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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2021
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (GAAP). The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries where the Company exerts control. Investments in which the Company does not have control, and is not the primary beneficiary of a Variable Interest Entity (VIE), but where the Company exercises significant influence over the operating and financial policies of the investee, are accounted for using the equity method of accounting. Intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of (1) assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and (2) revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant Risks and Uncertainties The COVID-19 pandemic has caused, and is likely to continue to cause severe economic, market and other disruptions worldwide, which could lead to future material impairments of our assets, increases in our allowance for credit losses and changes in judgments in determining the fair value of our assets. Conditions in the bank lending, capital and other financial markets may deteriorate, and our access to capital and other sources of funding may become constrained or more costly, which could materially and adversely affect the availability and terms of future borrowings, renewals, re-financings and other capital raises. The Company is closely monitoring the impact of the ongoing COVID-19 pandemic and any variants on all aspects of its business in all geographies, including how it will impact its customers and business partners. While the Company did not incur significant disruptions during 2020 from the COVID-19 pandemic, the year ended December 31, 2021 was negatively impacted by COVID-19 related disruptions in (i) the food supply chain; (ii) our customers’ production of goods; (iii) the labor market impacting availability and cost; and (iv) the overall impact of inflation on the cost to provide our services. We expect that end-consumer demand for food will remain consistent over the long-term with historic levels overall but varying between retail and food service sectors. The consistent end consumer demand has driven down holdings in our facilities as it remains steady and production has remained challenged since the onset of the pandemic. We expect it will continue to do so until our customers are able to ramp production back up to pre-pandemic levels for an extended period of time in order to rebuild inventory in the supply chain. However, uncertainty still surrounds the impact of the pandemic and recovery ultimately depends on many factors. COVID-19 disruptions in certain markets where we or our customers operate continue to impact the food supply chain and our business. As a result, occupancy and throughput volume continue at lower than historical levels experienced prior to COVID-19. As the Company continues to protect its employees from the spread of COVID-19, it is incurring elevated labor related costs and incremental health and safety supplies costs relative to its pre-pandemic experience. We continue to expect to see inflationary impacts in the cost of providing our services, but anticipate that these will be partially mitigated through price increases that have either taken effect or are expected to take effect in the near future. The Company is unable to predict the impact that the COVID-19 pandemic will have on its financial condition, results of operations and cash flows due to numerous uncertainties. The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with any degree of confidence, including the scope, severity, duration and geographies of the outbreak, the actions taken to contain the COVID-19 pandemic or mitigate its impact as requested or mandated by governmental authorities or otherwise voluntarily taken by individuals or businesses, the direct and indirect economic effects of the illness and containment measures, and supply chain disruption, among others. As a result, we cannot at this time predict the impact of the COVID-19 pandemic, but it could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects. Property, Buildings and Equipment Property, buildings and equipment is stated at cost, less accumulated depreciation. Depreciation is computed on a straight-line basis over the estimated useful lives of the respective assets or, if less, the term of the underlying lease. Depreciation begins in the month an asset is placed into service. Useful lives range from 40 to 43 years for buildings, 5 to 20 years for building and land improvements, and 3 to 15 years for machinery and equipment. For the years ended December 31, 2021, 2020 and 2019, the Company recorded depreciation expense of $284.6 million, $198.8 million and $153.9 million, respectively. The Company periodically reviews the appropriateness of the estimated useful lives of its long-lived assets. Costs of normal maintenance and repairs and minor replacements are charged to expense as incurred. When non-real estate assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed, and any resulting gain or loss is included in “Other income (expense), net” on the accompanying Consolidated Statements of Operations. Gains or losses from the sale of real estate assets are reported in the accompanying Consolidated Statement of Operations as a component of operating expenses. Costs incurred to develop software for internal use and purchased software are capitalized and included in “Machinery and equipment” on the accompanying Consolidated Balance Sheets. Capitalized software is amortized over the estimated life of the software which ranges from 3 to 10 years. Amortization of previously capitalized amounts was $6.3 million, $7.3 million and $6.4 million for 2021, 2020 and 2019, respectively, and is included in “Depreciation and amortization” on the accompanying Consolidated Statements of Operations. Activity in real estate facilities during the years ended December 31, 2021 and 2020 is as follows:
| 2021 |  | 2020
| (In thousands)
Operating facilities, at cost: |  |  |
Beginning balance | $ | 5,706,760 |  |  | $ | 3,729,589 |
Capital expenditures | 304,886 |  |  | 346,027 |
Acquisitions | 383,600 |  |  | 1,662,650 |
Purchase price allocation adjustments | (198,541) |  |  | — |
Disposition | (3,691) |  |  | (62,225) |
Impairment | (1,700) |  |  | (2,153) |
Conversion of leased assets to owned | — |  |  | 7,956 |
Impact of foreign exchange rate changes | (56,612) |  |  | 24,916 |
Ending balance | 6,134,702 |  |  | 5,706,760 |
Accumulated depreciation: |  |  |
Beginning balance | (1,080,922) |  |  | (936,422) |
Depreciation expense | (201,497) |  |  | (146,237) |
Dispositions | 1,259 |  |  | 8,731 |
Impact of foreign exchange rate changes | 3,986 |  |  | (6,994) |
Ending balance | (1,277,174) |  |  | (1,080,922) |
Total real estate facilities | $ | 4,857,528 |  |  | $ | 4,625,838 |
Non-real estate assets | 372,101 |  |  | 269,668 |
Total property, buildings and equipment and finance leases, net | $ | 5,229,629 |  |  | $ | 4,895,506 |
The total real estate facilities amounts in the table above include $157.4 million and $165.2 million of assets under sale-leaseback agreements accounted for as a financing lease as of December 31, 2021 and 2020, respectively. The Company does not hold title in these assets under sale-leaseback agreements. The description of our acquisitions during 2021 and 2020 are described in detail within Note 3. Additionally, please refer to the section below titled ‘Impairment of Long-Lived Assets’ for discussion of impairment recorded during 2021 and 2020. The Company made significant investments in various expansion and development projects during 2021 and 2020. During the first quarter of 2020, the Company commenced operations in a public facility in Columbus, OH which was acquired as part of the Cloverleaf acquisition, which cost approximately $7.0 million to construct. In addition, the Company commenced operations in a distribution facility in Savannah, GA, which was built on land that was acquired as part of the PortFresh acquisition, and cost approximately $69.5 million to construct. During the second quarter of 2020, the Company broke ground on two fully-automated build-to-suit warehouses in Lancaster, PA and Plainville, CT. During 2021 and 2020, the Company invested $57.2 million and $73.3 million in the Lancaster facility, respectively. During 2021 and 2020, the Company invested $54.0 million and $74.8 million in the Plainville facility, respectively. During 2020, the Company commenced construction on its Auckland, New Zealand expansion. During 2021 and 2020, the Company invested $20.4 million and $22.0 million in the Auckland facility, respectively, and it was completed during the second quarter of 2021. Additionally, during 2021 the Company invested $4.5 million and completed its Lurgan, Northern Ireland expansion. During the fourth quarter of 2020, the Company announced two additional expansion projects in Russellville, Arkansas and Calgary, Canada. During 2021 and 2020, the Company invested $37.5 million and $11.7 million in the Russellville facility, respectively, and its expected completion is during the fourth quarter of 2022. During 2021 and 2020, the Company invested $9.5 million and $1.5 million in the Calgary facility, respectively, and it was completed during the third quarter of 2021. During 2021, the Company continued to progress on its Dublin, Ireland development and invested $13.5 million during 2021 and $3.0 million during 2020. During the second quarter of 2021, the Company broke ground on its Dunkirk, NY development and its Atlanta Major Market Strategy Phase 2 project, investing $24.0 million and $21.0 million, respectively, through December 31, 2021. During the fourth quarter of 2021, the Company broke ground on its Barcelona, Italy development and has invested $3.3 million through December 31, 2021. During the year ended December 31, 2020, the Company sold its Boston facility for a gain of $20.1 million, recorded to “Gain on sale of real estate” in the accompanying Consolidated Statement of Operations, and primarily related to “Buildings and improvements” on its Consolidated Balance Sheet. Lease Accounting Arrangements wherein we are the lessee: At the inception of a contract, we determine if the contract is or contains a lease. Leases are classified as either financing or operating based upon criteria within ASC 842, Leases, and a right-of-use (ROU) asset and liability are established for leases with an initial term greater than 12 months. Leases with an initial term of 12 months or less, and not expected to renew beyond 12 months, are not recorded on the balance sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the present value of the lease payments over the lease term, as adjusted for prepayments, incentives and initial direct costs. ROU assets are subsequently measured at the value of the remeasured lease liability, adjusted for the remaining balance of the following, as applicable: lease incentives, cumulative prepaid or accrued rent and unamortized initial direct costs. When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. We generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The depreciable lives of assets are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Depreciation expense on assets acquired under financing leases is included in “Depreciation and amortization” on the accompanying Consolidated Statements of Operations. Amortization of leased assets classified as ROU assets are included within cost of operations for the respective segment the asset pertains to, or within “Selling, general and administrative” for corporate assets on the accompanying Consolidated Statements of Operations. As with other long-lived assets, ROU assets are reviewed for impairment when events or change in circumstances indicate the carrying value may not be recoverable. Operating leases are included in “Operating lease right-of-use assets”, “Accounts payable and accrued expenses” and “Operating lease obligations” on our Consolidated Balance Sheets. Financing lease assets are included in “Financing leases-net”, “Accounts payable and accrued expenses” and “Financing lease obligations” on our Consolidated Balance Sheets. Arrangements wherein we are the lessor: Each new lease contract is evaluated for classification as a sales-type lease, direct financing or operating lease. A lease is a sales-type lease if any one of five criteria are met, as outlined in ASC 842 each of which indicate the lease, in effect, transfers control of the underlying asset to the lessee. If none of those five criteria are met, but two additional criteria are both met, indicating we have transferred substantially all the risks and benefits of the underlying asset to the lessee and a third party, the lease is a direct financing lease. All leases that are not sales-type or direct financing leases are operating leases. We do not currently have any sales-type or direct financing leases. For operating leases wherein we are the lessor, we assess the probability of payments at commencement of the lease contract and subsequently recognize lease income, including variable payments based on an index or rate, over the lease term on a straight-line basis. We continue to measure and disclose the underlying assets subject to operating leases based on our policies for application of ASC 360, Property, Plant and Equipment. For all asset classes we have elected to not separate the lease and non-lease components which generally relate to taxes and common area maintenance. Additionally, we elected a practical expedient to present all funds collected from lessees for sales and other similar taxes net of the related sales tax expense. Our lease contracts are structured in a manner to reduce risks associated with the residual value of leased assets. Impairment of Long-Lived Assets The Company reviews its long-lived assets for impairment when events or changes in circumstances (such as decreases in operating income and declines in occupancy) indicate that the carrying amounts may not be recoverable. A comparison is made of the expected future operating cash flows of the long-lived assets on an undiscounted basis to their carrying amounts. If the carrying amounts of the long-lived assets exceed the sum of the expected future undiscounted cash flows, an impairment charge is recognized in an amount equal to the excess of the carrying amount over the estimated fair value of the long-lived assets, which the Company calculates based on projections of future cash flows and appraisals with significant unobservable inputs classified as Level 3 of the fair value hierarchy. The Company determined that individual warehouse properties constitute the lowest level of independent cash flows for purposes of considering possible impairment. For the years ended December 31, 2021, 2020 and 2019, the Company recorded charges of $3.3 million, $8.2 million and $13.5 million, respectively, as “Impairment of long-lived assets” on the accompanying Consolidated Statements of Operations. For the year ended December 31, 2021, the Company recorded impairment charges totaling $3.3 million, which included an impairment charge of $1.7 million within the Warehouse segment and recorded to “Assets under construction” and a charge of $1.6 million for certain software costs that were determined no longer usable and which were recorded to “Other assets”. During 2020, the Company recognized an impairment charge of $3.7 million of Other segment assets related to the sale of the quarry completed on July 1, 2020, which resulted in a write-off of primarily “Land” on the accompanying Consolidated Balance Sheets. Additionally, the Company recognized an impairment charge of $2.1 million of Managed segment assets related to the exit of two Canadian facilities; the write-off was primarily related to “Machinery and equipment” on the accompanying Consolidated Balance Sheets. During the fourth quarter of 2020, the Company recognized an aggregate impairment charge of $2.2 million of Warehouse segment assets and the write-off primarily related to “Assets under construction” on the accompanying Consolidated Balance Sheets. During the year ended December 31, 2019, the Company recorded impairment charges of $13.5 million, of which $12.6 million was related to Warehouse segment assets, and $0.9 million was related to Transportation segment assets. Capitalization of Costs Project costs that are clearly associated with the development of properties are capitalized as incurred. Project costs include all costs directly associated with the development of a property, including construction costs, insurance, property taxes, interest, and costs of personnel working on the project. Costs that do not clearly relate to the projects under development are not capitalized and are charged to expense as incurred. Capitalization of costs begins when the activities necessary to get the development project ready for its intended use commence, which include costs incurred before the beginning of construction. Capitalization of costs ceases when the development project is substantially complete and ready for its intended use. Determining when a development project commences and when it is substantially complete and ready for its intended use involves a degree of judgment. We generally consider a development project to be substantially complete and ready for its intended use upon receipt of a certificate of occupancy. If and when development of a property is suspended pursuant to a formal change in the planned use of the property, we will evaluate whether the accumulated costs exceed the estimated value of the project and write off the amount of any such excess accumulated costs. For a development project that is suspended for reasons other than a formal change in the planned use of such property, the accumulated project costs are written off. Capitalized costs are allocated to the specific components of a project that are benefited. During each of the years ended 2021, 2020 and 2019, we capitalized interest of approximately $11.6 million, $4.0 million, and $3.3 million, respectively. During the years ended 2021, 2020 and 2019, we capitalized amounts relating to compensation and travel expense of associates direct and incremental to development of properties of approximately $2.8 million, $0.9 million, and $0.5 million, respectively. During 2021, we capitalized $0.7 million of costs for insurance and property taxes. These costs were immaterial in 2020 and 2019. Business Combinations For business combinations, the excess of purchase price over the net fair value of assets acquired and liabilities assumed is recorded as goodwill. In an asset acquisition where we have determined that the cost incurred differs from the fair value of the net assets acquired, we assess whether we have appropriately determined the fair value of the assets and liabilities acquired and we also confirm that all identifiable assets have been appropriately identified and recognized. After completing this assessment, we allocate the difference on a relative fair value basis to all assets acquired except for financial assets (as defined in ASC 860, Transfers and Servicing), deferred taxes, and assets defined as “current” (as defined in ASC 210, Balance Sheet). Whether the acquired business is being accounted for as a business combination or an asset acquisition, the determination of fair values of identifiable assets and liabilities requires estimates and the use of valuation techniques. Significant judgment is involved specifically in determining the estimated fair value of the acquired land and buildings and intangible assets. For intangible assets, we typically use the excess earnings method. Significant estimates that are more subjective and complex include the discount rate and operating margin. Significant estimates, although not necessarily highly subjective or complex, used in valuing intangible assets acquired in a business combination include, but are not limited to, revenue growth rates, customer attrition rates, operating costs, capital expenditures, tax rates and long-term growth rates. For buildings, we used a combination of methods including the cost approach to value buildings and the sales comparison approach to value the underlying land. Significant estimates used in valuing buildings and improvements acquired in a business combination include, but are not limited to estimates of indirect costs and entrepreneurial profit, which were added to the replacement cost of the acquired assets in order to estimate their fair value in the market. Significant estimates use in valuing the land include but are not limited to estimating the price per acre of comparable market transactions. Asset Acquisitions On November 12, 2021, the Company acquired a warehouse in Denver for $53.6 million.The cost incurred in connection with this asset acquisition was allocated primarily to property, buildings and equipment. The Company acquired Caspers Warehouse in an asset acquisition on August 31, 2020 for $25.6 million. The cost incurred in connection with this asset acquisition was allocated primarily to property, buildings and equipment. Bridge Loan Commitment Fees During the fourth quarter of 2020, we incurred costs of $2.4 million related to unused bridge loan commitment fees in connection with the potential funding need to complete the Agro Acquisition which ultimately was not utilized. During the second quarter of 2019, we incurred costs of $2.7 million related to unused bridge loan commitment fees in connection with the potential funding need to complete the Cloverleaf Acquisition which ultimately was not utilized. These costs are classified as a component of interest expense within the caption titled “Bridge loan commitment fees” and are presented within “Other expense” on the accompanying Consolidated Statement of Operations. Cash, Cash Equivalents, and Restricted Cash Cash and cash equivalents consist of cash on hand, demand deposits, and short-term liquid investments purchased with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. As of December 31, 2021 and 2020, the Company held $44.9 million and $88.6 million, respectively, of cash and cash equivalents in bank accounts of its foreign subsidiaries. Restricted cash relates to cash on deposit and cash restricted for the payment of certain property repairs or obligations related to warehouse properties collateralized by mortgage notes, cash on deposit for certain workers’ compensation programs and cash collateralization of certain outstanding letters of credit, and payment of costs to administer and service the New Market Tax Credit (“NMTC”) entity. Accounts Receivable Accounts receivable are recorded at the invoiced amount. The Company periodically evaluates the collectability of amounts due from customers and maintains an allowance for doubtful accounts for estimated amounts uncollectable from customers. Management exercises judgment in establishing these allowances and considers the balance outstanding, payment history, and current credit status in developing these estimates. Specific accounts are written off against the allowance when management determines the account is uncollectable. The following table provides a summary of activity of the allowance for doubtful accounts (in thousands):
| Balance at beginning of year |  | Charged to expense/against revenue |  | Amounts written off, net of recoveries |  | Balance at end of year
Year ended December 31, 2019 | $ | 5,706 |  |  | 3,608 |  |  | (2,387) |  |  | $ | 6,927 |
Year ended December 31, 2020 | $ | 6,927 |  |  | 7,161 |  |  | (1,802) |  |  | $ | 12,286 |
Year ended December 31, 2021 | $ | 12,286 |  |  | 7,186 |  |  | (717) |  |  | $ | 18,755 |
The Company records interest on delinquent billings within “Interest income” in the accompanying Consolidated Statements of Operations when collected. Identifiable Intangibles Assets Identifiable intangibles consist of a trade name and customer relationships. Indefinite-Lived Asset The trade name asset, with a carrying amount of $15.1 million as of December 31, 2021 and 2020, relates to “Americold” and has an indefinite life; thus, it is not amortized. The Company evaluates the carrying value of its trade name each year as of October 1, and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the trade name below its carrying amount. There were no impairments to the Company’s trade name for the years ended December 31, 2021, 2020 and 2019. Finite-Lived Assets Customer relationship assets are the Company’s largest finite-lived assets and are amortized over 18 to 40 years using a straight-line or accelerated amortization method dependent on the estimated benefits, which reflects the pattern in which economic benefits of intangible assets are expected to be realized by the Company. Customer relationship amortization expense for the years ended December 31, 2021, 2020 and 2019 was $34.2 million, $15.3 million and $7.9 million, respectively. The weighted-average remaining life of the customer relationship assets is 28 years as of December 31, 2021. The Company reviews these intangible assets for impairment when circumstances indicate the carrying amount may not be recoverable. There were no impairments to customer relationship assets for the years ended December 31, 2021, 2020 and 2019. Leasehold Interests - Below Market Leases, Above Market Leases and In-place Lease In reference to certain temperature-controlled warehouses where the Company is the lessee in an acquired business, below-market and above-market leases are amortized on a straight-line basis over the remaining lease terms in a manner that adjusts lease expense to the market rate in effect as of the acquisition date. In reference to certain temperature-controlled warehouses where the Company has a tenant lease assigned through an acquisition, the resulting intangible asset is amortized over the remaining term of the tenant lease and recorded to amortization expense. There were no impairments to leasehold interests for the years ended December 31, 2021, 2020 or 2019. Deferred Financing Costs Direct financing costs are deferred and amortized over the terms of the related agreements as a component of “Interest expense” in the accompanying Consolidated Statements of Operations. The Company amortizes such costs based on the effective interest rate or on a straight-line basis. The Company uses the latter approach when the periodic amortization approximates the amounts calculated under the effective-interest rate method. Deferred financing costs related to revolving line of credits are classified as other assets, whereas deferred financing costs related to debt are offset against the related principal balance, as applicable in the accompanying Consolidated Balance Sheets. Goodwill The Company evaluates the carrying value of goodwill each year as of October 1 and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. When evaluating whether goodwill is impaired, the Company compares the fair value of its reporting units to its carrying amounts, including goodwill. The Company estimates the fair value of its reporting units based upon a combination of the net present value of future cash flows and a market-based approach. Future cash flows are estimated based upon certain economic assumptions. The estimates of future cash flows are subject, but not limited to the following assumptions: revenue growth rates, operating costs and margins, capital expenditures, tax rates, long-term growth rates and discount rates, which are affected by expectations about future market and economic conditions. The assumptions are based on risk-adjusted growth rates and discount factors accommodating multiple viewpoints that consider the full range of variability contemplated in the current and potential future economic situations. The market-based multiples approach assesses the financial performance and market values of other market-participant companies. If the estimated fair value of each of the reporting units exceeds the corresponding carrying value, no impairment of goodwill exists. If a reporting unit’s carrying amount exceeds its fair value, an impairment charge would be recorded for the difference in the fair value and carrying value. If the reporting unit carrying value exceeds the reporting unit fair value an impairment charge is recorded for the difference between fair value and carrying value, limited to the amount of goodwill in the reporting unit. As of October 1, 2021, our reporting units included the following: North America warehouse, North America transportation, North America managed, Europe warehouse, Europe transportation, Asia-Pacific warehouse, Asia-Pacific transportation, Asia-Pacific managed and South America warehouse. There were no goodwill impairment charges for the years ended December 31, 2021, 2020 and 2019. 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). The Company made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer (e.g., sales, use, value added, some excise taxes). Warehouse Revenue The Company’s customer arrangements generally include rent, storage and service elements that are priced separately. 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, management fees, 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. We do not view the operation of the quarry as an integral part of our business, and as a result this business segment was sold on July 1, 2020. 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. Income Taxes The Company operates in a manner intended to enable it to continue to qualify as a REIT under Sections 856-860 of the Code. Under those sections, a REIT that distributes at least 100% of its REIT taxable income, as defined in the Code, as a dividend to its shareholders each year and that meets certain other conditions will not be taxed on that portion of its taxable income that is distributed to its shareholders for U.S. federal income tax purposes. Through cash dividends, the Company, for tax purposes, has distributed an amount equal to or greater than its REIT taxable income for the years ended December 31, 2021, 2020 and 2019. For all periods presented, the Company has met all the requirements to qualify as a REIT. Thus, no provision for federal income taxes was made for the years ended December 31, 2021, 2020 and 2019, except as needed for the Company’s U.S. Taxable REIT Subsidiaries (TRSs), and for the Company’s foreign entities. To qualify as a REIT, an entity cannot have at the end of any taxable year any undistributed earnings and profits that are attributable to a non-REIT taxable year (undistributed E&P). The Company believes that it has no undistributed E&P as of December 31, 2021. However, to the extent there is a determination (within the meaning of Section 852(e)(1)) of the Code that the Company has undistributed earnings and profits (as determined for U.S. federal income tax purposes) accumulated (or acquired from another entity) from any taxable year in which the Company (or any other entity that converts to a Qualified REIT Subsidiary (QRS) that was acquired during the year) was not a REIT or a QRS, the Company will take all necessary steps to permit the Company to avoid the loss of its REIT status, including, but not limited to: 1) within the 90-day period beginning on the date of the determination, making one or more qualified designated distributions (within the meaning of the Section 852(e)(2)) of the Code in an amount not less than such undistributed earnings and profits over the interest payable under section 852(e)(3) of the Code; and 2) timely paying to the IRS the interest payable under Section 852(e)(3) of the Code resulting from such a determination. If the Company fails to qualify as a REIT in any taxable year, it will be subject to U.S. federal income taxes at regular corporate rates and may not be able to qualify as a REIT for the four subsequent taxable years. Even as a REIT, it may be subject to certain state and local income and franchise taxes, and to U.S. federal income and excise taxes on undistributed taxable income and on certain built-in gains. The Company has elected TRS status for certain wholly-owned subsidiaries. This allows the Company to provide services at those consolidated subsidiaries that would otherwise be considered impermissible for REITs. Many of the foreign countries in which we have operations do not recognize REITs or do not grant REIT status under their respective tax laws to our entities that operate in their jurisdiction. Accordingly, the Company recognizes income tax expense for the U.S. federal and state income taxes incurred by the TRSs, taxes incurred in certain U.S. states and foreign jurisdictions, and interest and penalties associated with unrecognized tax benefit liabilities, as applicable. Taxable REIT Subsidiary The Company has elected to treat certain of its wholly owned subsidiaries as TRSs. A TRS is subject to U.S. federal and state income taxes at regular corporate tax rates. Thus, income taxes for the Company’s TRSs are accounted for using the asset and liability method, under which deferred income taxes are recognized for (i) temporary differences between the financial reporting and tax bases of assets and liabilities and (ii) operating loss and tax credit carryforwards based on enacted tax rates expected to be in effect when such amounts are realized or settled. The Company records a valuation allowance for deferred tax assets when it estimates that it is more likely than not that future taxable income will be insufficient to fully use a deduction or credit in a specific jurisdiction. In assessing the need for the recognition of a valuation allowance for deferred tax assets, we consider whether it is more likely than not that some portion, or all, of the deferred tax assets will not be realized and adjust the valuation allowance accordingly. We evaluate all significant available positive and negative evidence as part of our analysis. Negative evidence includes the existence of losses in recent years. Positive evidence includes the forecast of future taxable income by jurisdiction, tax-planning strategies that would result in the realization of deferred tax assets, reversal of existing deferred tax liabilities, and the presence of taxable income in prior carryback years. The underlying assumptions we use in forecasting future taxable income require significant judgment and take into account our recent performance. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which temporary differences are deductible or creditable. The Company accrues liabilities when it believes that it is more likely than not that it will not realize the benefits of tax positions that it has taken in its tax returns or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with ASC 740-10, Uncertain Tax Positions. The Company recognizes interest and penalties related to unrecognized tax benefits within “Income tax (expense) benefit” in the accompanying Consolidated Statements of Operations. The unremitted earnings and basis of certain foreign subsidiaries are indefinitely reinvested, except principally in Canada and Hong Kong. The Company changed its assertion for its Canadian subsidiaries in 2018 to begin repatriating its unremitted earnings to the U.S. starting in 2018. The Company is liquidating its Hong Kong subsidiaries and is no longer asserting permanent reinvestment there. The liquidation will not result in recognition of deferred taxes. If our plans change in the future or if we elect to repatriate the unremitted earnings of our foreign subsidiaries, we would be subject to additional income taxes which could result in a higher effective tax rate. With respect to the foreign subsidiaries owned directly or indirectly by the REIT or Operating Partnership, any unremitted earnings would not be subject to additional U.S. income tax because the REIT would distribute 100% of such earnings or would receive a participation exemption. Pension and Post-Retirement Benefits The Company has defined benefit pension plans that cover certain union and nonunion associates. The Company also participates in multi-employer union defined benefit pension plans under collective bargaining agreements for certain union associates. The Company also has a post-retirement benefit plan to provide life insurance coverage to eligible retired associates. The Company also offers defined contribution plans to all of its eligible associates. Contributions to multi-employer union defined benefit pension plans are expensed as incurred, as are the Company’s contributions to the defined contribution plans. For the defined benefit pension plans and the post-retirement benefit plan, an asset or a liability is recorded in the consolidated balance sheet equal to the funded status of the plan, which represents the difference between the fair value of the plan assets and the projected benefit obligation at the consolidated balance sheet date. The Company utilizes the services of a third-party actuary to assist in the assessment of the fair value of the plan assets and the projected benefit obligation at each measurement date. Certain changes in the value of plan assets and the projected benefit obligation are not recognized immediately in earnings but instead are deferred as a component of accumulated other comprehensive income (loss) and amortized to earnings in future periods. Foreign Currency Gains and Losses The local currency is the functional currency for the Company’s operations in Australia, Canada, Chile, Europe and New Zealand. For these operations, assets and liabilities are translated at the rates of exchange on the consolidated balance sheet date, while income and expense items are translated at average rates of exchange during the period. The resulting gains or losses arising from the translation of accounts from the functional currency into U.S. dollars are included as a separate component of equity in accumulated other comprehensive income (loss) until a partial or complete liquidation of the Company’s net investment in the foreign operation. From time to time, the Company’s foreign operations may enter into transactions that are denominated in a currency other than their functional currency. These transactions are initially recorded in the functional currency of the subsidiary based on the applicable exchange rate in effect on the date of the transaction. On a monthly basis, these transactions are remeasured to an equivalent amount of the functional currency based on the applicable exchange rate in effect on the remeasurement date. Any adjustment required to remeasure a transaction to the equivalent amount of functional currency is recorded in “Foreign currency exchange gain (loss), net” in the accompanying Consolidated Statements of Operations. Foreign currency transaction gains and losses on the remeasurement of short-term intercompany loans denominated in currencies other than a subsidiary’s functional currency are recognized as a component of foreign currency gain or loss, except to the extent that the transaction is effectively hedged. For loans that are effectively hedged, the transaction gains and losses on remeasurement are recorded to “Accumulated other comprehensive income (loss)”. Refer to Note 10 for further details. Foreign currency transaction gains and losses resulting from the remeasurement of long-term intercompany loans denominated in currencies other than a subsidiary’s functional currency are is recorded in “Change in unrealized net gain on foreign currency” on the accompanying Consolidated Statements of Comprehensive (Loss) Income if a repayment of these loans is not anticipated. Certain foreign denominated debt instruments have been designated as a hedge of our net investment in the international subsidiaries which were funded. The remeasurement of these instruments is recorded in “Change in unrealized net gain on foreign currency” on the accompanying Consolidated Statements of Comprehensive (Loss) Income. Refer to Note 10 for further details. Recently Adopted Accounting Standards Defined Benefit Plans Effective January 1, 2021, we adopted ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans, on a retrospective basis. This update amends ASC 715 to remove disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant to defined benefit pension and other postretirement plans. The ASU’s changes related to disclosures are part of the FASB’s disclosure framework project. Adoption of the new standard did not have a material impact on the Company’s consolidated financial statements. Simplifying the Accounting for Income Taxes Effective January 1, 2021, we adopted ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This ASU is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements. Investments - equity securities; Investments—Equity Method and Joint Ventures; Derivatives and Hedging Effective January 1, 2021, we adopted ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in this ASU clarify the interaction between the accounting for investments in equity securities, equity method investments and certain derivatives instruments. The ASU is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. The adoption of this ASU did not have an impact on the Company’s consolidated financial statements. Future Adoption of Accounting Standards Reference Rate Reform In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). This ASU contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

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