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Business Combinations | 9 Months Ended
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Sep. 30, 2021
Business Combination and Asset Acquisition [Abstract] |
Business Combinations | Business Combinations Acquisitions Completed During the Nine Months Ended September 30, 2021 Acquisition of Liberty Freezers The Company completed the acquisition of Liberty Freezers on March 1, 2021 for total consideration of C$55.0 million, or $43.5 million, including cash received of C$1.8 million, or $1.4 million based on the exchange rate between the CAD and USD on the closing date of the transaction. The acquisition accounting related to the consideration transferred primarily included the preliminary fair values of the assets acquired and liabilities assumed including $3.2 million of land, $13.9 million of buildings and improvements, $3.7 million of machinery and equipment, $12.4 million of goodwill, $8.0 million of a customer relationship intangible asset, $29.0 million of operating right-of-use assets adjusted to reflect the favorable terms of the lease when compared with market terms, and $7.1 million of deferred tax liabilities, all of which are allocated to the Warehouse segment. The customer relationship asset has been preliminarily assigned a useful life of 25 years and is being amortized on a straight-line basis. The goodwill recorded is primarily attributable to the strategic benefits of the acquisition including the expanded presence in the Canadian market and leveraging integration experience to drive synergies. The acquisition was completed through the acquisition of stock in Canada; as a result, no tax basis in goodwill exists for Canadian tax purposes. Deferred taxes may not be recorded for deductible goodwill unless the tax basis exceeds the book basis; therefore, the Company recorded no deferred taxes for tax deductible goodwill for Canadian tax purposes. Deductible goodwill exists for U.S. federal income tax purposes and will be available to reduce taxable income at the REIT, including any Global Intangible Low-Taxed Income (“GILTI”) inclusion associated with the foreign TRS in Canada. The preliminary acquisition accounting is based upon the Company’s estimates of fair value. The estimated fair values of the assets acquired and liabilities assumed and the related preliminary acquisition accounting are based on management’s estimates and assumptions, as well as other information compiled by management. The estimates and assumptions are subject to change during the measurement period, not to exceed one year from the acquisition date. The financial results of the acquired operations are included in the Warehouse segment since the date of the acquisition. We believe that the information gathered to date provides a reasonable basis for estimating the preliminary fair values of assets acquired and liabilities assumed. We will continue to evaluate these items until they are satisfactorily resolved and adjust our acquisition accounting accordingly, within the allowable measurement period (not to exceed one year from the date of acquisition), as defined by ASC 805, Business Combinations. Acquisition of KMT Brrr! The Company completed the acquisition of KMT Brrr! on May 5, 2021 for total consideration of $70.8 million, including cash received of $0.5 million. The acquisition accounting related to the consideration transferred primarily included the preliminary fair values of the assets acquired and liabilities assumed including $8.4 million of land, $46.7 million of buildings and improvements, $11.5 million of machinery and equipment, $1.6 million of goodwill, and $1.1 million of a customer relationship intangible asset, all of which are allocated to the Warehouse segment. The customer relationship asset has been preliminarily assigned a useful life of 25 years and is being amortized on a straight-line basis. The goodwill recorded is primarily attributable to the strategic benefits of the acquisition including the expanded presence in the New Jersey market and leveraging integration experience to drive synergies. The KMT Brrr! acquisition was completed through the acquisition of all of the membership interests of certain limited liability companies and the acquisition allowed goodwill recorded to be deductible for federal income tax purposes. Deferred taxes may not be recorded for deductible goodwill unless the tax basis exceeds the book basis; therefore, the Company recorded no deferred taxes for tax deductible goodwill as a result. Deductible goodwill will be available to reduce taxable income at both the REIT and its domestic TRS. The preliminary acquisition accounting is based upon the Company’s estimates of fair value. The estimated fair values of the assets acquired and liabilities assumed and the related preliminary acquisition accounting are based on management’s estimates and assumptions, as well as other information compiled by management. The estimates and assumptions are subject to change during the measurement period, not to exceed one year from the acquisition date. The financial results of the acquired operations are included in the Warehouse and Transportation segments since the date of the acquisition. We believe that the information gathered to date provides a reasonable basis for estimating the preliminary fair values of assets acquired and liabilities assumed. We will continue to evaluate these items until they are satisfactorily resolved and adjust our acquisition accounting accordingly, within the allowable measurement period (not to exceed one year from the date of acquisition), as defined by ASC 805. Acquisition of Bowman Stores The Company completed the acquisition of Bowman Stores on May 28, 2021 for total consideration of £75.5 million, or $107.1 million, including cash received of £2.4 million, or $3.4 million based on the exchange rate between the Pound Sterling and USD on the closing date of the transaction. The purchase price included deferred consideration of £8.3 million, or $11.8 million. The acquisition accounting related to the consideration transferred primarily included the preliminary fair values of the assets acquired and liabilities assumed including $6.0 million of land, $33.6 million of buildings and improvements, $17.8 million of machinery and equipment, $34.5 million of goodwill, $25.3 million of a customer relationship intangible asset, and $12.7 million of deferred tax liabilities, all of which are allocated to the Warehouse segment. The customer relationship asset has been preliminarily assigned a useful life of 25 years and is being amortized on a straight-line basis. The goodwill recorded is primarily attributable to the strategic benefits of the acquisition including the expanded presence in the European market and leveraging integration experience to drive synergies. The Bowman acquisition was completed through the acquisition of stock in the UK; as a result, no additional step-up in tax basis in goodwill in the UK was created aside from the inherited carryover tax basis that existed prior to the acquisition. The Company’s US deemed asset election under IRC section 338 will reduce the US income taxability of future foreign profits under the GILTI regime. The estimated fair values of the assets acquired and liabilities assumed and the related preliminary acquisition accounting are based on management’s estimates and assumptions, as well as other information compiled by management. The estimates and assumptions are subject to change during the measurement period, not to exceed one year from the acquisition date. The financial results of the acquired operations are included in the Warehouse segment since the date of the acquisition. We believe that the information gathered to date provides a reasonable basis for estimating the preliminary fair values of assets acquired and liabilities assumed. We will continue to evaluate these items until they are satisfactorily resolved and adjust our acquisition accounting accordingly, within the allowable measurement period (not to exceed one year from the date of acquisition), as defined by ASC 805. Acquisition of ColdCo The Company completed the acquisition of the assets of the ColdCo Companies located in St. Louis, Missouri and Reno, Nevada, on August 2, 2021 for total consideration of $20.7 million, including cash received of $0.3 million. The acquisition accounting related to the consideration transferred primarily included the preliminary fair values of the assets acquired and liabilities assumed including $1.3 million of land, $10.3 million of buildings and improvements, $2.7 million of machinery and equipment, $1.8 million of goodwill, and $4.3 million of a customer relationship intangible asset, all of which are allocated to the Warehouse segment. The customer relationship asset has been preliminarily assigned a useful life of 25 years and is being amortized on a straight-line basis. The goodwill recorded is primarily attributable to the strategic benefits of the acquisition including entry into the direct-to-consumer, e-fulfillment market and leveraging integration experience to drive synergies. The ColdCo acquisition was completed through the acquisition of substantially all of the assets from the seller and the acquisition allowed goodwill recorded to be deductible for federal income tax purposes. Deferred taxes may not be recorded for deductible goodwill unless the tax basis exceeds the book basis; therefore, the Company recorded no deferred taxes for tax deductible goodwill as a result. Deductible goodwill will be available to reduce taxable income at both the REIT and its domestic TRS. The estimated fair values of the assets acquired and liabilities assumed and the related preliminary acquisition accounting are based on management’s estimates and assumptions, as well as other information compiled by management. The estimates and assumptions are subject to change during the measurement period, not to exceed one year from the acquisition date. The financial results of the acquired operations are included in the Warehouse segment since the date of the acquisition. We believe that the information gathered to date provides a reasonable basis for estimating the preliminary fair values of assets acquired and liabilities assumed. We will continue to evaluate these items until they are satisfactorily resolved and adjust our acquisition accounting accordingly, within the allowable measurement period (not to exceed one year from the date of acquisition), as defined by ASC 805. Acquisition of Newark Facility Management The Company completed the acquisition of Newark Facility Management located in New Jersey, on September 1, 2021 for total consideration of $391.4 million, including cash received of $1.0 million. The acquisition accounting related to the consideration transferred primarily included the preliminary fair values of the assets acquired and liabilities assumed including $30.3 million of land, $51.0 million of buildings and improvements, $24.4 million of machinery and equipment, $17.2 million of goodwill, and $269.0 million of a customer relationship intangible asset, all of which are allocated to the Warehouse segment. The customer relationship asset has been preliminarily assigned a useful life of 25 years and is being amortized on a straight-line basis. The goodwill recorded is primarily attributable to the Company’s ability to add complementary customers into its network, provide an opportunity for growth in the the northeast market, deepen existing customer relationships and leveraging integration experience to drive synergies. The Newark Facility Management acquisition was completed through the acquisition of all of the membership interests of certain limited liability companies. The acquisition allowed goodwill recorded to be deductible for federal income tax purposes. Deferred taxes may not be recorded for deductible goodwill unless the tax basis exceeds the book basis; therefore, the Company recorded no deferred taxes for tax deductible goodwill as a result. Deductible goodwill will be available to reduce taxable income at both the REIT and potentially the domestic TRS. The estimated fair values of the assets acquired and liabilities assumed and the related preliminary acquisition accounting are based on management’s estimates and assumptions, as well as other information compiled by management. The estimates and assumptions are subject to change during the measurement period, not to exceed one year from the acquisition date. The financial results of the acquired operations are included in the Warehouse segment since the date of the acquisition. We believe that the information gathered to date provides a reasonable basis for estimating the preliminary fair values of assets acquired and liabilities assumed. We will continue to evaluate these items until they are satisfactorily resolved and adjust our acquisition accounting accordingly, within the allowable measurement period (not to exceed one year from the date of acquisition), as defined by ASC 805. Acquisition of Lago Cold Stores The Company expects to complete the acquisition of Australia-based Lago Cold Stores in November 2021 for approximately A100.8 million. Acquisitions Completed During 2020 Acquisition of AM-C Warehouses The Company completed the acquisition of privately-held AM-C Warehouses on August 31, 2020 for total cash consideration of $82.7 million. The acquisition accounting was finalized within one year from the date of acquisition. The financial results of the acquired operations are included in the Warehouse segment since the date of the acquisition. The adjustments recorded during the measurement period did not have a significant impact on our Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2021. Acquisition of Hall’s Warehouses The Company completed the acquisition of Hall’s Warehouses on November 2, 2020 for total cash consideration of $489.2 million, including cash received of $7.9 million. A summary of the preliminary fair values of the assets acquired and liabilities assumed and the measurement period adjustments recorded during the nine months ended September 30, 2021 is as follows (in thousands):
|  | Initial Amounts Recognized as of the Acquisition Date |  | Measurement Period Adjustments |  | Preliminary Amounts Recognized as of the Acquisition Date (as Adjusted) |  |
Assets |  |  |  |  |  |  |  |
Land |  | $ | 29,352 |  |  | $ | 3,208 |  |  | $ | 32,560 |  |  |
Buildings and improvements |  | 239,708 |  |  | (87,428) |  |  | 152,280 |  |  |
Machinery and equipment |  | 63,596 |  |  | (38,248) |  |  | 25,348 |  |  |
Assets under construction |  | — |  |  | 41 |  |  | 41 |  |  |
Operating lease right-of-use assets |  | 26,400 |  |  | 739 |  |  | 27,139 |  |  |
Cash and cash equivalents |  | 7,894 |  |  | — |  |  | 7,894 |  |  |
Accounts receivable |  | 11,894 |  |  | — |  |  | 11,894 |  |  |
Goodwill |  | 42,737 |  |  | 130,249 |  |  | 172,986 |  |  |
Acquired identifiable intangibles: |  |  |  |  |  |  |  |
Customer relationships |  | 102,732 |  |  | 1,268 |  |  | 104,000 |  |  |
Other assets |  | 303 |  |  | — |  |  | 303 |  |  |
Total assets |  | 524,616 |  |  | 9,829 |  |  | 534,445 |  |  |
Liabilities |  |  |  |  |  |  |  |
Accounts payable and accrued expenses |  | 4,006 |  |  | 2,117 |  |  | 6,123 |  |  |
Operating lease obligations |  | 26,400 |  |  | (661) |  |  | 25,739 |  |  |
Deferred tax liability |  | 5,012 |  |  | 8,373 |  |  | 13,385 |  |  |
Total liabilities |  | 35,418 |  |  | 9,829 |  |  | 45,247 |  |  |
Total consideration for the Hall’s acquisition |  | $ | 489,198 |  |  | $ | — |  |  | $ | 489,198 |  |  |
During the third quarter of 2021, we continued to refine the initial estimates and assumptions included in the valuation studies, including appraisals, necessary to assess the fair values of the tangible and intangible assets acquired and liabilities assumed, and the amount of goodwill to be recognized as of the acquisition date. These valuation studies are preliminary and we are continuing to review the inputs used, assumptions made and the underlying cash flows used to determine the fair value of the identified tangible and intangible assets. The initial preliminary acquisition accounting was based upon management’s estimates and assumptions, as well as other information compiled by management, including the books and records of Hall’s. The measurement period adjustments recorded during the nine months ended September 30, 2021 resulted from changes in fair values based on the drafts of the third-party valuations received. The final values may also result in changes to amortization expense related to intangible assets and depreciation expense related to property and equipment. Any potential adjustments made could be material in relation to the values presented in the table above. The primary areas of the preliminary acquisition accounting that are not yet finalized relate to the following: (i) finalizing the review and valuation of land, land improvements, building and machinery and equipment (including the models, key assumptions, estimates and inputs used) and assignment of remaining useful lives associated with the depreciable assets, (ii) finalizing the review and valuation of customer related intangible assets (including key assumptions, inputs and estimates), (iii) finalizing the valuation of certain in-place contracts or contractual relationships (including but not limited to leases), including determining the appropriate amortization period, (iv) finalizing our review of certain assets acquired and liabilities assumed, (v) finalizing the evaluation and valuation of certain legal matters and/or other loss contingencies, including those that we may not yet be aware of but meet the requirement to quality as a pre-acquisition contingency, and (vi) finalizing our estimate of the impact of acquisition accounting on deferred income taxes or liabilities. As the acquisition accounting is based on our preliminary assessments and draft valuations, actual values may differ (possibly materially) when final information becomes available that differs from our current estimates. We will continue to evaluate these items until they are satisfactorily resolved and adjust our acquisition accounting accordingly, within the allowable measurement period (not to exceed one year from the date of acquisition), as defined by ASC 805. The customer relationship intangible asset has been assigned a preliminary useful life of 25 years and will be amortized on a straight-line basis. The goodwill recorded is primarily attributable to the strategic benefits of the acquisition including the expanded presence in the New Jersey market. The financial results of the acquired operations are included in the Warehouse and Transportation segments since the date of the acquisition. This transaction will allow us to grow our market share with key customers while diversifying our overall customer base. All of the acquired facilities are located within 15 miles of each other and 30 miles of Newark Port. The Hall’s acquisition was completed through the acquisition of the outstanding stock of certain Hall’s entities and the direct purchase of real estate assets from the sellers. The acquisition allowed a portion of the goodwill recorded to be deductible for federal income tax purposes. Deductible goodwill will be available to reduce taxable income at both the REIT and potentially the domestic TRS. Acquisition of Agro The Company completed the acquisition of Agro on December 30, 2020 for total consideration of $1.59 billion, including cash received of $47.5 million. This was comprised of cash consideration totaling $1.08 billion, of which $49.7 million was deferred, and the issuance of 14,166,667 common shares of beneficial interest to Oaktree, with a fair value of $512.1 million based upon the closing share price on December 29, 2020 of $36.15. Financing lease and sale-leaseback obligations associated with the acquisition totaled $105.4 million, as indicated in the table below, and when added to the total consideration transferred brings the total transaction cost to approximately $1.7 billion. A summary of the preliminary fair values of the assets acquired and liabilities assumed and the measurement period adjustments recorded during the nine months ended September 30, 2021 is as follows (in thousands):
|  | Initial Amounts Recognized as of the Acquisition Date |  | Measurement Period Adjustments |  | Preliminary Amounts Recognized as of the Acquisition Date (as Adjusted)
Assets |  |  |  |  |  |
Land |  | $ | 95,286 |  |  | $ | 56,749 |  |  | $ | 152,035 |
Building and improvements |  | 778,170 |  | (132,809) |  |  | 645,361
Machinery and equipment |  | 206,453 |  | 21,487 |  |  | 227,940
Assets under construction |  | — |  |  | 15,416 |  |  | 15,416
Operating lease right-of-use assets |  | 191,229 |  | 12,552 |  |  | 203,781
Financing lease asset |  | 46,845 |  | (14,531) |  |  | 32,314
Cash and cash equivalents |  | 47,534 |  | — |  |  | 47,534
Accounts receivable |  | 78,423 |  | (1,132) |  |  | 77,291
Goodwill |  | 346,673 |  | 57,550 |  |  | 404,223
Acquired identifiable intangibles: |  |  |  |  |  |
Customer relationships |  | 333,501 |  | (58,357) |  |  | 275,144
Investment in partially owned entities |  | 21,638 |  | (9,738) |  |  | 11,900
Other assets |  | 20,038 |  | 7,219 |  |  | 27,257
Total assets |  | 2,165,790 |  |  | (45,594) |  |  | 2,120,196 |
Liabilities |  |  |  |  |  |
Accounts payable and accrued expenses |  | 90,860 |  | 14,397 |  |  | 105,257
Operating lease obligations |  | 191,229 |  | 2,688 |  |  | 193,917
Financing lease obligations |  | 46,845 |  | (14,531) |  |  | 32,314
Sale-leaseback obligations |  | 73,075 |  | — |  |  | 73,075
Deferred tax liability |  | 175,719 |  | (49,385) |  |  | 126,334 |
Total liabilities |  | 577,728 |  |  | (46,831) |  |  | 530,897 |
Total consideration for the Agro acquisition |  | $ | 1,588,062 |  |  | $ | 1,237 |  |  | $ | 1,589,299 |
During the third quarter of 2021, we continued to refine the estimates and assumptions included in the valuation studies, including appraisals, necessary to assess the fair values of the tangible and intangible assets acquired and liabilities assumed, and the amount of goodwill to be recognized as of the acquisition date. These valuation studies are preliminary and we are continuing to review the inputs used, assumptions made and the underlying cash flows used to determine the fair value of the identified tangible and intangible assets. The initial preliminary acquisition accounting was based upon management’s estimates and assumptions, as well as other information compiled by management, including information from prior valuations of similar entities and the books and records of Agro. The measurement period adjustments recorded during the nine months ended September 30, 2021 resulted from changes in fair values based on the drafts of the third-party valuations received. The final values may also result in changes to amortization expense related to intangible assets and depreciation expense related to property and equipment. Any potential adjustments made could be material in relation to the values presented in the table above. The primary areas of the acquisition accounting that are not yet finalized relate to the following: (i) finalizing the review and valuation of land, land improvements, building and machinery and equipment (including the models, key assumptions, estimates and inputs used) and assignment of remaining useful lives associated with the depreciable assets, (ii) finalizing the review and valuation of customer related intangible assets (including key assumptions, inputs and estimates), (iii) finalizing our review of certain assets acquired and liabilities assumed, (iv) finalizing the valuation of certain in-place contracts or contractual relationships (including but not limited to leases), including determining the appropriate amortization period, (v) finalizing the evaluation and valuation of certain legal matters and/or other loss contingencies, including those that we may not yet be aware of but meet the requirement to quality as a pre-acquisition contingency, and (vi) finalizing our estimate of the impact of acquisition accounting on deferred income taxes or liabilities. As the acquisition accounting is based on our preliminary assessments and draft valuations, actual values may differ (possibly materially) when final information becomes available. Additionally, the total consideration transferred is subject to certain post-close adjustments. We will continue to evaluate these items until they are satisfactorily resolved and adjust our acquisition accounting accordingly, within the allowable measurement period (not to exceed one year from the date of acquisition), as defined by ASC 805. As shown above, the Company recorded approximately $404.2 million of goodwill related to the Agro Acquisition. Strategic benefits of the acquisition include: (i) establishing a strategic footprint in Europe, which enhances its ability to serve their multinational customers on a global scale, (ii) adding depth to the existing networks in North America, Australia and South America, and (iii) providing significant growth opportunities through potential future acquisitions, given Europe's fragmented temperature controlled storage industry. These factors contributed to the goodwill that was recorded upon consummation of the transaction. The Agro Acquisition was completed through the acquisition of stock of various Agro entities in the U.S. and foreign jurisdictions; as a result, no tax basis exists in each of these jurisdictions for tax purposes, except for minimal tax basis that existed prior to the acquisition. We expect that the goodwill will be assigned to the Warehouse and Transportation segments during the measurement period. The Company’s deemed asset elections for the foreign operations under IRC section 338 will reduce the US income taxability of future foreign profits under the GILTI regime. Also shown above, in connection with the Agro Acquisition the Company recorded an intangible asset of approximately $275.1 million for customer relationships which has been assigned a preliminary useful life of 25 years and will be amortized on a straight-line basis. Based on the discussion under goodwill above, the Agro Acquisition resulted in federal income tax deductibility for a minimal portion of the intangible assets. The deductible intangible assets will be available to reduce taxable income for the REIT and reduce any GILTI inclusion in the US associated with foreign entities acquired. The Agro acquisition included an assumption of the 65% majority ownership of Frigorifico, a joint venture in Chile. On June 1, 2021, the Company purchased the remaining 35% minority shareholders portion of Frigorifico for $16.0 million. Pro Forma Consolidated Results (Unaudited) The following table presents the unaudited pro forma financial results as if the 2020 acquisition of Agro had occurred on January 1, 2020. The pro forma adjustments primarily relate to depreciation expense on acquired assets, amortization of acquired intangibles, and estimated interest expense related to financing transactions, the proceeds of which were used to partially fund the acquisition of Agro. The accompanying unaudited pro forma consolidated financial statements exclude the results of the AM-C, Bowman Stores, ColdCo, Halls, KMT Brrr!, Lanier, Liberty Freezers and Newark Facility Management acquisitions, which were deemed immaterial individually and in the aggregate based on quantitative and qualitative considerations. Additionally, the Company has not presented pro forma combined results of operations for the acquisitions of Nova Cold and Newport, because the results of operations as reported in the accompanying Condensed Consolidated Statements of Operations would not have been materially different. These statements are provided for illustrative purposes only and do not purport to represent what the actual Consolidated Statements of Operations of the Company would have been had the Agro acquisition occurred on the dates assumed, nor are they necessarily indicative of what the results of operations would be for any future periods.
Pro forma (unaudited)
(in thousands, except per share data)
| Three Months Ended |  | Nine Months Ended
| September 30, 2020
Total revenue | $ | 643,195 |  |  | $ | 1,859,384 |
Net (loss) income attributable to Americold Realty Trust | $ | (3,264) |  |  | $ | 28,247 |
Net (loss) income per share, diluted(1) | $ | (0.01) |  |  | $ | 0.11 |
(1)Adjusted to give effect to the issuance of 46.1 million common shares in connection with the Agro Acquisition. Total revenues of approximately $140.9 million and $256.9 million and net loss of approximately $11.1 million and $23.6 million associated with properties and operations acquired in the Agro Acquisition are included in the Consolidated Statements of Operations for the three and nine months ended September 30, 2021, respectively. The revenues and net income associated with properties and operations acquired in the Agro Acquisition included in the Consolidated Statements of Operations for the year ended December 31, 2020 was immaterial as the acquisition closed on December 30, 2020.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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