Welbilt, Inc. (NYSE:WBT), today announced financial results for
its 2021 fourth quarter.
2021 Fourth Quarter Highlights
(1)
- Net sales were $423.0 million, an increase of 32.2 percent from
the prior year; Organic Net Sales (a non-GAAP measure) increased
32.3 percent from the prior year
- Earnings from operations were $47.3 million compared to $40.6
million in the prior year; as a percentage of net sales, earnings
from operations were 11.2 percent compared to 12.7 percent in the
prior year
- Adjusted Operating EBITDA (a non-GAAP measure) was $77.0
million compared to $60.0 million in the prior year; Adjusted
Operating EBITDA margin was 18.2 percent compared to 18.8 percent
in the prior year
- Net earnings were $13.8 million compared to net earnings of
$20.2 million in the prior year; Adjusted Net Earnings (a non-GAAP
measure) were $25.0 million compared to Adjusted Net Earnings of
$21.7 million in the prior year
- Diluted net earnings per share was $0.10 compared to diluted
net earnings per share of $0.14 in the prior year; Adjusted Diluted
Net Earnings Per Share (a non-GAAP measure) was $0.18 compared to
Adjusted Diluted Net Earnings Per Share of $0.15 in the prior
year
- Net cash provided by operating activities was $21.9 million,
compared to net cash provided by operating activities of $41.9
million in last year's fourth quarter; Free Cash Flow (a non-GAAP
measure) was $13.2 million compared to $37.7 million in last year's
fourth quarter
2021 Full-Year Highlights
(1)
- Net sales were $1,546.9 million, an increase of 34.1 percent
from the prior year; Organic Net Sales (a non-GAAP measure)
increased 31.9 percent from the prior year
- Earnings from operations were $181.6 million compared to $63.1
million in the prior year; as a percent of net sales, earnings from
operations were 11.7 percent compared to 5.5 percent in the prior
year
- Adjusted Operating EBITDA (a non-GAAP measure) was $275.4
million compared to $170.9 million in the prior year; Adjusted
Operating EBITDA margin was 17.8 percent compared to 14.8 percent
in the prior year
- Net earnings were $70.3 million compared to a net loss of $7.4
million in the prior year; Adjusted Net Earnings (a non-GAAP
measure) were $98.5 million compared to Adjusted Net Earnings of
$23.1 million in the prior year
- Diluted net earnings per share was $0.49 compared to diluted
net loss per share of $0.05 in the prior year; Adjusted Diluted Net
Earnings Per Share (a non-GAAP measure) was $0.69 compared to
Adjusted Diluted Net Earnings Per Share of $0.16 in the prior
year
- Net cash provided by operating activities was $56.1 million,
compared to net cash provided by operating activities of $15.0
million in the prior year; Free Cash Flow (a non-GAAP measure) was
$30.2 million, compared to a $5.1 million use of cash in the prior
year
- Total liquidity was $407.6 million on December 31, 2021 and
consisted of $134.2 million of cash and cash equivalents and $273.4
million of availability on the Revolving Credit Facility
(1) Definitions and
reconciliations of the non-GAAP measures used herein are included
in the schedules accompanying this release.
Summarizing the Company's fourth quarter performance, Bill
Johnson, Welbilt's President and CEO, stated, "Third-party Net
Sales and Organic Net Sales both grew in excess of 30 percent this
quarter compared to last year's fourth quarter, which was
materially impacted by the COVID-19 pandemic. We are pleased with
our Adjusted Operating EBITDA and Adjusted Operating EBITDA margin
performance despite the continued inflationary impacts from our
supply chain and logistics providers, and productivity headwinds in
some of our plants due to parts shortages and staffing disruptions.
We offset the majority of these headwinds with the beneficial
impact from increased volume, positive net pricing, the supply
chain and productivity improvements we achieved as part of our
Business Transformation Program ("Transformation Program") and
through the cost containment actions we put in place earlier in the
year that continued to benefit us in the fourth quarter. Industry
conditions have improved with the rollout of COVID-19 vaccines and
fewer restrictions in many locations, although the Delta and
Omicron variants resulted in temporary restrictions in some
locations. We continued to build inventory in the fourth quarter to
address ongoing supply chain challenges, which helped alleviate
some manufacturing disruptions and shorten lead times to support
our customers. While the investment in inventory reduced Free Cash
Flow in the quarter, our balance sheet ended the year in its
strongest position since before the pandemic began in terms of
leverage and liquidity."
Net sales increased 32.2 percent in the fourth quarter compared
to last year's fourth quarter. Excluding the impact from foreign
currency translation, Organic Net Sales increased 32.3 percent,
with strong growth coming from large chain customers, general
market dealers and distributors, and KitchenCare® master parts
distributors and factory-authorized service dealers. Over 85
percent of the growth in the fourth quarter was from higher volume
versus increased pricing. The strong growth in the fourth quarter
is compared against last year's weak fourth quarter which was
impacted by the COVID-19 pandemic.
Fourth quarter Adjusted Operating EBITDA increased 28.3 percent
from last year's fourth quarter while the Adjusted Operating EBITDA
margin of 18.2 percent was 60 basis points lower than last year due
to higher material and manufacturing costs, and 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")). These were partially offset by the incremental
benefit to margins from higher volume and positive net pricing. Net
SG&A costs increased primarily due to increased compensation
expense and commissions reflecting higher incentives, the
non-recurrence of government subsidies and other measures taken in
the prior year in response to the impact from the pandemic.
Liquidity and Debt
Net cash provided by operating activities in the fourth quarter
was $21.9 million compared to $41.9 million in last year's fourth
quarter. Net cash used in investing activities in the fourth
quarter was $8.7 million compared to $4.2 million of net cash used
in investing activities in last year's fourth quarter. Free Cash
Flow (a non-GAAP measure) was $13.2 million in the quarter compared
to $37.7 million in last year's fourth quarter. The decrease in
Free Cash Flow in the fourth quarter versus last year's fourth
quarter reflects a use of cash for changes in operating assets and
liabilities and an increase in capital spending. Capital spending
was $8.7 million in the fourth quarter compared to $4.2 million in
last year's fourth quarter.
During the quarter, total debt and finance leases (including the
current portion) increased by $12.1 million. Our ending cash and
cash equivalents was $134.2 million, an increase of $22.3 million
in the quarter. Total global liquidity was $407.6 million as of
December 31, 2021, which consisted of the $134.2 million of cash
and cash equivalents and $273.4 million of availability on our
Revolving Credit Facility. Total global liquidity increased by
$10.3 million in the quarter from $397.3 million as of September
30, 2021.
Additional Management
Commentary
"We are pleased with our fourth quarter results in light of
ongoing supply chain disruptions and inflationary pressure on
materials and logistics costs," said Bill Johnson. "The drivers of
our fourth quarter sales growth were very similar to those of the
third quarter. 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 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. With positive trends
for incoming orders and historically high backlogs, we expect sales
growth to remain strong for the next several quarters."
"The combination of continued aggressive discretionary cost
management, improved absorption of fixed costs due to higher
volumes, improved net pricing and benefits from Transformation
Program, allowed us to deliver an Adjusted Operating EBITDA margin
of 18.2 percent in the fourth quarter. With the tools we developed
as part of our recently-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. This continued
operational improvement, along with realizing benefits from both
recent and upcoming price increases, is expected to 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 4,800 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; descriptions of
the Transformation Program, including anticipated costs, completion
dates and targeted annualized savings and the expected impact on
productivity levels; 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 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 the Ice business (and the risk
that we are unable to find a suitable buyer for the Ice business in
connection with such proposed divestiture), 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 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 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 (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, 2021 and in our other
filings with the Securities and Exchange Commission. The ongoing
COVID-19 pandemic has amplified 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 December
31,
Year Ended December
31,
2021
2020
2021
2020
Net sales
$
423.0
$
320.0
$
1,546.9
$
1,153.4
Cost of sales
273.6
198.5
987.3
743.4
Gross profit
149.4
121.5
559.6
410.0
Selling, general and administrative
expenses
92.0
69.7
337.6
285.3
Amortization expense
9.7
9.9
39.4
39.1
Restructuring and other expense
0.1
1.4
0.6
10.9
Loss from impairment and (gain) loss on
disposal of assets — net
0.3
(0.1
)
0.4
11.6
Earnings from operations
47.3
40.6
181.6
63.1
Interest expense
18.4
19.0
74.9
81.4
Other expense (income) — net
1.2
(1.5
)
7.5
(4.6
)
Earnings (loss) before income taxes
27.7
23.1
99.2
(13.7
)
Income tax expense (benefit)
13.9
2.9
28.9
(6.3
)
Net earnings (loss)
$
13.8
$
20.2
$
70.3
$
(7.4
)
Per share data:
Earnings (loss) per share — Basic
$
0.10
$
0.14
$
0.49
$
(0.05
)
Earnings (loss) per share — Diluted
$
0.10
$
0.14
$
0.49
$
(0.05
)
Weighted average shares outstanding —
Basic
142,609,590
141,519,211
142,089,570
141,491,326
Weighted average shares outstanding —
Diluted
143,561,129
141,762,497
143,134,460
141,491,326
WELBILT, INC.
Consolidated Balance
Sheets
(In millions, except share and
per share data)
December 31,
December 31,
2021
2020
Assets
Current assets:
Cash and cash equivalents
$
134.2
$
125.0
Restricted cash
0.5
0.4
Accounts receivable, less allowance of
$6.6 and $4.4, respectively
220.5
165.9
Inventories — net
294.4
180.6
Prepaids and other current assets
58.5
50.1
Total current assets
708.1
522.0
Property, plant and equipment — net
135.6
129.1
Operating lease right-of-use assets
44.2
47.5
Goodwill
936.3
942.9
Other intangible assets — net
420.8
469.6
Other non-current assets
32.6
30.5
Total assets
$
2,277.6
$
2,141.6
Liabilities and equity
Current liabilities:
Trade accounts payable
$
130.6
$
86.4
Accrued expenses and other liabilities
210.7
164.2
Current portion of long-term debt and
finance leases
0.9
1.0
Product warranties
30.9
29.9
Total current liabilities
373.1
281.5
Long-term debt and finance leases
1,388.0
1,407.8
Deferred income taxes
64.2
76.5
Pension and postretirement health
liabilities
21.7
27.8
Operating lease liabilities
35.3
37.7
Other long-term liabilities
36.9
37.3
Total non-current liabilities
1,546.1
1,587.1
Total equity:
Common stock ($0.01 par value, 300,000,000
shares authorized, 142,961,244 shares and 141,557,236 shares issued
and outstanding as of December 31, 2021 and December 31, 2020,
respectively)
1.4
1.4
Additional paid-in capital (deficit)
(5.4
)
(25.6
)
Retained earnings
387.0
316.7
Accumulated other comprehensive loss
(24.6
)
(19.5
)
Total equity
358.4
273.0
Total liabilities and equity
$
2,277.6
$
2,141.6
WELBILT, INC.
Consolidated Statements of
Cash Flows
(In millions)
Year Ended December
31,
2021
2020
Cash flows from operating
activities
Net earnings (loss)
$
70.3
$
(7.4
)
Adjustments to reconcile net earnings
(loss) to cash provided by operating activities:
Depreciation expense
22.2
21.6
Amortization of intangible assets
40.9
40.6
Amortization of debt issuance costs
5.3
5.2
Deferred income taxes
(8.9
)
(8.2
)
Stock-based compensation expense
15.0
4.7
Loss from impairment and disposal of
assets
0.4
11.6
Changes in operating assets and
liabilities:
Accounts receivable
(57.9
)
21.8
Inventories
(116.2
)
10.2
Other assets
(1.3
)
(9.2
)
Trade accounts payable
42.9
(21.6
)
Other current and long-term
liabilities
43.4
(54.3
)
Net cash provided by operating
activities
56.1
15.0
Cash flows from investing
activities
Capital expenditures
(25.9
)
(20.1
)
Acquisition of intangible assets
—
(0.2
)
Other
—
(3.9
)
Net cash used in investing activities
(25.9
)
(24.2
)
Cash flows from financing
activities
Proceeds from long-term debt
232.0
219.1
Repayments on long-term debt and finance
leases
(256.2
)
(218.7
)
Debt issuance costs
—
(2.1
)
Exercises of stock options
10.9
1.2
Payments on tax withholdings for equity
awards
(8.1
)
(0.8
)
Net cash used in financing activities
(21.4
)
(1.3
)
Effect of exchange rate changes on
cash
0.5
5.2
Net increase (decrease) in cash and cash
equivalents and restricted cash
9.3
(5.3
)
Balance at beginning of period
125.4
130.7
Balance at end of period
$
134.7
$
125.4
WELBILT, INC.
Consolidated Statements of
Cash Flows (Continued)
(In millions)
Year Ended December
31,
2021
2020
Supplemental disclosures of cash flow
information:
Cash paid for income taxes, net of
refunds
$
30.8
$
17.8
Cash paid for interest, net of related
hedge settlements
$
69.9
$
76.0
Supplemental disclosures of non-cash
activities:
Non-cash investing activity: Purchase of
property, plant and equipment in accounts payable at period end
$
4.7
$
—
Non-cash financing activity: Reassessments
and modifications of right-of-use assets and lease liabilities and
assets obtained through leasing arrangements
$
8.4
$
20.7
Business Segments
During the first quarter of 2020, the Company revised the
allocation of certain of its functional expenses between the
corporate level and the geographic business segments. Management
believes the revised allocation methodology better aligns the
operating results of the geographic business segments with how
management assesses performance and makes operating decisions. The
prior period segment results and related disclosures have been
recast to conform to the current period presentation. These changes
did not impact the Company's previously reported consolidated
financial results.
(in millions, except percentage
data)
Three Months Ended December
31,
Year Ended December
31,
2021
2020
2021
2020
Net sales:
Americas
$
315.8
$
236.1
$
1,185.8
$
867.0
EMEA
120.2
83.1
447.1
292.6
APAC
80.4
60.6
261.1
202.1
Elimination of intersegment sales
(93.4
)
(59.8
)
(347.1
)
(208.3
)
Total net sales
$
423.0
$
320.0
$
1,546.9
$
1,153.4
Segment Adjusted Operating
EBITDA:
Americas
$
53.0
$
49.7
$
219.7
$
155.5
EMEA
23.5
16.6
86.7
46.2
APAC
13.8
8.9
40.7
31.2
Total Segment Adjusted Operating
EBITDA
90.3
75.2
347.1
232.9
Corporate and unallocated expenses
(13.3
)
(15.2
)
(71.7
)
(62.0
)
Amortization expense
(10.0
)
(10.4
)
(40.9
)
(40.6
)
Depreciation expense
(5.6
)
(5.2
)
(22.2
)
(20.7
)
Transaction costs (1)
(12.9
)
—
(26.4
)
(0.2
)
Other items (2)
—
0.4
2.1
(3.2
)
Transformation Program expense (3)
(0.2
)
(2.4
)
(4.6
)
(23.3
)
Restructuring activities (4)
(0.7
)
(1.9
)
(1.4
)
(8.2
)
Loss from impairment and gain (loss) on
disposal of assets — net
(0.3
)
0.1
(0.4
)
(11.6
)
Earnings from operations
47.3
40.6
181.6
63.1
Interest expense
(18.4
)
(19.0
)
(74.9
)
(81.4
)
Other (expense) income — net
(1.2
)
1.5
(7.5
)
4.6
Earnings (loss) before income taxes
$
27.7
$
23.1
$
99.2
$
(13.7
)
(1) Transaction costs for the
three months and year ended December 31, 2021 are related to the
pending sale of the Company and consist primarily of professional
services recorded in "Selling, general and administrative
expenses." Transaction costs for the three months and year ended
December 31, 2020 are related to professional services and other
direct acquisition and integration costs recorded in "Selling,
general and administrative expenses."
(2) Other items are costs which
are not representative of the Company's operational performance.
For the year ended December 31, 2021, other items consist primarily
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 months and year ended
December 31, 2020, other items represent the changes in the loss
contingency estimate of amounts due for customs duties, fees and
interest on previously imported products of $(0.5) million and $3.1
million, respectively, which are included in "Restructuring and
other expenses" in the Consolidated Statements of Operations and
$0.1 million of professional fees for recovery of misappropriated
funds within the Crem business related to the 2018 matter for both
the three months and year ended December 31, 2020.
(3) Transformation Program
expense includes consulting and other costs associated with
executing our Transformation Program initiatives. For the year
ended December 31, 2021, $1.8 million is included in "Cost of
sales" in the Consolidated Statements of Operations. For the three
months and year ended December 31, 2020, $0.5 million and $2.0
million, respectively, are included in "Cost of sales" in the
Consolidated Statements of Operations. For the three months and
year ended December 31, 2021, $0.2 million and $2.8 million,
respectively, are included in "Selling, general and administrative
expenses" in the Consolidated Statements of Operations. For the
three months and year ended December 31, 2020, $1.9 million and
$21.3 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
year ended December 31, 2021, these costs include severance and
related costs of $0.2 million and $0.8 million. Comparatively, for
the three months and year ended December 31, 2020, these costs also
include severance and other related costs of $1.9 million and $7.8
million, respectively. Severance and related costs are included in
"Restructuring and other expense" in the Consolidated Statements of
Operations. For the three months and year ended December 31, 2021,
these costs include inventory write-downs of $0.5 million and $0.6
million that was recorded in "Cost of sales" in the Consolidated
Statements of Operations. Comparatively, for the year ended
December 31, 2020, these costs include inventory write-downs of
$0.4 million.
(in millions, except percentage
data)
Three Months Ended December
31,
Year Ended December
31,
2021
2020
2021
2020
Adjusted Operating EBITDA % by
segment (5):
Americas
16.8
%
21.1
%
18.5
%
17.9
%
EMEA
19.6
%
20.0
%
19.4
%
15.8
%
APAC
17.2
%
14.7
%
15.6
%
15.4
%
(5) Adjusted Operating EBITDA % is
calculated by dividing Adjusted Operating EBITDA by net sales for
each respective segment.
Third-party net sales by geographic
area (6):
United States
$
252.4
$
195.0
$
973.4
$
725.0
Other Americas
25.7
16.3
87.8
60.4
EMEA
82.9
57.8
294.3
217.5
APAC
62.0
50.9
191.4
150.5
Total net sales by geographic area
$
423.0
$
320.0
$
1,546.9
$
1,153.4
(6) 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 plus cash receipts on our beneficial interest
in sold receivables and the related impact of terminating our
accounts receivable securitization program during the first quarter
of 2019. 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 December
31,
Year Ended December
31,
2021
2020
2021
2020
Net cash provided by operating
activities
$
21.9
$
41.9
$
56.1
$
15.0
Capital expenditures
(8.7
)
(4.2
)
(25.9
)
(20.1
)
Free Cash Flow
$
13.2
$
37.7
$
30.2
$
(5.1
)
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 December
31,
Year Ended December
31,
2021
2020
2021
2020
Net earnings (loss)
$
13.8
$
20.2
$
70.3
$
(7.4
)
Income tax expense (benefit)
13.9
2.9
28.9
(6.3
)
Other expense (income) — net
1.2
(1.5
)
7.5
(4.6
)
Interest expense
18.4
19.0
74.9
81.4
Earnings from operations
47.3
40.6
181.6
63.1
Loss from impairment and (gain) loss on
disposal of assets — net
0.3
(0.1
)
0.4
11.6
Restructuring activities (1)
0.7
1.9
1.4
8.2
Amortization expense
10.0
10.4
40.9
40.6
Depreciation expense
5.6
5.2
22.2
20.7
Transformation Program expense (2)
0.2
2.4
4.6
23.3
Transaction costs (3)
12.9
—
26.4
0.2
Other items (4)
—
(0.4
)
(2.1
)
3.2
Total Adjusted Operating EBITDA
$
77.0
$
60.0
$
275.4
$
170.9
Adjusted Operating EBITDA margin (5)
18.2
%
18.8
%
17.8
%
14.8
%
(1) Restructuring activities include costs
associated with actions to improve operating efficiencies and
rationalization of our cost structure. For the year ended December
31, 2021, these costs include severance and related costs of $0.2
million and $0.8 million. Comparatively, for the three months and
year ended December 31, 2020, these costs also include severance
and other related costs of $1.9 million and $7.8 million,
respectively. Severance and related costs are included in
"Restructuring and other expense" in the Consolidated Statements of
Operations. For the three months and year ended December 31, 2021,
these costs include inventory write-downs of $0.5 million and $0.6
million that was recorded in "Cost of sales" in the Consolidated
Statements of Operations. Comparatively, for the year ended
December 31, 2020, these costs include inventory write-downs of
$0.4 million.
(2) Transformation Program expense
includes consulting and other costs associated with executing our
Transformation Program initiatives. For the year ended December 31,
2021, $1.8 million is included in "Cost of sales" in the
Consolidated Statements of Operations. For the three months and
year ended December 31, 2020, $0.5 million and $2.0 million,
respectively, are included in "Cost of sales" in the Consolidated
Statements of Operations. For the three months and year ended
December 31, 2021, $0.2 million and $2.8 million, respectively, are
included in "Selling, general and administrative expenses" in the
Consolidated Statements of Operations. For the three months and
year ended December 31, 2020, $1.9 million and $21.3 million,
respectively, are included in "Selling, general and administrative
expenses" in the Consolidated Statements of Operations.
(3) Transaction costs for the three months
and year ended December 31, 2021 are related to the pending sale of
the Company and consist primarily of professional services recorded
in "Selling, general and administrative expenses." Transaction
costs for the three months and year ended December 31, 2020 are
related to professional services and other direct acquisition and
integration costs recorded in "Selling, general and administrative
expenses."
(4) Other items are costs which are not
representative of the Company's operational performance. For the
year ended December 31, 2021, other items consist primarily 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 months and year ended
December 31, 2020, other items represent the changes in the loss
contingency estimate of amounts due for customs duties, fees and
interest on previously imported products of $(0.5) million and $3.1
million, respectively, which are included in "Restructuring and
other expenses" in the Consolidated Statements of Operations and
$0.1 million of professional fees for recovery of misappropriated
funds within the Crem business related to the 2018 matter for both
the three months and year ended December 31, 2020.
(5) 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 December
31,
Year Ended December
31,
2021
2020
2021
2020
Net earnings (loss)
$
13.8
$
20.2
$
70.3
$
(7.4
)
Loss from impairment and (gain) loss on
disposal of assets — net
0.3
(0.1
)
0.4
11.6
Restructuring activities (1)
0.7
1.9
1.4
8.2
Transformation Program expense (2)
0.2
2.4
4.6
23.3
Transaction costs (3)
12.9
—
26.4
0.2
Other items (4)
—
(0.4
)
(2.1
)
3.2
Foreign currency transaction loss (gain)
(6)
0.7
(1.5
)
6.0
(5.7
)
Tax effect of adjustments (7)
(3.6
)
(0.8
)
(8.5
)
(10.3
)
Total Adjusted Net Earnings
$
25.0
$
21.7
$
98.5
$
23.1
Per share basis
Diluted net earnings (loss)
$
0.10
$
0.14
$
0.49
$
(0.05
)
Loss from impairment and (gain) loss on
disposal of assets — net
—
—
0.01
0.08
Restructuring activities (1)
0.01
0.01
0.01
0.06
Transformation Program expense (2)
—
0.02
0.03
0.16
Transaction costs (3)
0.09
—
0.18
—
Other items (4)
—
—
(0.01
)
0.02
Foreign currency transaction loss (gain)
(6)
0.01
(0.01
)
0.04
(0.04
)
Tax effect of adjustments (7)
(0.03
)
(0.01
)
(0.06
)
(0.07
)
Total Adjusted Diluted Net Earnings
$
0.18
$
0.15
$
0.69
$
0.16
(1) Restructuring activities include costs
associated with actions to improve operating efficiencies and
rationalization of our cost structure. For the year ended December
31, 2021, these costs include severance and related costs of $0.2
million and $0.8 million. Comparatively, for the three months and
year ended December 31, 2020, these costs also include severance
and other related costs of $1.9 million and $7.8 million,
respectively. Severance and related costs are included in
"Restructuring and other expense" in the Consolidated Statements of
Operations. For the three months and year ended December 31, 2021,
these costs include inventory write-downs of $0.5 million and $0.6
million that was recorded in "Cost of sales" in the Consolidated
Statements of Operations. Comparatively, for the year ended
December 31, 2020, these costs include inventory write-downs of
$0.4 million.
(2) Transformation Program expense
includes consulting and other costs associated with executing our
Transformation Program initiatives. For the year ended December 31,
2021, $1.8 million is included in "Cost of sales" in the
Consolidated Statements of Operations. For the three months and
year ended December 31, 2020, $0.5 million and $2.0 million,
respectively, are included in "Cost of sales" in the Consolidated
Statements of Operations. For the three months and year ended
December 31, 2021, $0.2 million and $2.8 million, respectively, are
included in "Selling, general and administrative expenses" in the
Consolidated Statements of Operations. For the three months and
year ended December 31, 2020, $1.9 million and $21.3 million,
respectively, are included in "Selling, general and administrative
expenses" in the Consolidated Statements of Operations.
(3) Transaction costs for the three months
and year ended December 31, 2021 are related to the pending sale of
the Company and consist primarily of professional services recorded
in "Selling, general and administrative expenses." Transaction
costs for the three months and year ended December 31, 2020 are
related to professional services and other direct acquisition and
integration costs recorded in "Selling, general and administrative
expenses."
(4) Other items are costs which are not
representative of the Company's operational performance. For the
year ended December 31, 2021, other items consist primarily 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 months and year ended
December 31, 2020, other items represent the changes in the loss
contingency estimate of amounts due for customs duties, fees and
interest on previously imported products of $(0.5) million and $3.1
million, respectively, which are included in "Restructuring and
other expenses" in the Consolidated Statements of Operations and
$0.1 million of professional fees for recovery of misappropriated
funds within the Crem business related to the 2018 matter for both
the three months and year ended December 31, 2020.
(5) Pension settlement represents a
non-cash pension settlement loss of $1.2 million incurred during
the year ended December 31, 2019, resulting from the settlement of
a portion of our United Kingdom pension obligations.
(6) 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.
(7) 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
December 31, 2021 vs. 2020
Favorable/(Unfavorable)
Americas
EMEA
APAC
Welbilt
Organic Net Sales
30.9
%
44.6
%
23.7
%
32.3
%
Impact of foreign currency
translation(1)
0.5
%
(3.2
) %
1.0
%
(0.1
) %
Third-party Net Sales
31.4
%
41.4
%
24.7
%
32.2
%
For the Years Ended December
31, 2021 vs. 2020
Favorable/(Unfavorable)
Americas
EMEA
APAC
Welbilt
Organic Net Sales
34.6
%
30.6
%
20.7
%
31.9
%
Impact of foreign currency
translation(1)
0.9
%
6.0
%
3.1
%
2.2
%
Third-party Net Sales
35.5
%
36.6
%
23.8
%
34.1
%
(1) The impact from foreign currency
translation is calculated by translating current period activity at
the weighted average prior period rates.
Three Months Ended December
31,
Year Ended December
31,
(in millions)
2021
2020
2021
2020
Consolidated:
Net sales
$
516.4
$
379.8
$
1,894.0
$
1,361.7
Less: Intersegment sales
(93.4
)
(59.8
)
(347.1
)
(208.3
)
Net sales (as reported)
423.0
320.0
1,546.9
1,153.4
Impact of foreign currency
translation(1)
0.5
—
(25.2
)
—
Organic net sales
$
423.5
$
320.0
$
1,521.7
$
1,153.4
Americas:
Net sales
$
315.8
$
236.1
$
1,185.8
$
867.0
Less: Intersegment sales
(40.2
)
(26.3
)
(136.3
)
(92.4
)
Third-party net sales
275.6
209.8
1,049.5
774.6
Impact of foreign currency
translation(1)
(0.9
)
—
(7.1
)
—
Total Americas organic net sales
$
274.7
$
209.8
$
1,042.4
$
774.6
EMEA:
Net sales
$
120.2
$
83.1
$
447.1
$
292.6
Less: Intersegment sales
(35.5
)
(23.2
)
(141.9
)
(69.1
)
Third-party net sales
84.7
59.9
305.2
223.5
Impact of foreign currency
translation(1)
1.9
—
(13.4
)
—
Total EMEA organic net sales
$
86.6
$
59.9
$
291.8
$
223.5
APAC:
Net sales
$
80.4
$
60.6
$
261.1
$
202.1
Less: Intersegment sales
(17.7
)
(10.3
)
(68.9
)
(46.8
)
Third-party net sales
62.7
50.3
192.2
155.3
Impact of foreign currency
translation(1)
(0.5
)
—
(4.7
)
—
Total APAC organic net sales
$
62.2
$
50.3
$
187.5
$
155.3
(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/20220228005152/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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