Lineage (NASDAQ:LINE) lowered its full-year adjusted EBITDA outlook after rising transportation costs and weaker-than-expected seasonal warehouse activity weighed on its third-quarter results. The cold-storage company maintained the midpoint of its adjusted funds from operations, or AFFO, per-share forecast, helped by lower spending and taxes.
Third-quarter adjusted EBITDA fell 7% from a year earlier to $317 million, while AFFO was $188 million, or $0.73 per share. President and CEO Greg Lehmkuhl said EBITDA was in line with expectations, supported by favorable administrative expenses, and AFFO exceeded expectations.
Warehouse occupancy rises as trade pressures persist
Same-store physical occupancy increased 110 basis points year over year to 76.2%, its second consecutive quarter of growth. Same-store throughput fell about 1%, an improvement from declines of approximately 3% in the first quarter and 2% in the second.
Lehmkuhl said customer inventories had broadly stabilized, though some customers were holding leaner inventories because of higher carrying and transportation costs. Same-store warehouse net operating income, or NOI, declined 4.2% to $342 million, while same-store revenue rose 0.4%.
CFO Robb LeMasters said higher power costs, net of surcharges, were the primary driver of the NOI decline. Lineage temporarily de-energized portions of its solar arrays for safety reviews following the fire at its Big Bear facility in Los Angeles. The company expects to re-energize most of the arrays by early 2027.
Lineage now expects same-store NOI to decline 3% to 2% for the full year. LeMasters said the company anticipates only a 3% sequential increase in occupancy in the second half, compared with a typical seasonal uplift of 9% and a 6% increase in the prior year’s second half.
International trade remained a particular source of pressure. Same-store container volumes fell 8% in the third quarter, following declines of 18% and 15% in the first and second quarters, respectively. Lehmkuhl said NOI from seafood customers dropped more than 14% year over year and accounted for about half of the same-store NOI decline.
In response to an analyst’s question about customer inventories, Lehmkuhl said two of four top-10 customers recently consulted expect inventory levels to remain stable through 2027, while the other two expect to begin rebuilding inventories next year. He said pricing and minimum-volume guarantee discussions were beginning, with most contracts resetting in the first quarter.
Transportation costs squeeze GIS margins
Lineage’s global integrated solutions, or GIS, segment reported third-quarter NOI of approximately $56 million, down 13.8%. Its margin fell 200 basis points to 15.9% as third-party carrier costs rose faster than the company could increase customer rates.
LeMasters said Lineage had achieved contract pricing gains of 5% to 6%, but carrier rates had risen into an 8% to 10% range by the third quarter. The company reduced its full-year GIS NOI forecast to $231 million to $236 million, representing a decline of 8% to 6%, from its prior forecast for a 4% to 2% decline.
Lehmkuhl said he expects margins to recover over the next couple of quarters as customer contracts are repriced. He distinguished the carrier-rate pressure from fuel costs, noting that fuel surcharges reset automatically each week.
Fire costs and balance-sheet plans
Lineage increased its estimate of the 2026 Big Bear fire’s impact on warehouse NOI and adjusted EBITDA to $20 million from $15 million. The revised figure includes $5 million in lost solar generation across the network during safety reviews.
Lehmkuhl said that, excluding the fire’s estimated impact and a roughly $7 million California legal settlement in GIS, the company would be forecasting adjusted EBITDA near the upper end of its initial full-year range. The company also lowered its administrative expense and recurring maintenance capital expenditure forecasts, citing cost reductions and operational efficiencies.
Lineage ended the quarter with approximately $8.1 billion in net debt and $371 million in liquidity. LeMasters said a $500 million unsecured term loan completed after quarter-end was used to repay revolver borrowings, bringing pro forma liquidity to approximately $870 million, excluding insurance payments received since quarter-end.
Insurers had approved $100 million in payments related to Big Bear since quarter-end, and Lineage expects approval for another $200 million before year-end, LeMasters said. The company also is pursuing $1 billion in recovery through legal action against third-party solar operators.
Lineage expects cash proceeds from strategic asset transactions in the first half of 2027 and plans to use proceeds first to reduce leverage and fund development. Its $1.1 billion development pipeline spans 17 projects and is expected to generate $130 million in incremental NOI at stabilization. LeMasters said the largest uplift is expected in 2028 and 2029, with a more modest contribution in 2027.
About Lineage (NASDAQ:LINE)
Lineage, Inc is a global temperature-controlled warehousing and logistics company. It operates refrigerated and frozen storage facilities that help food producers, retailers, and other customers manage products that require controlled temperatures.
Its services include cold storage, food processing and handling, blast freezing, transportation, and other supply-chain solutions. By connecting warehouses with transportation and distribution networks, Lineage supports the movement of perishable goods from producers to consumers.
Lineage grew through acquisitions and expansion into international markets, serving customers across North America, Europe, and the Asia-Pacific region.
