Lineage Inc

Previous wording

We are the world’s largest global temperature-controlled warehouse REIT, with a modern and strategically located network of properties. Our business is competitively positioned to deliver a seamless end-to-end, technology-enabled experience for a well-diversified and stable customer base, each with their own unique requirements in the temperature-controlled supply chain. As of June 30, 2024, we operated an interconnected global temperature-controlled warehouse network, comprising over 84.0 million square feet and 2.9 billion cubic feet of capacity across 483 warehouses predominantly located in densely populated critical-distribution markets, with 312 in North America, 83 in Europe, and 88 in Asia-Pacific.

Current wording

We are the world’s largest global temperature-controlled warehouse REIT, with a modern and strategically located network of properties. Our business is competitively positioned to deliver a seamless end-to-end, technology-enabled experience for a well-diversified and stable customer base, each with their own unique requirements in the temperature-controlled supply chain. As of September 30, 2024, we operated an interconnected global temperature-controlled warehouse network, comprising over 85.0 million square feet and 3.0 billion cubic feet of capacity across 487 warehouses predominantly located in densely populated critical-distribution markets, with 313 in North America, 88 in Asia-Pacific, and 86 in Europe.

Previous wording

On July 26, 2024, we closed our IPO of 56,882,051 shares of our common stock at a price of $78.00 per share, with a subsequent exercise in full by the underwriters of their option to purchase from us an additional 8,532,307 shares of common stock that closed on July 31, 2024. The net proceeds to us from the IPO were approximately $4,875 million. In connection with the IPO, we terminated the operating services agreement between our subsidiary, Lineage Holdings, and Bay Grove Management. Additionally, we entered into a transition services agreement with Bay Grove Management, pursuant to which Bay Grove Management is expected to provide certain transition services to support capital deployment, mergers, and acquisitions activities for the three years following our IPO.

Current wording

On July 26, 2024, we closed our IPO of 56,882,051 shares of our common stock at a price of $78.00 per share, with a subsequent exercise in full by the underwriters of their option to purchase from us an additional 8,532,307 shares of common stock that closed on July 31, 2024. The net proceeds to us from the IPO were $4,873 million. In connection with the IPO, we terminated the operating services agreement between our subsidiary, Lineage Holdings, and Bay Grove Management. Additionally, we entered into a transition services agreement with Bay Grove Management, pursuant to which Bay Grove Management is expected to provide certain transition services to support capital deployment, mergers, and acquisitions activities for the three years following our IPO.

Previous wording

Refer to Note 20, Subsequent events in the condensed consolidated financial statements included in this Quarterly Report for more information regarding our IPO-related transactions.

Current wording

Refer to Note 2, Capital structure and noncontrolling interests in the condensed consolidated financial statements included in this Quarterly Report for more information regarding our IPO-related transactions.

Previous wording

Cost of operations. Our global warehousing segment cost of operations consists primarily of labor, power, and other warehouse costs. Labor comprises the largest component of the cost of operations from our global warehousing segment and consists primarily of employee wages (both direct and indirect) and benefits. Changes in our labor expense are driven by, among other things, changes in headcount, changes in compensation levels, and associated performance incentives, the use of third-party labor to support our operations, changes in terms of collective bargaining agreements, changes in customer requirements and associated work content, workforce productivity, labor availability, governmental policies and regulations, and variability in costs associated with employer-provided benefits. Our second-largest cost of operations of our global warehousing segment is electrical power utilized in the operation of our temperature-controlled warehouses. We may, from time to time, hedge our exposure to changes in power prices through fixed rate agreements. In addition, to the extent possible and appropriate, we may seek to mitigate or offset the impact of fluctuations in the price of power on our financial results through rate escalations or power surcharge provisions within our agreements with customers. We also look to implement energy saving alternatives to reduce energy consumption, including the installation of solar panels, state of the art refrigeration control systems, LED lighting, thermal energy storage, motion-sensor technology, variable frequency drives for our fans and compressors, and rapid open/close doors. Additionally, business mix impacts our power expense depending on the temperature zone and type and frequency of freezing required (e.g., blast freezing). Other warehouse costs include utilities other than power, insurance, real estate taxes, repairs and maintenance, rent under real property operating leases where applicable, equipment costs, warehouse consumables (e.g., pallets and shrink-wrap), personal protective equipment, warehouse administration, and other related facility and services costs.

Current wording

Cost of operations. Our global warehousing segment cost of operations consists primarily of labor, power, and other warehouse costs. Labor comprises the largest component of the cost of operations from our global warehousing segment and consists primarily of employee wages (both direct and indirect) and benefits, excluding stock-based compensation. Changes in our labor expense are driven by, among other things, changes in headcount, changes in compensation levels, and associated performance incentives, the use of third-party labor to support our operations, changes in terms of collective bargaining agreements, changes in customer requirements and associated work content, workforce productivity, labor availability, governmental policies and regulations, and variability in costs associated with employer-provided benefits. Our second-largest cost of operations of our global warehousing segment is electrical power utilized in the operation of our temperature-controlled warehouses. We may, from time to time, hedge our exposure to changes in power prices through fixed rate agreements. In addition, to the extent possible and appropriate, we may seek to mitigate or offset the impact of fluctuations in the price of power on our financial results through rate escalations or power surcharge provisions within our agreements with customers. We also look to implement energy saving alternatives to reduce energy consumption, including the installation of solar panels, state of the art refrigeration control systems, LED lighting, thermal energy storage, motion-sensor technology, variable frequency drives for our fans and compressors, and rapid open/close doors. Additionally, business mix impacts our power expense depending on the temperature zone and type and frequency of freezing required (e.g., blast freezing). Other warehouse costs include utilities other than power, insurance, real estate taxes, repairs and maintenance, rent under real property operating leases where applicable, equipment costs, warehouse consumables (e.g., pallets and shrink-wrap), personal protective equipment, warehouse administration, and other related facility and services costs.

Previous wording

Cost of operations. Our global integrated solutions cost of operations consists primarily of third-party carrier charges, which are impacted by factors affecting those carriers, including truck and ocean liner capacity and driver and equipment availability in certain markets. Additionally, in certain markets we employ drivers and operate assets to serve our customers. Costs to operate these assets include wages, fuel, tolls, insurance, and maintenance.

Current wording

Cost of operations. Our global integrated solutions cost of operations consists primarily of third-party carrier charges, which are impacted by factors affecting those carriers, including truck and ocean liner capacity and driver and equipment availability in certain markets. Additionally, in certain markets we employ drivers and operate assets to serve our customers. Costs to operate these assets include wages (excluding stock-based compensation), fuel, tolls, insurance, and maintenance.

Previous wording

Depreciation and amortization expenses. Our depreciation and amortization expenses result primarily from the capital-intensive nature of our business. The principal components of depreciation relate to our warehouses, both owned and leased, including buildings and improvements, refrigeration equipment, racking, leasehold improvements, material handling equipment, furniture and fixtures, and our computer hardware and software. We also incur depreciation related to owned transportation assets. Amortization relates primarily to intangible assets for customer relationships and finance lease right-of-use assets.

Current wording

Depreciation and amortization expenses. Our depreciation and amortization expenses result primarily from the capital-intensive nature of our business. The principal components of depreciation relate to our warehouses, both owned and leased, including buildings and improvements, refrigeration equipment, racking, leasehold improvements, material handling equipment, furniture and fixtures, and our computer hardware and internal use software. We also incur depreciation related to owned transportation assets. Amortization relates primarily to intangible assets for customer relationships and finance lease right-of-use assets.

Previous wording

Acquisition, transaction, and other expenses. Our acquisition, transaction, and other expenses consist of costs with a high level of variability from period-to-period and include professional fees associated with planned and completed business expansion activities, acquisition integration costs, and costs related to public company readiness efforts. These costs are expensed as incurred. It also includes employee-related expenses associated with acquisitions, such as acquisition-related severance and consulting agreements and certain cash-based incentive awards given to employees of legacy companies in acquisitions.

Current wording

Acquisition, transaction, and other expenses. Our acquisition, transaction, and other expenses consist of costs with a high level of variability from period-to-period and include professional fees associated with planned and completed business expansion activities, and acquisition integration costs. In addition, it includes expenses associated with our IPO, including costs related to public company readiness efforts and costs incurred as a result of our IPO in the third quarter of 2024 (see Note 2, Capital structure and noncontrolling interests to the condensed consolidated financial statements included in this Quarterly Report for further detail on costs associated with our IPO). These costs are expensed as incurred. It also includes employee-related expenses associated with acquisitions, such as acquisition-related severance and consulting agreements and certain cash-based incentive awards given to employees of legacy companies in acquisitions.

Previous wording

•Labor. Following headwinds in recent years from wage inflation, labor shortages, and team member turnover, our team has focused on strategic initiatives to decrease turnover through higher wages, engagement best practices, and training to help retain talent. Retention has improved due to these internal efforts and macroeconomic factors.

Current wording

•Labor. Following headwinds in recent years from wage inflation, labor shortages, and team member turnover, our team has focused on strategic initiatives to decrease turnover through our stock-based compensation awards, higher wages, engagement best practices, and training to help retain talent. Retention has improved due to these internal efforts and macroeconomic factors.

Previous wording

We seek to maximize energy efficiency in our warehouses including the latest technology and alternative energy generation practices. The technologies we deploy include variable frequency drives, refrigeration control systems, rapid close doors, motion sensor technology, LED lighting, and “flywheeling”— an innovative process that leverages machine learning and artificial intelligence to manage energy load based on predictions of peak demand. We also generate alternative sources of energy primarily through the deployment of solar, battery capacity, and linear generators. These initiatives have allowed us to reduce our consumption of kilowatt hours, optimize rates, and reduce overall energy costs.

Current wording

We seek to maximize energy efficiency in our warehouses by using the latest technology and alternative energy generation practices. The technologies we deploy include variable frequency drives, refrigeration control systems, rapid close doors, motion sensor technology, LED lighting, and “flywheeling”— an innovative process that leverages machine learning and artificial intelligence to manage energy load based on predictions of peak demand. We also generate alternative sources of energy primarily through the deployment of solar, battery capacity, and linear generators. These initiatives have allowed us to reduce our consumption of kilowatt hours, optimize rates, and reduce overall energy costs.

Previous wording

Segment Net Operating Income or “NOI”

Current wording

Segment Net Operating Income or “Segment NOI”

Previous wording

We evaluate the performance of our business segments based on their net operating income relative to our overall results of operations. We use the term “segment net operating income” or “segment NOI” to mean a segment’s revenues less its cost of operations (excluding any depreciation and amortization, impairment charges, general and administrative expenses, acquisition, transaction, and other expense and restructuring and impairment expenses). We use segment NOI to evaluate our segments for purposes of making operating decisions and assessing performance in accordance with Accounting Standards Codification (“ASC”) 280, Segment Reporting.

Current wording

We evaluate the performance of our business segments based on their net operating income relative to our overall results of operations. We use the term “segment net operating income” or “segment NOI” to mean a segment’s revenues less its cost of operations (excluding any depreciation and amortization, impairment charges, general and administrative expenses, stock-based compensation expense, restructuring and impairment expense, gains and losses on sale of assets, and acquisition, transaction, and other expenses). We use segment NOI to evaluate our segments for purposes of making operating decisions and assessing performance in accordance with Accounting Standards Codification (“ASC”) 280, Segment Reporting.

Previous wording

We calculate “same warehouse NOI” as revenues for the same warehouse population less its cost of operations (excluding any depreciation and amortization, general and administrative expenses, acquisition, transaction, and other expense, restructuring and impairment expenses and gain or loss on sale of assets). We evaluate the performance of the warehouses we own, lease, or manage using a “same warehouse” analysis, and we believe that same warehouse NOI is helpful to investors as a supplemental performance measure because it includes the operating performance from the population of properties that is consistent from period to period, thereby eliminating the effects of changes in the composition of our warehouse portfolio on performance measures.

Current wording

We calculate “same warehouse NOI” as revenues for the same warehouse population less its cost of operations (excluding any depreciation and amortization, general and administrative expenses, stock-based compensation expense, restructuring and impairment expense, gains and losses on sale of assets, and acquisition, transaction, and other expense). We evaluate the performance of the warehouses we own, lease, or manage using a “same warehouse” analysis, and we believe that same warehouse NOI is helpful to investors as a supplemental performance measure because it includes the operating performance from the population of properties that is consistent from period to period, thereby eliminating the effects of changes in the composition of our warehouse portfolio on performance measures.

Previous wording

We define average economic occupancy as the aggregate number of physical pallets on hand and any additional pallet positions otherwise contractually committed and paid for by customers for a given period divided by the approximate number of average physical pallet positions in our warehouse for the applicable period. We estimate the number of contractually committed pallet positions by taking into account the actual pallet commitment specified in each customer’s warehouse agreement and subtracting the physical pallets on hand for that customer. We regard economic occupancy as an important driver of our financial results. We plan to expand our use of minimum storage guarantees that pay us minimum or fixed storage fees for pallet positions whether or not a minimum number of pallet positions are physically occupied. We actively seek to enter into minimum storage guarantees when establishing new customer agreements, renewing existing customer agreements or upon a change in the anticipated profile of our customer. We believe that transitioning certain customer contracts from on-demand, as-utilized structures to minimum storage guarantee structures will drive NOI growth and consistency by maintaining our storage revenues during periods of lower inventories.

Current wording

We define average economic occupancy as the aggregate number of physical pallets on hand and any additional pallet positions otherwise contractually committed and paid for by customers for a given period divided by the approximate number of average physical pallet positions in our warehouse for the applicable period. We estimate the number of contractually committed pallet positions by taking into account the actual pallet commitment specified in each customer’s warehouse agreement and subtracting the physical pallets on hand for that customer. We regard economic occupancy as an important driver of our financial results. We plan to expand our use of minimum storage guarantees that pay us minimum or fixed storage fees for pallet positions whether or not a minimum number of pallet positions are physically occupied. We actively seek to enter into minimum storage guarantees when establishing new customer agreements, renewing existing customer agreements or upon a change in the anticipated profile of our customer. We believe that transitioning certain customer contracts from on-demand, as-utilized structures to minimum storage guarantee structures will drive segment NOI growth and consistency by maintaining our storage revenues during periods of lower inventories.

Previous wording

(1)Includes real estate rent expense of $50 million and $47 million for the six months ended June 30, 2024 and 2023, respectively; non-real estate rent expense (equipment lease and rentals) of $9 million and $11 million for the six months ended June 30, 2024 and 2023, respectively.

Current wording

(2)Includes real estate rent expense of $25 million and $24 million for the three months ended September 30, 2024 and 2023, respectively, and non-real estate rent expense (equipment lease and rentals) of $3 million and $5 million for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

Global warehousing segment revenues were $966 million for the three months ended June 30, 2024, an increase of $2 million, or 0.2%, compared to $964 million for the three months ended June 30, 2023. Revenues were driven by an approximate $16 million increase from our recently completed and in-progress expansion and development projects and an approximate $14 million increase from acquisitions. This growth was offset by a $21 million decrease in our same warehouse pool and an $8 million decrease from closed facilities. In addition, the foreign currency translation of revenues earned by our foreign operations had a $3 million unfavorable impact compared to the three months ended June 30, 2023.

Current wording

Global warehousing segment revenues were $972 million for the three months ended September 30, 2024, an increase of $12 million, or 1.3%, compared to $960 million for the three months ended September 30, 2023. The increase in revenues was driven by an approximate $17 million increase from acquisitions and an approximate $15 million increase from our recently completed and in-progress expansion and development projects. This growth was offset by a $15 million decrease from other non-same warehouse sites, including closed facilities, and a $5 million decrease in our same warehouse pool. The decrease in our same warehouse pool was primarily driven by lower utilization and throughput volumes, partially offset by a favorable increase in rates. In addition, the foreign currency translation of revenues earned by our foreign operations had a $3 million favorable impact compared to the three months ended September 30, 2023.

Previous wording

Global warehousing segment cost of operations was $582 million for the three months ended June 30, 2024, a decrease of $1 million, or 0.2%, compared to $583 million for the three months ended June 30, 2023. The cost of operations for our same warehouse pool decreased $13 million, representing decreases across power and other warehouse costs. In addition, there was a $6 million decrease in cost of operations from closed facilities. These cost decreases were offset by increases of approximately $8 million from the additional facilities we acquired in connection with the above-mentioned acquisitions and approximately $7 million related to our recently completed and in-progress expansion and development projects. In addition, the foreign currency translation of cost of operations from our foreign operations had a $2 million favorable impact compared to the three months ended June 30, 2023.

Current wording

Global warehousing segment cost of operations was $589 million for the three months ended September 30, 2024, a decrease of $4 million, or 0.7%, compared to $593 million for the three months ended September 30, 2023. The cost of operations for our same warehouse pool decreased $13 million, representing decreases across labor and other warehouse costs. In addition, there was a $10 million decrease in cost of operations from other non-same warehouse sites, including closed facilities. These cost decreases were offset by increases of approximately $11 million from the additional facilities we acquired in connection with the above-mentioned acquisitions and approximately $8 million related to our recently completed and in-progress expansion and development projects. In addition, the foreign currency translation of cost of operations from our foreign operations had a $3 million unfavorable impact compared to the three months ended September 30, 2023.

Previous wording

Global warehousing segment NOI was $384 million for the three months ended June 30, 2024, an increase of $3 million, or 0.8%, compared to $381 million for the three months ended June 30, 2023. The NOI for our same warehouse pool decreased $8 million or 2.3%, attributable to revenue and cost of operations factors previously described. In addition, there was a $2 million net decrease in NOI from closed facilities. Global warehousing segment NOI was positively impacted by approximately $9 million related to our recently completed and in-process expansion and development projects as they continue to ramp up prior to stabilization and approximately $6 million related to the above mentioned acquisitions. Foreign currency translation had a $1 million unfavorable impact to the global warehousing segment NOI period-over-period.

Current wording

Global warehousing segment NOI was $383 million for the three months ended September 30, 2024, an increase of $16 million, or 4.4%, compared to $367 million for the three months ended September 30, 2023. The segment NOI for our same warehouse pool increased $8 million or 2.4%, attributable to revenue and cost of operations factors previously described. In addition, segment NOI was positively impacted by approximately $7 million related to our recently completed and in-process expansion and development projects as they continue to ramp up prior to stabilization and approximately $6 million related to the above-mentioned acquisitions. These were offset by a $5 million net decrease from other non-same warehouse sites, including closed facilities.

Previous wording

The following table presents revenues, cost of operations, NOI, and margins for our same warehouses for the three months ended June 30, 2024 and June 30, 2023.

Current wording

The following table presents revenues, cost of operations, same warehouse NOI, and margins for our same warehouses for the three months ended September 30, 2024 and September 30, 2023.

Previous wording

Economic occupancy at our same warehouses was 84.1% for the three months ended June 30, 2024, a decrease of 300 basis points compared to 87.1% for the three months ended June 30, 2023. Our economic occupancy at our same warehouses was 660 basis points higher than our corresponding average physical occupancy of 77.5%. Economic occupancy was lower than the prior year due to lower physical utilization as customers rationalized their inventory during continued economic pressures driven by higher interest rates. Same warehouse storage revenues per economic occupied pallet decreased 0.3% period-over-period, primarily driven by a change in our business profile due to customer rationalization of inventory.

Current wording

Economic occupancy at our same warehouses was 84.1% for the three months ended September 30, 2024, a decrease of 190 basis points compared to 86.0% for the three months ended September 30, 2023. Our economic occupancy at our same warehouses was 650 basis points higher than our corresponding average physical occupancy of 77.6%. Economic occupancy was lower than the prior year due to lower physical utilization as customers rationalized their inventory during continued economic pressures driven by higher interest rates. Same warehouse storage revenues per economic occupied pallet decreased 0.9% period-over-period, primarily driven by a change in our business profile due to customer rationalization of inventory.

Previous wording

Throughput pallets at our same warehouses were 11.4 million pallets for the three months ended June 30, 2024, a decrease of 1.3% from 11.5 million pallets for the three months ended June 30, 2023. This decrease was the result of lower turns due to continued economic pressures driven by higher interest rates. Same warehouse services revenue per throughput pallet decreased 0.2% compared to the prior year, primarily driven by a change in our business profile due to customer rationalization of inventory.

Current wording

Throughput pallets at our same warehouses were 11.3 million pallets for the three months ended September 30, 2024, a decrease of 1.7% from 11.5 million pallets for the three months ended September 30, 2023. The decrease was the result of lower turns due to continued economic pressures driven by higher interest rates. Same warehouse services revenue per throughput pallet increased 3.7% compared to the prior year, primarily driven by a change in our business profile due to customer rationalization of inventory.

Previous wording

The following tables present revenues, cost of operations, NOI, and margins for our non-same warehouses for the three months ended June 30, 2024 and 2023.

Current wording

The following table presents revenues, cost of operations, non-same warehouse NOI, and margins for our non-same warehouses for the three months ended September 30, 2024 and 2023.

Previous wording

Global integrated solutions segment revenues were $372 million for the three months ended June 30, 2024, a decrease of $10 million, or 2.6%, compared to $382 million for the three months ended June 30, 2023. The decrease was due to lower volumes and fuel surcharges and the sale of a European subsidiary which occurred in September 2023, offset by increases from acquisitions which closed in the fourth quarter of 2023.

Current wording

Global integrated solutions segment revenues were $363 million for the three months ended September 30, 2024, a decrease of $6 million, or 1.6%, compared to $369 million for the three months ended September 30, 2023. The decrease was due to lower volumes and the sale of a European subsidiary which occurred in September 2023, offset by increases from acquisitions. In addition, the foreign currency translation of revenues earned by our foreign operations had a $3 million favorable impact compared to the three months ended September 30, 2023.

Previous wording

Global integrated solutions segment cost of operations was $609 million for the six months ended June 30, 2024, a decrease of $31 million, or 4.8%, compared to $640 million for the six months ended June 30, 2023. The decrease was due to lower volumes, cost controls, and the above-mentioned sale of a European subsidiary, offset by increases from the above-mentioned 2023 acquisitions.

Current wording

Global integrated solutions segment cost of operations was $307 million for the three months ended September 30, 2024, an increase of $1 million, or 0.3%, compared to $306 million for the three months ended September 30, 2023. The net increase included the above-mentioned acquisitions, partially offset by lower costs driven by volumes, cost controls, and the above-mentioned sale of a European subsidiary. Theforeign currency translation of cost of operations from our foreign operations had a $2 million unfavorable impact compared to the three months ended September 30, 2023.

Previous wording

Global integrated solutions segment NOI was $63 million for the three months ended June 30, 2024, an increase of $3 million, or 5.0%, compared to $60 million for the three months ended June 30, 2023.

Current wording

Global integrated solutions segment NOI was $56 million for the three months ended September 30, 2024, a decrease of $7 million, or 11.1%, compared to $63 million for the three months ended September 30, 2023. Foreign currency translation had a $1 million favorable net impact compared to the three months ended September 30, 2023.

Previous wording

Depreciation and amortization expense. Depreciation and amortization expense was $219 million for the three months ended June 30, 2024, an increase of $31 million, or 16.5%, compared to $188 million for the three months ended June 30, 2023. The increase was primarily due to information technology investments, acquisitions, and greenfield and expansion projects.

Current wording

Depreciation and amortization expense. Depreciation and amortization expense was $210 million for the three months ended September 30, 2024, an increase of $22 million, or 11.7%, compared to $188 million for the three months ended September 30, 2023. The increase was primarily due to information technology investments, acquisitions, and greenfield and expansion projects.

Previous wording

The increase in general and administrative expense was primarily due to growing our global platform in support of our expanding operations. We expect our general and administrative expenses to stabilize and generate operating leverage. For the three months ended June 30, 2024 and 2023, general and administrative expenses were 9.5% and 9.2% of total revenues, respectively.

Current wording

General and administrative expense. General and administrative expenses were $143 million for the three months ended September 30, 2024, an increase of $21 million, or 17.2%, compared to $122 million for the three months ended September 30, 2023. The increase was primarily driven by higher stock-based compensation expense related to our annual grants. We expect our general and administrative expenses to stabilize over time and generate operating leverage. For the three months ended September 30, 2024 and 2023, general and administrative expenses were 10.7% and 9.2% of total revenues, respectively.

Previous wording

Restructuring, impairment, and (gain) loss on disposals. Restructuring, impairment, and (gain) loss on disposals were net expenses of $15 million for the three months ended June 30, 2024, an increase of $12 million compared to net expenses of $3 million for the three months ended June 30, 2023. The increase was related to impairment charges primarily resulting from losses on properties classified as held for sale and higher severance expenses. The three months ended June 30, 2024 also included a net loss of $1 million related to a fire which occurred at the Company’s warehouse in Kennewick, Washington (see Note 16, Commitments and contingencies in our condensed consolidated financial statements included in this Quarterly Report for details).

Current wording

Restructuring, impairment, and (gain) loss on disposals. Restructuring, impairment, and (gain) loss on disposals were net expenses of $8 million for the three months ended September 30, 2024, an increase of $4 million compared to net expenses of $4 million for the three months ended September 30, 2023. The increase was related to higher impairment expense primarily related to properties sold or classified as held for sale and higher severance costs. Partially offsetting these increases, the three months ended September 30, 2024 also included a net gain of $5 million related to a fire which occurred at the Company’s warehouse in Kennewick, Washington (see Note 17, Commitments and contingencies in our condensed consolidated financial statements included in this Quarterly Report for details).

Previous wording

Interest (expense), net. Interest (expense), net was $148 million for the three months ended June 30, 2024, an increase of $32 million, or 27.6%, compared to $116 million for the three months ended June 30, 2023. The average effective interest rate of our outstanding debt increased from 5.6% for the three months ended June 30, 2023 to 6.3% for the three months ended June 30, 2024, due to higher average borrowings paired with rising interest rates associated primarily with our credit facilities and CMBS loans. When taking into account income (expense) generated from those hedging instruments, the average effective interest rate of our outstanding debt increased from 4.3% for the three months ended June 30, 2023 to 5.2% for the three months ended June 30, 2024.

Current wording

Interest (expense), net. We reported a net interest expense of $82 million for the three months ended September 30, 2024, a decrease of $44 million, or 34.9%, compared to $126 million for the three months ended September 30, 2023. The average effective interest rate of our outstanding debt was 5.8% for the three months ended September 30, 2024, a decrease from 6.2% for the three months ended September 30, 2023, primarily due to the substantial debt repayments with IPO proceeds. When taking into account income (expense) generated from hedging instruments, the average effective interest rate of our outstanding debt was 4.2% for the three months ended September 30, 2024, a decrease from 4.8% for the three months ended September 30, 2023.

Previous wording

Gain (loss) on foreign currency transactions, net. We reported a net foreign currency exchange gain of $2 million for the three months ended June 30, 2024, compared to a net loss of $3 million for the three months ended June 30, 2023. The increase in foreign currency exchange gain was due to more favorable foreign currency exchange rates driven by the relative strength of the foreign currencies we transact in, primarily the Australian dollar, against the US dollar.

Current wording

Gain (loss) on foreign currency transactions, net. We reported a net foreign currency exchange gain of $14 million for the three months ended September 30, 2024, compared to a net loss of $5 million for the three months ended September 30, 2023. The increase in foreign currency exchange gain was due was due to more favorable foreign currency exchange rates against the U.S. dollar, with the largest impacts driven by the Euro and Australian dollar.

Previous wording

Equity income (loss), net of tax. We reported a net loss from equity method investments of $1 million for the three months ended June 30, 2024, compared to no net income (loss) for the three months ended June 30, 2023, primarily related to our investments in Emergent Cold LatAm Holdings, LLC and Ndustrial.io.

Current wording

Equity income (loss), net of tax. We reported less than $1 million of net income (loss) from equity method investments for the three months ended September 30, 2024, compared to a net loss of $2 million for the three months ended September 30, 2023, primarily related to our investment in Emergent Cold LatAm Holdings, LLC.

Previous wording

Income tax benefit for the six months ended June 30, 2024 was $3 million, which was consistent with the income tax benefit of $3 million for the six months ended June 30, 2023. The tax benefit in 2024 was principally created by tax-effect of pre-tax earnings in various jurisdictions, tax adjustments related to REIT activity, and withholding taxes paid in various jurisdictions. The tax benefit in 2023 was principally created by tax-effect of pre-tax earnings and losses in various jurisdictions, tax adjustments related to REIT activity, and changes to uncertain tax positions. Our income taxes are discussed in more detail in Note 8, Income taxes to the condensed consolidated financial statements included in this Quarterly Report.

Current wording

Income tax benefit for the three months ended September 30, 2024 was $45 million, which represented an increase of $40 million from an income tax benefit of $5 million for the three months ended September 30, 2023. The tax benefit in 2024 was principally created by the release of a $24 million valuation allowance on deferred tax assets relating to net operating losses carryforwards in the U.S., the tax-effect of pre-tax earnings in various jurisdictions, tax adjustments related to REIT activity, and withholding taxes paid in various jurisdictions. The tax expense (benefit) in 2023 was principally created by tax-effect of pre-tax earnings and losses in various jurisdictions, tax adjustments related to REIT activity, and changes to uncertain tax positions. Our income taxes are discussed in more detail in Note 8, Income taxes to the condensed consolidated financial statements included in this Quarterly Report.

Previous wording

Comparison of Results for the Six Months Ended June 30, 2024 and 2023

Current wording

Comparison of Results for the Nine Months Ended September 30, 2024 and 2023

Previous wording

The following table presents the operating results of our warehouse segment for the six months ended June 30, 2024 and 2023.

Current wording

The following table presents the operating results of our warehouse segment for the nine months ended September 30, 2024 and 2023.

Previous wording

(1)Includes real estate rent expense of $25 million for the three months ended June 30, 2024 and $25 million for the three months ended June 30, 2023, and non-real estate rent expense (equipment lease and rentals) of $4 million for the three months ended June 30, 2024 and $4 million for the three months ended June 30, 2023.

Current wording

(2)Includes real estate rent expense of $75 million and $71 million for the nine months ended September 30, 2024 and 2023, respectively, and non-real estate rent expense (equipment lease and rentals) of $12 million and $16 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Global warehousing segment NOI was $769 million for the six months ended June 30, 2024, an increase of $2 million, or 0.3%, compared to $767 million for the six months ended June 30, 2023. Global warehousing segment NOI was positively impacted by approximately $16 million related to our recently completed and in-process expansion and development projects as they continue to ramp up prior to stabilization and approximately $10 million related to the above mentioned acquisitions. These were offset by a decrease from our same warehouse pool of $18 million or 2.5%, attributable the to revenue and cost of operations factors previously described. In addition, there was a $5 million net decrease in NOI from closed facilities. Foreign currency translation had a $1 million unfavorable impact compared to the six months ended June 30, 2023.

Current wording

Global warehousing segment NOI was $1,152 million for the nine months ended September 30, 2024, an increase of $18 million, or 1.6%, compared to $1,134 million for the nine months ended September 30, 2023. Global warehousing segment NOI was positively impacted by approximately $21 million related to our recently completed and in-process expansion and development projects as they continue to ramp up prior to stabilization and approximately $19 million related to the above mentioned acquisitions. These were offset by a decrease from our same warehouse pool of $10 million, or 1.0%, attributable to the revenue and cost of operations factors previously described. In addition, there was a $12 million net decrease from other non-same warehouse sites including closed facilities.

Previous wording

Economic occupancy at our same warehouses was 84.4% for the six months ended June 30, 2024, a decrease of 360 basis points compared to 88.0% for the six months ended June 30, 2023. Our economic occupancy at our same warehouses was 640 basis points higher than our corresponding average physical occupancy of 78.0%. Economic occupancy was lower than the prior year due to lower physical utilization as customers rationalize their inventory during continued economic pressures driven by higher interest rates. Same warehouse storage revenues per economic occupied pallet increased 1.0% period-over-period, primarily driven by a change in our business profile due to customer rationalization of inventory.

Current wording

Economic occupancy at our same warehouses was 84.3% for the nine months ended September 30, 2024, a decrease of 300 basis points compared to 87.3% for the nine months ended September 30, 2023. Our economic occupancy at our same warehouses was 650 basis points higher than our corresponding average physical occupancy of 77.8%. Economic occupancy was lower than the prior year due to lower physical utilization as customers rationalize their inventory during continued economic pressures driven by higher interest rates. Same warehouse storage revenues per economic occupied pallet increased 0.3% period-over-period, primarily driven by a change in our business profile due to customer rationalization of inventory.

Previous wording

Throughput pallets at our same warehouses were 22.5 million pallets for the six months ended June 30, 2024, a decrease of 1.9% from 23.0 million pallets for the six months ended June 30, 2023. This decrease was the result of lower turns due to continued economic pressures driven by higher interest rates. Same warehouse services revenue per throughput pallet increased 0.5% compared to the prior year, primarily driven by a change in our business profile due to customer rationalization of inventory.

Current wording

Throughput pallets at our same warehouses were 33.6 million pallets for the nine months ended September 30, 2024, a decrease of 2.0% from 34.3 million pallets for the nine months ended September 30, 2023. This decrease was the result of lower turns due to continued economic pressures driven by higher interest rates. Same warehouse services revenue per throughput pallet increased 1.6% compared to the prior year, primarily driven by a change in our business profile due to customer rationalization of inventory.

Previous wording

Global integrated solutions segment revenues were $731 million for the six months ended June 30, 2024, a decrease of $26 million, or 3.4%, compared to $757 million for the six months ended June 30, 2023. The decrease was due to lower volumes and fuel surcharges and the sale of a European subsidiary which occurred in September 2023, offset by increases from acquisitions which closed in the fourth quarter of 2023.

Current wording

Global integrated solutions segment revenues were $1,094 million for the nine months ended September 30, 2024, a decrease of $32 million, or 2.8%, compared to $1,126 million for the nine months ended September 30, 2023. The decrease was due to lower volumes and the sale of a European subsidiary which occurred in September 2023, offset by increases from acquisitions. In addition, the foreign currency translation of revenues earned by our foreign operations had a $5 million favorable impact compared to the nine months ended September 30, 2023.

Previous wording

Global integrated solutions segment cost of operations was $309 million for the three months ended June 30, 2024, a decrease of $13 million, or 4.0%, compared to $322 million for the three months ended June 30, 2023. The decrease was due to lower volumes, cost controls, and the above-mentioned sale of a European subsidiary, offset by increases from the above-mentioned 2023 acquisitions.

Current wording

Global integrated solutions segment cost of operations was $916 million for the nine months ended September 30, 2024, a decrease of $30 million, or 3.2%, compared to $946 million for the nine months ended September 30, 2023. The decrease was due to lower volumes, cost controls, and the above-mentioned sale of a European subsidiary, offset by increases from the above-mentioned acquisitions. Theforeign currency translation of cost of operations from our foreign operations had a $4 million unfavorable impact compared to the nine months ended September 30, 2023.

Previous wording

Depreciation and amortization expense. Depreciation and amortization expense was $430 million for the six months ended June 30, 2024, an increase of $61 million, or 16.5%, compared to $369 million for the six months ended June 30, 2023. The increase was primarily due to information technology investments, acquisitions, and greenfield and expansions projects.

Current wording

Depreciation and amortization expense. Depreciation and amortization expense was $640 million for the nine months ended September 30, 2024, an increase of $83 million, or 14.9%, compared to $557 million for the nine months ended September 30, 2023. The increase was primarily due to information technology investments, acquisitions, and greenfield and expansion projects.