Welbilt, Inc. (NYSE:WBT), today announced financial results for
its 2021 second quarter.
2021 Second Quarter Highlights
(1)
- Net sales were $395.6 million, an increase of 92.0 percent from
the prior year; Organic Net Sales (a non-GAAP measure) increased
85.8 percent from the prior year
- Earnings from operations were $50.2 million compared to $0.7
million in the prior year; as a percentage of net sales, earnings
from operations were 12.7 percent compared to 0.3 percent in the
prior year
- Adjusted Operating EBITDA (a non-GAAP measure) was $73.5
million compared to $19.8 million in the prior year; Adjusted
Operating EBITDA margin was 18.6 percent compared to 9.6 percent in
the prior year
- Net earnings were $23.7 million compared to a net loss of $17.4
million in the prior year; Adjusted Net Earnings (a non-GAAP
measure) were $31.7 million compared to Adjusted Net Loss of $9.9
million in the prior year
- Diluted net earnings per share was $0.17 compared to diluted
net loss per share of $0.12 in the prior year; Adjusted Diluted Net
Earnings Per Share (a non-GAAP measure) was $0.22 compared to
Adjusted Diluted Net Loss Per Share of $0.07 in the prior year
- Net cash provided by operating activities was $37.1 million,
compared to net cash provided by operating activities of $8.1
million in last year's second quarter; Free Cash Flow (a non-GAAP
measure) was $31.9 million compared to $3.2 million in last year's
second quarter
2021 Second Quarter Year-to-date
Highlights (1)
- Net sales were $712.4 million, an increase of 33.2 percent from
the prior year; Organic Net Sales (a non-GAAP measure) increased
29.3 percent from the prior year
- Earnings from operations were $81.7 million compared to $1.3
million in the prior year; as a percentage of net sales, earnings
from operations were 11.5 percent compared to 0.2 percent in the
prior year
- Adjusted Operating EBITDA (a non-GAAP measure) was $123.3
million compared to $65.3 million in the prior year; Adjusted
Operating EBITDA margin was 17.3 percent compared to 12.2 percent
in the prior year
- Net earnings were $31.6 million compared to a net loss of $32.5
million in the prior year; Adjusted Net Earnings (a non-GAAP
measure) were $43.6 million compared to Adjusted Net Loss of $8.5
million in the prior year
- Diluted net earnings per share was $0.22 compared to diluted
net loss per share of $0.23 in the prior year; Adjusted Diluted Net
Earnings Per Share (a non-GAAP measure) was $0.31 compared to
Adjusted Diluted Net Loss Per Share of $0.06 in the prior year
- Net cash provided by operating activities was $20.7 million,
compared to net cash used in operating activities of $64.4 million
in the prior year; Free Cash Flow (a non-GAAP measure) was $10.8
million compared to a use of $74.9 million in the prior year
(1) Definitions and reconciliations of the non-GAAP measures
used herein are included in the schedules accompanying this
release.
Summarizing Welbilt's second quarter performance, Bill Johnson,
Welbilt's President and CEO, stated, "Second quarter Third-party
Net Sales and Organic Net Sales grew substantially this quarter
compared to last year's second quarter, which marked the worst
quarter we experienced since the beginning of the COVID-19
pandemic. We are very pleased with our strong Adjusted Operating
EBITDA and Adjusted Operating EBITDA margin performance despite the
inflationary impacts from our supply chain and logistics providers.
We successfully offset these headwinds with the beneficial impact
from increased volume, positive net pricing, and improved
productivity attributable to the improvements we have made to date
as part of our Business Transformation Program ("Transformation
Program") and through the cost containment actions we put in place
last year that are continuing to benefit us. Industry conditions
are improving with the rollout of COVID-19 vaccines and the lifting
of restrictions in some locations, although improvements are uneven
globally. We are building inventory and capacity to respond to our
growing order pace and will adjust our costs and investments
accordingly. Finally, we are pleased with our second quarter Free
Cash Flow generation, which allowed us to both increase cash and
reduce total debt in the quarter."
Net sales increased 92.0 percent in the second quarter compared
to last year's second quarter. Excluding the impact from foreign
currency translation, Organic Net Sales increased 85.8 percent,
with strong growth coming from large chain customers, general
market dealers and distributors, and KitchenCare® master parts
distributors and factory-authorized service dealers. This growth is
compared against last year's historically weak second quarter which
was highly impacted by the COVID-19 pandemic.
The second quarter Adjusted Operating EBITDA margin of 18.6
percent was 900 basis points higher than last year's second quarter
driven by the incremental impact on margins from higher volume,
positive net pricing and lower manufacturing costs partially offset
by increased selling, general and administrative expenses (net of
adjustments for the Transformation Program expenses and other
adjustments to SG&A that are included in our Adjusted Operating
EBITDA reconciliation ("Net SG&A")) and higher materials costs.
Net SG&A costs were higher primarily from higher compensation
expense and commissions reflecting both the higher incentives and
the non-recurrence of some of the measures taken in the second
quarter a year ago in response to the impact from the pandemic. The
prior year period included temporary salary reductions, furloughs,
reductions in incentive compensation and lower commissions due to
the large sales decrease in the quarter.
We continued to make progress on the Transformation Program
during the second quarter. We continued to execute on our planned
procurement activities related to materials spend and on executing
incremental cost savings opportunities through the implementation
of Value Analysis Value Engineering ("VAVE") initiatives, although
we faced challenges in balancing progress on these activities with
the need for resources to address component supply issues. We
delivered productivity improvements in our manufacturing plants
which provided additional savings in the quarter, even as some
plants were impacted by parts shortages that impacted production
schedules. We have completed the majority of the planned consulting
spend related to the Transformation Program and expect minimal
additional spend going forward.
Liquidity and Debt
Net cash provided by operating activities in the second quarter
was $37.1 million compared to $8.1 million in last year's second
quarter. Net cash used in investing activities in the second
quarter was $5.2 million compared to $5.1 million of net cash used
in investing activities in last year's second quarter. Free Cash
Flow (a non-GAAP measure) was $31.9 million in the quarter compared
to $3.2 million in last year's second quarter. The improvement in
Free Cash Flow in the second quarter versus last year's second
quarter reflects increased net earnings partially offset by an
increase in cash used due to changes in operating assets and
liabilities. Capital spending was $5.2 million in the second
quarter compared to $4.9 million in last year's second quarter.
During the quarter, total debt and finance leases (including the
current portion) decreased by $25.1 million. Our ending cash and
cash equivalents was $153.8 million, an increase of $13.5 million
in the quarter. Total global liquidity was $392.2 million as of
June 30, 2021, which consisted of the $153.8 million of cash and
cash equivalents and $238.4 million of availability on our
Revolving Credit Facility. Total global liquidity increased by
$38.5 million in the quarter from $353.7 million as of March 31,
2021.
Guidance
On July 8, 2021, we issued a Form 8-K that included Updated
Welbilt Management Forecasted Financial Information that included
2021 net sales of $1,482 million and 2021 Adjusted Operating EBITDA
of $267 million. We are reiterating this forecast today.
Additional Management
Commentary
"We are extremely pleased with our second quarter results in
light of ongoing supply chain disruptions and inflationary pressure
on materials and logistics costs," said Bill Johnson, Welbilt’s
President and CEO. "In the Americas, sales to strategic QSRs and
fast casual operators increased over last year with improved demand
for replacement equipment and stronger rollout activity by large
chains across many of our brands. General market sales turned
positive for the first time since the pandemic began and
KitchenCare aftermarket sales increased in the Americas. Both EMEA
and APAC also saw year-over-year growth from strategic QSRs,
general market dealers and KitchenCare aftermarket customers. We
believe overall demand, while still negatively impacted by the
COVID-19 pandemic, will continue to improve over the next several
quarters as public health orders and other restrictions are lifted
and the rollout of COVID-19 vaccines accelerates in more regions
globally, giving both consumers and operators more confidence and
driving a gradual recovery in commercial foodservice end
markets."
"We continued to aggressively manage our discretionary costs
which, combined with improving absorption of fixed costs due to
higher volumes, higher net pricing and benefits from our
Transformation Program, allowed us to deliver an Adjusted Operating
EBITDA margin of 18.6 percent in the second quarter. With the tools
we have developed as part of our Transformation Program, the
productivity levels in our plants are improved compared to prior
year levels, despite some production disruption due to parts
shortages from our supply chain. We are continuing to experience
rising commodity prices, longer lead times and inflation from our
parts suppliers, and continued logistics inefficiencies. We were
able to offset most, but not all, of the effect of these pressures
in the second quarter with our Transformation Program procurement
activities through negotiated price reductions with new and
existing suppliers and by executing VAVE initiatives. In addition,
we continued to implement additional price increases in June and
July which will also help us offset the effect of these
inflationary pressures as we move through the balance of the year,"
concluded Johnson.
Conference Call and
Webcast
Welbilt will host a conference call to discuss its 2021 second
quarter earnings on Tuesday, August 3, 2021 at 10:00 am ET. A live
webcast, supplemental presentation slides and replay of the call
can be accessed on the Investor Relations page at www.welbilt.com.
The webcast replay will be available for 30 days from Tuesday,
August 3, 2021 at 1:00 pm ET. The information on our website is not
a part of this release.
About Welbilt, Inc.
Welbilt, Inc. provides the world’s top chefs, premier chain
operators and growing independents with industry-leading equipment
and solutions. Our innovative products and solutions are powered by
our deep knowledge, operator insights, and culinary expertise. Our
portfolio of award-winning product brands includes Cleveland™,
Convotherm®, Crem®, Delfield®, Frymaster®, Garland®, Kolpak®,
Lincoln®, Manitowoc® Ice, Merco®, Merrychef® and Multiplex®. These
product brands are supported by three service brands: KitchenCare®,
our aftermarket parts and service brand, FitKitchen®, our
fully-integrated kitchen systems brand, and KitchenConnect®, our
cloud-based digital platform brand. Headquartered in the Tampa Bay
region of Florida and operating 19 manufacturing facilities
throughout the Americas, Europe and Asia, we sell through a global
network of over 5,000 distributors, dealers, buying groups and
manufacturers' representatives in over 100 countries. We have
approximately 4,600 employees and generated sales of $1.2 billion
in 2020. For more information, visit www.welbilt.com.
Forward-looking
Statements
Certain statements in this press release constitute
“forward-looking statements” within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. Statements contained in
this press release that are not historical facts are
forward-looking statements and include, for example, our
expectations regarding the potential future impacts from the
COVID-19 pandemic, including with respect to vaccine rollout,
overall demand and consumer confidence on our business, results of
operations, financial condition and cash flows (including demand,
sales, operating expenses, Adjusted Operating EBITDA, net income
(loss), operating cash flows, intangible assets, staffing levels,
supply chain, government assistance, compliance with financial
covenants); our ability to meet working capital needs and cash
requirements over the next 12 months; our ability to realize
savings from reductions in force and other cost saving measures;
compliance with the financial covenants under our credit facility;
our ability to obtain financial and tax benefits from the CARES
Act; our ability to consummate the recently announced transaction
with Ali Holdings S.r.l. ("Ali Group") and realize the anticipated
benefits thereof; our expectations regarding future results;
descriptions of the Transformation Program, including related
costs, completion dates and targeted annualized savings; expected
impact of restructuring and other plans and objectives for future
operations; assumptions on which all such projects, plans or
objectives are based; and discussions of conditions and demand in
the global foodservice market and foodservice equipment industry.
Certain of these forward-looking statements can be identified by
using words such as "anticipates," "believes," "intends,"
"estimates," "targets," "expects," "endeavors," "forecasts,"
"could," "will," "may," "future," "likely," "on track to deliver,"
"gaining momentum," "plans," "projects," "assumes," "should" or
other similar expressions. Such forward-looking statements involve
known and unknown risks and uncertainties, and our actual results
could differ materially from future results expressed or implied in
these forward-looking statements. The forward-looking statements
included in this release are based on our current beliefs and
expectations of our management as of the date of this release.
These statements are not guarantees or indicative of future
performance. Important assumptions and other important factors that
could cause actual results to differ materially from those
forward-looking statements include, but are not limited to, risks
related to the Company's proposed merger with Ali Group, including
the risk that the conditions to closing of the transaction are not
satisfied, including the risk that required approvals of the
transaction from the stockholders of the Company or from regulatory
authorities are not obtained, the risk of litigation relating to
the transaction, uncertainties as to the timing of the consummation
of the transaction and the ability of each party to consummate the
transaction, risks that the proposed transaction disrupts our
current plans or operations, our ability to retain and hire key
personnel, competitive responses to the proposed transaction
unexpected costs, charges or expenses resulting from the
transaction, potential adverse reactions or changes to
relationships with our customers, suppliers, distributors and other
business partners resulting from the announcement or completion of
the transaction; risks from global pandemics including COVID-19,
including the emergence of new strains of the virus, measures taken
by governmental authorities and third parties in response to
pandemics and the efficacy and availability of vaccines; risks
related to our ability to timely and efficiently execute on
manufacturing strategies; our ability to realize anticipated or
targeted earnings enhancements, cost savings, strategic options and
other synergies (through the Transformation Program or otherwise)
and the anticipated timing to realize those enhancements, savings,
synergies, and options; acquisitions, including our ability to
realize the benefits of acquisitions in a manner consistent with
our expectations and general integration risks; our substantial
levels of indebtedness; actions by competitors including
competitive pricing; consumer and customer demand for products; the
successful development and market acceptance of innovative new
products; world economic factors and ongoing economic and political
uncertainty; our ability to source raw materials and commodities on
favorable terms and successfully respond to and manage related
price volatility; our ability to generate cash and manage working
capital consistent with our stated goals; costs of litigation and
our ability to defend against lawsuits and other claims and to
protect our intellectual property rights; unanticipated
environmental liabilities; the ability to obtain and maintain
adequate insurance coverage; data security and technology systems;
risks and uncertainties relating to internal controls over
financial reporting; our labor relations and the ability to recruit
and retain highly qualified personnel; product quality and
reliability, including product liability claims; changes in the
interest rate environment and currency fluctuations; compliance
with, or uncertainty created by, existing, evolving or new laws and
regulations, including recent changes in tax laws, tariffs and
trade regulations and enforcement of such laws around the world,
and any customs duties and related fees we may be assessed
retroactively for failure to comply with U.S. customs regulations;
our ability to comply with evolving and complex accounting rules,
many of which involve significant judgment and assumptions; the
possibility that additional information may arise, that would
require us to make further adjustments or revisions to our
historical financial statements or delay the filing of our current
financial statements; actions of activist shareholders; and those
additional risks, uncertainties and factors described in more
detail under the caption "Risk Factors" in our Annual Report on
Form 10-K for the year ended December 31, 2020, our Quarterly
Report on Form 10-Q for the quarters ended March 31, 2021 and June
30, 2021, and in our other filings with the Securities and Exchange
Commission. The COVID-19 pandemic amplifies many of these risks,
uncertainties and factors. We do not intend, and, except as
required by law, we undertake no obligation, to update any of our
forward-looking statements after the issuance of this release to
reflect any future events or circumstances. Given these risks and
uncertainties, readers are cautioned not to place undue reliance on
such forward-looking statements.
WELBILT, INC.
Consolidated Statements of
Operations
(In millions, except share and
per share data)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Net sales
$
395.6
$
206.0
$
712.4
$
534.9
Cost of sales
250.7
137.6
449.7
351.7
Gross profit
144.9
68.4
262.7
183.2
Selling, general and administrative
expenses
85.0
56.8
161.0
143.3
Amortization expense
9.7
9.6
19.8
19.3
Restructuring and other expense
—
1.2
0.2
8.0
Loss from impairment and disposal of
assets — net
—
0.1
—
11.3
Earnings from operations
50.2
0.7
81.7
1.3
Interest expense
19.0
20.4
37.7
42.8
Other expense (income) — net
2.9
5.5
5.9
(1.0
)
Earnings (loss) before income taxes
28.3
(25.2
)
38.1
(40.5
)
Income tax expense (benefit)
4.6
(7.8
)
6.5
(8.0
)
Net earnings (loss)
$
23.7
$
(17.4
)
$
31.6
$
(32.5
)
Per share data:
Earnings (loss) per share — Basic
$
0.17
$
(0.12
)
$
0.22
$
(0.23
)
Earnings (loss) per share — Diluted
$
0.17
$
(0.12
)
$
0.22
$
(0.23
)
Weighted average shares outstanding —
Basic
141,921,328
141,502,737
141,772,631
141,466,676
Weighted average shares outstanding —
Diluted
143,175,251
141,502,737
142,717,189
141,466,676
WELBILT, INC.
Consolidated Balance
Sheets
(In millions, except share and
per share data)
June 30,
December 31,
2021
2020
Assets
Current assets:
Cash and cash equivalents
$
153.8
$
125.0
Restricted cash
0.5
0.4
Accounts receivable, less allowance of
$4.6 and $4.4, respectively
210.0
165.9
Inventories — net
235.5
180.6
Prepaids and other current assets
60.4
50.1
Total current assets
660.2
522.0
Property, plant and equipment — net
129.9
129.1
Operating lease right-of-use assets
43.9
47.5
Goodwill
939.8
942.9
Other intangible assets — net
444.7
469.6
Other non-current assets
30.7
30.5
Total assets
$
2,249.2
$
2,141.6
Liabilities and equity
Current liabilities:
Trade accounts payable
$
135.3
$
86.4
Accrued expenses and other liabilities
172.5
164.2
Current portion of long-term debt and
finance leases
1.0
1.0
Product warranties
31.1
29.9
Total current liabilities
339.9
281.5
Long-term debt and finance leases
1,421.4
1,407.8
Deferred income taxes
73.5
76.5
Pension and postretirement health
liabilities
23.6
27.8
Operating lease liabilities
35.1
37.7
Other long-term liabilities
37.2
37.3
Total non-current liabilities
1,590.8
1,587.1
Total equity:
Common stock ($0.01 par value, 300,000,000
shares authorized, 142,118,645 shares and 141,557,236 shares issued
and outstanding as of June 30, 2021 and December 31, 2020,
respectively)
1.4
1.4
Additional paid-in capital (deficit)
(12.7
)
(25.6
)
Retained earnings
348.3
316.7
Accumulated other comprehensive loss
(18.5
)
(19.5
)
Total equity
318.5
273.0
Total liabilities and equity
$
2,249.2
$
2,141.6
WELBILT, INC.
Consolidated Statements of
Cash Flows
(In millions)
Six Months Ended June
30,
2021
2020
Cash flows from operating
activities
Net earnings (loss)
$
31.6
$
(32.5
)
Adjustments to reconcile net earnings
(loss) to cash used in operating activities:
Depreciation expense
10.9
10.4
Amortization of intangible assets
20.7
20.0
Amortization of deferred financing
fees
2.7
2.4
Deferred income taxes
(2.1
)
7.6
Stock-based compensation expense
5.7
1.0
Loss from impairment or disposal of assets
- net
—
11.3
Changes in operating assets and
liabilities:
Accounts receivable
(45.5
)
42.9
Inventories
(55.2
)
(24.4
)
Other assets
(7.0
)
(28.0
)
Trade accounts payable
46.8
(19.7
)
Other current and long-term
liabilities
12.1
(55.4
)
Net cash provided by (used in) operating
activities
20.7
(64.4
)
Cash flows from investing
activities
Capital expenditures
(9.9
)
(10.5
)
Acquisition of intangible assets
—
(0.2
)
Other
—
(3.9
)
Net cash used in investing activities
(9.9
)
(14.6
)
Cash flows from financing
activities
Proceeds from long-term debt
98.0
153.0
Repayments on long-term debt and finance
leases
(86.6
)
(58.6
)
Debt issuance costs
—
(2.1
)
Exercises of stock options
7.0
1.1
Payments on tax withholdings for equity
awards
(1.0
)
(0.7
)
Net cash provided by financing
activities
17.4
92.7
Effect of exchange rate changes on
cash
0.7
(4.7
)
Net increase in cash and cash equivalents
and restricted cash
28.9
9.0
Balance at beginning of period
125.4
130.7
Balance at end of period
$
154.3
$
139.7
WELBILT, INC.
Consolidated Statements of
Cash Flows (Continued)
(In millions)
Six Months Ended June
30,
2021
2020
Supplemental disclosures of cash flow
information:
Cash paid for income taxes, net of
refunds
$
12.6
$
14.4
Cash paid for interest, net of related
hedge settlements
$
35.0
$
40.3
Supplemental disclosures of non-cash
activities:
Non-cash financing activity: Lease
liabilities and assets obtained through leasing arrangements and
reassessments and modifications of right-of-use assets
$
2.0
$
6.8
Business Segments
(in millions, except percentage
data)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Net sales:
Americas
$
304.7
$
158.6
$
551.1
$
409.1
EMEA
112.3
45.6
205.7
135.6
APAC
63.8
42.2
112.5
93.5
Elimination of intersegment sales
(85.2
)
(40.4
)
(156.9
)
(103.3
)
Total net sales
$
395.6
$
206.0
$
712.4
$
534.9
Segment Adjusted Operating
EBITDA:
Americas
$
59.7
$
18.7
$
110.0
$
71.0
EMEA
21.0
5.5
35.6
19.1
APAC
9.0
5.7
15.8
13.9
Total Segment Adjusted Operating
EBITDA
89.7
29.9
161.4
104.0
Corporate and unallocated expenses
(16.2
)
(10.1
)
(38.1
)
(38.7
)
Amortization expense
(10.2
)
(10.0
)
(20.7
)
(20.0
)
Depreciation expense
(5.5
)
(5.2
)
(10.9
)
(10.4
)
Transaction costs (1)
(8.3
)
—
(8.3
)
(0.1
)
Other items (2)
2.1
(0.3
)
2.1
(3.4
)
Transformation Program expense (3)
(1.3
)
(2.6
)
(3.5
)
(14.2
)
Restructuring activities (4)
(0.1
)
(0.9
)
(0.3
)
(4.6
)
Loss from impairment and disposal of
assets — net
—
(0.1
)
—
(11.3
)
Earnings from operations
50.2
0.7
81.7
1.3
Interest expense (5)
(19.0
)
(20.4
)
(37.7
)
(42.8
)
Other (expense) income — net (5)
(2.9
)
(5.5
)
(5.9
)
1.0
Earnings (loss) before income taxes
$
28.3
$
(25.2
)
$
38.1
$
(40.5
)
(1) Transaction costs for the three and
six months ended June 30, 2021 of $8.3 million are related to the
pending sale of the Company and are comprised primarily of
professional services recorded in "Selling, general and
administrative expenses." Transaction costs of $0.1 million for the
six months ended June 30, 2020 are related to integration costs
resulting from a company acquisition in 2018, recorded in "Selling,
general and administrative expenses."
(2) Other items are costs which are not
representative of the Company's operational performance. For the
three and six months ended June 30, 2021, other items is primarily
comprised of a partial recovery of $2.0 million from the diversion
of funds in 2018 from one of the Company's EMEA locations and is
included in "Selling, general and administrative expenses" in the
Consolidated Statements of Operations. For the three and six months
ended June 30, 2020, other items represents the changes in the loss
contingency estimate of $0.3 million and $3.4 million,
respectively, due for customs duties, fees and interest on
previously imported products, which is included in "Restructuring
and other expense" in the Consolidated Statement of Operations.
(3) Transformation Program expense
includes consulting and other costs associated with executing our
Transformation Program initiatives. For the three and six months
ended June 30, 2021, $0.6 million and $1.1 million, respectively,
are included in "Cost of sales" in the Consolidated Statements of
Operations. For the three and six months ended June 30, 2020, $0.3
million and $1.1 million, respectively, are included in "Cost of
sales" in the Consolidated Statements of Operations. For the three
and six months ended June 30, 2021, $0.7 million and $2.4 million,
respectively, are included in "Selling, general and administrative
expenses" in the Consolidated Statements of Operations. For the
three and six months ended June 30, 2020, $2.3 million and $13.1
million, respectively, are included in "Selling, general and
administrative expenses" in the Consolidated Statements of
Operations.
(4) Restructuring activities include costs
associated with actions to improve operating efficiencies and
rationalization of our cost structure. For the three and six months
ended June 30, 2021, these costs include severance and related
costs of $0.1 million and $0.3 million. Comparatively, for the
three and six months ended June 30, 2020, these costs were $1.0
million and $4.6 million, respectively. Severance and related costs
are included in "Restructuring and other expenses" in the
Consolidated Statements of Operations. For the three months ended
June 30, 2020, a recovery of $0.1 million was recorded in "Cost of
sales" in the Consolidated Statements of Operations
(5) As disclosed in the Company's Annual
Report on Form 10-K for the year ended December 31, 2020,
amortization of debt issuance costs previously included as a
component of "Other expense (income) — net" totaled $2.4 million
and $1.3 million, respectively, for the three and six months ended
June 30, 2020 and has been reclassified to be included as a
component of "Interest expense" in the Company's Consolidated
Statements of Operations for the respective periods.
(in millions, except percentage
data)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Adjusted Operating EBITDA % by
segment (6):
Americas
19.6
%
11.8
%
20.0
%
17.4
%
EMEA
18.7
%
12.1
%
17.3
%
14.1
%
APAC
14.1
%
13.5
%
14.0
%
14.9
%
(6) Adjusted Operating EBITDA % is
calculated by dividing Adjusted Operating EBITDA by net sales for
each respective segment.
Third-party net sales by geographic
area (7):
United States
$
253.3
$
135.6
$
459.7
$
340.0
Other Americas
21.1
11.0
38.0
29.5
EMEA
74.6
34.7
133.5
103.9
APAC
46.6
24.7
81.2
61.5
Total net sales by geographic area
$
395.6
$
206.0
$
712.4
$
534.9
(7) Net sales in the section above are
attributed to geographic regions based on location of customer.
NON-GAAP FINANCIAL MEASURES
In this release, we use certain non-GAAP financial measures
discussed below to evaluate our results of operations, financial
condition and liquidity. We believe that the presentation of these
non-GAAP financial measures, when viewed as a supplement to our
results prepared in accordance with U.S. GAAP, provides useful
information to investors in evaluating the ongoing performance of
our operating businesses, provides greater transparency into our
results of operations and is consistent with how management
evaluates operating performance and liquidity. In addition, these
non-GAAP measures address questions we routinely receive from
analysts and investors and, in order to ensure that all investors
have access to similar data we make this data available to all
investors. None of the non-GAAP measures presented should be
considered as an alternative to net earnings, earnings from
operations, net cash used in operating activities, net sales or any
other measures derived in accordance with U.S. GAAP. These non-GAAP
measures have important limitations as analytical tools and should
not be considered in isolation or as substitutes for financial
measures presented in accordance with U.S. GAAP. The presentation
of our non-GAAP financial measures may change from time to time,
including as a result of changed business conditions, new
accounting rules or otherwise. Further, our use of these terms may
vary from the use of similarly-titled measures by other companies
due to the potential inconsistencies in the method of calculation
and differences due to items subject to interpretation. We do not
provide reconciliations of our forward-looking Adjusted Operating
EBITDA margin and Adjusted Diluted Net Earnings Per Share guidance,
which are presented on a non-GAAP basis, to the most directly
comparable GAAP financial measure because the combined impact and
timing of certain potential charges or gains is inherently
uncertain, outside of our control and difficult to predict.
Accordingly, we cannot provide reconciliations without unreasonable
effort and are unable to determine the probable significance of the
unavailable information.
Free Cash Flow
In this release, we refer to Free Cash Flow, a non-GAAP measure,
as our net cash provided by or used in operating activities less
capital expenditures. We believe this non-GAAP financial measure is
useful to investors in measuring our ability to generate cash
internally to fund our debt repayments, acquisitions, dividends and
share repurchases, if any. Free Cash Flow reconciles to net cash
used in operating activities presented in our Consolidated
Statements of Cash Flows presented in accordance with U.S. GAAP as
follows:
(in millions)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Net cash provided by (used in) operating
activities
$
37.1
$
8.1
$
20.7
$
(64.4
)
Capital expenditures
(5.2
)
(4.9
)
(9.9
)
(10.5
)
Free Cash Flow
$
31.9
$
3.2
$
10.8
$
(74.9
)
Adjusted Operating EBITDA
In addition to analyzing our operating results on a U.S. GAAP
basis, management also reviews our results on an "Adjusted
Operating EBITDA" basis. Adjusted Operating EBITDA is defined as
net earnings before interest expense, income taxes, other income or
expense, depreciation and amortization expense plus certain other
items such as loss from impairment of assets, gain or loss from
disposal of assets, restructuring activities, loss on modification
or extinguishment of debt, acquisition-related transaction and
integration costs, Transformation Program expense and certain other
items. Management uses Adjusted Operating EBITDA as the basis on
which we evaluate our financial performance and make resource
allocations and other operating decisions. Management considers it
important that investors review the same operating information used
by management.
The Company's Adjusted Operating EBITDA reconciles to net
earnings as presented in the Consolidated Statements of Operations
in accordance with U.S. GAAP as follows:
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Net earnings (loss)
$
23.7
$
(17.4
)
$
31.6
$
(32.5
)
Income tax expense (benefit)
4.6
(7.8
)
6.5
(8.0
)
Other expense (income) — net (1)
2.9
5.5
5.9
(1.0
)
Interest expense (1)
19.0
20.4
37.7
42.8
Earnings from operations
50.2
0.7
81.7
1.3
Loss from impairment and disposal of
assets — net
—
0.1
—
11.3
Restructuring activities (2)
0.1
0.9
0.3
4.6
Amortization expense
10.2
10.0
20.7
20.0
Depreciation expense
5.5
5.2
10.9
10.4
Transformation Program expense (3)
1.3
2.6
3.5
14.2
Transaction costs (4)
8.3
—
8.3
0.1
Other items (5)
(2.1
)
0.3
(2.1
)
3.4
Total Adjusted Operating EBITDA
$
73.5
$
19.8
$
123.3
$
65.3
Adjusted Operating EBITDA margin (6)
18.6
%
9.6
%
17.3
%
12.2
%
(1) As disclosed in the Company's Annual
Report on Form 10-K for the year ended December 31, 2020,
amortization of debt issuance costs previously included as a
component of "Other expense (income) — net" totaled $2.4 million
and $1.3 million, respectively, for the three and six months ended
June 30, 2020 and has been reclassified to be included as a
component of "Interest expense" in the Company's Consolidated
Statements of Operations for the respective periods.
(2) Restructuring activities include costs
associated with actions to improve operating efficiencies and
rationalization of our cost structure. For the three and six months
ended June 30, 2021, these costs include severance and related
costs of $0.1 million and $0.3 million. Comparatively, for the
three and six months ended June 30, 2020, these costs were $1.0
million and $4.6 million, respectively. Severance and related costs
are included in "Restructuring and other expenses" in the
Consolidated Statements of Operations. For the three months ended
June 30, 2020, a recovery of $0.1 million was recorded in "Cost of
sales" in the Consolidated Statements of Operations.
(3) Transformation Program expense
includes consulting and other costs associated with executing our
Transformation Program initiatives. For the three and six months
ended June 30, 2021, $0.6 million and $1.1 million, respectively,
are included in "Cost of sales" in the Consolidated Statements of
Operations. For the three and six months ended June 30, 2020, $0.3
million and $1.1 million, respectively, are included in "Cost of
sales" in the Consolidated Statements of Operations. For the three
and six months ended June 30, 2021, $0.7 million and $2.4 million,
respectively, are included in "Selling, general and administrative
expenses" in the Consolidated Statements of Operations. For the
three and six months ended June 30, 2020, $2.3 million and $13.1
million, respectively, are included in "Selling, general and
administrative expenses" in the Consolidated Statements of
Operations.
(4) Transaction costs for the three and
six months ended June 30, 2021 of $8.3 million are related to the
pending sale of the Company and are comprised primarily of
professional services recorded in "Selling, general and
administrative expenses." Professional services and other direct
acquisition and integration costs recorded in "Selling, general and
administrative expenses" were $0.1 million for the six months ended
June 30, 2020.
(5) Other items are costs which are not
representative of the Company's operational performance. For the
three and six months ended June 30, 2021, other items is primarily
comprised of a partial recovery of $2.0 million from the diversion
of funds in 2018 from one of the Company's EMEA locations and is
included in "Selling, general and administrative expenses" in the
Consolidated Statements of Operations. For the three and six months
ended June 30, 2020, other items represents the changes in the loss
contingency estimate of $0.3 million and $3.4 million,
respectively, due for customs duties, fees and interest on
previously imported products, which is included in "Restructuring
and other expense" in the Consolidated Statement of Operations.
(6) Adjusted Operating EBITDA margin in
the section above is calculated by dividing the dollar amount of
Adjusted Operating EBITDA by net sales.
Adjusted Net Earnings and Adjusted Diluted Net Earnings Per
Share
We define Adjusted Net Earnings as net earnings before the
impact of certain items, such as loss on modification or
extinguishment of debt, gain or loss from impairment and disposal
of assets, restructuring activities, separation expense,
Transformation Program expense, acquisition-related transaction and
integration costs, certain other items, expenses associated with
pension settlements, foreign currency transaction gain or loss and
the tax effect of the aforementioned adjustments, as applicable.
Adjusted Diluted Net Earnings Per Share for each period represents
Adjusted Net Earnings while giving effect to all potentially
dilutive shares of common stock that were outstanding during the
period. We believe these measures are useful to investors in
assessing the ongoing performance of our underlying businesses
before the impact of certain items.
The following tables present Adjusted Net Earnings and Adjusted
Diluted Net Earnings Per Share reconciled to net earnings and
diluted net earnings per share, respectively, presented in
accordance with U.S. GAAP:
(in millions, except share
data)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Net earnings (loss)
$
23.7
$
(17.4
)
$
31.6
$
(32.5
)
Loss from impairment and disposal of
assets — net
—
0.1
—
11.3
Restructuring activities (1)
0.1
0.9
0.3
4.6
Transformation Program expense (2)
1.3
2.6
3.5
14.2
Transaction costs (3)
8.3
—
8.3
0.1
Other items (4)
(2.1
)
0.3
(2.1
)
3.4
Foreign currency transaction loss (gain)
(5)
2.6
5.7
5.4
(2.0
)
Tax effect of adjustments (6)
(2.2
)
(2.1
)
(3.4
)
(7.6
)
Total Adjusted Net Earnings (Loss)
$
31.7
$
(9.9
)
$
43.6
$
(8.5
)
Per share basis
Diluted net earnings (loss)
$
0.17
$
(0.12
)
$
0.22
$
(0.23
)
Loss from impairment and disposal of
assets — net
—
—
—
0.08
Restructuring activities (1)
—
—
—
0.03
Transformation Program expense (2)
—
0.02
0.02
0.10
Transaction costs (3)
0.06
—
0.06
—
Other items (4)
(0.01
)
—
(0.01
)
0.02
Foreign currency transaction loss (gain)
(5)
0.02
0.04
0.04
(0.01
)
Tax effect of adjustments (6)
(0.02
)
(0.01
)
(0.02
)
(0.05
)
Total Adjusted Diluted Net Earnings
(Loss)
$
0.22
$
(0.07
)
$
0.31
$
(0.06
)
(1) Restructuring activities include costs
associated with actions to improve operating efficiencies and
rationalization of our cost structure. For the three and six months
ended June 30, 2021, these costs include severance and related
costs of $0.1 million and $0.3 million. Comparatively, for the
three and six months ended June 30, 2020, these costs were $1.0
million and $4.6 million, respectively. Severance and related costs
are included in "Restructuring and other expenses" in the
Consolidated Statements of Operations. For the three months ended
June 30, 2020, a recovery of $0.1 million was recorded in "Cost of
sales" in the Consolidated Statements of Operations.
(2) Transformation Program expense
includes consulting and other costs associated with executing our
Transformation Program initiatives. For the three and six months
ended June 30, 2021, $0.6 million and $1.1 million, respectively,
are included in "Cost of sales" in the Consolidated Statements of
Operations. For the three and six months ended June 30, 2020, $0.3
million and $1.1 million, respectively, are included in "Cost of
sales" in the Consolidated Statements of Operations. For the three
and six months ended June 30, 2021, $0.7 million and $2.4 million,
respectively, are included in "Selling, general and administrative
expenses" in the Consolidated Statements of Operations. For the
three and six months ended June 30, 2020, $2.3 million and $13.1
million, respectively, are included in "Selling, general and
administrative expenses" in the Consolidated Statements of
Operations.
(3)Transaction costs for the three and six
months ended June 30, 2021 of $8.3 million are related to the
pending sale of the Company and are comprised primarily of
professional services recorded in "Selling, general and
administrative expenses." Professional services and other direct
acquisition and integration costs recorded in "Selling, general and
administrative expenses" were $0.1 million for the six months ended
June 30, 2020.
(4) Other items are costs which are not
representative of the Company's operational performance. For the
three and six months ended June 30, 2021, other items is primarily
comprised of a partial recovery of $2.0 million from the diversion
of funds in 2018 from one of the Company's EMEA locations and is
included in "Selling, general and administrative expenses" in the
Consolidated Statements of Operations. For the three and six months
ended June 30, 2020, other items represents the changes in the loss
contingency estimate of $0.3 million and $3.4 million,
respectively, due for customs duties, fees and interest on
previously imported products, which is included in "Restructuring
and other expense" in the Consolidated Statement of Operations.
(5) Foreign currency transaction gains and
losses are inclusive of gains and losses on related foreign
currency exchange contracts not designated as hedging instruments
for accounting purposes.
(6) The tax effect of adjustments is
determined using the statutory tax rates for the countries
comprising such adjustments.
Third-party Net Sales and Organic Net Sales
In this release, we define Third-party Net Sales as net sales
for the segment excluding intersegment sales and Organic Net Sales
as net sales before the impacts of acquisitions and foreign
currency translations during the period. We believe the Third-party
Net Sales and Organic Net Sales measures are useful to investors in
assessing the ongoing performance of our underlying businesses. The
change in third-party Net Sales and Organic Net Sales reconcile to
the change in net sales presented in accordance with U.S. GAAP as
follows:
For the Three Months Ended
June 30, 2021 vs. 2020
Favorable/(Unfavorable)
Americas
EMEA
APAC
Welbilt
Organic Net Sales
85.3
%
110.9
%
57.9
%
85.8
%
Impact of foreign currency
translation(1)
2.1
%
23.2
%
6.7
%
6.2
%
Third-party Net Sales
87.4
%
134.1
%
64.6
%
92.0
%
For the Six Months Ended June
30, 2021 vs. 2020
Favorable/(Unfavorable)
Americas
EMEA
APAC
Welbilt
Organic Net Sales
34.3
%
20.7
%
15.9
%
29.3
%
Impact of foreign currency
translation(1)
1.3
%
12.4
%
4.5
%
3.9
%
Third-party Net Sales
35.6
%
33.1
%
20.4
%
33.2
%
(1) The impact from foreign currency
translation is calculated by translating current period activity at
the weighted average prior period rates.
Three Months Ended June
30,
Six Months Ended June
30,
(in millions)
2021
2020
2021
2020
Consolidated:
Net sales
$
480.8
$
246.4
$
869.3
$
638.2
Less: Intersegment sales
(85.2
)
(40.4
)
(156.9
)
(103.3
)
Net sales (as reported)
395.6
206.0
712.4
534.9
Impact of foreign currency
translation(1)
(12.9
)
—
(20.6
)
—
Organic net sales
$
382.7
$
206.0
$
691.8
$
534.9
Americas:
Net sales
$
304.7
$
158.6
$
551.1
$
409.1
Less: Intersegment sales
(34.8
)
(14.6
)
(60.2
)
(47.0
)
Third-party net sales
269.9
144.0
490.9
362.1
Impact of foreign currency
translation(1)
(3.1
)
—
(4.5
)
—
Total Americas organic net sales
$
266.8
$
144.0
$
486.4
$
362.1
EMEA:
Net sales
$
112.3
$
45.6
$
205.7
$
135.6
Less: Intersegment sales
(32.7
)
(11.6
)
(65.1
)
(30.0
)
Third-party net sales
79.6
34.0
140.6
105.6
Impact of foreign currency
translation(1)
(7.9
)
—
(13.1
)
—
Total EMEA organic net sales
$
71.7
$
34.0
$
127.5
$
105.6
APAC:
Net sales
$
63.8
$
42.2
$
112.5
$
93.5
Less: Intersegment sales
(17.7
)
(14.2
)
(31.6
)
(26.3
)
Third-party net sales
46.1
28.0
80.9
67.2
Impact of foreign currency
translation(1)
(1.9
)
—
(3.0
)
—
Total APAC organic net sales
$
44.2
$
28.0
$
77.9
$
67.2
(1) The impact from foreign currency
translation is calculated by translating current period activity at
the weighted average prior period rates.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210803005213/en/
Rich Sheffer Vice President Investor Relations, Risk Management
and Treasurer Welbilt, Inc. +1 (727) 853-3079
Richard.sheffer@welbilt.com
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