LINE · Lineage, Inc.

Operating income declined 35.7% to $36 million from $56 million, compressing the operating margin to 2.8%. The capital-intensive nature of our business drove higher depreciation and amortization expenses tied to ongoing facility expansions and maintenance. Cost control measures helped temper some pressures from the divestiture, but fixed costs rose in line with investments. Our depreciation primarily stems from warehouse infrastructure, which we maintain through regularly updated long-range plans to ensure high quality and operational efficiency that customers expect.

Net income swung to a $46 million loss from breakeven, with diluted EPS at -$0.18 versus $0.01, due to elevated interest expenses and non-operating items. Despite this, net cash from operating activities remained solid at $130 million, down slightly from $139 million, demonstrating underlying business strength. This cash generation funded $185 million in capital expenditures, up from $151 million, focused on greenfields, expansions measured by cubic feet, and energy return projects to boost efficiency by reducing kWh consumption and energy procurement costs. The result was negative free cash flow of -$55 million, underscoring our commitment to growth investments amid compliance requirements that involve significant capital outlays.

Customers' production levels, influenced by market conditions, labor availability, supply chain dynamics, and preferences, continue to drive inbound pallet volumes. As of March 31, 2026, our funding sources are expected to meet short-term liquidity needs and capital commitments for the next twelve months, positioning us to navigate capacity dynamics and sustain long-term efficiency.