Welbilt, Inc. (NYSE:WBT), today announced financial results for
its 2022 first quarter. Due to the announced and pending sale of
Welbilt's Manitowoc® Ice business to Pentair plc, the results for
Manitowoc Ice are presented as Discontinued Operations in this
release and accompanying financial statements and tables for all
periods presented.
2022 First Quarter Highlights
(1)
- Net sales from continuing operations were $333.0 million, an
increase of 31.5 percent from the prior year; Organic Net Sales
from continuing operations (a non-GAAP measure) increased 33.4
percent from the prior year
- Earnings from continuing operations were $23.1 million compared
to $7.2 million in the prior year; as a percentage of net sales,
earnings from continuing operations were 6.9 percent compared to
2.8 percent in the prior year
- Adjusted Operating EBITDA from continuing operations (a
non-GAAP measure) was $40.3 million compared to $24.9 million in
the prior year; Adjusted Operating EBITDA from continuing
operations margin was 12.1 percent compared to 9.8 percent in the
prior year
- Net loss from continuing operations was $0.9 million compared
to $4.5 million in the prior year
- Earnings from discontinued operations were $3.8 million (net of
income tax expense of $0.7 million) compared to $12.4 million (net
of income tax expense of $3.5 million) in the prior year
- Net earnings were $2.9 million compared to net earnings of $7.9
million in the prior year; Adjusted Net Earnings (a non-GAAP
measure) were $14.4 million compared to Adjusted Net Earnings of
$11.9 million in the prior year
- Diluted net earnings per share was $0.02 compared to diluted
net earnings per share of $0.06 in the prior year; Adjusted Diluted
Net Earnings Per Share (a non-GAAP measure) was $0.10 compared to
Adjusted Diluted Net Earnings Per Share of $0.08 in the prior
year
- Net cash used in operating activities from continuing
operations was $49.9 million compared to $20.4 million in last
year's first quarter
- Free Cash Flow from continuing operations (a non-GAAP measure)
was a $50.9 million use of cash compared to a $24.4 million use of
cash in last year's first quarter
(1) Definitions and reconciliations of the
non-GAAP measures used herein are included in the schedules
accompanying this release.
Summarizing Welbilt's first quarter performance, Bill Johnson,
Welbilt's President and CEO, stated, "Third-party Net Sales from
continuing operations and Organic Net Sales from continuing
operations grew substantially this quarter compared to last year's
first quarter, which was materially impacted by the COVID-19
pandemic. Our Adjusted Operating EBITDA from continuing operations
and Adjusted Operating EBITDA from continuing operations margin
performance were impacted from ongoing inflationary pressures from
our supply chain and logistics providers. Productivity in our
manufacturing plants was impacted by parts shortages from our
suppliers, high levels of COVID-19 cases in our Americas plants in
January, and a four-week COVID-related plant shutdown in APAC. We
successfully offset these headwinds with the beneficial impact from
increased volume and positive net pricing. Industry conditions have
improved with the rollout of COVID-19 vaccines and the lifting of
restrictions in some locations, although improvements are uneven
globally. In response to ongoing supply chain challenges, we
continued to build inventory of critical components to help
alleviate manufacturing disruptions and shorten order lead times to
support our customers. While the investment in higher inventory
reduced Free Cash Flow from continuing operations in the quarter,
we continue to have ample liquidity and strong leverage
metrics."
Net sales from continuing operations increased 31.5 percent in
the first quarter compared to last year's first quarter. Excluding
the impact from foreign currency translation, Organic Net Sales
from continuing operations increased 33.4 percent, with strong
growth coming from general market dealers and distributors, large
chain customers, and KitchenCare® master parts distributors and
factory-authorized service dealers. Over 75 percent of the growth
in the first quarter was from higher volume versus increased
pricing. This growth is compared against last year's weaker first
quarter which was highly impacted by the COVID-19 pandemic.
The first quarter Adjusted Operating EBITDA from continuing
operations margin of 12.1 percent was 230 basis points higher than
last year's first quarter driven by the incremental impact on
margins from higher volume and positive net pricing, partially
offset by higher material and manufacturing costs and increased
selling, general and administrative expenses (net of adjustments to
SG&A that are included in our Adjusted Operating EBITDA from
continuing operations reconciliation ("Net SG&A")). Net
SG&A costs increased primarily due to higher commissions and
increased travel expenses related to the sales growth in the
quarter.
Liquidity and Debt
Net cash used in operating activities from continuing operations
in the first quarter was $49.9 million compared to $20.4 million in
last year's first quarter. Net cash used in investing activities of
continuing operations in the first quarter was $3.1 million
compared to $4.0 million of net cash used in investing activities
from continuing operations in last year's first quarter. Free Cash
Flow from continuing operations (a non-GAAP measure) was a $50.9
million use of cash in the quarter compared to a $24.4 million use
of cash in last year's first quarter. The decrease in Free Cash
Flow from continuing operations in the first quarter versus last
year's first quarter reflects an increase in cash used in operating
assets and liabilities, primarily to support higher inventory
levels to help mitigate ongoing supply chain disruptions. Capital
spending in continuing operations was $3.1 million in the first
quarter compared to $4.0 million in last year's first quarter.
During the quarter, total debt and finance leases (including the
current portion) increased by $69.8 million. As of March 31, 2022,
our total global liquidity was $342.2 million, consisting of $138.9
million of cash and cash equivalents and $203.3 million available
for additional borrowing on our Revolving Credit Facility, compared
to total global liquidity of $407.6 million as of December 31,
2021. Cash and cash equivalents includes the cash balances and
equivalents from our continuing operations of $108.3 million and
$91.6 million as of March 31, 2022 and December 31, 2021,
respectively, and cash included in discontinued operations of $30.6
million and $42.6 million as of March 31, 2022 and December 31,
2021, respectively.
Additional Management
Commentary
"We are pleased with our first quarter results in light of
ongoing supply chain and production disruptions and inflationary
pressure on materials and logistics costs," said Bill Johnson. "In
the Americas, sales to general market dealers and distributors
increased strongly over last year's weak market conditions. 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.
KitchenCare aftermarket sales decreased slightly in the Americas
due to timing of orders from master parts distributors. Both EMEA
and APAC saw year-over-year growth from strategic QSRs, general
market dealers and KitchenCare aftermarket customers. We believe
overall demand will remain strong for the next several quarters as
our commercial foodservice end markets continue their gradual
recovery."
"The combination of continued aggressive discretionary cost
management, improved absorption of fixed costs due to higher
volumes, and improved net pricing allowed us to deliver an Adjusted
Operating EBITDA from continuing operations margin of 12.1 percent
in the first quarter. With the tools we developed as part of our
completed Transformation Program, we will focus on continually
improving productivity in our plants and working on other
initiatives to help offset production disruptions, parts shortages
and inflation from our supply chain and logistics providers. We
remain confident that our operational improvements, along with our
recent and upcoming price increases to help offset inflationary
pressures, will deliver improved margins in 2022," concluded
Johnson.
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 4,700 employees and generated sales of $1.5 billion
in 2021. 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 availability
and effectiveness, effects of inflation and disruption to the
supply chain, 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 announced transaction with
Ali Holdings S.r.l. ("Ali Group") and realize anticipated benefits
thereof; our expectations regarding future results; 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 and the
divestiture of Manitowoc Ice, including the risk that the remaining
conditions to closing of the transaction are not satisfied,
including the risk that regulatory approvals are not obtained or
require divestitures in addition to the divestiture of Manitowoc
Ice, 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 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 of inflation
and continuing disruptions to our supply chain resulting in delays,
difficulties and increased costs of acquiring raw materials, parts
and components; 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 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,
including as a result of the conflict between Russia and Ukraine;
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, 2021, our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2022, 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 March
31,
2022
2021
Net sales
$
333.0
$
253.3
Cost of sales
223.3
163.3
Gross profit
109.7
90.0
Selling, general and administrative
expenses
76.9
72.5
Amortization expense
9.7
10.1
Restructuring and other expense
—
0.2
Earnings from continuing operations
23.1
7.2
Interest expense
10.5
10.5
Other expense — net
13.2
2.9
Loss from continuing operations before
income taxes
(0.6
)
(6.2
)
Income tax expense (benefit) on continuing
operations
0.3
(1.7
)
Net loss from continuing operations
$
(0.9
)
$
(4.5
)
Earnings from discontinued operations, net
of income tax expense of $0.7 and $3.5, respectively
3.8
$
12.4
Net earnings
$
2.9
$
7.9
Per share data:
Diluted
Continuing operations
$
(0.01
)
$
(0.03
)
Discontinued operations
$
0.03
$
0.09
Net earnings
$
0.02
$
0.06
Basic
Continuing operations
$
(0.01
)
$
(0.03
)
Discontinued operations
$
0.03
$
0.09
Net earnings
$
0.02
$
0.06
Weighted average shares outstanding —
Basic
143,065,161
141,622,281
Weighted average shares outstanding —
Diluted
143,988,763
142,189,112
WELBILT, INC.
Consolidated Balance
Sheets
(In millions, except share and
per share data)
March 31,
December 31,
2022
2021
Assets
Current assets:
Cash and cash equivalents
$
108.3
$
91.6
Restricted cash
0.5
0.4
Accounts receivable, less allowance of
$6.0 and $6.2, respectively
184.5
185.3
Inventories — net
289.9
244.7
Prepaids and other current assets
75.0
55.8
Current assets of discontinued
operations
552.8
555.0
Total current assets
1,211.0
1,132.8
Property, plant and equipment — net
112.6
113.0
Operating lease right-of-use assets
31.9
34.0
Goodwill
548.9
551.3
Other intangible assets — net
407.6
420.8
Other non-current assets
25.9
25.7
Total assets
$
2,337.9
$
2,277.6
Liabilities and equity
Current liabilities:
Trade accounts payable
$
128.4
$
104.4
Accrued expenses and other liabilities
146.8
170.5
Current portion of long-term debt and
finance leases
0.7
0.9
Product warranties
26.6
24.7
Current liabilities of discontinued
operations
76.7
93.5
Total current liabilities
379.2
394.0
Long-term debt and finance leases
1,459.0
1,388.0
Deferred income taxes
63.6
64.2
Pension and postretirement health
liabilities
21.1
21.7
Operating lease liabilities
24.6
26.3
Other long-term liabilities
21.2
25.0
Total non-current liabilities
1,589.5
1,525.2
Total equity:
Common stock ($0.01 par value, 300,000,000
shares authorized, 143,175,392 shares and 142,961,244 shares issued
and outstanding as of March 31, 2022 and December 31, 2021,
respectively)
1.4
1.4
Additional paid-in capital (deficit)
(1.8
)
(5.4
)
Retained earnings
389.9
387.0
Accumulated other comprehensive loss
(20.3
)
(24.6
)
Total equity
369.2
358.4
Total liabilities and equity
$
2,337.9
$
2,277.6
WELBILT, INC.
Consolidated Statements of
Cash Flows
(In millions)
Three Months Ended March
31,
2022
2021
Cash flows from operating activities of
continuing operations
Net earnings (loss)
$
2.9
$
7.9
Earnings from discontinued operations, net
of income taxes of $0.7 and $3.5, respectively
3.8
12.4
Net loss from continuing operations
$
(0.9
)
$
(4.5
)
Adjustments to reconcile net earnings from
continuing operations to cash provided by (used in) operating
activities:
Depreciation expense
5.1
4.6
Amortization of intangible assets
9.9
10.7
Amortization of deferred financing
fees
0.2
0.2
Deferred income taxes
(0.4
)
(0.2
)
Stock-based compensation expense
2.9
3.2
Changes in operating assets and
liabilities:
Accounts receivable
(0.7
)
(6.8
)
Inventories
(46.3
)
(20.8
)
Other assets
(14.5
)
2.4
Trade accounts payable
23.4
15.0
Other current and long-term
liabilities
(28.6
)
(24.2
)
Net cash provided by (used in) operating
activities of continuing operations
(49.9
)
(20.4
)
Cash flows from investing activities of
continuing operations
Capital expenditures
(3.1
)
(4.0
)
Net cash used in investing activities of
continuing operations
(3.1
)
(4.0
)
Cash flows from financing activities of
continuing operations
Proceeds from long-term debt
80.3
58.0
Repayments on long-term debt and finance
leases
(10.5
)
(21.3
)
Exercises of stock options
0.8
0.5
Payments on tax withholdings for equity
awards
—
(0.1
)
Net cash provided by financing activities
of continuing operations
70.6
37.1
Cash flows from discontinued
operations
Cash used in (provided by) operating
activities
(11.3
)
4.0
Cash used in investing activities
(0.8
)
(0.7
)
Cash provided by (used in) financing
activities
—
—
Net cash (used in) provided by
discontinued operations
(12.1
)
3.3
Effect of exchange rate changes on
cash
(0.8
)
(0.6
)
Net increase in cash and cash equivalents
and restricted cash
4.7
15.4
Balance at beginning of period
134.7
125.4
Balance at end of period
139.4
140.8
Balance at end of period - discontinued
operations
30.6
46.7
Balance at end of period - continuing
operations
$
108.8
$
94.1
WELBILT, INC.
Consolidated Statements of
Cash Flows (Continued)
(In millions)
Three Months Ended March
31,
2022
2021
Supplemental disclosures of cash flow
information:
Cash paid for income taxes, net of
refunds
$
6.5
$
5.3
Cash paid for interest
$
20.4
$
27.6
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
$
—
$
1.6
Business Segments - Continuing
Operations
Three Months Ended March
31,
(in millions, except percentage data)
2022
2021
Net sales:
Americas
$
243.1
$
193.2
EMEA
122.8
89.8
APAC
51.1
42.0
Elimination of intersegment sales
(84.0
)
(71.7
)
Total net sales
$
333.0
$
253.3
Segment Adjusted Operating
EBITDA:
Americas
$
31.5
$
28.8
EMEA
23.0
12.7
APAC
7.7
4.8
Total Segment Adjusted Operating
EBITDA
62.2
46.3
Corporate and unallocated expenses
(21.9
)
(21.4
)
Amortization expense
(9.9
)
(10.7
)
Depreciation expense
(5.2
)
(4.6
)
Transaction costs (1)
(2.1
)
—
Transformation Program expense (2)
—
(2.2
)
Restructuring activities
—
(0.2
)
Earnings from continuing operations
23.1
7.2
Interest expense
(10.5
)
(10.5
)
Other expense — net (3)
(13.2
)
(2.9
)
Loss from continuing operations before
income taxes
$
(0.6
)
$
(6.2
)
(1) Transaction costs for the three months
ended March 31, 2022 are related to the pending sale of the Company
and consist primarily of professional services recorded in
"Selling, general and administrative expenses".
(2) Transformation Program expense
includes consulting and other costs associated with the execution
of the Company's Transformation Program initiatives, which was
completed as of December 31, 2021. Refer to Note 15, "Business
Transformation Program and Restructuring" for discussion.
(3) Other expense - net is comprised
primarily of $12.5 million and $2.8 million, respectively, of
foreign currency transaction losses incurred during the three
months ended March 31, 2022 and 2021. Foreign currency transaction
losses are inclusive of losses on related foreign currency exchange
contracts not designated as hedging instruments for accounting
purposes.
(in millions, except percentage
data)
Three Months Ended March
31,
2022
2021
Adjusted Operating EBITDA % by
segment (4):
Americas
12.9
%
14.9
%
EMEA
18.7
%
14.1
%
APAC
15.1
%
11.4
%
(4) Adjusted Operating EBITDA % is
calculated by dividing Adjusted Operating EBITDA by net sales for
each respective segment.
Third-party net sales by geographic
area (5):
United States
$
178.4
$
142.9
Other Americas
24.9
16.9
EMEA
86.3
58.9
APAC
43.4
34.6
Total net sales by geographic area
$
333.0
$
253.3
(5) Net sales in the section above are
attributed to geographic regions based on location of customer.
Discontinued Operations
Summarized Financial Operating Results
and Balance Sheet
Three Months Ended March
31,
2022
2021
Net sales
$
74.7
$
63.5
Cost of sales
49.6
35.6
Gross profit
25.1
27.9
Selling, general and administrative
expenses
4.5
3.7
Transaction expenses (1)
8.3
—
Earnings from discontinued operations
12.3
24.2
Interest expense
7.8
8.3
Earnings from discontinued operations
before income taxes
4.5
15.9
Income tax expense
0.7
3.5
Earnings from discontinued operations, net
of income taxes
$
3.8
$
12.4
March 31,
December 31,
2022
2021
Assets
Cash and cash equivalents
$
30.6
$
42.6
Restricted cash
—
0.1
Accounts receivable - net
40.9
35.2
Inventories — net
54.2
49.7
Prepaids and other assets
9.8
9.6
Property, plant and equipment — net
22.0
22.6
Operating lease right-of-use assets
10.3
10.2
Goodwill
385.0
385.0
Total assets
$
552.8
$
555.0
Liabilities
Trade accounts payable
$
18.1
$
26.2
Accrued expenses and other liabilities
38.3
46.4
Product warranties
11.3
11.9
Operating lease liabilities
9.0
9.0
Total liabilities
$
76.7
$
93.5
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. In the
calculation of the non-GAAP financial measures, we have also
excluded the results of the Company's Manitowoc Ice business as a
component of continued operations consistent with the Company's
Consolidated Statements of Operations. The Company's Manitowoc Ice
business has been included in "Earnings from discontinued
operations" for all periods presented.
Free Cash Flow from Continuing Operations
In this release, we refer to Free Cash Flow from continuing
operations, a non-GAAP measure, as our net cash provided by or used
in operating activities for continuing operations less capital
expenditures in continuing operations. 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 from continuing operations reconciles to net cash used in
operating activities for continuing operations presented in our
Consolidated Statements of Cash Flows presented in accordance with
U.S. GAAP as follows:
Three Months Ended March
31,
(in millions)
2022
2021
Net cash used in operating activities from
continuing operations
$
(49.9
)
$
(20.4
)
Plus: Capital expenditures
(3.1
)
(4.0
)
Less: Transaction costs (1)
2.1
—
Free cash flow from continuing
operations
$
(50.9
)
$
(24.4
)
(1) Transaction costs for the three months
ended March 31, 2022 are related to the pending sale of the Company
and consist primarily of professional services recorded in
"Selling, general and administrative expenses".
Adjusted Operating EBITDA From Continuing Operations
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 from continuing operations 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, which are
non-operating and unusual in nature. 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 from continuing
operations reconciles to net earnings as presented in the
Consolidated Statements of Operations in accordance with U.S. GAAP
as follows:
Three Months Ended March
31,
2022
2021
Net loss from continuing operations
$
(0.9
)
$
(4.5
)
Income tax expense (benefit) on continuing
operations
0.3
(1.7
)
Other expense — net (1)
13.2
2.9
Interest expense
10.5
10.5
Earnings from continuing operations
23.1
7.2
Restructuring activities
—
0.2
Amortization expense
9.9
10.7
Depreciation expense
5.2
4.6
Transformation Program expense (2)
—
2.2
Transaction costs (3)
2.1
—
Total Adjusted Operating EBITDA
$
40.3
$
24.9
Adjusted Operating EBITDA margin (4)
12.1
%
9.8
%
(1) Other expense - net is comprised
primarily of $12.5 million and $2.8 million, respectively, of
foreign currency transaction losses incurred during the three
months ended March 31, 2022 and 2021. Foreign currency transaction
losses are inclusive of losses on related foreign currency exchange
contracts not designated as hedging instruments for accounting
purposes.
(2) Transformation Program expense
includes consulting and other costs associated with executing our
Transformation Program initiatives. Refer to Note 14, "Business
Transformation Program and Restructuring" for discussion of the
impact to the Consolidated Statements of Operations.
(3) Transaction costs for the three months
ended March 31, 2022 are related to the pending merger of the
Company with Ali Group and consist primarily of professional
services recorded in "Selling, general and administrative
expenses."
(4) 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 Consolidated Adjusted Net Earnings as net earnings
before the impact of certain items, such as divestiture-related
transaction costs, 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. Consolidated Adjusted
Diluted Net Earnings Per Share for each period represents
Consolidated 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 Consolidated 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 March
31,
2022
2021
Net earnings
$
2.9
$
7.9
Restructuring activities (1)
—
0.2
Transformation Program expense (2)
—
2.2
Transaction costs (3)
2.1
—
Foreign currency transaction loss (5)
12.5
2.8
Tax effect of adjustments (6)
(3.1
)
(1.2
)
Total Adjusted Net Earnings
$
14.4
$
11.9
Per share basis
Diluted net earnings
$
0.02
$
0.06
Restructuring activities
—
—
Transformation Program expense (1)
—
0.01
Transaction costs (2)
0.01
—
Foreign currency transaction loss (3)
0.09
0.02
Tax effect of adjustments (4)
(0.02
)
(0.01
)
Total Adjusted Diluted Net Earnings
$
0.10
$
0.08
(1) Transformation Program expense
includes consulting and other costs associated with executing our
Transformation Program initiatives. Refer to Note 15, "Business
Transformation Program and Restructuring," for discussion of the
impact to the Consolidated Statements of Operations.
(2) Transaction costs for the three months
ended March 31, 2022 are related to the pending merger of the
Company with Ali Group and consist primarily of professional
services recorded in "Selling, general and administrative expenses"
in the Company's Consolidated Statements of Operations.
(3) Foreign currency transaction losses
are inclusive of losses on related foreign currency exchange
contracts not designated as hedging instruments for accounting
purposes. Foreign currency transaction losses are included as a
component of "Other expense - net" in the Company's Consolidated
Statements of Operations.
(4) 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 from Continuing
Operations
In this release, we define Third-party Net Sales as net sales of
continuing operations for the segment excluding intersegment sales
and Organic Net Sales as net sales before the impacts of
acquisitions, divestitures 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 for continuing operations reconcile
to the change in net sales presented in accordance with U.S. GAAP
as follows:
For the Three Months Ended
March 31, 2022 vs. 2021
Favorable/(Unfavorable)
Americas
EMEA
APAC
Welbilt
Organic Net Sales
25.1
%
57.1
%
38.5
%
33.4
%
Impact of foreign currency
translation(1)
(92.9
) %
(1.9
) %
(81.8
) %
(29.9
) %
Third-party Net Sales
24.1
%
51.7
%
33.8
%
31.5
%
(1) The impact from foreign currency
translation is calculated by translating current period activity at
the weighted average prior period rates.
Three Months Ended March
31,
(in millions)
2022
2021
Consolidated:
Net sales
$
417.0
$
325.0
Less: Intersegment sales
(84.0
)
(71.7
)
Net sales (as reported)
333.0
253.3
Impact of foreign currency
translation(1)
(5.4
)
(7.7
)
Organic net sales
$
327.6
$
245.6
Americas:
Net sales
$
243.1
$
193.2
Less: Intersegment sales
(34.8
)
(25.4
)
Third-party net sales
208.3
167.8
Impact of foreign currency
translation(1)
(0.1
)
(1.4
)
Total Americas organic net sales
$
208.2
$
166.4
EMEA:
Net sales
$
122.8
$
89.8
Less: Intersegment sales
(35.7
)
(32.4
)
Third-party net sales
87.1
57.4
Impact of foreign currency
translation(1)
(5.1
)
(5.2
)
Total EMEA organic net sales
$
82.0
$
52.2
APAC:
Net sales
$
51.1
$
42.0
Less: Intersegment sales
(13.5
)
(13.9
)
Third-party net sales
37.6
28.1
Impact of foreign currency
translation(1)
(0.2
)
(1.1
)
Total APAC organic net sales
$
37.4
$
27.0
(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/20220510006293/en/
Rich Sheffer Vice President Investor Relations, Risk Management
and Treasurer Welbilt, Inc. +1 (727) 853-3079
Richard.sheffer@welbilt.com
Welbilt (NYSE:WBT)
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