Income tax benefit for the three months ended June 30, 2018 was $0.1 million, which represented a change of $0.2 million from an income tax expense of $0.1 million for the three months ended June 30, 2017. This change was mainly driven by a reduction in the projected annual effective tax rate associated with the enactment of the TCJA and lower income reported by our taxable REIT foreign subsidiaries.

Comparison of Results for the Six Months Ended June 30, 2018 and 2017

Warehouse Segment

The following table presents the operating results of our warehouse segment for the six months ended June 30, 2018 and 2017.



	Six Months Ended June 30,									Change
	2018 actual			2018 constant currency ⁽¹⁾			2017 actual			Actual		Constant currency
	(Dollars in thousands)
Rent and storage	251,060			251,620			242,090			3.7	%	3.9	%
Warehouse services	323,169			322,234			315,381			2.5	%	2.2	%
Total warehouse segment revenues	$	574,229		$	573,854		$	557,471		3.0	%	2.9	%

Power	34,745			34,924			34,009			2.2	%	2.7	%
Other facilities costs ⁽²⁾	52,913			53,093			51,577			2.6	%	2.9	%
Labor	254,475			253,954			250,133			1.7	%	1.5	%
Other services costs⁽³⁾	51,691			51,646			53,427			(3.2	)%	(3.3	)%
Total warehouse segment cost of operations	393,824			393,617			389,146			1.2	%	1.1	%
Warehouse segment contribution (NOI)	$	180,405		$	180,237		$	168,325		7.2	%	7.1	%

Warehouse rent and storage contribution (NOI) ⁽⁴⁾	$	163,402		$	163,603		$	156,504		4.4	%	4.5	%
Warehouse services contribution (NOI) ⁽⁵⁾	$	17,003		$	16,634		$	11,821		43.8	%	40.7	%

Total warehouse segment margin	31.4		%	31.4		%	30.2		%	120 bps		120 bps
Rent and storage margin⁽⁶⁾	65.1		%	65.0		%	64.6		%	50 bps		40 bps
Warehouse services margin⁽⁷⁾	5.3		%	5.2		%	3.7		%	160 bps		150 bps


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


(2)	Includes real estate rent expense of $7.5 million and $7.5 million for the six months ended June 30, 2018 and 2017, respectively.


(3)	Includes non-real estate rent expense of $6.7 million and $7.0 million for the six months ended June 30, 2018 and 2017, respectively.


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


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


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


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

Warehouse segment revenues were $574.2 million for the six months ended June 30, 2018, an increase of $16.8 million, or 3.0%, compared to $557.5 million for the six months ended June 30, 2017. On a constant currency basis, our warehouse segment revenues were $573.9 million for the six months ended June 30, 2018, an increase of $16.4 million, or 2.9%, period-over-period. These increases were primarily driven by a more favorable customer mix, net new business, improvements in our commercial terms and contractual rate escalations. Our domestic operations accounted for the majority of the change in customer composition and increase in fixed commitment storage contracts. The foreign currency translation of revenues incurred by our foreign operations had a $0.4 million favorable impact during the six months ended June 30, 2018.

Warehouse segment cost of operations was $393.8 million for the six months ended June 30, 2018, an increase of $4.7 million, or 1.2%, compared to $389.1 million for the six months ended June 30, 2017. On a constant currency basis, our warehouse segment cost of operations was $393.6 million for the six months ended June 30, 2018, an increase of $4.5 million, or 1.1%, compared to $389.1 million for the six months ended June 30, 2017. This change was driven primarily by an increase in more labor-intensive warehouse services partially offset by lower worker's compensation expenses reported by from our domestic operations during the six months ended June 30, 2017.

Warehouse segment contribution (NOI) was $180.4 million for the six months ended June 30, 2018, an increase of $12.1 million, or 7.2%, compared to $168.3 million for the six months ended June 30, 2017. On a constant currency basis, warehouse segment contribution was $180.2 million for the six months ended June 30, 2018, an increase of $11.9 million, or 7.1%, period-over-period. Again, a more favorable customer mix, net new business, improvements in our commercial terms and contractual rate escalations, combined with operating efficiency gains driven by labor productivity, the leveraging of our fixed expenses and lower worker's compensation expenses, led to improved contribution margins for our warehouse segment during the second half of 2018 compared to the same period in 2017.

Same Store Analysis

We had 137 same stores for the six months ended June 30, 2018. Please see “How We Assess the Performance of Our Business—Same Store Analysis” above for a reconciliation of the change in the same store portfolio from year to year. 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 six months ended June 30, 2018 and 2017.



	Six Months Ended June 30,									Change
	2018 actual			2018 constant currency⁽¹⁾			2017 actual			Actual		Constant currency
Same store revenues:	(Dollars in thousands)
Rent and storage	$	245,236		$	245,796		$	234,737		4.5	%	4.7	%
Warehouse services	316,208			315,502			308,394			2.5	%	2.3	%
Total same store revenues	561,444			561,298			543,131			3.4	%	3.3	%
Same store cost of operations:
Power	33,448			33,639			32,120			4.1	%	4.7	%
Other facilities costs	49,830			50,022			47,868			4.1	%	4.5	%
Labor	248,489			248,168			243,922			1.9	%	1.7	%
Other services costs	50,097			50,093			51,743			(3.2	)%	(3.2	)%
Total same store cost of operations	$	381,864		$	381,922		$	375,653		1.7	%	1.7	%

Same store contribution (NOI)	$	179,580		$	179,376		$	167,478		7.2	%	7.1	%
Same store rent and storage contribution (NOI)⁽²⁾	$	161,958		$	162,135		$	154,749		4.7	%	4.8	%
Same store services contribution (NOI)⁽³⁾	$	17,622		$	17,241		$	12,729		38.4	%	35.4	%

Total same store margin	32.0		%	32.0		%	30.8		%	120 bps		120 bps
Same store rent and storage margin⁽⁴⁾	66.0		%	66.0		%	65.9		%	10 bps		10 bps
Same store services margin⁽⁵⁾	5.6		%	5.5		%	4.1		%	150 bps		140 bps

Non-same store revenues:
Rent and storage	$	5,825		$	5,825		$	7,353		(20.8	)%	(20.8	)%
Warehouse services	6,960			6,960			6,987			(0.4	)%	(0.4	)%
Total non-same store revenues	12,785			12,785			14,340			(10.8	)%	(10.8	)%
Non-same store cost of operations:
Power	1,297			1,297			1,888			(31.3	)%	(31.3	)%
Other facilities costs	3,082			3,082			3,709			(16.9	)%	(16.9	)%
Labor	5,987			5,987			6,211			(3.6	)%	(3.6	)%
Other services costs	1,594			1,594			1,685			(5.4	)%	(5.4	)%
Total non-same store cost of operations	$	11,960		$	11,960		$	13,493		(11.4	)%	(11.4	)%

Non-same store contribution (NOI)	$	825		$	825		$	847		(2.6	)%	(2.6	)%
Non-same store rent and storage contribution (NOI)⁽²⁾	$	1,446		$	1,446		$	1,756		(17.7	)%	(17.7	)%
Non-same store services contribution (NOI)⁽³⁾	$	(621	)	$	(621	)	$	(909	)	(31.7	)%	(31.7	)%

Total warehouse segment revenues	$	574,229		$	574,083		$	557,471		3.0	%	3.0	%
Total warehouse cost of operations	$	393,824		$	393,882		$	389,146		1.2	%	1.2	%
Total warehouse segment contribution	$	180,405		$	180,201		$	168,325		7.2	%	7.1	%


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


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


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


(4)	Calculated as same store rent and storage contribution (NOI) divided by same store rent and storage revenues.


(5)	Calculated as same store warehouse services contribution (NOI) divided by same store warehouse services revenues.

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



	Six Months Ended June 30,						Change
	2018			2017			Change
Same store rent and storage:
Occupancy⁽¹⁾
Average occupied pallets (in thousands)	2,341			2,382			(1.7	)%
Average physical pallet positions (in thousands)	3,088			3,081			0.2	%
Occupancy percentage	75.8		%	77.3		%	-150 bps
Same store rent and storage revenues per occupied pallet	$	104.75		$	98.56		6.3	%
Constant currency same store rent and storage revenues per occupied pallet	$	104.99		$	98.56		6.5	%

Same store warehouse services:
Throughput pallets (in thousands)	12,935			13,391			(3.4	)%
Same store warehouse services revenues per throughput pallet	$	24.45		$	23.03		6.2	%
Constant currency same store warehouse services revenues per throughput pallet	$	24.39		$	23.03		5.9	%

Non-same store rent and storage:
Occupancy⁽¹⁾
Average occupied pallets (in thousands)	73			77			(5.2	)%
Average physical pallet positions (in thousands)	124			130			(4.6	)%
Occupancy percentage	59.1		%	58.8		%

Non-same store warehouse services:
Throughput pallets (in thousands)	322			318			1.3	%

(1)

Average occupancy at our same stores was 75.8% for the six months ended June 30, 2018, a decrease of 150 bps compared to 77.3% for the six months ended June 30, 2017. This change was primarily the result of a decrease of 1.7% in average occupied pallets, which was partially attributable to a decline in the number of occupied pallets in our West region of the United States caused by lower average inventory in our "harvest sites" that service some of our largest fruit and vegetables suppliers. In addition, certain other regions of our domestic warehouse segment reported lower storage volume as we continue to focus on profitable growth by optimizing our warehouse network and improving our customer mix. Finally, in the third quarter of 2017, we exited a leased facility in New Zealand and partially transferred the storage volume from that facility to other warehouses in that country.

Despite the reduction in average occupied pallets, same store rent and storage revenues per occupied pallet increased 6.3% period-over-period, primarily driven by a more favorable customer mix, net new business, improvements in our commercial terms and contractual rate escalations. On a constant currency basis, the increase in our same store rent and storage revenues per occupied pallet was 6.5% period-over-period largely driven by the strengthening of the U.S. dollar against the Argentinian peso.

Throughput pallets at our same stores were 12.9 million for the six months ended June 30, 2018, a decrease of 3.4% from 13.4 million pallets for the six months ended June 30, 2017. This decrease was primarily attributable to a shift in the inbound/outbound profile of certain domestic customers from higher inventory turn customers to lower inventory turn customers with more profitable volumes. Same store warehouse services revenues per throughput pallet increased 6.2% period-over-period primarily as a result of an increase in higher priced repackaging, blast freezing, and case-picking warehouse services and, in part, a favorable net effect of foreign currency translation as the increase in warehouse services revenues from our foreign operations was greater than the increase from the same revenues stream at our domestic operations. On a constant currency basis, our same store services revenues per throughput pallet increased 5.9% period-over-period.

Third-Party Managed Segment

The following table presents the operating results of our third-party managed segment for the six months ended June 30, 2018 and 2017.



	Six Months Ended June 30,									Change
	2018 actual			2018 constant currency⁽¹⁾			2017 actual			Actual		Constant currency
Number of managed sites	12						12
	(Dollars in thousands)
Third-party managed revenues	$	129,632		$	129,050		$	118,005		9.9	%	9.4	%
Third-party managed cost of operations	121,995			121,552			111,534			9.4	%	9.0	%
Third-party managed segment contribution	$	7,637		$	7,498		$	6,471		18.0	%	15.9	%

Third-party managed margin	5.9		%	5.8		%	5.5		%	40 bps		30 bps


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

Third-party managed revenues were $129.6 million for the six months ended June 30, 2018, an increase of $11.6 million, or 9.9%, compared to $118.0 million for the six months ended June 30, 2017. On a constant currency basis, third-party managed revenues were $129.1 million for the six months ended June 30, 2018, an increase of $11.0 million, or 9.4%, period-over-period. These increases were attributable to higher business volume from our largest third-party managed customers in the United States and Australia.

Third-party managed cost of operations was $122.0 million for the six months ended June 30, 2018, an increase of $10.5 million, or 9.4%, compared to $111.5 million for the six months ended June 30, 2017. On a constant currency basis, third-party managed cost of operations was $121.6 million for the six months ended June 30, 2018, an increase of $10.0 million, or 9.0%, period-over-period.

Third-party managed segment contribution (NOI) was $7.6 million for the six months ended June 30, 2018, an increase of $1.2 million, or 18.0%, compared to $6.5 million for the six months ended June 30, 2017. On a constant currency basis, third-party managed segment contribution (NOI) was $7.5 million for the six months ended June 30, 2018, an increase of $1.0 million, or 15.9%, period-over-period. Improved margins in this segment were primarily driven by increased volume from our largest retail customer in Australia.

Transportation Segment

The following table presents the operating results of our transportation segment for the six months ended June 30, 2018 and 2017.



	Six Months Ended June 30,									Change
	2018 actual			2018 constant currency⁽¹⁾			2017 actual			Actual		Constant currency
	(Dollars in thousands)
Transportation revenues	$	77,234		$	77,201		$	71,977		7.3	%	7.3	%

Brokered transportation	56,961			57,105			51,620			10.3	%	10.6	%
Other cost of operations	13,093			12,908			13,715			(4.5	)%	(5.9	)%
Total transportation cost of operations	70,054			70,013			65,335			7.2	%	7.2	%
Transportation segment contribution (NOI)	$	7,180		$	7,188		$	6,642		8.1	%	8.2	%

Transportation margin	9.3		%	9.3		%	9.2		%	10 bps		10 bps


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

Our transportation segment continued its strategic shift to focus on more profitable solutions, which create value for our customers while driving and supporting our warehouse business including consolidation offerings. Transportation revenues were $77.2 million for the six months ended June 30, 2018, an increase of $5.3 million, or 7.3%, compared to $72.0 million for the six months ended June 30, 2017. On a constant currency basis, transportation revenues were $77.2 million for the six months ended June 30, 2018, an increase of $5.2 million, or 7.3%, period-over-period. The strategic shift in our transportation segment resulted in higher revenue of $4.9 million on new and incremental business primarily from our domestic operations, which now focus on providing multi-vendor consolidation programs and dedicated transportation services. Our international operations led to a net revenue increase of $0.4 million primarily from incremental transportation services in Australia.

Transportation cost of operations was $70.1 million for the six months ended June 30, 2018, an increase of $4.7 million, or 7.2%, compared to $65.3 million for the six months ended June 30, 2017. On a constant currency basis, transportation cost of operations was $70.0 million for the six months ended June 30, 2018, an increase of $4.7 million, or 7.2%, period-over-period. Brokered transportation costs were higher than a year ago primarily as a result of an increase in domestic consolidation programs, higher volume and rates escalation. The strategic shift referenced above led to a decline in other cost of operations for the segment.

Transportation segment contribution (NOI) was $7.2 million for the six months ended June 30, 2018, an increase of 8.1% as compared to the six months ended June 30, 2017. Transportation segment margin decreased 10 bps period-over-period, to 9.3% from 9.2%. Despite increased margins and greater efficiencies in our domestic transportation operations, the overall decrease in margins resulted from slightly lower margins in our international transportation business due to a shift in the customer mix in Australia. On a constant currency basis, transportation segment contribution was $7.2 million for the six months ended June 30, 2018, an increase of 8.2%, period-over-period.

Quarry Revenues and Cost of Operations

The following table presents the operating results of our quarry segment for the six months ended June 30, 2018 and 2017.



	Six Months Ended June 30,						Change
	2018			2017			Change
	(Dollars in thousands)
Quarry revenues	$	4,714		$	4,913		(4.1	)%
Quarry cost of operations	4,448			5,445			(18.3	)%
Quarry segment contribution (NOI)	$	266		$	(532	)	(150.0	)%

Quarry margin	5.6		%	(10.8		)%	n/m

n/m: not meaningful

Quarry revenues were $4.7 million for the six months ended June 30, 2018, a decrease of $0.2 million or 4.1% compared to $4.9 million for the six months ended June 30, 2017. Lower revenues in our quarry operations were attributable to lower demand from our construction and industrial customers. Demand from these customers was higher in the comparable prior period as favorable weather conditions led to an early start of the 2017 construction season.

Quarry cost of operations was $4.4 million for the six months ended June 30, 2018, a decrease of $1.0 million, or 18.3%, compared to $5.4 million for the six months ended June 30, 2017. This decrease was primarily due to the recording of an impairment charge of $2.1 million in the second quarter of 2017. No such impairment charge was recorded year-to-date in 2018. After excluding the prior year impact of this impairment charge, Quarry costs of operations were approximately $1.1 million higher period-over-period. For the six months ended June 30, 2018, Quarry recognized a worker's compensation expense of approximately $0.5 million related to current realized claim. In addition, less of the limestone byproduct has been capitalized compared to 2017 due to excess surpluses.

Quarry segment contribution (NOI) was $0.3 million for the six months ended June 30, 2018, as compared to a loss (NOI) of $0.5 million for the six months ended June 30, 2017, largely driven by the factors described above.

Other Consolidated Operating Expenses

Selling, general and administrative. Corporate-level selling, general and administrative expenses were $59.4 million for the six months ended June 30, 2018, an increase of $11.1 million, or 23.0%, compared to $48.3 million for the six months ended June 30, 2017. Included in these amounts are business development expenses attributable to our customer onboarding, engineering and consulting services to support our customers in the cold chain. We believe these costs are comparable to leasing costs for other publicly traded REITs. The increase in corporate-level selling, general and administrative expenses period-over period was primarily due to higher stock-based compensation expense we incurred for i) the issuance of retention equity awards to certain employees and non-employee directors in connection with the IPO; ii) the issuance of new long-term incentive equity awards to certain employees post-IPO; and iii) the modification of certain terms governing equity awards issued under the 2010 Equity Incentive Plan. In addition, during the second half of 2017, we have hired additional resources within our business development, finance, and human resources functions. Included in corporate-level selling, general and administrative expense for the six months ended June 30, 2018, were also higher professional fees we have, and will continue to incur, in preparation for our annual assessment of internal control over financial reporting, higher audit fees as a public company, and other professional fees. For the six months ended June 30, 2018 and

2017, corporate-level selling, general and administrative expenses were 7.6% and 6.4%, respectively, of total revenues.

Impairment of long-lived assets. For the six months ended June 30, 2018, we recorded an impairment charge of $0.7 million related to a domestic warehouse facility in anticipation of a potential future sale of the asset . The estimated fair value of this asset was determined based on ongoing negotiations with prospective buyers in August 2018. For the six months ended June 30, 2017, we recorded an impairment charge of $8.8 million as a result of the planned disposal or exit of certain domestic warehouse facilities, including certain idle facilities, with a net book value in excess of their estimated fair value based on third-party appraisals or letters of intent executed with prospective buyers. These impaired assets are or were reported under the Warehouse segment, and the related impairment charges are included in the "Impairment of long-lived assets" line item of the condensed consolidated statements of operations for the related periods.

Other Income and Expense

Income (Loss) from Investments in Partially Owned Entities. For the six months ended June 30, 2018, income from our investments in partially owned entities was $0.1 million, a $1.5 million increase compared to a loss of $1.4 million for the first half of 2017. This change was primarily attributable to a $1.4 million charge our China JV recorded in 2017 to write-off a loan receivable from one of its bankrupt customers.There were no such impairment charges in the first half of 2018.

Impairment of Investments in Partially Owned Entities. In 2017, we recognized an impairment charge totalling $6.5 million related to our investment in the China JV accounted for under the equity method as we determined that the recorded investment was no longer recoverable from the projected future cash flows expected to be received from the China JV. The estimated fair value of this investment was determined based on an assessment of the proceeds expected to be received from the potential sale of our investment interests to the joint venture partner based on current negotiations. There were no such impairment charges in the first half of 2018.

The following table presents other items of income and expense for the six months ended June 30, 2018 and 2017.



	Six Months Ended June 30,						Change
	2018			2017			%
Other (expense) income:	(In thousands)
Interest expense	$	(47,424	)	$	(56,015	)	(15.3	)%
Interest income	1,733			567			205.6	%
Loss on debt extinguishment and modification	(21,385		)	(600		)	n/m
Foreign currency exchange gain (loss)	2,191			(2,825		)	n/m
Other income (expense) - net	89			(1,212		)	n/m

n/m: not meaningful

Interest expense. Interest expense was $47.4 million for the six months ended June 30, 2018, a decrease of $8.6 million, or 15.3%, compared to $56.0 million for the six months ended June 30, 2017. In connection with the IPO, we used the net proceeds from the equity offering and the 2018 Senior Secured Term Loan A Facility to pay in full our 2015 Senior Secured Term Loan B Facility, which had a balance outstanding of approximately $811.0 million during the first half of 2017. By comparison, our 2018 Senior Secured Term Loan A Facility has a balance of $475.0 million during the second half of 2018.

Interest income. Interest income of $1.7 million for the six months ended June 30, 2018 was 257.7% higher when compared to the amount reported for six months ended June 30, 2017. This change was primarily

driven by the increase in interest income associated with the increase in net cash provided by our financing activities in the first half of 2018. In addition, during the first half of 2018, we collected higher interest income from delinquent customers as compared to the same period in 2017.

Loss on debt extinguishment and modification. We recognized a $21.4 million charge primarily to write-off unamortized debt issuance costs in connection with the refinancing of our 2015 Senior Secured Credit Facilities. A small portion of that charge includes certain financing costs we incurred in connection with the issuance of our 2018 Senior Secured Credit Facilities that could not be capitalized.

Foreign currency exchange gain (loss). We reported a foreign currency exchange gain of $2.2 million for the six months ended June 30, 2018 as compared to a $2.8 million foreign currency exchange loss for the six months ended June 30, 2017. The periodic re-measurement of an intercompany loan denominated in Australian dollars, issued from our Australian subsidiary to one of our U.S. corporate subsidiaries, resulted in a foreign currency exchange gain in the six months ended June 30, 2018, as the U.S. dollar strengthened against the Australian dollar as compared to the six months ended June 30, 2017. In addition, the balance outstanding under this intercompany loan was $5.6 million higher during the six months ended June 30, 2017.

Other income (expense) - net. In this line item, which represents income or expense outside our operating segments, we reported a net income of $0.1 million for the six months ended June 30, 2018 as compared to a net expense of $1.2 million for the six months ended June 30, 2017. This change is attributed primarily to higher pension expense in 2017 as a result of a lump sum participant settlements.

Income Tax Benefit (Expense)

Income tax benefit for the six months ended June 30, 2018 was $0.2 million, which represented a change of $1.8 million, or 113.6% from an income tax expense of $1.6 million for the six months ended June 30, 2017. This change was mainly driven by a reduction in the projected annual effective tax rate associated with the enactment of the TCJA and lower income reported by our taxable REIT foreign subsidiaries.

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 and Core EBITDA.

We calculate funds from operations, or FFO, in accordance with the standards established by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT defines FFO as net income or loss determined in accordance with U.S. GAAP, excluding extraordinary items as defined under U.S. GAAP and gains or losses from sales of previously depreciated operating real estate assets, plus specified non-cash items, such as real estate asset depreciation and amortization, and 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 elsewhere in this Quarterly Report on Form 10-Q. FFO, Core FFO and Adjusted FFO should be considered as supplements, but not alternatives, to our net income or cash flows from operating activities as indicators of our operating performance. Moreover, other REITs may not calculate FFO in accordance with the NAREIT definition or may interpret the NAREIT definition differently than we do. Accordingly, our FFO may not be comparable to FFO as calculated by other REITs. In addition, there is no industry definition of Core FFO or Adjusted FFO and, as a result, other REITs may also calculate Core FFO or Adjusted FFO, or other similarly-captioned metrics, in a manner different than we do. The table 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.



Reconciliation of Net Earnings to NAREIT FFO, Core FFO, and AFFO
(In thousands)
	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net income (loss)	$	29,406		$	(8,385	)	$	20,766		$	(4,001	)
Adjustments:
Real estate related depreciation and depletion	21,764			21,474			43,938			42,907
Net gain on sale of depreciable real estate	(8,384		)	—			(8,384		)	—
Impairment charges on certain real estate assets	747			8,773			747			8,773
Real estate depreciation on China JV	242			288			511			555
NAREIT Funds from operations	43,775			22,150			57,578			48,234
Less distributions on preferred shares of beneficial interest	—			(7,117		)	(1,818		)	(14,226		)
NAREIT Funds from operations attributable to common shareholders	$	43,775		$	15,033		$	55,760		$	34,008
Adjustments:
Net gain on sale of non-real estate assets	(387		)	(96		)	(535		)	(192		)
Non-offering related IPO expenses ^(a)	—			—			1,242			—
Non-recurring public company implementation costs ^(b)	162			—			162			—
Acquisition, diligence and other pursuit costs	48			—			51			—
Stock-based compensation expense, IPO grants	965			—			1,930			—
Impairment of investments in partially owned entities ^(c)	—			6,496			—			6,496
Severance and reduction in workforce costs	—			—			11			—
Terminated site operations costs	66			121			66			118
Strategic alternative costs ^(d)	—			902			—			1,744
Loss on debt extinguishment and modification	—			430			21,385			600
Inventory asset impairment	—			2,108			—			2,108
Foreign currency exchange (gain) loss	(1,511		)	52			(2,191		)	2,825
Core FFO applicable to common shareholders	$	43,118		$	25,046		$	77,881		$	47,707
Adjustments:
Amortization of deferred financing costs and debt discount	1,556			2,163			3,230			4,186
Amortization of below/above market leases	38			38			76			76
Straight-line net rent	(26		)	77			(31		)	65
Deferred income taxes benefit	(1,449		)	(3,283		)	(2,605		)	(4,031		)
Stock-based compensation expense, excluding IPO grants	701			587			4,254			1,173
Non-real estate depreciation and amortization	7,287			7,439			14,520			15,414
Non-real estate depreciation and amortization on China JV	143			147			299			298
Recurring maintenance capital expenditures ^(e)	(11,563		)	(12,467		)	(17,946		)	(18,372		)
Adjusted FFO applicable to common shareholders	$	39,805		$	19,747		$	79,678		$	46,516


(a)	Represents one-time costs and professional fees associated with becoming a public company.


(b)	Represents one-time costs associated with the implementation of financial reporting systems and processes needed to convert the organization to a public company.


(c)	Represents an impairment charge related to our investment in the China JV based on a determination that the recorded investment was no longer recoverable from the projected future cash distributions we expect to receive from the China JV. We did not receive any cash distributions from the China JV since the formation of the joint venture.


(d)	Represents one-time operating costs associated with our review of strategic alternatives prior to the IPO.


(e)	Recurring maintenance capital expenditures include capital expenditures made to extend the life of, and provide future economic benefit from, our existing temperature-controlled warehouse network and its existing supporting personal property and information technology.

We calculate EBITDA for Real Estate, or EBITDAre, in accordance with the standards established by the Board of Governors of NAREIT, defined as, earnings before interest expense, taxes, depreciation, 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 table below reconciles EBITDAre and Core EBITDA to net income, which is the most directly comparable financial measure calculated in accordance with U.S. GAAP.



Reconciliation of Net Earnings to NAREIT EBITDAre and Core EBITDA
(In thousands)
	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net income (loss)	$	29,406		$	(8,385	)	$	20,766		$	(4,001	)
Adjustments:
Depreciation, depletion and amortization	29,051			28,913			58,459			58,320
Interest expense	22,929			28,288			47,424			56,015
Income tax expense	(126		)	85			(215		)	1,579
Gain on disposal of depreciated property	(8,384		)	—			(8,384		)	—
Adjustment to reflect share of EBITDAre of partially owned entities	592			625			1,149			1,196
NAREIT EBITDAre	$	73,468		$	49,526		$	119,199		$	113,109
Adjustments:
Severance and reduction in workforce costs	—			—			11			—
Terminated site operations cost	66			121			66			118
Non-offering related IPO expenses ^(a)	—			—			1,242			—
Non-recurring public company implementation costs ^(b)	162			—			162			—
Acquisition, diligence, and other pursuit costs	48			—			51			—
Strategic alternative costs^(c)	—			902			—			1,744
(Income) loss from investments in partially owned entities	(252		)	1,324			(112		)	1,351
Non-recurring impairment of investments in partially owned entities ^(d)	—			6,496			—			6,496
Impairment of inventory and long-lived assets	747			10,881			747			10,881
(Gain) loss on foreign currency exchange	(1,511		)	52			(2,191		)	2,825
Stock-based compensation expense	1,666			587			6,184			1,173
Loss on debt extinguishment and modification	—			430			21,385			600
(Gain) loss on other asset disposals	(170		)	58			(307		)	(43		)
Reduction In EBITDAre from partially owned entities	(592		)	(625		)	(1,149		)	(1,196		)
Core EBITDA	$	73,632		$	69,752		$	145,288		$	137,058


(a)	Represents one-time costs and professional fees associated with becoming a public company.


(b)	Represents one-time costs associated with the implementation of financial reporting systems and processes needed to convert the organization to a public company.


(c)	Represents one-time operating costs associated with our review of strategic alternatives prior to the IPO.


(d)	Represents an impairment charge related to our investment in the China JV based on a determination that the recorded investment was no longer recoverable from the projected future cash distributions we expect to receive from the China JV. We did not receive any cash distributions from the China JV since the formation of the joint venture.

LIQUIDITY AND CAPITAL RESOURCES

Overview

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


•	current cash balances;


•	cash flows from operations;


•	borrowings under our 2018 Senior Secured Credit Facilities; and


•	other forms of secured or unsecured debt financings and equity offerings.

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;


•	debt service obligations; and


•	quarterly shareholder 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 shareholder distributions, and our future development and acquisition activities.

REIT Qualification

To maintain our qualification as a REIT, we must make distributions to our common shareholders aggregating annually at least 90% of our REIT taxable income excluding capital gains. While historically we have satisfied this requirement by making cash distributions to our shareholders, we may choose to satisfy this requirement by making distributions of other property, including, in limited circumstances, our own common shares. Cash flows from our operations, which are included in net cash provided by operating activities in our consolidated statements of cash flows, were sufficient to cover distributions on our common shares and our then outstanding preferred shares for the three and six months ended June 30, 2018 and 2017.

As a result of this requirement, we cannot rely on retained earnings to fund our business needs to the same extent as other entities that are not REITs. If we do not have sufficient funds available to us from our operations to fund our business needs, we will need to find alternative ways to fund those needs. Such alternatives may include, among other things, divesting ourselves of temperature-controlled warehouses (whether or not the sales price is optimal or otherwise meets our strategic long-term objectives), incurring additional indebtedness or issuing equity securities in public or private transactions, the availability and attractiveness of the terms of which cannot be assured.

Security Interests in Customers’ Products

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

Our bad debt expense was $0.3 million and $0.2 million for the three months ended June 30, 2018 and 2017, respectively and $0.4 million and $0.3 million for the six months ended June 30, 2018 and 2017, respectively. As of June 30, 2018, we maintained bad debt allowances of approximately $5.5 million, which we believed to be adequate.

Outstanding and Available Indebtedness

The following table presents our outstanding and available indebtedness as of June 30, 2018 and December 31, 2017.



	Stated maturity date	Contractual interest rate ⁽⁴⁾ ⁽⁵⁾	Effective interest rate ⁽⁶⁾ as of June 30, 2018	June 30, 2018			December 31, 2017
2010 Mortgage Loans cross-collateralized and cross-defaulted by 46 warehouses:				(In thousands)
Component A-1	1/2021	3.86%	4.40%	$	48,287		$	56,941
Component A-2-FX	1/2021	4.96%	5.38%	150,334			150,334
Component A-2-FL ⁽¹⁾	1/2021	L+1.51%	3.96%	48,654			48,654
Component B	1/2021	6.04%	6.48%	60,000			60,000
Component C	1/2021	6.82%	7.28%	62,400			62,400
Component D	1/2021	7.45%	7.92%	82,600			82,600
2013 Mortgage Loans cross-collateralized and cross-defaulted by 15 warehouses:
Senior note	5/2023	3.81%	4.14%	191,110			194,223
Mezzanine A	5/2023	7.38%	7.55%	70,000			70,000
Mezzanine B	5/2023	11.50%	11.75%	32,000			32,000
ANZ Term Loans secured by mortgages in properties owned by relevant subsidiaries:
Australia Term Loan ^{(2), (4)}	6/2020	BBSY+1.40%	4.63%	150,200			158,645
New Zealand Term Loan ^{(3), (4)}	6/2020	BKBM+1.40%	5.21%	29,801			31,240
2018 Senior Secured Term A Facility ⁽⁴⁾secured by stock pledge in qualified subsidiaries	1/2023	L+2.35%	4.95%	475,000			—
2015 Senior Secured Term Loan B Facility ⁽⁴⁾	12/2022	L+3.75%	5.79%	—			806,918
Total principal amount of mortgage notes and term loans				1,400,386			1,753,955
Less deferred financing costs				(14,395		)	(25,712		)
Less debt discount				(309		)	(6,285		)
Total mortgage notes and term loans, net of deferred financing costs and debt discount				$	1,385,682		$	1,721,958

2018 Senior Secured Revolving Credit Facility secured by stock pledge in qualified subsidiaries ⁽^{4) , (5)}	1/2021	L+2.35%	n/a	$	—		$	—
Construction Loan:
Warehouse Clearfield, UT secured by mortgage⁽⁴⁾	2/2019	L+ 3.25%	5.18%	$	—		$	19,671
Less deferred financing costs				—			(179		)
				$	—		$	19,492


(1)	Component A-2-FL of the 2010 Mortgage Loans has a variable interest rate equal to one-month LIBOR plus 1.51%, with one-month LIBOR subject to a floor of 1.00% per annum. In addition, we maintain an interest rate cap on the variable rate tranche that caps one-month LIBOR at 6.0%. The variable interest rate at June 30, 2018 was 3.50% per annum.


(2)	As of June 30, 2018, the outstanding balance was AUD$203.0 million and the variable interest rate was 3.30% per annum (1.90% BBSY plus 1.40% margin) of which 75% is fixed via an interest rate swap at 4.06% per annum (2.66% BBSY plus 1.40% margin).


(3)	As of June 30, 2018, the outstanding balance was NZD$44.0 million and the variable interest rate was 3.34% per annum (1.94% BKBM plus 1.40% margin), of which 75% is fixed via an interest rate swap at 4.93% per annum (3.53% BKBM plus 1.40% margin).


(4)	References in this table to L are references to one-month LIBOR and references to BBSY and BKBM are to Australian Bank Bill Swap Bid Rate and New Zealand Bank Bill Reference Rate, respectively.


(5)	Unused line, letter of credit and financing fees increase the stated interest rate.


(6)	The effective interest rate includes effects of amortization of the deferred financing costs and debt discount. The weighted average effective interest rate for total debt was 5.43% and 5.68% as of June 30, 2018 and December 31, 2017, respectively.

2018 Senior Secured Credit Facilities

On December 26, 2017, we closed into escrow on our 2018 Senior Secured Credit Facilities, consisting of a five-year, $525.0 million Senior Secured Term Loan A Facility and a three-year, $400.0 million 2018 Senior Secured Revolving Credit Facility. Our 2018 Senior Secured Credit Facilities also have an additional $400.0 million accordion option. Our 2018 Senior Secured Revolving Credit Facility has a one-year extension option subject to certain conditions. We used the net proceeds from the IPO transactions, together with $517.0 million of net proceeds from our Senior Secured Term Loan A Facility, to repay the entire $806.9 million aggregate principal amount of indebtedness outstanding under our Senior Secured Term Loan B Facility plus accrued and unpaid interest, to repay $20.9 million of indebtedness outstanding under our Clearfield, Utah and Middleboro, Massachusetts construction loans, and for working capital.

On February 6, 2018, we amended the credit agreement with the lenders of our 2018 Senior Revolving Credit Facility (the 2018 Credit Agreement) to increase the aggregate revolving credit commitments on this facility by $50.0 million to $450.0 million. Concurrently, we utilized cash on hand to repay $50.0 million on our Senior Secured Term Loan A facility. As a result of these modifications, our total aggregate commitments under its 2018 Senior Credit Facilities remain unchanged at $925.0 million.

During the second quarter of 2018, due to a stronger leverage ratio, which reflects an improvement of our credit profile, the applicable margin in the case of LIBOR-based loans was reduced to 2.35% from 2.50%.

Our operating partnership is the borrower under our 2018 Senior Secured Credit Facilities, which are guaranteed by our company and certain eligible subsidiaries of our operating partnership and secured by a pledge in the stock of certain subsidiaries of our operating partnership. Our 2018 Senior Secured Revolving Credit Facility is structured to include a borrowing base, which will allow us to borrow against the lesser of our Senior Secured Term Loan A Facility balance outstanding and $450.0 million in revolving credit commitments, and the value of certain owned real estate assets, ground, capital and operating leased assets, with credit given for income from third-party managed warehouses. At June 30, 2018, the most recent period for which the we submitted our compliance certificate to the lenders of the 2018 Senior Secured Credit Facilities, the gross value of our assets included in the covenants calculations was in excess of $1.8 billion, and had an effective borrowing base

collateral value (after concentration limits and advance rates as calculated under the anticipated terms of our 2018 Credit Agreement) in excess of $1.1 billion.


•	a maximum leverage ratio of less than or equal to 60% of our total asset value;


•	a minimum borrowing base coverage ratio of greater than or equal to 1.00 to 1.00;


•	a minimum pro forma fixed charge coverage ratio of greater than or equal to 1.40 to 1.00, which increased to 1.50 to 1.00 in the first quarter of 2018;


•	a minimum borrowing base debt service coverage ratio of greater than or equal to 2.00 to 1.00;


•	a minimum tangible net worth requirement of greater than or equal to $900 million plus 70% of any future net equity proceeds following the completion of the IPO transactions; and


•	a maximum recourse secured debt ratio of less than or equal to 20% of our total asset value.

Our 2018 Senior Secured Credit Facilities are fully recourse to our operating partnership.

ANZ Loans

In June 2015, we entered into syndicated facility agreements in each of Australia and New Zealand, which we refer to collectively as the ANZ Loans, and separately as the Australian term loan and the New Zealand term loan. The ANZ Loans are non-recourse to us and our U.S. subsidiaries.

The Australian term loan is an AUD$203.0 million five-year syndicated facility. The $151.1 million net proceeds that we borrowed under this facility were used to repay the AUD$19.0 million mortgage loan on one of our facilities, return AUD$30.0 million of capital to our domestic subsidiary owning the equity of our Australian subsidiary, repay an intercompany loan totaling CAD$47.6 million, and return AUD$70.0 million to the United States in the form of a long-term intercompany loan and working capital. This facility is secured by our owned real property and equity of certain of our Australian subsidiaries and bears interest at a floating rate of Australian Bank Bill Swap Bid Rate plus 1.4%. The Australian term loan is fully prepayable without penalty.

The New Zealand term loan is a NZD$44.0 million five-year syndicated facility. The $29.3 million net proceeds that we borrowed under this facility were used to repay an intercompany loan plus interest totaling NZD$28.3 million, make a NZD$14.3 million dividend, and fund working capital. The facility is secured by our owned real property, leased assets and equity of certain of our New Zealand subsidiaries, and bears interest at a floating rate of New Zealand Bank Bill Swap Bid Rate plus 1.4%. The New Zealand term loan is fully prepayable without penalty.

As part of the ANZ Loans, we entered into interest rate swaps to effectively fix the interest rates on 75% of the notional balances.

2013 Mortgage Loans

On May 1, 2013, we entered into a mortgage financing in an aggregate principal amount of $322.0 million, which we refer to as the 2013 Mortgage Loans. The debt consists of a senior debt note and two mezzanine notes. The components are cross-collateralized and cross-defaulted. The senior debt note requires monthly principal payments. The mezzanine notes require no principal payments until the stated maturity date in May 2023. The interest rates on the notes are fixed and range from 3.81% to 11.50% per annum. The senior debt note and the two mezzanine notes remain subject to yield maintenance provisions. We used the net proceeds of

these loans to refinance certain of the 2006 Mortgage Loans, as described below, acquire two warehouses, and fund general corporate purposes.

The 2013 Mortgage Loans are collateralized by 15 warehouses. The terms governing the 2013 Mortgage Loans require us to maintain certain cash amounts in accounts that are restricted as to their use for the respective warehouses. As of June 30, 2018, the amount of restricted cash associated with the 2013 Mortgage Loans was $3.1 million. Additionally, if we do not maintain certain financial thresholds, including a debt service coverage ratio of 1.10x, the cash generated will further be temporarily restricted and limited to the use for scheduled debt service and operating costs. The debt service coverage ratio as of June 30, 2018 was 1.70x. The 2013 Mortgage Loans are non-recourse to us subject to customary non-recourse carve-outs.

2010 Mortgage Loans

On December 15, 2010, we entered into a mortgage financing in an aggregate principal amount of $600.0 million, which we refer to as the 2010 Mortgage Loans. The debt includes six separate components, which are comprised of independent classes of certificates and seniority. The components are cross-collateralized and cross-defaulted. No principal payments are required on five of the six components until the stated maturity date in January 2021, and one component requires monthly principal payments of $1.4 million. Interest is payable monthly in an amount equal to the aggregate interest accrued on each component. The interest rates on five of the six components are fixed, and range from 3.86% to 7.45% per annum. One component has a variable interest rate equal to one-month LIBOR plus 1.51%, with one-month-LIBOR subject to a floor of 1.00% per annum. In addition, we maintain an interest rate cap on the variable rate tranche that caps one-month LIBOR at 6.0%. The fair value of the interest rate cap was nominal at June 30, 2018. The floating rate interest component is pre-payable anytime without penalty; however, the fixed rate components remain subject to yield maintenance provisions. We used the net proceeds of these loans to refinance existing term loans, fund the acquisition of the acquired Versacold entities, and for general corporate purposes.

The 2010 Mortgage Loans were initially collateralized by 53 warehouses. In November 2014, we sold one of the warehouses collateralizing the 2010 Mortgage Loans for $9.5 million, and $6.0 million of the proceeds were used to pay down the 2010 Mortgage Loans. In 2015, we sold three warehouses for $9.4 million, and $6.1 million of the proceeds were used to pay down the 2010 Mortgage Loans. In 2017, we used a portion of the net proceeds from incremental borrowings under our Existing Senior Secured Term Loan B Facility to pay down $26.2 million of the 2010 Mortgage Loans. As a result, two warehouses were transferred from the collateral base of the 2010 Mortgage Loans to the Existing Senior Secured Revolving Credit Facility borrowing base, and one was released and positioned for sale. The terms governing the 2010 Mortgage Loans require us to maintain certain cash amounts in accounts that are restricted as to their use for the respective warehouses. As of June 30, 2018, the amount of restricted cash associated with the 2010 Mortgage Loans was $15.3 million. Additionally, if we do not maintain certain financial thresholds, including a debt service coverage ratio of 1.50x, the cash generated will further be temporarily restricted and limited to the use for scheduled debt service and operating costs. The debt service coverage ratio as of June 30, 2018 was 3.0x. The 2010 Mortgage Loans are non-recourse to us subject to customary non-recourse carve-outs.

Recurring 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.

Recurring Maintenance Capital Expenditures

Recurring 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 recurring maintenance capital expenditures related to our existing temperature-controlled warehouse network include replacing roofs and refrigeration equipment, and upgrading our racking systems. Examples of recurring 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 recurring maintenance capital expenditures related to information technology include expenditures on existing servers, networking equipment and current software. The following table sets forth our recurring maintenance capital expenditures for the three and six months ended June 30, 2018 and 2017.



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(In thousands, except per cubic foot amounts)
Real estate	$	9,505	$	10,355	$	15,314	$	15,498
Personal property	867		248		1,120		595
Information technology	1,191		1,864		1,513		2,279
Total recurring maintenance capital expenditures	$	11,563	$	12,467	$	17,947	$	18,372

Total recurring maintenance capital expenditures per cubic foot	$	0.013	$	0.013	$	0.019	$	0.020

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 three and six months ended June 30, 2018 and 2017.



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(In thousands, except per cubic foot amounts)
Real estate	$	4,971	$	5,564	$	10,168	$	10,880
Personal property	7,811		7,433		15,803		14,729
Total repair and maintenance expenses	$	12,782	$	12,997	$	25,971	$	25,609

Repair and maintenance expenses per cubic foot	$	0.014	$	0.014	$	0.028	$	0.027

Growth and Expansion Capital Expenditures

Growth and expansion capital expenditures are capitalized investments made to support our customers and warehouse expansion and development initiatives and enhance our information technology platform. Examples of growth and expansion 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 LED lighting, motion-sensor technology, variable frequency drives for our fans and compressors, rapid-close doors and alternative-power generation technologies. Examples of growth and expansion capital expenditures to enhance our information technology platform include expenditures related to the delivery of new systems and software and customer interface functionality. The following table sets forth our growth and expansion capital expenditures for the three and six months ended June 30, 2018 and 2017.



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(In thousands)
Expansion and development initiatives	$	21,140	$	9,687	$	39,376	$	46,840
Information technology	753		1,431		1,553		2,863
Total growth and expansion capital expenditures	$	21,893	$	11,118	$	40,929	$	49,703

Historical Cash Flows



	Six Months Ended June 30,
	2018			2017
	(In thousands)
Net cash provided by operating activities	$	76,887		$	82,801
Net cash used in investing activities	$	(46,935	)	$	(70,850	)
Net cash provided by financing activities	$	92,625		$	20,950

Operating Activities

For the six months ended June 30, 2018, our net cash provided by operating activities was $76.9 million, a decrease of $5.9 million, or 7.1%, compared to $82.8 million for the six months ended June 30, 2017. This change is mainly attributable to an unfavorable change in working capital. The decrease in working capital is offset by an 8.1% increase in our operating segments contribution and $8.5 million less cash paid for interest during the six months ended June 30, 2018, with $44.0 million interest paid for the six months ended June 30, 2018 compared to $52.5 million paid for the six months ended June 30, 2017.

Investing Activities

Our net cash used in investing activities was $46.9 million for the six months ended June 30, 2018 compared to $70.9 million for the six months ended June 30, 2017. Additions to property, plant, and equipment of $65.0 million accounted for the use of cash in investing activities and included outlays mainly associated with construction in progress and expansion of certain warehouse facilities in the United States. Net proceeds of $18.1 million were primarily from the sale of a domestic warehouse facility, partially offset the additions to property, plant and equipment.

Financing Activities

Net cash provided by financing activities was $92.6 million for the six months ended June 30, 2018 compared to $21.0 million for the six months ended June 30, 2017. Cash provided by financing activities for the current period primarily consisted of $525.0 million received in connection with the issuance of our Senior Secured Term Loan A Facility, and $493.6 million net proceeds from the IPO. These cash inflows were partially offset by $806.9 million paid to extinguish our Senior Secured Term Loan B facility, $50.0 million prepayment on our Senior Secured Term Loan A Facility, $28.5 million of repayments on mortgage notes, construction loans and

lease obligations, $8.7 million paid for debt issuance costs associated with the issuance of our Senior Secured Term Loan A Facility, and $23.3 million of stub period dividend distributions paid to both preferred and common shareholders of record as of the day prior to the IPO effective date.

Contractual Obligations

The following table summarizes our contractual obligations as of June 30, 2018:



	Payments due by period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Principal on mortgage and term loans	$	1,400,386	$	24,352	$	627,836	$	748,198	$	—
Interest on mortgage and term loans ⁽¹⁾	272,035		74,423		129,214		68,398		—
Sale leaseback financing obligations, including interest ⁽²⁾	228,362		16,701		34,176		35,239		142,246
Capital lease obligations, including interest	46,632		12,096		19,561		7,949		7,026
Operating leases	96,019		28,884		39,535		10,801		16,799
Total ^{(3), (4)}	$	2,043,434	$	156,456	$	850,322	$	870,585	$	166,071


(1)	Interest payable is based on interest rates in effect at June 30, 2018. Amounts include variable-rate interest payments, which are calculated utilizing the applicable interest rates as of June 30, 2018.


(2)	Sale leaseback financing obligations are subject to multiple expiration dates and bear interest rates that vary from 7.0% to 19.6%.


(3)	The table above excludes $0.8 million of estimated tax exposures, including interest and penalties, related to positions taken on U.S. federal and state income tax returns for our TRSs as of June 30, 2018.


(4)	The table also excludes $2.0 million aggregate fair value as of June 30, 2018 of two interest rate swap agreements expiring in June 2020.

Off-Balance Sheet Arrangements

As of June 30, 2018, we had no material off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

CRITICAL ACCOUNTING POLICIES UPDATE

See Note 2 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 2 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our future income and cash flows relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates.

As of June 30, 2018, we had $568.7 million of outstanding variable-rate debt. Approximately $523.7 million of this debt consisted of certain mortgage notes, construction loans and our Senior Secured Term Loan A Facility bearing interest at one-month LIBOR plus a margin ranging from 1.51% to 2.35% and, in the case of the certain mortgage notes subject to a 1.0% LIBOR floor. The majority of the remaining variable rate debt is related to our Australian and New Zealand entities and bears interest at variable rates determined by reference to the Australian Bank Bill Swap Bid Rate (BBSY) and the New Zealand Bank Bill Reference Rate (BKBM), respectively, plus, in each case, 1.4%. At June 30, 2018, one-month LIBOR was at approximately 2.09%, therefore a 100 basis point increase in market interest rates would result in an increase in interest expense to service our variable-rate debt of approximately $5.8 million. A 100 basis point decrease in market interest rates would result in only a $5.7 million decrease in interest expense to service our variable-rate debt.

Foreign Currency Risk

During the second quarter of 2018, Argentina met the definition of highly inflationary economy under the relevant U.S. GAAP guidance on foreign currency matters. As a result, beginning in the third quarter of 2018, the financial statements of our Argentinian subsidiary will be remeasured as if its functional currency were the U.S. dollar. This accounting treatment may result in additional gains or losses on foreign currency exchange reported in our statement of operations in future periods.

As it relates to the currency of countries other than Argentina where we own and operate warehouse facilities and provide logistics services, our foreign currency risk exposure at June 30, 2018 was not materially different than what we disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017. The information concerning market risk in Item 7A under the caption “Quantitative and Qualitative Disclosures about Market Risk” of our Annual Report on Form 10-K for the year ended December 31, 2017, is hereby incorporated by reference in this Report on Form 10-Q.

Item 4. Controls and Procedures

Evaluation of Controls and Procedures

In accordance with Rule 13a-15(b) of the Exchange Act, the Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of the Company’s “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2018.

Our management is responsible for establishing and maintaining adequate “internal control over financial reporting,” as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our management, including the Chief Executive Officer and Chief Financial Officer does not expect that our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their

costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be party to a variety of legal proceedings arising in the ordinary course of our business. We are not a party to, nor is any of our property a subject of, any material litigation or legal proceedings or, to the best of our knowledge, any threatened litigation or legal proceedings which, in the opinion of management, individually or in the aggregate, would have a material impact on our business, financial condition, liquidity, results of operations and prospects.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this Quarterly Report on Form 10-Q.

Item 5. Other Information

None.

Item 6. Exhibits

Index to Exhibits



Exhibit No.		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
95.1		Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		AMERICOLD REALTY TRUST
		(Registrant)


Date:	August 14, 2018	By:	/s/ Marc Smernoff
		Name:	Marc Smernoff
		Title:	Chief Financial Officer and Executive Vice President
		(On behalf of the registrant and as principal financial officer)