Item 1. Business
ITEM 1. Business
The Company
We are the world’s largest publicly traded REIT focused on the ownership, operation, acquisition and development of temperature-controlled warehouses. We are organized as a self-administered and self-managed REIT with proven operating, development and acquisition expertise. As of December 31, 2023, we operated a global network of 245 temperature-controlled warehouses encompassing approximately 1.5 billion cubic feet, with 197 warehouses in North America, 27 in Europe, 19 warehouses in Asia-Pacific, and 2 warehouses in South America. In addition, we hold minority interests in two joint ventures, one with SuperFrio, which owns or operates 35 temperature-controlled warehouses in Brazil, and one with RSA JV, which operates 2 temperature-controlled warehouses in Dubai. We view and manage our business through three primary business segments: warehouse, transportation, and third-party managed.
We consider our temperature-controlled warehouses to be “mission-critical” real estate in the markets we serve from “farm to fork” and an integral component of the temperature-controlled food infrastructure supply chain, which we refer to as the “cold chain.” The cold chain is vital for maintaining the quality of food producers’, distributors’, retailers’ and e-tailers’ temperature-sensitive products, protecting brand reputation and ensuring consumer safety and satisfaction. Our customers depend upon the location, high-quality nature, integration and scale of our portfolio to ensure the integrity and efficient distribution of their products. Many of our warehouses are located in key logistics corridors in the countries in which we operate, including strategic U.S. and international metropolitan statistical areas, or MSAs, while others are connected or immediately adjacent to customers’ production facilities. We believe our strategic locations and the extensive geographic presence of our integrated warehouse network are fundamental to our customers’ ability to optimize their distribution networks while reducing their capital expenditures, operating costs and supply-chain risks.
We consider ownership of our temperature-controlled warehouses to be fundamental to our business, and critical to our ability to attract and retain customers and our ability to achieve our targeted return on invested capital. We believe that the ownership of our real estate provides us with cost of capital and balance sheet advantages, stemming from the attractive financing options available to real estate owners and the tax advantages of being a REIT. We also believe that consolidation of the ownership and operation of our portfolio significantly enhances the value of our business by allowing us to provide customers with our complementary suite of value-added services across one integrated and reliable cold chain network. Ownership of our integrated cold chain network enhances our ability to efficiently reposition customers and undertake capital improvements or other modifications on their behalf. While some of our warehouses are leased, we own 75%, excluding ground leases, of our warehouses. Our decision to own, rather than lease, a significant majority of our warehouses provides us with better control over the specialized nature of our assets and greater influence over our warehouse locations on a long-term basis, which is crucial to meeting our customers’ “mission-critical” cold chain needs.
Recent Acquisitions and Investments in Joint Ventures
Over the last several years we have strategically acquired businesses to enhance our global portfolio and integrated network offerings to our customers.
In 2023, we acquired Safeway Freezer Storage Company LLC, Safeway Logistics LLC and T&P Realty LLC (collectively referred to as “Safeway”) for $24.0 million, and Ormeau Cold Storage (“Ormeau”) for
2
AUD$35.1 million or $23.5 million. Refer to Note 3-Business Combinations and Asset Acquisitions of the Consolidated Financial Statements for further information on the Company’s acquisitions.
On February 28, 2023, the Company purchased a 49% equity interest in a newly formed entity, RSA Cold Holdings Limited (the “RSA JV”), in a transaction that is accounted for as a joint venture. In exchange for our equity interest, the Company paid $4.0 million in total. RSA Cold Holdings Limited contributed their Dubai cold storage business, which consists of a single cold storage warehouse, in exchange for the remaining 51% equity interest in the joint venture.
On May 30, 2023, the Company sold its remaining 15% equity interest in the Americold LATAM Holdings Ltd joint venture (the “LATAM JV”) to Cold LATAM Limited (our “JV partner”) for total proceeds of $36.9 million. The gain associated with the sale was insignificant.
In June of 2023, the Company purchased the remaining outstanding equity interests in Agrofundo Brazil II Fundode Investimento em Participações (the “Comfrio joint venture” or “Comfrio JV” or “Comfrio”). During August of 2023, the Company sold the assets and liabilities of Comfrio. Refer to Note 3-Business Combinations and Asset Acquisitions of the Consolidated Financial Statements for further information regarding the acquisition and disposition of the Comfrio portfolio.
For further information about the Company’s joint ventures as of December 31, 2023, refer to Note 4 -Investments in Partially Owned Entities of the Consolidated Financial Statements.
Our Information
Our principal executive office is located at 10 Glenlake Parkway, South Tower, Suite 600, Atlanta, Georgia 30328, and our telephone number is (678) 441-1400. Our website address is www.americold.com. The information found on, or otherwise accessible through, our website is not incorporated into, and does not form a part of, this Annual Report on Form 10-K or any other report or document we file with or furnish to the Securities and Exchange Commission (the “SEC”). Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Proxy Statement and all amendments to those reports are available free of charge on our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We make our annual ESG report available on our website as well. We use our website as a means of disclosing additional information, including for complying with our disclosure obligations under the SEC’s Regulation FD. In addition, all reports we file with the SEC are available via EDGAR through the SEC website at www.sec.gov. Copies of our annual report will be made available, free of charge, on written request. Our Code of Business Conduct and Ethics is also made available through our website under “Investors - Governance Documents”.
3
BUSINESS STRATEGY AND OPERATING SEGMENTS
We were formed as a Maryland REIT on December 27, 2002 and subsequently converted to a Maryland corporation on May 26, 2022, pursuant to the Articles of Conversion, as approved by the stockholders at our annual stockholder meeting on May 17, 2022. Each issued and outstanding share of beneficial interest in Americold Realty Trust was converted into one share of common stock in Americold Realty Trust, Inc. As a result of this conversion, several references in this Form 10-K have been updated accordingly. Despite this conversion, the Company continues to operate as a REIT for U.S. federal income tax purposes. Our Operating Partnership was formed as a Delaware limited partnership on April 5, 2010 and was not impacted by the conversion to a Maryland corporation. Our operations are conducted through our Operating Partnership and its subsidiaries.
Our primary business objectives are to serve our customers and other stakeholders, increase stockholder value, grow our market share, enhance our operating and financial results and increase cash flows from operations. We also believe that our ability to execute on our business and growth strategies will enhance the overall value of our real estate. The strategies we intend to execute to achieve these objectives include the following:
Enhancing Our Operating and Financial Results Through Proactive Asset Management
We seek to enhance our operating and financial results by supporting our customers’ growth initiatives in the cold chain, optimizing both physical and economic occupancy, underwriting and deploying yield management initiatives and executing operational optimization and cost containment strategies. We believe that the combination of our ability to execute these and other initiatives and the significant investments we have made in our business over the last several years and continue to make will further drive our financial results and position us to expand our warehouse portfolio, grow our customer base, enhance our market share and create value for our stockholders.
Continue to Increase Committed Revenue in Our Warehouse Segment
Historically, providers of temperature-controlled warehouse space have offered storage services to customers on an as-utilized, on-demand basis. We actively seek to enter into contracts that implement our commercial business rules which contemplate, among other things, fixed storage commitments in connection with establishing new customer relationships or renewing agreements with existing customers, particularly with our largest customers, and variable rates for the value-added services we provide. Over the last several years, we have transitioned a significant portion of our rent and storage revenues generated on an as-utilized, on-demand basis to a fixed storage commitment basis. We believe the scope and breadth of our network position us favorably to continue to increase our fixed storage commitments as we believe this structure offers commercial advantages to both our customers and us.
Focused and Disciplined Strategy to Expand Our Portfolio of Temperature-Controlled Warehouses
We believe our operating systems and economies of scale provide us with a significant advantage over our competitors with respect to expansion, development and acquisition opportunities. Being a publicly-traded REIT focused on the temperature-controlled warehouse industry provides us access to capital markets and positions us to strategically enter new locations, fill gaps in existing distribution networks and effectively compete for expansion, development and acquisition opportunities. In addition, in certain international markets we operate through joint ventures with financial sponsors and operating platforms; and in the future we may expand the use of these vehicles to pursue acquisition, development and other opportunities.
Capitalize on Increased Outsourcing by Leading Global Food Producers, Distributors, Retailers and E-Tailers
4
Over the last 35 years, frozen food producers, distributors, retailers and e-tailers have increasingly outsourced their temperature-controlled warehousing needs to increase efficiency, reduce costs and redeploy capital into core businesses. We anticipate that cold chain participants will continue to make certain of their “in-house” temperature-controlled warehouses available for sale in the future and, accordingly, will continue to look to third-party providers to meet their temperature-controlled warehouse storage and service needs in related geographic markets. We believe that our ability to offer an extensive and integrated network of high-quality temperature-controlled warehouses globally with value-added services and our long-standing relationships with leading cold chain participants will enable us to capitalize on this trend.
Well Positioned to Benefit from E-Commerce Growth
Our warehouse portfolio serves as a fundamental bridge between food producers and fulfillment centers - whether for online e-tailers or traditional brick and mortar retailers. We believe our ability to design, build and operate warehouses across the cold chain makes us an attractive storage solution for existing retailers and the growing e-tailer segment and positions us well to generate new relationships, drive growth and capture market share by increasing our presence in the e-commerce channel.
Expand Our Presence by Increasing Market Share for Other Temperature-Sensitive Product Types
Although we focus on providing temperature-controlled warehouse space to the food industry, we also store other forms of temperature-sensitive products, including pharmaceutical, floral and chemical products. As the rapid growth in e-commerce continues to increase the flow of products through the global distribution network, we believe our ability to provide comprehensive and consistent quality warehousing and value-added services at all points in the cold chain put us in a strong position to develop new relationships, drive growth and enhance market share with producers, distributors, retailers and e-tailers in other temperature-sensitive products. Additionally, we have the flexibility to store non-temperature-sensitive “dry” goods in some of our warehouses to the extent desirable.
Increased Investment in and Transformation of our Technology Systems, Business Processes and Customer Solutions
In February 2023, we announced our transformation program “Project Orion” designed to drive future growth and achieve our long-term strategic objectives, through investment in our technology systems and business processes across our global platform. The project includes the implementation of a new, best-in-class, cloud-based enterprise resource planning (“ERP”) software system. Since going public in 2018, we have acquired over 100 facilities, or approximately 40% of our total warehouse facility network. Project Orion will enable us to better integrate many of these recent acquisitions and position us well for the integration of future acquisitions. The primary goals of this project are to streamline standard processes, reduce manual work and incrementally improve our business analytics capabilities. Highlights of the project include implementing centralized customer billing operations, a global payroll and human capital management platform, next-generation plant maintenance capabilities, global procurement functionality and shared-service operations in certain international regions, among others. We expect the benefits of these initiatives to include revenue and margin improvements through pricing data and analytics and heightened customer contract governance, finance and human resources cost reductions, information technology applications and infrastructure rationalization, reduced employee turnover, working capital efficiency and reduced IT maintenance capital expenditures. The activities associated with Project Orion are expected to be substantially complete within three years from inception. We estimate the aggregate total investment in Project Orion to be approximately $100 million. Since inception, the Company has incurred $61.8 million of implementation costs related to Project Orion of which $43.9 million has been deferred and capitalized within “ Other assets” on the Consolidated Balance Sheets. We will continue to evaluate our overall project for
5
additional opportunities and benefits, which could result in the identification and implementation of additional actions associated with Project Orion and incremental costs and benefits.
Investments in Our Warehouses
We employ a strategic investment approach to maintain a high-quality portfolio of temperature-controlled warehouses to ensure that our warehouses meet the “mission-critical” role they serve in the cold chain. We have successfully modernized many of our warehouses to reduce our power costs and increase their competitive position through reliable temperature-control systems that can implement distinct temperature zones within the same warehouse. In addition, we use LED lighting, thermal energy storage, motion-sensor technology, variable frequency drives for our fans and compressors, third-party efficiency reviews and real-time monitoring of energy consumption, high speed doors and alternative-power generation technologies, including solar, to improve the energy efficiency of our warehouses. We also utilize rain-water recapture to reduce our reliance on municipal water supplies and reduce run-off. We believe that our warehouses are well-maintained and in good operating condition.
Our Business Segments
We view and manage our business through three primary business segments—warehouse, transportation and third-party managed.
Warehouse. Our core business is our warehouse segment, where we provide temperature-controlled warehouse storage and related handling and other warehouse services. We collect rent and storage fees to store customer’s frozen and perishable food and other products. Our handling services optimize our customer’s product movement through the cold chain, including placement, case-picking, blast freezing, e-commerce fulfillment, and other recurring handling services, which are considered value added services.
Transportation. In our transportation segment, we broker, manage or operate transportation of frozen and perishable food and other products for our customers. Our services include consolidation ( i.e. , combining products for efficient shipment), freight under management services ( i.e. , arranging and overseeing transportation of customer inventory) and dedicated transportation, each designed to improve efficiency and reduce transportation and logistics costs to our customers.
Third party managed. Under our third-party managed segment, we manage warehouses on behalf of third parties and provide warehouse management services to leading food manufacturers and retailers in their owned facilities. We believe using our third-party management services allows our customers to increase efficiency, lower costs, reduce supply-chain risks and focus on their core businesses.
During the fourth quarter of 2022, we strategically transitioned the management of our largest third-party managed customer’s warehouses to a new third-party provider, and our operations ceased. As part of this transition, we agreed to continue to process certain costs for this customer for a period of time, and will continue to receive reimbursement for all such costs.
Customers
Our global footprint enables us to efficiently serve approximately 3,800 customers as of December 31, 2023, consisting primarily of producers, distributors, retailers and e-tailers of frozen and perishable food products, such as fruits, vegetables, meats, seafood, novelties, dairy and packaged foods. We believe the creditworthiness and geographic diversity of our customer base provide us with stable cash flows and a strong platform for growth. The
6
weighted average length of our relationship with our 25 largest customers in our warehouse segment exceeds 35 years. The total warehouse segment revenues generated by our 25 largest customers in our warehouse segment represent 49%, 47%, and 49% of our total warehouse segment revenues for the years ended December 31, 2023, 2022 and 2021, respectively. This disclosure is calculated on an annualized basis as if the Company had completed its acquisitions as of the beginning of the year in which they occurred. There has been no material change to the composition of our top 25 customers over the last three years.
The following table presents summary information concerning our 25 largest customers in our warehouse segment, based on warehouse segment revenues for the year ended December 31, 2023:
Network Utilization
% of Warehouse Revenue (1)
# of Sites Credit Rating (Moody’s/S&P) (2)
Multi Location Dedicated Sites Value Added Services Transportation Consolidation Technology Integration Committed Contract or Lease (3)
Retailer 4.8% 6 NR | NR ü ü ü ü ü ü
Producer 4.3% 32 BBB- | Baa3 ü ü ü ü ü
Producer 3.2% 58 BBB | Baa2 ü ü ü ü ü ü
Retailer 3.1% 17 AA | Aa2 ü ü ü ü ü ü
Retailer 2.7% 11 BBB | Baa2 ü ü ü ü ü
Producer 2.7% 20 NR | NR ü ü ü ü ü ü
Producer 2.7% 26 BBB | Baa2 ü ü ü ü ü
Retailer 2.0% 5 BBB+ | Baa1 ü ü ü ü
Producer 1.9% 19 BB+ | Ba2 ü ü ü ü ü
Producer 1.8% 19 NR | NR ü ü ü ü ü
Producer 1.6% 19 A+ | A1 ü ü ü ü ü ü
Retailer 1.5% 5 BBB+ | Baa1 ü ü ü ü ü ü
Producer 1.5% 5 NR | NR ü ü ü ü
Producer 1.5% 16 A+ | A1 ü ü ü ü ü ü
Producer 1.5% 42 A | A2 ü ü ü ü ü ü
Producer 1.4% 25 A- | A1 ü ü ü ü ü ü
Producer 1.4% 24 BBB- | Baa3 ü ü ü ü
Producer 1.4% 11 BBB | Baa2 ü ü ü ü ü ü
Producer 1.3% 32 NR | NR ü ü ü ü ü
Producer 1.3% 19 NR | NR ü ü ü ü ü
Producer 1.2% 24 BBB- | Baa3 ü ü ü ü ü
Producer 1.1% 25 NR | NR ü ü ü ü ü
Producer 1.0% 19 NR | NR ü ü ü ü ü ü
Retailer 1.0% 10 BBB+ | Baa1 ü ü ü ü
Producer 0.9% 5 NR | NR ü ü ü ü
Total 48.8%
(1) Based on warehouse revenues for the year ended December 31, 2023. Presented on an annualized basis as if we had completed all 2023 acquisitions as of the beginning of the year.
(2) Represents long-term issuer ratings as published in January 2024.
(3) A check mark indicates that the customer had at least one fixed commitment contract or lease with us as of December 31, 2023.
7
Seasonality
We are involved in providing services to food producers, distributors, retailers and e-tailers whose businesses, in some cases, are seasonal or cyclical. In order to mitigate the volatility in our revenue and earnings caused by seasonal business, we have implemented fixed commitment contracts with certain of our customers. Our customers with fixed commitment contracts pay for guaranteed warehouse space in order to maintain their required inventory levels, which is especially helpful to them during periods of peak physical occupancy. On a portfolio-wide basis, physical occupancy rates are generally the lowest during May and June. Physical occupancy rates typically exhibit a gradual increase after May and June as a result of annual harvests and our customers building inventories in connection with end-of-year holidays and generally peak between mid-September and early December as a result thereof. Typically, we have higher than average physical occupancy levels in October or November, which also tends to result in higher revenues.
Additionally, the involvement of our customers in a cross-section of the food industry mitigates, in part, the impact of seasonality as peak demand for various products occurs at different times of the year (for example, demand for ice cream is typically highest in the summer while demand for frozen turkeys usually peaks in the late fall). Our southern hemisphere operations in Australia, New Zealand and South America also help balance the impact of seasonality in our global operations, as their growing and harvesting cycles are complementary to North America and Europe. Each of our warehouses sets its own operating hours based on demand, which is heavily driven by growing seasons and seasonal consumer demand for certain products.
Competition
In our industry, the principal competitive factors are warehouse location, warehouse size and available occupancy, breadth and interconnectivity of warehouse networks, customer service and quality, type of service and price. For refrigerated food customers, transportation costs are typically significantly greater than warehousing costs and, accordingly, location and transportation capabilities are major competitive factors. The size of a warehouse is important in part because large customers generally prefer to have all of their products needed to serve a given market in a single location and to have the flexibility to increase storage at that single location during seasonal peaks. In areas with direct local competition, customers generally will select a temperature-controlled warehouse based upon service level, price and the quality of the warehouse. In addition, some food producers and distributors attend to their own warehousing and distribution needs by either building or leasing warehouses, creating a private warehousing market which may compete with the public warehouse industry. Many customers, including those for whom private warehousing is a viable option, will select distribution services based upon service level and price, provided that an appropriate network of related storage facilities is available. The ability to provide a wide breadth of high-quality integrated logistics management services is an increasingly important competitive advantage in the marketplace. In addition, we compete for the business of customers and potential customers who may choose to provide temperature-controlled warehousing in-house.
North America
Outside the seven largest owners of temperature-controlled warehouses, the North America temperature-controlled warehouse industry is highly fragmented among numerous owners and operators. We believe our main competitors include Lineage Logistics, LLC, United States Cold Storage, Inc. (an affiliate of John Swire & Sons), Interstate Warehousing, FreezPak Logistics, Conestoga Cold Storage, and Congebec Logistics, Inc, in addition to numerous other local, regional and national temperature-controlled warehouse owners, operators and developers.
Europe
8
Our main competitors in Europe include Constellation Cold Storage, Lineage Logistics, LLC and NewCold Advanced Logistics. Generally, the European temperature-controlled warehouse industry is highly fragmented among numerous owners and operators.
Asia-Pacific
Our main competitors in Australia include Lineage Logistics, LLC and NewCold Advanced Cold Logistics, which operate warehouses and service many of the Australian markets. Generally, our other competitors operate in only one region and do not compete in the retail market that comprises the majority of our revenues.
Our main competitors in New Zealand are Lineage Logistics, LLC and Halls Transport (not affiliated with the Halls acquisition we completed during 2020). Lineage Logistics, is the largest warehouse operator in New Zealand. Halls Transport is primarily a transporter that also operates a network of five warehouses. Generally, our other competitors also service the commodity market and operate in only one region.
HUMAN CAPITAL RESOURCES
Americold is committed to creating a work environment that supports the growth and success of our associates. We have employees located throughout the world. As of December 31, 2023, we employed 14,706 people worldwide, 99% of which are full-time associates.
The geographic distribution of our associates as of December 31, 2023 is summarized in the following table:
Region Number of associates Percentage of workforce
North America 11,519 78 %
Europe 1,449 10 %
Australia/New Zealand 1,610 11 %
South America 128 1 %
Total 14,706 100 %
As of December 31, 2023, approximately 29% of our associates were represented by various local labor unions and associations. During 2024, we expect to engage in negotiations for 20 agreements, which make up approximately 11% of our associate population. We do not anticipate any workplace disruptions during this renewal process. We consider our labor relations to be positive and productive.
Equity, Diversity, Inclusion and Belonging
We believe that how we attract, develop, and retain our talent is critical to how we achieve our strategic objectives and create sustained growth and value for our stockholders, customers, and associates. We are devoted to fostering a work environment where associates from diverse backgrounds are culturally and socially appreciated as their unique selves and can thrive as valued members of the organization. We are committed to developing and implementing programs and practices that create a supportive learning environment and encompasses communication of diverse perspectives and experiences.
We are an equal opportunity employer, with all qualified applicants receiving consideration for employment without regard to race, color, national origin, ancestry, religion, genetic information, physical or mental disability, marital status, age, sexual orientation or identification, gender, veteran status, political affiliation, physical appearance, or any other characteristic protected by federal, state, or local law. It is our policy to recruit talent
9
based on skill, knowledge, and experience, without discrimination. We evaluate compensation equity annually and ensure action plans are in place to address pay disparities when applicable.
During 2023, we conducted an enterprise-wide engagement survey, which was available in 16 languages that focused on measuring the engagement and inclusion of our associates. Americold achieved a higher engagement score and a higher associate response rate in 2023 as compared to 2022, continuing our trend of improving year over year. Creating a positive employee experience where individuals and teams feel their work is satisfying and impactful is a key focus area of ours. We continually assess and strive to enhance associate satisfaction and engagement.
In 2023 our Global Culture Committee, which is comprised of associate representatives from across all regions and levels of the organization, established messaging around Americold’s commitment to Diversity, Inclusion & Belonging (“DI&B”) and launched an Americold PROUD #ibelong campaign. This was the Committee’s first big step to integrate DI&B into every aspect of Americold’s culture through training, processes, and general awareness communication. The goal is to embed inclusion into our everyday operations where our associates can thrive as valued team members.
We continue to emphasize associate development and training. Our associates are offered regular opportunities to participate in formal and informal personal growth and professional development programs. Associates completed over 338,612 hours of training in 2023. In September 2023, Americold introduced the Value-Centered Leader Program to support the successful progression of front-line supervisors and managers to lead with the Company’s core values. The 12-week program takes participants on a learning journey – from leading self, to leading others, to leading Americold, with curriculum that’s rooted in the Americold values: Customer Service, Integrity, Giving Back, Accountability, and Teamwork. Other formal offerings for associates include tuition reimbursement, leadership development experiences, and a diverse curriculum of online learning programs.
Our Annual Leadership Conference, a three-day event for nearly 400 site and senior leaders to come together to align strategies and operations, was held in the first quarter of 2023. The conference included workshops, training, engagement, collaboration, and professional growth opportunities. We also continue to offer an executive coaching program to enhance leadership capabilities across the organization.
Throughout 2023, our focus remained on streamlining processes and tools within our organization. Our associates are heavily invested in ensuring that the design phases of our global ERP implementation results in improved efficiency and increased transparency. We also rolled out Leader Standard Work—a set of recurrent management techniques, tools, and skills—to associates across our operations and HR teams which is intended to improve management performance and foster cross-team communication.
10
Philanthropy
Giving Back to the communities where we live and work is at the heart of who we are as a company and reflects the desire of our associates to get involved in ways that are meaningful to them. To help guide and better align our giving back efforts across the Company, we updated our Giving Back policy in 2023 to provide guidance to leaders in planning events for their teams. We also introduced Giving Back Month, held in September, to encourage philanthropic activities across our sites globally.
We’re particularly proud of our associates and their efforts to give back and help those in need. We partner with and support organizations around the globe that contribute to fighting hunger and supporting the growth and development of children and teens. Our most significant partnership is with Feed the Children in the United States, through which we provide donations, complimentary temperature-controlled transportation of food products, and volunteer opportunities for our associates. Our associates are not only making a difference in their communities, but they also have strong passion and support for each other. Americold Foundation was introduced to give associates the opportunity to contribute monetary donations to aid members of the Americold family in need. All associates around the world can contribute as well as be recipients of this charitable foundation. Americold matches all donations dollar for dollar and covers all the operating expenses for the fund. Associates in need are encouraged to apply for a grant from the Americold Foundation Fund to ease their financial burden.
Safety and Wellbeing
Safety is an important focus area and foundational to Americold’s culture. Americold continues to be a Total Recordable Incident Rate (“TRIR”) industry leader by recording numbers well below the refrigerated warehousing and storage industry average of 4.6. We finished 2023 with a TRIR of 2.60. Our TRIR is calculated by multiplying the number of recordable cases by 200,000; that product is then divided by exposure hours.
Our facilities around the world embrace a proactive approach and consistently execute safety-minded programs. At the associate level, monthly safety training sessions focus on specific topics (e.g., lockout/tagout, powered industrial truck, personal protective equipment, etc.) and reinforce expectations for safe work practices. Additionally, June is recognized globally as safety month across our facilities with a focus on important safety topics and activities each week.
Supervisors complete Americold’s Behavioral Based Safety (“BBS”) Program, which reinforces desired behaviors and teaches how to constructively address unwanted behaviors. This program is implemented worldwide and serves to make safety part of an open and regular dialogue. Supervisors learn to address unique issues and performance at their site. They also learn effective remediation strategies.
Monthly safety inspections are performed at the facilities to ensure compliance with regulatory agency requirements and industry best practices, while also promoting continuing education for our site leaders to increase their knowledge in providing a safe working environment where every associate returns home at the end of the day the same way they arrived.
A Site Safety Committee at each Americold facility meets monthly to develop and promote a healthy and safe environment for all employees and visitors to our facilities. Our committees include associates from every department, including leaders, and focus on feedback provided from all the individuals at the site to drive the overall safety culture.
Over the last three years, Americold has moved its protocols and safety reporting to an online platform that is used globally. This online platform enables BBS observations, Safety Management System (“SMS”) audits, monthly inspections, and incident investigations can be conducted via a mobile device. In 2022, the full platform
11
was introduced to our Asia Pacific facilities, and in 2023, the Incident Investigation and Corrective Actions module was launched for our Europe facilities. In 2023, we engaged in a process to streamline our training and reporting processes to help make the experiences for our facilities as efficient and effective as possible.
Because our most valuable asset is our people, we are constantly looking to give associates the wellbeing support they need with the goal of having a healthier and more engaged workforce. We look at wellbeing from a holistic perspective inclusive of physical, mental, and financial wellness.
In the U.S., we offer a Health Reimbursement Account program funded solely by Americold. This program encourages annual wellbeing exams and self-health awareness, and rewards associates who participate in it. In 2023 we introduced emergency dependent care in the U.S., which will be available for associates in 2024. Globally, we offer comprehensive Employee Assistance Programs that assist associates with personal and/or work-related situations that may impact their job performance, health, and general sense of wellbeing.
For financial wellness, we offer a variety of retirement programs globally that provide associates flexibility towards their retirement options.
Total Rewards
We provide programs and benefits designed to attract, retain and reward high-performing associates. In addition to salaries or hourly wages, our compensation programs, which vary by geography and acquired entity, can include performance incentives for front-line workers, annual bonuses, share-based compensation awards, paid time off, retirement savings programs, healthcare and insurance benefits, health savings accounts, flexible work schedules, employee assistance programs and tuition assistance. To foster a stronger sense of ownership, aid in retention and align the interests of our associates with our stockholders, we provide restricted stock units to eligible associates through our equity incentive programs. In 2023, we expanded our equity incentive program to include all general managers across our operations in APAC after introducing the program to general managers in the U.S. in the prior year. To drive further engagement and individual ownership of the Company, we offer an Employee Stock Purchase Program (“ESPP”) which provides our associates an opportunity to purchase Americold stock at a discounted price. In 2023, we began introducing a global rewards and recognition program that is anchored in our organizational values of customer service, integrity, giving back, accountability, and teamwork. This program was initially launched in North America with plans to expand globally in 2024.
Business Conduct and Ethics
We are dedicated to conducting our business consistent with the highest standards of business ethics. Our updated Code of Business Conduct and Ethics sets forth our standards and policies. We have adopted a supplier code of conduct that seeks to ensure that our suppliers operate within our required code of conduct. We provide code of conduct training so that our associates receive regular training and reminders about our standards. We also maintain an anti-discrimination and anti-harassment policy that includes mandatory harassment training for all managers. We do not tolerate any form of racism, sexism or injustice within our facilities or across our organization. If at any time an associate witnesses an action or situation that is contrary to our code of conduct or policies, they are encouraged to report it immediately. We provide an anonymous Ethics Helpline, which our compliance, legal and human resources teams monitor regularly. We take all complaints seriously, and evaluate all claims, conduct internal investigations, and implement appropriate remediation plans if necessary. The Company’s audit committee is routinely briefed on complaints received and has access to reports made through our Ethics Helpline.
12
We have also adopted a Human Rights Policy overseen by our Board of Directors, which outlines our commitment to the United Nations Universal Declaration of Human Rights, and a policy against modern slavery, ensuring transparency within our business.
REGULATORY MATTERS
Many laws and governmental regulations are applicable to our properties and changes in these laws and regulations, or interpretation of such laws and regulations by agencies and the courts, occur frequently.
Environmental Matters
Our properties are subject to a wide range of environmental laws and regulations in each of the locations in which we operate, and compliance with these requirements involves significant capital and operating costs. Failure to comply with these environmental requirements can result in civil or criminal fines or sanctions, claims for environmental damages, remediation obligations, revocation of environmental permits or restrictions on our operations. Future changes in environmental laws or in the interpretation of those laws, including stricter requirements affecting our operations, could result in increased capital and operating costs, which could materially and adversely affect our business, financial condition, liquidity, results of operations and, consequently, amounts available for distribution to our stockholders.
Food Safety Regulations
Most of our properties in the United States are subject to compliance with federal regulations regarding food safety. Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002, the United States Food and Drug Administration, or the FDA, requires us to register all warehouses in which food is stored and further requires us to maintain records of sources and recipients of food for purposes of food recalls.
The Food Safety Modernization Act, or FSMA significantly expanded the FDA’s authority over food safety, providing the FDA with tools to proactively ensure the safety of the entire food system, including hazard analysis and preventive controls requirements, food safety planning, requirements for sanitary transportation of food, and increased inspections and mandatory food recalls under certain circumstances. The most significant rule under the FSMA which impacts our business is the Current Good Manufacturing Practice and Hazard Analysis and Risk-Based Preventive Controls for Human Food rule. This rule requires a food facility to establish a food safety system that includes an analysis of hazards and the implementation of risk-based preventive controls, among other steps. This is in addition to requirements that we satisfy existing Good Manufacturing Practices with respect to the holding of foods, as set forth in FDA regulations. The USDA also grants to some of our warehouses “ID status,” which entitles us to handle products of the USDA. Any products destined for export must also satisfy the applicable export requirements. As a result of the regulatory framework from the FDA, the USDA and other local regulatory requirements, we subject our warehouses to periodic food safety audits which are for the most part carried out by a recognized global, third-party provider of such audits. In addition to meeting any applicable food safety, food facility registration and record-keeping requirements, our customers often require us to perform food safety audits.
To the extent we fail to comply with existing food safety regulations or contractual obligations, or are required to comply with new regulations or obligations in the future, it could adversely affect our business, financial condition, liquidity, results of operations and prospects, as well as the amount of funds available for distribution to our stockholders.
Occupational Safety and Health Act, or OSHA
13
Our properties in the United States are subject to regulation under OSHA, which requires employers to provide associates with a safe work environment free from hazards, such as exposure to toxic chemicals, excessive noise levels, mechanical dangers, heat or cold stress and unsanitary conditions. In addition, due to the amount of ammonia stored at some of our facilities, we are also subject to compliance with OSHA’s Process Safety Management of Highly Hazardous Chemicals standard and OSHA’s ongoing National Emphasis Program related to potential releases of highly hazardous chemicals. 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 associates who may be injured at our warehouses.
International Regulations
Our international facilities are subject to many local laws and regulations which govern a wide range of matters, including food safety, building, environmental, health and safety, hazardous substances, waste minimization, as well as specific requirements for the storage of meat, dairy products, fish, poultry, agricultural and other products. Any products destined for export must also satisfy the applicable export requirements. A failure to comply with, or the cost of complying with, these laws and regulations could materially adversely affect our business, financial condition, liquidity, results of operations and prospects and, consequently the amounts available for distribution to our stockholders.
INSURANCE COVERAGE
We carry comprehensive general liability, fire, extended coverage, business interruption, umbrella liability and environmental coverage on all of our properties with limits of liability which we deem adequate. Similarly, we are insured against the risk of direct physical damage in amounts we believe to be adequate to reimburse us on a replacement basis for costs incurred to repair or rebuild each property, including loss of business profits during the reconstruction period. We also carry coverage for customers’ products in our warehouses that are damaged due to our negligence. The cost of all such insurance is passed through to customers as part of their regular rates for storage and handling.
We are self-insured for workers’ compensation and health insurance under a large-deductible program, meaning that we have accrued liabilities in amounts that we consider appropriate to cover losses in these areas. In addition, we maintain excess loss coverage to insure against losses in excess of the reserves that we have established for these claims in amounts that we consider appropriate.
We will not carry insurance for generally uninsured losses such as loss from riots or war; however, we do include coverage for risks across all programs for acts of terrorism. We carry earthquake insurance on our properties in areas known to be seismically active and flood insurance on our properties in areas known to be flood zones, in an amount and with deductibles which we believe are commercially reasonable. We also carry insurance coverage relating to cybersecurity incidents commensurate with the size and nature of our operations.
14