Greetings, and welcome to the Americold Realty Trust First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kara Smith, Investor Relations.

Good afternoon. We would like to thank you for joining us today for Americold Realty Trust First Quarter 2019 Earnings Conference Call. In addition to the press release distributed this afternoon, we have filed a supplemental package with additional detail on our results, which is available in the Investors section on our Web site at www.americold.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. A number of factors could cause actual results to differ materially from those anticipated. Forward-looking statements are based on current expectations, assumptions and beliefs as well as information available to us at this time and speak only as of the date they are made. Management undertakes no obligation to update publicly any of them in light of new information or future events. During this call, we will discuss certain non-GAAP financial measures. More information about these non-GAAP financial measures and reconciliations to the comparable GAAP financial measures is contained in the supplemental information package available on the company's Web site. We would also like to note that numbers presented in today's prepared remarks have been rounded to the nearest million with the exception of per share amounts. This afternoon's conference call is hosted by Americold's Chief Executive Officer, Fred Boehler; and Executive Vice President and Chief Financial Officer, Marc Smernoff. Management will make some prepared comments, after which, we will open up the call for your questions. Now, I will turn the call over to Fred.

Thanks, Kara. Thank you and welcome to our first quarter 2019 earnings conference call. This afternoon, I will provide highlights for the first quarter and discuss our exciting and significant transaction activity completed post quarter-end. Marc will follow with a summary of our first quarter results and then review our balance sheet, capital markets activity and outlook. After our prepared remarks, we will open the call for your questions. Beginning with the first quarter, we reported revenue growth in our Global Warehouse segment of 1.1% and NOI growth of 1.4%. We would note this quarter we were meaningfully impacted by currency fluctuations associated with the strength of the U.S. dollar and adjusting for that impact, revenue growth in our Global Warehouse segment would have been 3.4% and our NOI would have grown by 2.7%. With regard to our overall business, fundamentals in the temperature controlled warehouse industry remains strong. Demand continues to be steady supported by consumption growth and favorable secular trend. At the same time, high barriers to entry including high cost, customer relationship and operational expertise serve to keep supply growth in line with market growth. We believe owning the right assets in the right locations together with our customer-centric focus through which we partner with our customers to integrate their supply chain is the right long-term approach for consistent and profitable growth. Turning to our development activity, we continue to make progress on all fronts. In Chicago at our state-of-the-art expansion project, we have received our certificate of occupancy for Phase 1 of the building and our large anchor customer began inbounding product at the end of the quarter. We expect that Phase 2 of the building will be completed this quarter and we have signed an agreement with the customer for 7% of the capacity taking…

Thank you, Fred, and good afternoon, everyone. Today, we will provide updates on our actual performance as well as certain metrics on a constant currency basis as our results were meaningfully impacted by the strength of the U.S. dollar this quarter. In addition, certain items may not be comparable to prior year due to the changes in our capital structure in the first quarter of 2018. For the first quarter 2019, we reported total revenue of 393 million and total contribution or NOI of 99 million, which reflects a 0.5% increase and a 1.4% increase over the prior year, respectively. On a constant currency basis, these growth rates would have been 2.8% and 3%, respectively. Core EBITDA was 71 million for the first quarter of 2019, a slight decrease of 0.8% year-over-year. As a result, our core EBITDA margin contracted by 24.3 basis points to 18.1%. On a constant currency basis, core EBITDA would have been 72 million, an increase of 0.7% year-over-year. While our overall operations remain on plan, in addition to currency, we had certain items this quarter that impacted our comparison year-over-year. With regard to workers’ comp, we had a 1 million unfavorable comparison year-over-year. Recall that in 2018 in the first quarter, we had a 1 million favorable comparison for workers’ comp that did not recur. Also, healthcare costs were higher by 1 million year-over-year driven by the timing and nature of activity incurred during the first quarter of 2019. It is important to remember that these modest quarterly variations are normal in our business, which is one of the reasons we believe it is important to look at our results on an annual basis. We reported a net loss of 5 million compared to a net loss of 9 million for the same quarter of…

Thanks, Marc. We are proud of all we have accomplished since the start of the year. We continue to leverage our portfolio, operations, talent and technology to profitably serve our customers and drive long-term shareholder value. We are very excited about the external growth pipeline including our recent acquisitions and our development projects, which we believe represent significant long-term growth and value creation opportunities for the Company. I’d like to thank all of our associates for their continued outstanding contributions to advance this business. I’d also like to welcome the 1,600 employees that have just joined us from Cloverleaf, Zero Mountain and Lanier. We are excited about what this combined team of just under 13,000 employees can do to add value to our customers and shareholders. Thanks again for joining us today and we will now open the call for your questions. Operator?

[Operator Instructions]. Our first question comes from the line of Ki Bin Kim with SunTrust. Please proceed with your questions.

Thanks. First off, congratulations on the Cloverleaf deal.

Thanks.

I wanted to focus a little bit more on the core operations and everything I’m going to talk about here is going to be on a constant currency basis. I’m just trying to get a sense of how much the Easter shift mattered. The one extra day in the quarter, I’m not sure how much that matters, but it seems like very little to me, but your same-store revenue declined – same-store revenue growth declined to 2.7% versus 4.5% last quarter. NOI went up on a constant currency basis, 1.5% versus 6.9% last quarter. So just trying to get a better sense of like the puts and takes.

Yes, so I’ll make a quick comment and then turn it over to Marc on the financial side. But just kind of understanding Easter flow and typically what happens is obviously production starts to ramp up, storage starts to ramp up ahead of the holiday. And then about two weeks before Easter, product really starts to flow from a throughput standpoint out of our warehouses down the channel to retail warehouses, which then in turn get the product to the store. Usually, Easter is a little bit earlier in the year. It’s very, very late this year. So usually it kind of straddles two quarters; first quarter, second quarter, so you got a build happening in the first quarter and then sometimes the release of product to the stores happen also in the first quarter when there’s an early Easter. Sometimes they can straddle and the outflow will happen in the first two weeks. So in this particular case, Easter was so late that the whole flow outbound to the stores really occurred in the second quarter versus the first quarter.

And then just to answer the final part about the one less workday. Each workday translates to about $2 million of services revenue, which impacts our overall growth rate in this quarter by 70 basis points.

70 basis points to the NOI or to the revenue?

To revenue.

Right. So on the 2.7% same-store revenue growth, I mean if – I’m sure you guys can look at it neutralizing the shift of Easter. If you neutralize it, what would that be?

As we said, we reiterate looking at our business on the full year basis and if we think about it, we reiterated our same-store guidance in the same-store portfolio, which on the top line revenue was roughly 2% to 4% on an annual basis constant currency. So the 2.7% constant currency is right in line with what we’d expect the portfolio.

Okay. Your total pallet position if you look at it year-over-year is down 50 basis points. I’m just a little curious why there’s even a change in total pallet positions, assuming in the same-store pool?

Yes, so remember the same-store pool does change period to period. As an example, this quarter we pulled out [indiscernible] facility, which is attached to our development project cause that now will no longer comp as a same-store given that we started launching the next phase of the expansion of that building and we added two additional sites. So what that changes is the impact of the same-store, but the other thing that does go on period-over-period is the way – depending on what’s sold, different changes in the customer business profile, we may need to rewrap or readjust the facility to accommodate the business or the customers what have been sold into those buildings.

Okay. So the reason I ask that is that the economic occupancy went down 186 basis points while physical occupancy went down 250 basis points, but if you actually look at the physical occupied pallet change, it went down 370 basis points, right? The only reason the occupancy number looks better is because of the pallet position. Well, not only, but part of the reason why the occupancy number looks a little bit less worse is that the pallet position has changed, the denominator. So the physical occupied pallet position change of negative 370 basis points, like how much of that is explained by Easter?

There could be to a degree again with as late as Easter was, there is still builds going on in the first week of April, for example, so there could be a slight, slight piece of that. I’d say moreover what we’re seeing is because of our growth in the fixed committed space, which you can see is profitable and proving to be fruitful for us as an overall organization, that limits our ability to sell into that space, right? So if it’s reserved and its accounted for even if it’s not physically occupied, we’re not selling into that space because it’s reserved for our clients’ needs. So again, we’re making that trade-off. We think that the financials are proven out that, that trade-off is positive. So kind of that physical occupancy indicator is becoming muted somewhat by our drive towards economic occupancy in the fixed commitment.

I see. All right. Thank you.

Thanks, Ki Bin.

Our next question comes from the line of Michael Carroll with RBC Capital Markets. Please proceed with your questions.

Thanks. Fred, I wanted to touch on the company’s recent acquisitions. I know most of these deals seem to be focused on production advantaged facilities. Is there a specific reason for that? Are there better valuations out there for those types of assets, does it improve your platform more or less than other types of facilities or is it just the available opportunity set that you saw in the marketplace?

Yes, I think it’s more opportunistic-related. Remember, we’ve talked a lot about our different asset types and the kind of value that we put on it and we believe that the broader market has put on it as they understood our supply chain. Those assets that are production attached are just as valuable as those assets in the Tier 1 distribution market. Without those assets, food doesn’t get to market. So we think the value proposition is the same, even though that asset is sitting in Sioux City versus sitting in New York City. So again, if you don’t have that asset to that plant, the product never makes into the market itself. So we think these are critical infrastructure that’s needed to help facilitate the movement of those goods from that point of manufacture to market. So, I wouldn’t say that we’re out there targeting any specific production type versus distribution type versus retail. We’re looking at all the opportunities. We’re looking at the returns that can be achieved via any. So, quite honestly, we just don’t discriminate against any of the product types.

And if you marry that up against what you’re seeing from our development side, we are bringing state-of-the-art development to major markets. So with reference of our Chicago project that we’re nearing completion on, the launch of the Atlanta major market, the projects associated with the Australia build, all those are bringing state-of-the-art product to major distribution hubs. So we’re kind of balancing the portfolio in that way.

Okay. And then when you’re looking at your current acquisition pipeline today, can you break that out of how sizable is it or is there a good mix between the production advantage and distribution centers and also expect more of a breakout I guess going forward?

I would say that it is a mixed pipeline in terms of opportunities, some are distribution, some are production advantaged. I’d say the majority of opportunities we’re looking at are at either end of those supply chains as I think we’ve talked about before. I can’t think of anything that we’re looking at right now that’s in kind of tertiary markets like a Green Bay, Wisconsin type of thing. While that asset is still critically important, because again it is supporting local manufacturing and the consumers that do exist in Green Bay, we’ve seen most of the needs, most the trends in the production support, production advantaged operations as well as the distribution and retail operations.

Okay. And then, Marc, can you talk a little bit about the J-curve that you’re talking about in terms of the expense synergies from the recent acquisitions? Are you going to have to spend more money to bring those on? So we should expect a pickup in G&A and then over time, we will see that coming down. Is that what we should expect?

Yes, I think that’s what’s meant by a slicing. So there will be a slight increase in costs as we rationalize the cost structure to the extent there is certain redundant or headcount that’s eliminated. Typically, there may be a severance charge associated with that or some periods as we transition and we have duplicate roles. So that’s where the J-curve comes. Obviously, we’re going to need to invest to bring their systems integrated into our systems or put our systems directly in their operations. So that’s a little bit of investment. But we do think that the J-curve component of it, you’ll probably see more really in the next quarter or two and then you’ll start to see the benefit fully realized, consistent with the comments in our prepared remarks.

Okay. And then the last one from me, the Rochelle development, where is the occupancy at that right now? And I guess what was the negative contribution from that asset that was just completed that was delivered in 1Q?

Yes, it’s – actually the asset because it was an expansion, the base business is still generating positive cash flow. So there isn’t a next to the negative carry yet, but where we get the ramp up is just even though that’s a highly automated site, you still need to fully pass it with the automation tech, the maintenance tech, even some warehouseman that support the individual receipt off a truck and to put it into the – or to the automation system. So those costs are typically ramped up in advance. Of the Phase 1, we just started inbounding. We’re really at the early phases, but we’re actually ahead of our guidance with the customer in terms of their inbound path. So consistent with other developments of the type, we expect this asset will stabilize over this first year and we expect to be at full run rate by one year from now.

Okay, great. Thank you.

Thanks.

Our next question comes from the line of Michael Mueller with JPMorgan. Please proceed with your questions.

Great. Hi.

Hi, Michael.

Last Easter question here for you. So it sounds like based on what you said at the start of Q2, your occupancy comp should be higher than what it was last year. Is that correct? And also post Easter, are you at about even where you were last year on an occupancy basis?

Yes, I would say that – what I tried to explain is there some multiple variables that are driving occupancy. So if I was just isolating and looking at Easter independently what you said would be correct. But I’ll just remind you that there’s other things at play here in terms of harvest timing, the exact week that harvest come, promotional campaigns from retailers and when they’re pushing product and then that phenomenon associated with our fixed commitments and what that’s doing to our ability to be able to settle space that maybe in the past we would have.

As I remind people, I don’t want people to lose sight of it even though our physical occupancy and even economic was down, our overall revenues in both the total warehouse as well as just the rent and storage sub-line item were up as were our earnings. So this is part of the active portfolio.

Got it. And then second question, how did the EBITDA yields going in and I guess the expected stabilized EBITDA yields compare to the NOI yields for PortFresh and Lanier?

Yes, so as we’ve mentioned in our prepared remarks, if you look on an NOI basis, so think about the NOI yield as being the four-wall [ph] cash flow driven off the box, the PortFresh on the operation side was a 7% NOI yield, Cloverleaf was also a 7% NOI yield. So those two were consistent. Lanier was slightly higher at a 7.9% NOI yield. Obviously different scope, different scale of operation. So when you look at the EBITDA yield, slightly different. Obviously with Cloverleaf being a much – it was the fifth largest portfolio of U.S. temperature-controlled infrastructure, so they had a much larger G&A component associated with them.

Sure. So would the EBITDA yield on PortFresh and Lanier be fairly close to the NOI yield?

Yes, as we said in our prepared remarks, they are much closer. So the EBITDA yield of Lanier going in with the 7.3% EBITDA yield where the Cloverleaf on a trailing basis was 5.6%.

Okay. I missed the Lanier one. Sorry about that. Okay, thank you.

Thanks.

Our next question comes from the line of Dave Rodgers with Robert W. Baird. Please proceed with your questions.

Hi. Good afternoon, guys. I wanted to ask about the 6 pallet positions and maybe a broader question, the more of those that you add into the portfolio, what’s the impact to margin? And I guess I think the more of the economic occupancy moves up and physical maybe stays the same or drops, I think that margin would be enhanced to do that. So maybe you can explain that and then also maybe what’s implied in your guidance for NOI versus revenue growth in 2019?

Yes, sure. So I’ll take the first part of it and then turn it over to Marc. So yes, as we move to fixed commitment, there is definitely margin improvement associated with that and that margin improvement comes really from two places. Number one, no doubt in the down season when there’s not as much physical occupancy and we’re getting paid the rent for the space because we don’t have labor there, that’s going to enhance margins, right. Number two, during the busiest part of the season, one of the greatest impacts that we saw and I mentioned it in the last quarterly call, our fourth quarter last year was the smoothest quarter that we’ve ever had. Why? Because we didn’t overfill the warehouse. We had committed space, we were getting paid for that space and we are able to operate that warehouse efficiently, which was closer in line with the 85% to 90% physical occupancy. So that allowed us to be more efficient, not have to spend as much over time, not as much double handling, which is also margin enhancing. And it obviously translates to benefits for our customers as well because the less handling, less touches I have, the more responsive we can be from a customer service standpoint and get their product out to market. So it was really good from a margin enhancing opportunity and superior from a customer service, customer satisfaction standpoint. I think the third piece that comes out of this fixed commitment piece is seeing how efficient that we are in it and knowing what the demand is in these core markets because the one that this affects the most are your primary distribution markets. It opens up opportunities for us to add capacity into the marketplace and be able to kind of repeat that same story with new business, new volumes that needs to come into the market. And again, that’s why we feel so good about the expansion in Chicago and we feel great about the new one that we’ve just announced here in Atlanta.

And then on the overall margin base, we still expect in the same-store NOI margin to outpace the growth of the top line revenue roughly by 100, 200 basis points and you see that through the leveraging of fixed expenses, particularly on the real estate side of the business. So as we served in the first quarter, if you look through the detailed results, we were able to reduce the leverage of our overall power cost and related fixed costs in the warehouse. We expanded our margins roughly by 49%. So we are leveraging that overall fixed cost structure. Obviously, we have slightly higher core operational costs between the healthcare and the comp of the non-recurring benefit of last year and workers’ comp, but normalizing those. We continue to make progress on our core performance in our warehouse and we are continuing to see improved performance that should drive margin growth in the services side. So those things combined helped drive that outperformance.

I appreciate all that detail. Maybe shifting to acquisitions, you had a couple of questions earlier on it. But what’s your appetite right now? It sounds like the pipeline out there just in the market, but there’s quite a few things coming to market. Are you guys continuing to be very active out in the acquisition market, what’s your pipeline look like today?

I’m sure my CIO Jay is sitting listening to this call and I would just tell him that he shouldn’t be sitting listening to the call, he needs to be active. Jay is busy out there. We have a pipeline and we’ll continue to work that pipeline. I think as we’ve discussed in the past, some of those take awhile, right. And you have to nurture those relationships for a period of time before they can come to fruition. So we will continue. I think the thing that we love about these acquisitions is both PortFresh and Lanier, we would consider tuck-in, just not a tremendous amount of effort that’s needed from an integration standpoint. We fold them right into existing regions and districts then the operators take over and run those operations the same way they’ve been accustomed to with the Americold operations. Cloverleaf is obviously a little bit bigger. But again, one of the benefits that we have with those guys is they’ve already done a lot of streamlining. They’re on one system. There is a couple stragglers warehouses that we’re in the process of being converted that will convert on to either one of our WMS’ or the WMS that they were already going on, but very little integration, heavy lifting from a systems standpoint. The operations will be split up into our existing regions and two districts, and again run just like other operations. So our ability to digest additional tuck-ins is pretty straightforward. Bigger acquisitions, we would obviously time and strategize that accordingly. But again, pipeline is healthy and we continue to pursue it.

Great. Thank you.

Our next question comes from the line of Joshua Dennerlein with Bank of America. Please proceed with your questions.

Hi, guys. Per the Easter impact and the one less day in the quarter, how much of the impact was that on your FFO, AFFO and EBITDA? Is there a way to quantify that?

I think the best thing as I reiterate is overall, Easter happens every year and we encourage people to look at our results. Especially, this is a prime example on the full year basis and on the full year basis, we don’t expect the timing of Easter to impact the overall result or for our guidance to differ as a result of it.

Okay. And should – is there one more day, one more workday in 2Q that we should be factoring in?

I apologize. I don’t have that right on the top of my head, but I’ll look and get back to you.

All right, now worries. And then I saw in the press release you mentioned there is like an impairment you took on the potential future sales, an idle plant during 2Q '19. What happened with that plant? And then I also saw you mentioned a third party managed contract ran out during 1Q. How come that – I guess that warehouse didn’t renew the contract? Was that strategic on your part or is it more their part?

Yes, I’ll hit the first part. So when we went public, we actually had I think roughly about five or six idle assets in the overall portfolio. This sale would represent the final cleanup item of those assets which are not in production. It actually was a legacy plant attached facility to a canning operation in Georgia that was actually a triple net lease of ours. So it’s one that we didn’t operate. It was leased from us by the tenant, but they shut down operation and we found a buyer to sell those. So that’s the last. And I’m excited in terms of the last of the hanging [indiscernible] now of the portfolio. So we’re looking forward to that close and having that behind us. Yes, and this particular managed site was actually I think it was geared up to do this. This was kind of the endpoint of that agreement. Over time, it was kind of a lose JV type of structure where there was an agreement for a buyout at the end of the agreement. So this was planned to ultimately phase over into their manufacturing operations in terms of running it. So it was something that we kind of saw and expected.

You’ll see in our cash flow, we received $2 million in connection with the exit of that JV.

Okay. All right, great. And then I guess are there any maybe production advantaged facilities that you’re keeping an eye on that are older that maybe the attached manufacturing plant would potentially close in the next few years. So anything we should be aware of?

Yes, we have no expectation of any closures associated with those sites. Those manufacturing plants continue to hum and they invest in those manufacturing plants, which are obviously just as old as ours, if not older. So they are just huge investments in those plants, so you don’t see too many of those big operations get abandoned. And all of our production advantaged sites are attached to our high credit-worthy types of customers. So we don’t expect anything to happen there.

And then sorry, I think you asked a question earlier on business days. So Q2 has one more business day than Q1 did, but it has the same number of business days as the prior quarter – the prior year.

Okay. Thank you.

Sure.

Thanks, Josh.

Our next question comes from the line of Bill Crow with Raymond James. Please proceed with your questions.

Thanks. Good evening, guys. Just a couple of questions from me. Could you remind us what happens to your fixed commitment lease percentage when you factor in the new acquisitions that you’ve made particular Cloverleaf, which I believe doesn’t have any fixed commitment leases?

That is correct. Obviously, it will decrease because they don’t have any, but that speaks to the opportunity that we’ll have as we go forward because as I mentioned in the prepared comments, their top 10 customers overlap our customer set and that represents 56%. Most of those contracts – most of those customers, we already have agreements on and we’ll be working over the course of this year to move them back on to fixed commitment. So we fully expect that to progress through the year. I will say that their assets just like ours and just like most of the industry are as I say running hot, so they’re all full warehouses that are supporting those production attached facilities mostly in the protein industry.

And that was kind of the direction I wanted to go to next. We’ve talked I think in this call a couple of quarters ago about whether you were seeing any positive impact from some of the trade issues with China, and I don’t think you had but that was – seems to be kind of in the protein space more than anything else. I’m just wondering whether you could gauge what impact that’s having on Cloverleaf’s facilities at this point?

Yes, not much. A lot of it has been domestic-based and not a problem. We do think – we’ll see what happens given the issues that they’re having --

The African swine fever --

And the pork reduction that they’re seeing in China right now, that’s a main commodity for that marketplace and we could see a pickup. I think Tyson just reported recently and talked about their forecast for picked up production which just needs to increase throughput for us.

Okay. And then finally for those of us who don’t study currency markets every day, any change since the first quarter and the headwinds that you’re facing?

On a year-over-year basis, the biggest currency that impacted because it’s our largest international operation is Australia, which was roughly down about little over 9% in the first quarter. If we look at where current rates are relative to where they were a year ago, we probably expect some continued headline pressure from currency into second quarter. But when you look at the back end of the year, we think that that rate environment is not too dissimilar than the current rate environment. So this should flatten out in the back half.

Okay. I appreciate the time. Thanks.

Sure. Thank you.

Our next question comes from the line of Nate Crossett with Berenberg. Please proceed with your questions.

Hi. Thanks for taking my questions. Just on the M&A pipeline, maybe you can give us a little color on what markets in the U.S. you would like to maybe have a little bit more exposure to? And then on international I know you have a lot going on in Australia, but was curious to hear your comments on other markets, specifically Europe?

Sure. What I would say about the countries that we’re in, so U.S., Australia, New Zealand, primarily what I would say is in terms of the market coverage we have, it’s pretty expansive today. But again, there’s more demand in those existing markets. So what I would say is, we’re looking at acquisitions, we’re not necessarily looking to a specific market or a specific geography. We’re looking at the quality of the operations in whatever market that they happen to be in. So again, we’re not kind of discriminating, if you will, between product type, the type of operation it is, we’re just looking for the quality of earnings that makes sense because the market demands are there. So it doesn’t really matter if they overlap with us or not. In terms of looking at other geographies, I would say that we are paying close attention to those other geographies. We believe that there are opportunities in areas such as Europe. Now Europe’s a little bit flatter in terms of upside potential. It’s pretty built out, but there could be opportunities there and as well as supporting some other opportunities into more emerging markets, kind of surrounding Europe, if you will. So we’ll continue to look at that space. We’re looking at space pretty much everywhere, but I would say that our primary focus right now in our pipeline is quite heavily filled with opportunities within our existing countries.

Okay, that’s helpful. And then one on labor costs. I just wanted to get your take and I know you had a $1 million benefit last year that made it a tougher comp. But are you seeing any notable changes in labor costs the last few months? Because we’ve seen from other REITs that have a logistics component that labor costs have gone up more than they have expected because it’s been more difficult to find and retain workers. I’m just curious.

Yes, I would say that we have not seen additional pressure. Our wage hikes and increases were right in line with what we expected them to be. We think there’s other ways to gain employee engagement and reduce turnover than just throwing money. We do give people – we do pay for performance through incentive systems. So we think that helps in terms of our comparison versus market pay. And we have a much more engaging environment trying to drive participation, involvement and that type of thing. So there’s other things that we’re doing to try to create that stickiness. As well as again we continue to focus and look for opportunities where we need to automate. And I think you’ve heard in our last three major builds, there is considerable automation in those major markets where we’re kind of struggling with hiring people, if you will, and there’s a lot more competition for those resources. So Chicago’s automated, Atlanta both major pieces that we’re expanding here in the market are also automated. And remember the labor cost increase that we talked about is really just in one specific niche, it’s not with labor rate, it’s with workers’ comp. And so that usually fluctuates on a quarter-to-quarter basis. We still feel comfortable with our overall workers’ comp expenditure over the course of the year. It’s just you can’t predict when things are going to happen, right, when incidents occur and the degree of severity associated with those incidents. So our safety program is I’d say industry-leading and we’ll continue to stay focused on that. And I fully expect that for the full year we’ll come in where we thought we would.

Okay, that’s helpful. Thanks, guys.

Sure.

Thank you.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to management for closing remarks.

Great. Thanks for joining us tonight. I just want to reiterate that I think that this first quarter was an exciting quarter for us, again, positive trends. This is our sixth quarter in a row of positive improvement from an NOI and from a revenue standpoint, so that’s exciting. Really excited about the acquisitions. We’ve been talking about it over the last several quarters and we said that the pipeline is rich and heavy and we were working a number of things and a couple of those obviously just came to fruition, and we’re very pleased to be affiliated with Cloverleaf and Zero Mountain and Lanier and we’re excited to integrate those operations into the family. And as I mentioned, Jay is going to continue to work and there will be other opportunities that will expose themselves. So we reiterate and feel bullish about the business overall and reemphasize that our annual guidance is intact. So with that, I’d like to thank you again and we’ll see you next quarter.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.