Diversey Holdings, Ltd. ("Diversey") (NASDAQ: DSEY) announced Q3
results with continued quarter-over-quarter top line growth and
margin expansion.
THIRD QUARTER HIGHLIGHTS
- Reported Q3 net sales declined 2.4% vs 2020 as continued
strength in Food & Beverage and encouraging base Institutional
recovery was offset by infection prevention normalization off the
increased level in Q3 2020, although infection prevention remains
significantly above 2019 levels.
- Reported Q3 net sales nearly back to pre-COVID level with a
decline of 0.4% vs 2019 baseline.
- Net loss of $42.1 million in Q3 versus $13.0 million net income
in 2020 and $7.1 million net loss in pre-COVID 2019
- Q3 Adjusted net income of $30.2 million versus $37.8 million in
2020 and $37.8 million in pre-COVID 2019
- Adjusted EBITDA of $106.6 million and margin of 16.0%
represents an expansion of 30 basis points versus both Q3 2020 and
Q3 2019 as pricing and continued focus on cost management offset
higher inflation.
Unaudited |
Third Quarter Ended September 30 |
(millions) |
|
2021 |
|
|
2020 |
% Change |
|
2019 |
|
% Change |
Net sales |
$ |
664.9 |
|
$ |
681.1 |
|
(2.4)% |
|
$ |
667.6 |
|
(0.4)% |
Income (loss) before
taxes |
|
(22.9) |
|
$ |
20.1 |
|
NM |
|
|
(8.3) |
|
(175.9)% |
Net income (loss) |
|
(42.1) |
|
|
13.0 |
|
NM |
|
|
(7.1) |
|
(493.0)% |
Adjusted net income(1) |
|
30.2 |
|
|
37.8 |
|
(20.1)% |
|
|
37.8 |
|
(20.1)% |
|
|
|
|
|
|
|
|
Adjusted EBITDA(1) |
|
106.6 |
|
|
106.8 |
|
(0.2)% |
|
|
104.6 |
|
1.9% |
% Margin(1) |
|
16.0% |
|
|
15.7% |
|
30 bps |
|
|
15.7% |
|
30 bps |
(1) See the “Non-GAAP Financial Information and Segment Adjusted
EBITDA” section herein for explanations of these financial
measures.
“We are pleased to report another good quarter, continuing to
execute well, win new customers and expand adjusted EBITDA margins.
I am proud of our teams for the way they are responding to the
current global challenges. Our supply chain teams are managing
freight issues, our procurement teams are managing a difficult and
fast-changing raw material landscape and our R&D teams are
working tirelessly to reformulate products in order to deliver
exceptional product and service for customers,” said Phil Wieland,
Diversey’s Chief Executive Officer. “Our Food and Beverage growth
continues to be excellent and the base Institutional results have
been very strong with plenty of further runway as markets continue
to open up. Our infection prevention has come down from the strong
growth we experienced in 2020, but remains significantly ahead of
pre-COVID 2019 levels. Although difficult to judge exact trends
given the complexity of the overall environment, we are encouraged
by increased hygiene standards and market receptivity to our
differentiated solutions portfolio and compelling value
proposition. In summary, we believe we will drive growth in Q4 and
acceleration in 2022, and we are increasingly well positioned for
long-term growth."
Third Quarter 2021 Consolidated Results
Reported net sales declined 2.4% vs prior year or 3.2% when
adjusting for currency. Both the Institutional and F&B segments
are showing good momentum. The F&B segment continues to win new
customers and grow revenue while improving margins. The recovery of
base Institutional revenue is progressing well and the segment
continues to win new customers, with significant recovery still
ahead as reopenings progress around the world. Institutional
infection prevention has seen normalization from the strong growth
experienced in 2020, but is still significantly above pre-pandemic
levels. Consolidated reported net sales were within 0.4% of
pre-COVID 2019 baseline.
Loss before income taxes of $22.9 million in the third quarter
of 2021 included Special Items (as defined below) of $57.0 million
and compared to income before taxes of $20.1 million in Q3 2020
including Special Items of $7.0 million. Adjusted net income in Q3
2021 was $30.2 million compared to $37.8 million in Q3 2020 and
$37.8 million in Q3 2019.
Adjusted EBITDA for Q3 2021 was $106.6 million, representing a
0.2% decline compared to Q3 2020 and growth of 1.9% versus
pre-COVID 2019. Adjusted EBITDA margin expanded 30 basis points
compared to both Q3 2020 and Q3 2019 in a challenging environment.
Adjusted EBITDA margin of 16.0% in Q3 2021 continues the margin
expansion from 15.6% in Q2 2021 and 14.7% in Q1 2021, representing
strong sequential margin improvement in each quarter of 2021.
Segment Review
Institutional
Unaudited |
Third Quarter Ended September 30 |
(millions) |
|
2021 |
|
2020 |
% Change |
|
2019 |
% Change |
Net sales |
$ |
487.2 |
$ |
522.4 |
(6.7)% |
$ |
504.6 |
(3.4)% |
Adjusted EBITDA |
|
84.3 |
|
89.2 |
(5.5)% |
|
87.0 |
(3.1)% |
% Margin |
|
17.3 % |
|
17.1 % |
20 bps |
|
17.2 % |
10 bps |
Reported net sales in the Institutional segment of $487.2
million were 6.7% below Q3 2020 and 3.4% below Q3 2019. The
recovery of the base business continues to be encouraging, with
strong growth over Q3 2020 from new business wins, strong
innovation, pricing and reopening in some markets. However, this is
more than offset by infection prevention revenue normalization
versus very strong gains last year. Adjusted EBITDA margin grew +20
basis points vs Q2 2020 and +10 basis points vs Q2 2019 from
ongoing efficiency initiatives.
Food & Beverage
Unaudited |
Third Quarter Ended September 30 |
(millions) |
|
2021 |
|
2020 |
% Change |
|
2019 |
% Change |
Net sales |
$ |
177.7 |
$ |
158.7 |
12.0% |
$ |
163.0 |
9.0% |
Adjusted EBITDA |
|
34.3 |
|
26.4 |
29.9% |
|
27.3 |
25.6% |
% Margin |
|
19.3 % |
|
16.6 % |
270 bps |
|
16.7% |
260 bps |
The Food & Beverage segment continues to grow its top line
while improving margins. Net sales of $177.7 million in Q3 2021
increased 12.0% versus prior year and 9.0% versus Q3 2019,
continuing very high win rates and success with the new water
treatment offering. Adjusted EBITDA of $34.3 million grew 29.9%
versus Q3 2020 and 25.6% versus Q3 2019. Margin improvement of +270
basis points versus the prior year and +260 basis points versus
pre-COVID 2019 reflect pricing actions and cost control measures
that were in place before the global pandemic and will continue.
Acquisitions contributed $3.0 million to sales growth and $1.2
million to Adjusted EBITDA.
Outlook
Q4 2021 revenue is expected to grow over Q4 2020, absent further
supply chain disruption. Revenue continues to improve as markets
reopen and we continue to implement new business that we've won
over the last year. For infection prevention, we're seeing demand
lower than what we experienced in 2020 during the pandemic, but
much higher than pre-pandemic levels, which is likely to continue
in the future due to increased hygiene standards. In the fourth
quarter we also expect to continue quarter-over-quarter progressive
growth in sales, Adjusted EBITDA and Adjusted EBITDA Margin, as
mentioned last quarter, and accelerating momentum into 2022.
As a leading provider of hygiene, infection prevention and
cleaning solutions amidst a pandemic, we are well positioned to
capture significant growth due to elevated cleaning standards as
markets continue to reopen. We’re building great momentum for 2022
and beyond with an improving top line, aggressive pricing to combat
inflation and a very strong funnel of acquisitions.
About Diversey
Diversey’s mission is to protect and care for people through
leading hygiene, infection prevention, and cleaning solutions. We
develop and deliver innovative products, services, and technologies
that save lives and protect our environment. Over the course of 95
years, the Diversey brand has become synonymous with product
quality, service, and innovation.
For more information, visit www.diversey.com or follow us on
LinkedIn, Facebook, or Twitter @diversey.
Diversey Holdings, Ltd.Investor Contact:Grant
Graverir@diversey.com
Conference Call and Webcast Information
Management will host a conference call today, November 5, 2021
at 8:30 am ET to discuss the results for Q3 2021.
Interested parties may access the conference call live over the
phone by dialing 1-877-407-0784 (Toll Free) or 1-201-689-8560
(Toll/International) and requesting the Diversey Third Quarter 2021
Earnings Conference Call. Participants are asked to dial in a few
minutes prior to the call to register for the event. Related
materials that will be referenced on the call are available to the
public at ir.diversey.com. The event will also be available live
via webcast which can be accessed here.
An audio replay of the conference call will be available
approximately three hours after the conference call until 11:59 pm
ET on November 19, 2021 and can be accessed by dialing
1-844-512-2921 (domestic) or 1-412-317-6671 (international), and
providing the passcode 13723846.
Cautionary Statements Regarding Forward-Looking
Information
This communication contains forward-looking statements that are
subject to substantial risks and uncertainties. All statements
other than statements of historical fact included in this
communication, including statements regarding our business
strategy, future operations and results thereof, future financial
position, future revenue, projected costs, prospects, current and
prospective products, current and prospective collaborations,
timing and likelihood of success, plans and objectives of
management, expected market growth and future results of current
and anticipated products are forward-looking statements. You can
identify forward-looking statements by the fact that they do not
relate strictly to historical or current facts. These statements
may include words such as “anticipate”, “estimate”, “expect”,
“project”, “plan”, "potential", "predict", “intend”, “believe”,
“may”, "might", “will”, "would", “should”, “can have”, "could",
"continue", "contemplate", "target", “likely” and other words and
terms of similar meaning in connection with any discussion of the
timing or nature of future operating or financial performance or
other events although not all forward-looking statements contain
these identifying words. For example, all statements we make
relating to our estimated and projected costs, expenditures, cash
flows, growth rates and financial results or our plans and
objectives for future operations, growth initiatives, or strategies
are forward-looking statements. All forward-looking statements
involve unknown risks, and other important factors that may cause
actual results performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements,
including:
- the continuation of the COVID-19 pandemic may cause disruptions
to our operations, customer demand, and our suppliers’ ability to
support us;
- uncertain global economic conditions which have had and could
continue to have an adverse effect on our consolidated financial
condition and results of operations;
- the global nature of our operations exposes us to numerous
risks that could materially adversely affect our consolidated
financial condition and results of operations;
- fluctuations between non-U.S. currencies and the U.S. dollar
could materially impact our consolidated financial condition or
results of operations;
- political and economic instability and risk of government
actions affecting our business and our customers or suppliers may
adversely impact our business, results of operations and cash
flows;
- raw material pricing, availability and allocation by suppliers
as well as energy-related costs may negatively impact our results
of operations, including our profit margins;
- if we do not develop new and innovative products or if
customers in our markets do not accept them, our results would be
negatively affected;
- cyber risks and the failure to maintain the integrity of our
operational or security systems or infrastructure;
- the introduction of the Organization for Economic Cooperation
and Development’s Base Erosion and Profit Shifting may adversely
affect our effective rate of tax in future periods;
- the consolidation of customers may adversely affect our
business, consolidated financial condition or results of
operations;
- we experience competition in the markets for our products and
services and in the geographic areas in which we operate;
- instability and uncertainty in the credit and financial markets
could adversely impact the availability of credit that we and our
customers need to operate our business;
- new and stricter regulations may affect our business and
consolidated condition and results of operations; and
- the other risks described under “Risk Factors” in Diversey’s
prospectus dated March 24, 2021 filed with the Securities and
Exchange Commission in connection with our recently completed
IPO.
We derive many of our forward-looking statements from our
operating budgets and forecasts, which are based on many detailed
assumptions. While we believe that our assumptions are reasonable,
we caution that it is very difficult to predict the impact of known
factors, and it is impossible for us to anticipate all factors that
could affect our actual results. All written and oral
forward-looking statements attributable to us, or persons acting on
our behalf, are expressly qualified in their entirety by these
cautionary statements as well as other cautionary statements that
are made from time to time in our other SEC filings and public
communications. You should evaluate all forward-looking statements
in the context of these risks and uncertainties.
We caution you that the important factors referenced above may
not contain all of the factors that are important to you. In
addition, we cannot assure you that we will realize the results or
developments we expect or anticipate or, even if substantially
realized, that they will result in the consequences or affect us or
our operations in the way we expect. The forward-looking statements
included herein are made only as of the date hereof. We undertake
no obligation to update or revise any forward-looking statement as
a result of new information, future events or otherwise, except as
otherwise required by law.
Non-GAAP Financial Information
We present financial information that conforms to generally
accepted accounting principles in the United States (“U.S. GAAP").
We also present financial information that does not conform to U.S.
GAAP ("Non-GAAP"), as our management believes it is useful to
investors.
The Non-GAAP financial metrics exclude items that we consider to
be certain specified items (“Special Items”), such as restructuring
charges, transition and transformation costs, certain transaction
and other charges related to acquisitions and divestitures, gains
and losses related to acquisitions and divestitures, and certain
other items. We evaluate unusual or Special Items on an individual
basis. Our evaluation of whether to exclude an unusual or Special
Item for purposes of determining our Non-GAAP financial measures
considers both the quantitative and qualitative aspects of the
item, including among other things (i) its nature, (ii) whether or
not it relates to our ongoing business operations, and (iii)
whether or not we expect it to occur as part of our normal business
on a regular basis.
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are supplemental measures that are
not required by, or presented in accordance with, U.S. GAAP. We
define EBITDA as income (loss) before income tax provisions
(benefit), interest expense, and depreciation and amortization, and
Adjusted EBITDA, as EBITDA adjusted for other items to (i)
eliminate certain non-operating income or expense items, (ii)
eliminate the impact of certain non-cash and other items that are
included in net income (loss) that we do not consider indicative of
our ongoing operating performance, and (iii) eliminate certain
unusual and non-recurring items impacting results in a particular
period.
EBITDA and Adjusted EBITDA are not measures of our financial
performance under U.S. GAAP and should not be considered as an
alternative to revenues, net income (loss), income (loss) before
income tax provision or any other performance measures derived in
accordance with U.S. GAAP, nor should they be considered as
alternatives to cash flows from operating activities as a measure
of liquidity in accordance with U.S. GAAP. In addition, our method
of calculating EBITDA and Adjusted EBITDA may vary from the methods
used by other companies.
Our management considers EBITDA and Adjusted EBITDA to be key
indicators of our financial performance. Additionally, we believe
EBITDA and Adjusted EBITDA are frequently used by securities
analysts, investors and other interested parties in the evaluation
of companies in our industry. We also believe that investors,
analysts and rating agencies consider EBITDA and Adjusted EBITDA
useful means of measuring our ability to meet our debt service
obligations and evaluating our financial performance, and
management uses these measures for one or more of these purposes.
Our presentation of EBITDA and Adjusted EBITDA should not be
construed as an inference that our future results will be
unaffected by unusual or nonrecurring items. EBITDA and Adjusted
EBITDA have important limitations as analytical tools and you
should not consider them in isolation or as a substitute for
analysis of our results as reported under U.S. GAAP. The use of
EBITDA and Adjusted EBITDA instead of net income has limitations as
an analytical tool.
Adjusted Net Income
Adjusted Net Income (as defined below) and Adjusted Earnings
(Loss) Per Share (“Adjusted EPS”) are Non-GAAP financial measures.
We define Adjusted Net Income as net income (loss) adjusted to (i)
eliminate certain non-operating income or expense items, (ii)
eliminate the impact of certain non-cash and other items that are
included in net income that we do not consider indicative of our
ongoing operating performance, (iii) eliminate certain unusual and
non-recurring items impacting results in a particular period, and
(iv) reflect the tax effect of items (i) through (iii) and other
tax special items.
We believe that in addition to our results determined in
accordance with GAAP, Adjusted Net Income and Adjusted EPS are
useful in evaluating our business, results of operations and
financial condition. We believe that Adjusted Net Income and
Adjusted EPS may be helpful to investors because they provide
consistency and comparability with past financial performance and
facilitate period to period comparisons of our operations and
financial results, as they eliminate the effects of certain
variables from period to period for reasons that we do not believe
reflect our underlying operating performance or are unusual or
infrequent in nature. However, Adjusted Net Income and Adjusted EPS
are presented for supplemental informational purposes only and
should not be considered in isolation or as a substitute or
alternative for financial information presented in accordance with
GAAP.
Adjusted Net Income and Adjusted EPS have limitations as
analytical tools.
Diversey Holdings,
Ltd.Condensed Consolidated Balance
Sheets(Unaudited)
(in millions except
per share amounts) |
September 30, 2021 |
December 31, 2020 |
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ |
68.8 |
|
|
$ |
192.9 |
|
Trade receivables, net of allowance for doubtful accounts of $25.4
and $28.7 |
403.9 |
|
|
342.0 |
|
Other receivables |
51.8 |
|
|
71.0 |
|
Inventories |
327.5 |
|
|
282.4 |
|
Prepaid expenses and other current assets |
63.6 |
|
|
62.0 |
|
Total current assets |
915.6 |
|
|
950.3 |
|
Property and equipment, net |
187.9 |
|
|
188.3 |
|
Goodwill |
459.5 |
|
|
467.0 |
|
Intangible assets, net |
2,193.8 |
|
|
2,311.4 |
|
Other non-current assets |
338.9 |
|
|
369.1 |
|
Total assets |
$ |
4,095.7 |
|
|
$ |
4,286.1 |
|
|
|
|
Liabilities and
stockholders' equity |
|
|
Current liabilities: |
|
|
Short-term borrowings |
$ |
16.5 |
|
|
$ |
0.4 |
|
Current portion of long-term debt |
11.4 |
|
|
13.2 |
|
Accounts payable |
396.8 |
|
|
404.6 |
|
Accrued restructuring costs |
15.9 |
|
|
26.3 |
|
Other current liabilities |
392.1 |
|
|
512.4 |
|
Total current liabilities |
832.7 |
|
|
956.9 |
|
Long-term debt, less current portion |
1,966.4 |
|
|
2,686.7 |
|
Preferred equity certificates |
— |
|
|
641.7 |
|
Deferred taxes |
164.1 |
|
|
181.1 |
|
Other non-current liabilities |
563.6 |
|
|
328.3 |
|
Total liabilities |
3,526.8 |
|
|
4,794.7 |
|
Commitments and contingencies |
|
|
Stockholders'
equity: |
|
|
Common stock, $0.01 par value per share, 0 and 243,163,947 shares
authorized and outstanding in 2021 and 2020, respectively |
— |
|
|
2.2 |
|
Ordinary shares, $0.0001 par value per share; 1,000,000,000 and 0
shares authorized, 302,431,140 and 0 shares outstanding in 2021 and
2020, respectively |
— |
|
|
— |
|
Preferred shares, $0.0001 par value per share, 200,000,000 and 0
shares authorized, 0 and 0 shares outstanding in 2021 and 2020,
respectively |
— |
|
|
— |
|
Additional paid-in capital |
1433.7 |
|
|
247.2 |
|
Accumulated deficit |
(684.4 |
) |
|
(545.3 |
) |
Accumulated other comprehensive loss |
(180.4 |
) |
|
(212.7 |
) |
Total stockholders' equity |
568.9 |
|
|
(508.6 |
) |
Total liabilities and stockholders' equity |
$ |
4,095.7 |
|
|
$ |
4,286.1 |
|
|
|
Diversey Holdings,
Ltd.Condensed Consolidated Statements of
Operations(Unaudited)
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
(in millions except
per share amounts) |
2021 |
2020 |
2021 |
2020 |
Net sales |
$ |
664.9 |
|
|
$ |
681.1 |
|
|
$ |
1,946.5 |
|
|
$ |
1,961.8 |
|
Cost of sales |
403.9 |
|
|
410.9 |
|
|
1,173.5 |
|
|
1,150.0 |
|
Gross profit |
261.0 |
|
|
270.2 |
|
|
773.0 |
|
|
811.8 |
|
Selling, general and
administrative expenses |
193.2 |
|
|
189.0 |
|
|
642.5 |
|
|
582.9 |
|
Transition and transformation
costs |
7.5 |
|
|
11.2 |
|
|
33.1 |
|
|
20.0 |
|
Management fee |
— |
|
|
1.8 |
|
|
19.4 |
|
|
5.6 |
|
Amortization of intangible
assets |
24.2 |
|
|
24.8 |
|
|
72.6 |
|
|
74.0 |
|
Restructuring and exit
costs |
19.8 |
|
|
2.0 |
|
|
22.4 |
|
|
5.3 |
|
Merger and acquisition related
costs |
— |
|
|
0.9 |
|
|
— |
|
|
0.9 |
|
Operating income (loss) |
16.3 |
|
|
40.5 |
|
|
(17.0 |
) |
|
123.1 |
|
Interest expense |
25.8 |
|
|
32.4 |
|
|
97.4 |
|
|
94.8 |
|
Foreign currency (gain) loss
related to Argentina subsidiaries |
(2.9 |
) |
|
(0.3 |
) |
|
(2.7 |
) |
|
0.3 |
|
Loss on extinguishment of
debt |
15.6 |
|
|
— |
|
|
15.6 |
|
|
— |
|
Other (income) expense,
net |
0.7 |
|
|
(11.7 |
) |
|
4.8 |
|
|
(29.2 |
) |
Income (loss) before income tax provision |
(22.9 |
) |
|
20.1 |
|
|
(132.1 |
) |
|
57.2 |
|
Income tax provision |
19.2 |
|
|
7.1 |
|
|
7.0 |
|
|
23.9 |
|
Net income (loss) |
$ |
(42.1 |
) |
|
$ |
13.0 |
|
|
$ |
(139.1 |
) |
|
$ |
33.3 |
|
|
|
|
|
|
Basic income (loss) per
share |
$ |
(0.14 |
) |
|
$ |
0.05 |
|
|
$ |
(0.49 |
) |
|
$ |
0.14 |
|
Diluted income (loss) per
share |
$ |
(0.14 |
) |
|
$ |
0.05 |
|
|
$ |
(0.49 |
) |
|
$ |
0.14 |
|
Basic weighted average shares
outstanding |
301.6 |
|
|
243.2 |
|
|
283.4 |
|
|
243.2 |
|
Diluted weighted average
shares outstanding |
301.6 |
|
|
243.2 |
|
|
283.4 |
|
|
243.2 |
|
|
|
|
|
|
Reconciliation of gross margin
to adjusted gross margin: |
|
|
|
|
Net sales |
$ |
664.9 |
|
|
$ |
681.1 |
|
|
$ |
1,946.5 |
|
|
$ |
1,961.8 |
|
|
|
|
|
|
Cost of sales, as
reported |
403.9 |
|
|
410.9 |
|
|
1,173.5 |
|
|
1,150.0 |
|
Less share-based compensation
included in cost of sales |
(0.9 |
) |
|
— |
|
|
(6.9 |
) |
|
— |
|
Non-GAAP adjusted cost of sales |
$ |
403.0 |
|
|
$ |
410.9 |
|
|
$ |
1,166.6 |
|
|
$ |
1,150.0 |
|
|
|
|
|
|
Gross margin |
|
|
|
|
Reported gross margin |
39.3 |
% |
|
39.7 |
% |
|
39.7 |
% |
|
41.4 |
% |
Non-GAAP adjusted gross margin |
39.4 |
% |
|
39.7 |
% |
|
40.1 |
% |
|
41.4 |
% |
|
|
Diversey Holdings,
Ltd.Condensed Consolidated Statements of Cash
Flows(Unaudited)
|
|
|
|
|
Nine Months Ended September 30, |
(in
millions) |
2021 |
2020 |
Operating
activities: |
|
|
|
Net income (loss) |
$ |
(139.1 |
) |
|
$ |
33.3 |
|
|
Adjustments to
reconcile net income (loss) to cash provided by (used in) operating
activities: |
|
|
|
Depreciation and amortization |
141.6 |
|
|
144.8 |
|
|
Amortization of deferred financing costs and original issue
discount |
21.6 |
|
|
8.2 |
|
|
Loss on extinguishment of debt |
15.6 |
|
|
— |
|
|
Gain (loss) on cash flow hedges |
2.3 |
|
|
(2.2 |
) |
|
Deferred taxes |
(15.6 |
) |
|
0.3 |
|
|
Unrealized foreign currency exchange (gain) loss |
5.2 |
|
|
(17.6 |
) |
|
Share-based compensation |
67.1 |
|
|
1.1 |
|
|
Impact of highly inflationary economy - Argentina |
(2.7 |
) |
|
0.3 |
|
|
Provision for (recovery of ) bad debts |
(1.9 |
) |
|
15.0 |
|
|
Provision for slow moving inventory |
4.1 |
|
|
5.6 |
|
|
Non-cash pension benefit |
(12.0 |
) |
|
(9.7 |
) |
|
Non-cash restructuring and exit costs |
16.9 |
|
|
— |
|
|
Changes in operating assets and liabilities: |
|
|
|
Trade receivables, net |
(96.8 |
) |
|
(13.7 |
) |
|
Inventories, net |
(52.8 |
) |
|
(82.9 |
) |
|
Accounts payable |
1.9 |
|
|
(39.8 |
) |
|
Income taxes, net |
(5.8 |
) |
|
(7.3 |
) |
|
Other assets and liabilities, net |
(60.5 |
) |
|
14.6 |
|
Cash
provided by (used in) operating activities |
(110.9 |
) |
|
50.0 |
|
Investing
activities: |
|
|
|
Business acquired in purchase transaction |
(9.4 |
) |
|
(31.8 |
) |
|
Acquisition of intellectual property |
(3.0 |
) |
|
— |
|
|
Dosing and dispensing equipment |
(47.8 |
) |
|
(32.5 |
) |
|
Capital expenditures |
(22.2 |
) |
|
(24.4 |
) |
|
Collection of deferred factored receivables |
40.1 |
|
|
54.5 |
|
Cash used
in investing activities |
(42.3 |
) |
|
(34.2 |
) |
Financing
activities: |
|
|
|
Contingent consideration payments |
(0.3 |
) |
|
(0.2 |
) |
|
Proceeds from (payments on) short-term borrowings |
16.7 |
|
|
(0.7 |
) |
|
Proceeds from revolving credit facility |
109.0 |
|
|
90.0 |
|
|
Payments on revolving credit facility |
(109.0 |
) |
|
(210.0 |
) |
|
Proceeds from long-term borrowings |
2,000.0 |
|
|
167.4 |
|
|
Payments on long-term borrowings |
(2,667.8 |
) |
|
(16.7 |
) |
|
Payment of deferred financing costs and original issue
discount |
(35.1 |
) |
|
— |
|
|
Payment of bond redemption premium |
(7.6 |
) |
|
— |
|
|
Issuance of ordinary shares sold in IPO, net of offering costs |
725.7 |
|
|
— |
|
|
Equity contributions |
— |
|
|
5.0 |
|
Cash
provided by financing activities |
31.6 |
|
|
34.8 |
|
Exchange rate
changes on cash, cash equivalents and restricted cash |
(4.0 |
) |
|
(2.3 |
) |
|
Increase (decrease) in cash, cash equivalents and restricted
cash |
(125.6 |
) |
|
48.3 |
|
Cash, cash
equivalents and restricted cash at beginning of period(a) |
201.7 |
|
|
142.3 |
|
Cash, cash
equivalents and restricted cash at end of period(b) |
$ |
76.1 |
|
|
$ |
190.6 |
|
Supplemental Cash
Flow Information: |
|
|
|
Interest payments |
$ |
99.3 |
|
|
$ |
94.6 |
|
|
Income tax payments |
$ |
27.0 |
|
|
$ |
28.2 |
|
|
Conversion of preferred equity certificates to equity |
$ |
620.9 |
|
|
$ |
— |
|
|
Beneficial interest obtained in exchange for factored
receivables |
$ |
25.6 |
|
|
$ |
50.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA for each of our reportable
segments and in total is as follows:
Unaudited |
Third Quarter Ended September 30 |
(millions) |
2021 |
2020 |
2019 |
Institutional |
$ |
84.3 |
|
|
$ |
89.2 |
|
|
$ |
87.0 |
|
Food & Beverage |
34.3 |
|
|
26.4 |
|
|
27.3 |
|
Total Segment Adjusted EBITDA |
118.6 |
|
|
115.6 |
|
|
114.3 |
|
Corporate costs |
(12.0 |
) |
|
(8.8 |
) |
|
(9.7 |
) |
Consolidated Adjusted
EBITDA |
$ |
106.6 |
|
|
$ |
106.8 |
|
|
$ |
104.6 |
|
|
|
The following tables reconcile net income (loss) before income
tax provision (benefit) to EBITDA and AdjustedEBITDA for the
periods presented:
|
Three Months Ended September 30, |
(in
millions) |
2021 |
2020 |
2019 |
Income (loss) before income tax provision (benefit) |
$ |
(22.9 |
) |
|
$ |
20.1 |
|
|
$ |
(8.3 |
) |
Interest expense |
25.8 |
|
|
32.4 |
|
|
34.0 |
|
Interest income |
(0.8 |
) |
|
(1.2 |
) |
|
(1.8 |
) |
Amortization expense of
intangible assets |
24.2 |
|
|
24.8 |
|
|
22.8 |
|
Depreciation expense included
in cost of sales |
20.4 |
|
|
21.4 |
|
|
20.8 |
|
|
|
|
|
|
|
|
|
|
Depreciation expense included
in selling, general and administrative expenses |
2.9 |
|
|
2.3 |
|
|
1.4 |
|
EBITDA |
49.6 |
|
|
99.8 |
|
|
68.9 |
|
Transition and transformation
costs and non-recurring costs(1) |
7.5 |
|
|
11.2 |
|
|
12.6 |
|
Restructuring and exit
costs(2) |
19.8 |
|
|
2.0 |
|
|
4.8 |
|
Foreign currency loss (gain)
related to Argentina subsidiaries(3) |
(2.9 |
) |
|
(0.3 |
) |
|
1.5 |
|
Adjustment for tax
indemnification asset(4) |
0.1 |
|
|
0.1 |
|
|
0.7 |
|
Merger and acquisition-related
cost(5) |
— |
|
|
0.9 |
|
|
— |
|
Acquisition accounting
adjustments (6) |
— |
|
|
— |
|
|
0.5 |
|
Bain Capital management
fee(7) |
— |
|
|
1.8 |
|
|
1.8 |
|
Non-cash pension and other
post-employment benefit plan(8) |
(4.3 |
) |
|
(3.5 |
) |
|
(2.3 |
) |
Unrealized foreign currency
exchange loss (gain)(9) |
(2.4 |
) |
|
(8.8 |
) |
|
10.3 |
|
Factoring and securitization
fees(10) |
1.4 |
|
|
1.3 |
|
|
1.0 |
|
Share-based
compensation(11) |
16.0 |
|
|
0.6 |
|
|
— |
|
Tax receivable agreement
adjustments(12) |
— |
|
|
— |
|
|
— |
|
Loss on extinguishment of
debt(13) |
15.6 |
|
|
— |
|
|
— |
|
Realized foreign currency
exchange loss on debt refinancing(15) |
4.5 |
|
|
— |
|
|
— |
|
Other items |
1.7 |
|
|
1.7 |
|
|
4.8 |
|
Consolidated Adjusted
EBITDA |
$ |
106.6 |
|
|
$ |
106.8 |
|
|
$ |
104.6 |
|
|
|
|
Nine Months Ended September 30, |
(in
millions) |
2021 |
2020 |
2019 |
Income (loss) before income tax provision (benefit) |
$ |
(132.1 |
) |
|
$ |
57.2 |
|
|
$ |
(61.8 |
) |
Interest expense |
97.4 |
|
|
94.8 |
|
|
105.0 |
|
Interest income |
(2.9 |
) |
|
(4.6 |
) |
|
(5.1 |
) |
Amortization expense of
intangible assets |
72.6 |
|
|
74.0 |
|
|
68.6 |
|
Depreciation expense included
in cost of sales |
62.0 |
|
|
64.4 |
|
|
61.5 |
|
|
|
|
|
|
|
|
|
|
Depreciation expense included
in selling, general and administrative expenses |
6.9 |
|
|
6.2 |
|
|
4.3 |
|
EBITDA |
103.9 |
|
|
292.0 |
|
|
172.5 |
|
Transition and transformation
costs and non-recurring costs(1) |
33.1 |
|
|
20.0 |
|
|
37.5 |
|
Restructuring and exit
costs(2) |
22.4 |
|
|
5.3 |
|
|
9.7 |
|
Foreign currency loss (gain)
related to Argentina subsidiaries(3) |
(2.7 |
) |
|
0.3 |
|
|
6.7 |
|
Adjustment for tax
indemnification asset(4) |
1.4 |
|
|
1.4 |
|
|
0.9 |
|
Merger and acquisition-related
cost(5) |
— |
|
|
0.9 |
|
|
— |
|
Acquisition accounting
adjustments (6) |
— |
|
|
— |
|
|
1.9 |
|
Bain Capital management
fee(7) |
19.4 |
|
|
5.6 |
|
|
5.6 |
|
Non-cash pension and other
post-employment benefit plan(8) |
(12.0 |
) |
|
(9.7 |
) |
|
(7.0 |
) |
Unrealized foreign currency
exchange loss (gain)(9) |
5.2 |
|
|
(17.6 |
) |
|
11.9 |
|
Factoring and securitization
fees(10) |
3.6 |
|
|
3.2 |
|
|
2.8 |
|
Share-based
compensation(11) |
99.3 |
|
|
1.2 |
|
|
— |
|
Tax receivable agreement
adjustments(12) |
4.1 |
|
|
— |
|
|
— |
|
Loss on extinguishment of
debt(13) |
15.6 |
|
|
— |
|
|
— |
|
Realized foreign currency
exchange loss on debt refinancing(15) |
4.5 |
|
|
— |
|
|
— |
|
Other items |
2.8 |
|
|
2.3 |
|
|
3.0 |
|
Consolidated Adjusted
EBITDA |
$ |
300.6 |
|
|
$ |
304.9 |
|
|
$ |
245.5 |
|
|
|
The following tables reconcile net income (loss) to Adjusted Net
Income and basic and diluted earnings (loss) per share to Adjusted
EPS for the periods presented:
|
Three Months Ended September 30, |
|
2021 |
2020 |
2019 |
(in millions, except
per share amounts) |
Net Income (Loss) |
Basic and diluted EPS(18) |
Net Income (Loss) |
Basic and diluted EPS(18) |
Net Income (Loss) |
Basic and diluted EPS(18) |
Reported (GAAP) |
$ |
(42.1 |
) |
|
$ |
(0.14 |
) |
|
$ |
13.0 |
|
|
$ |
0.05 |
|
|
$ |
(7.1 |
) |
|
$ |
(0.03 |
) |
|
Amortization expense of
intangible assets |
24.2 |
|
|
0.08 |
|
|
24.8 |
|
|
0.10 |
|
|
22.8 |
|
|
0.09 |
|
|
Transition and transformation
costs and non-recurring costs(1) |
7.5 |
|
|
0.02 |
|
|
11.2 |
|
|
0.05 |
|
|
12.6 |
|
|
0.05 |
|
|
Restructuring and exit
costs(2) |
19.8 |
|
|
0.07 |
|
|
2.0 |
|
|
0.01 |
|
|
4.8 |
|
|
0.02 |
|
|
Foreign currency loss (gain)
related to Argentina subsidiaries(3) |
(2.9 |
) |
|
(0.01 |
) |
|
(0.3 |
) |
|
— |
|
|
1.5 |
|
|
0.01 |
|
|
Adjustment for tax
indemnification asset(4) |
0.1 |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
0.7 |
|
|
— |
|
|
Merger and acquisition-related
cost(5) |
— |
|
|
— |
|
|
0.9 |
|
|
— |
|
|
— |
|
|
— |
|
|
Acquisition accounting
adjustments (6) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.5 |
|
|
— |
|
|
Bain Capital management
fee(7) |
— |
|
|
— |
|
|
1.8 |
|
|
0.01 |
|
|
1.8 |
|
|
0.01 |
|
|
Non-cash pension and other
post-employment benefit plan(8) |
(4.3 |
) |
|
(0.01 |
) |
|
(3.5 |
) |
|
(0.01 |
) |
|
(2.3 |
) |
|
(0.01 |
) |
|
Unrealized foreign currency
exchange loss (gain)(9) |
(2.4 |
) |
|
(0.01 |
) |
|
(8.8 |
) |
|
(0.04 |
) |
|
10.3 |
|
|
0.04 |
|
|
Factoring and securitization
fees(10) |
1.4 |
|
|
— |
|
|
1.3 |
|
|
0.01 |
|
|
1.0 |
|
|
— |
|
|
Share-based
compensation(11) |
16.0 |
|
|
0.05 |
|
|
0.6 |
|
|
— |
|
|
— |
|
|
— |
|
|
Tax receivable agreement
adjustments(12) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Loss on extinguishment of
debt(13) |
15.6 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Accelerated expense of
deferred financing and original issue discount costs(14) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Realized foreign currency
exchange loss on debt refinancing(15) |
4.5 |
|
|
0.01 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Other items |
1.7 |
|
|
0.01 |
|
|
1.7 |
|
|
0.01 |
|
|
4.8 |
|
|
0.02 |
|
|
Tax effects related to
non-GAAP adjustments(16) |
(18.2 |
) |
|
(0.05 |
) |
|
(7.1 |
) |
|
(0.03 |
) |
|
(12.7 |
) |
|
(0.04 |
) |
|
Discrete tax
adjustments(17) |
9.3 |
|
|
0.03 |
|
|
0.1 |
|
|
— |
|
|
(0.9 |
) |
|
— |
|
|
Adjusted
(Non-GAAP) |
$ |
30.2 |
|
|
$ |
0.10 |
|
|
$ |
37.8 |
|
|
$ |
0.16 |
|
|
$ |
37.8 |
|
|
$ |
0.16 |
|
|
|
|
|
Nine Months Ended September 30, |
|
2021 |
2020 |
2019 |
(in millions, except
per share amounts) |
Net Income (Loss) |
Basic and diluted EPS(18) |
Net Income (Loss) |
Basic and diluted EPS(18) |
Net Income (Loss) |
Basic and diluted EPS(18) |
Reported (GAAP) |
$ |
(139.1 |
) |
|
$ |
(0.49 |
) |
|
$ |
33.3 |
|
|
$ |
0.14 |
|
|
$ |
(64.4 |
) |
|
$ |
(0.26 |
) |
|
Amortization expense of
intangible assets |
72.6 |
|
|
0.26 |
|
|
74.0 |
|
|
0.30 |
|
|
68.6 |
|
|
0.28 |
|
|
Transition and transformation
costs and non-recurring costs(1) |
33.1 |
|
|
0.12 |
|
|
20.0 |
|
|
0.08 |
|
|
37.5 |
|
|
0.15 |
|
|
Restructuring and exit
costs(2) |
22.4 |
|
|
0.08 |
|
|
5.3 |
|
|
0.02 |
|
|
9.7 |
|
|
0.04 |
|
|
Foreign currency loss (gain)
related to Argentina subsidiaries(3) |
(2.7 |
) |
|
(0.01 |
) |
|
0.3 |
|
|
— |
|
|
6.7 |
|
|
0.03 |
|
|
Adjustment for tax
indemnification asset(4) |
1.4 |
|
|
— |
|
|
1.4 |
|
|
0.01 |
|
|
0.9 |
|
|
— |
|
|
Merger and acquisition-related
cost(5) |
— |
|
|
— |
|
|
0.9 |
|
|
— |
|
|
— |
|
|
— |
|
|
Acquisition accounting
adjustments (6) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1.9 |
|
|
0.01 |
|
|
Bain Capital management
fee(7) |
19.4 |
|
|
0.07 |
|
|
5.6 |
|
|
0.02 |
|
|
5.6 |
|
|
0.02 |
|
|
Non-cash pension and other
post-employment benefit plan(8) |
(12.0 |
) |
|
(0.04 |
) |
|
(9.7 |
) |
|
(0.04 |
) |
|
(7.0 |
) |
|
(0.03 |
) |
|
Unrealized foreign currency
exchange loss (gain)(9) |
5.2 |
|
|
0.02 |
|
|
(17.6 |
) |
|
(0.07 |
) |
|
11.9 |
|
|
0.05 |
|
|
Factoring and securitization
fees(10) |
3.6 |
|
|
0.01 |
|
|
3.2 |
|
|
0.01 |
|
|
2.8 |
|
|
0.01 |
|
|
Share-based
compensation(11) |
99.3 |
|
|
0.35 |
|
|
1.2 |
|
|
— |
|
|
— |
|
|
— |
|
|
Tax receivable agreement
adjustments(12) |
4.1 |
|
|
0.01 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Loss on extinguishment of
debt(13) |
15.6 |
|
|
0.06 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Accelerated expense of
deferred financing and original issue discount costs(14) |
14.0 |
|
|
0.05 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Realized foreign currency
exchange loss on debt refinancing(15) |
4.5 |
|
|
0.02 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Other items |
2.8 |
|
|
0.01 |
|
|
2.3 |
|
|
0.01 |
|
|
3.0 |
|
|
0.01 |
|
|
Tax effects related to
non-GAAP adjustments(16) |
(42.6 |
) |
|
(0.16 |
) |
|
(19.2 |
) |
|
(0.06 |
) |
|
(30.0 |
) |
|
(0.11 |
) |
|
Discrete tax
adjustments(17) |
2.6 |
|
|
0.01 |
|
|
(1.9 |
) |
|
(0.01 |
) |
|
3.4 |
|
|
0.01 |
|
|
Adjusted
(Non-GAAP) |
$ |
104.2 |
|
|
$ |
0.37 |
|
|
$ |
99.1 |
|
|
$ |
0.41 |
|
|
$ |
50.6 |
|
|
$ |
0.21 |
|
|
(1) |
In the period
following the Diversey Acquisition, we incurred costs primarily
consisting of professional and consulting services in such areas as
information technology, controllership, tax, treasury,
transformation services, human resources, procurement and supply
chain in establishing ourselves as a standalone company and to
position ourselves for future growth. Costs incurred in 2021
include those necessary to become a publicly traded Company. |
|
|
(2) |
Includes costs related to restructuring programs and business
exit activities. See Note 17 — Restructuring and Exit Activities in
the Notes to our Condensed Consolidated Financial Statements
included in our Quarterly Report on Form 10-Q for additional
information. |
|
|
(3) |
Effective July 1, 2018, Argentina was deemed to have a highly
inflationary economy and the functional currency for our Argentina
operations was changed from the Argentinian Peso to the United
States dollar and remeasurement charges/credits are recorded in our
Condensed Consolidated Statements of Operations rather than as a
component of Cumulative Translation Adjustment on our Condensed
Consolidated Balance Sheets. |
|
|
(4) |
In connection with the Diversey Acquisition, the purchase
agreement governing the transaction includes indemnification
provisions with respect to tax liabilities. The offset to this
adjustment is included in income tax provision. |
|
|
(5) |
These costs consisted primarily of investment banking, legal
and other professional advisory services costs. |
|
|
(6) |
In connection with the 2017 Acquisition, Twister Acquisition
and Zenith Acquisition, we recorded fair value increases to our
inventory. These amounts represent the amortization of this
increase. |
|
|
(7) |
Represents fees paid to Bain Capital pursuant a management
agreement whereby we have received general business consulting
services; financial, managerial and operational advice; advisory
and consulting services with respect to selection of advisors;
advice in different fields; and financial and strategic planning
and analysis. The management agreement was terminated in March 2021
pursuant to its terms upon the consummation of the IPO, and we
recorded a termination fee of $17.5 million during the nine months
ended September 30, 2021. |
|
|
(8) |
Represents the net impact of the expected return on plan
assets, interest cost, and settlement cost components of net
periodic defined benefit income related to our defined benefit
pension plans. |
|
|
(9) |
Represents the unrealized foreign currency exchange impact on
our operations, primarily attributed to the valuation of the U.S.
Dollar-denominated debt held by our European entity. |
|
|
(10) |
On November 15, 2018, we entered into a factoring Master
Agreement with Factofrance, S.A. Additionally, on April 22, 2020,
the Company entered into a securitization arrangement with PNC Bank
to sell certain North American customer receivables without
recourse on a revolving basis. This amount represents the fees to
complete the sale of the receivables without recourse. Refer to
Note 5 — Financial Statement Details in the Notes to our Condensed
Consolidated Financial Statements included in our Quarterly Report
on Form 10-Q for additional information. |
|
|
(11) |
Represents compensation expense associated with our Management
Equity Incentive Plan and Long-Term Incentive Plan awards. See Note
19 — Share-Based Compensation in the Notes to our Condensed
Consolidated Financial Statements included in our Quarterly Report
on Form 10-Q for additional information. |
|
|
(12) |
Represents the adjustment to our Tax Receivable Agreement
liability primarily due to changes in tax laws that impact the
realizability of the attributes of the Tax Receivable Agreement.
See Note 13 — Income Taxes in the Notes to our Condensed
Consolidated Financial Statements included in our Quarterly Report
on Form 10-Q for additional information. |
|
|
(13) |
Represents the costs incurred in connection with the redemption
of the 2017 Senior Notes on September 29, 2021. See Note 8 — Debt
and Credit Facilities in the Notes to our Condensed Consolidated
Financial Statements included in our Quarterly Report on Form 10-Q
for additional information. |
|
|
(14) |
Represents accelerated non-cash expense of deferred financing
costs and original issue discount costs as the Company's U.S.
Dollar Incremental Term Loan was fully repaid and the Euro Term
Loan was paid down significantly using proceeds from the IPO. |
|
|
(15) |
For the three and nine months ended September 30, 2021, the
Company incurred a realized foreign currency exchange loss of $4.5
million related to the refinancing of the Senior Secured Credit
Facilities. See Note 8 — Debt and Credit Facilities in the Notes to
our Condensed Consolidated Financial Statements included in our
Quarterly Report on Form 10-Q for additional information. |
|
|
(16) |
The tax rate used to calculate the tax impact of the pre-tax
adjustments is based on the jurisdiction in which the charge was
recorded. |
|
|
(17) |
Represents adjustments related to discrete tax items including
uncertain tax provisions, impacts from rate changes in certain
jurisdictions and changes in our valuation allowance. |
|
|
(18) |
For purposes of calculating earnings (loss) per share the
Company has retrospectively presented earnings (loss) per share as
if the Reorganization Transactions had occurred at the beginning of
the earliest period presented. Such retrospective presentation
reflects an increase of approximately 47.4 million shares due to
the exchange of shares in Constellation for shares in the
Company. |
|
|
The following table represents net sales by
segment:
(in millions, except
percentages) |
Institutional |
Food & Beverage |
Total |
Q3 2020 Net Sales |
$ |
522.4 |
|
|
76.7 |
% |
$ |
158.7 |
|
23.3 |
% |
$ |
681.1 |
|
|
|
|
Organic change (non-U.S.
GAAP) |
(40.0 |
) |
|
(7.7 |
)% |
15.2 |
|
9.6 |
% |
(24.8 |
) |
|
(3.6 |
)% |
Acquisition |
— |
|
|
— |
% |
3.0 |
|
1.9 |
% |
3.0 |
|
|
0.4 |
% |
Constant dollar change
(non-U.S. GAAP) |
(40.0 |
) |
|
(7.7 |
)% |
18.2 |
|
11.5 |
% |
(21.8 |
) |
|
(3.2 |
)% |
Foreign currency
translation |
4.8 |
|
|
0.9 |
% |
0.8 |
|
0.5 |
% |
5.6 |
|
|
0.8 |
% |
Total change |
(35.2 |
) |
|
(6.7 |
)% |
19.0 |
|
12.0 |
% |
(16.2 |
) |
|
(2.4 |
)% |
Q3 2021 Net
Sales |
$ |
487.2 |
|
|
73.3 |
% |
$ |
177.7 |
|
26.7 |
% |
$ |
664.9 |
|
|
|
|
Diversey (NASDAQ:DSEY)
Historical Stock Chart
From Jun 2024 to Jul 2024
Diversey (NASDAQ:DSEY)
Historical Stock Chart
From Jul 2023 to Jul 2024