NEW PORT RICHEY, Fla.--(BUSINESS WIRE)--Aug 9, 2018--Welbilt, Inc. (NYSE:WBT), today announced financial results for its 2018 second quarter.

2018 Second Quarter Highlights

Net sales were $420.7 million, an increase of 13.4 percent from prior year; Organic Net Sales increased 6.5 percent Net earnings were $12.1 million, a decrease of 59.8 percent; Adjusted Net Earnings were $28.8 million, a decrease of 9.4 percent Diluted net earnings per share were $0.09, a decrease of 57.1 percent; Adjusted Diluted Net Earnings Per Share were $0.20, a decrease of 13.0 percent Earnings from operations were $55.6 million, an increase of 2.2 percent; as a percent of net sales, earnings from operations were 13.2 percent, a decrease of 150 basis points Adjusted Operating EBITDA was $75.5 million, an increase of 12.9 percent; Adjusted Operating EBITDA margin was 17.9 percent, a decrease of 10 basis points and was negatively impacted by 20 basis points from the Crem Acquisition; excluding this impact, the Adjusted Operating EBITDA margin increased 10 basis points

2018 Second Quarter Year-to-date Highlights

Net sales were $771.1 million, an increase of 10.3 percent from prior year; Organic Net Sales increased 5.2 percent Net earnings were $24.6 million, a decrease of 29.9 percent; Adjusted Net Earnings were $50.1 million, an increase of 14.9 percent Diluted net earnings per share were $0.17, a decrease of 32.0 percent; Adjusted Diluted Net Earnings Per Share were $0.35, an increase of 12.9 percent Earnings from operations were $97.2 million, an increase of 8.4 percent; as a percent of net sales, earnings from operations were 12.6 percent, a decrease of 20 basis points Adjusted Operating EBITDA was $130.8 million, an increase of 9.1 percent; Adjusted Operating EBITDA margin was 17.0 percent, a decrease of 20 basis points; on a year-to-date basis, the Crem acquisition had an immaterial impact on the Adjusted Operating EBITDA margin

2018 Guidance

Net sales growth: between 9.0 and 12.0 percent (organic +2.0 to +5.0 percent, acquisition +5.0 percent, foreign currency translation +2.0 percent) Adjusted Operating EBITDA margin: between 19.1 and 20.1 percent including a 20 basis point negative impact from the Crem acquisition Adjusted Diluted Net Earnings Per Share: between $0.80 and $0.90 per share, based on a forecast of 141.0 million fully diluted shares outstanding and including a $0.02 benefit from the Crem acquisition

"We are pleased to deliver another quarter of Organic Net Sales and Adjusted Operating EBITDA growth," said Hubertus Muehlhaeuser, Welbilt’s President and CEO. "Organic Net Sales increased in the Americas segment, with new product rollouts with large chain customers and higher general market sales driving stronger hot-side and cold-side product sales, which more than offset lower KitchenCare ® aftermarket sales. In the APAC segment, Organic Net Sales increased with higher hot-side product sales to both large chain and general market customers. In the EMEA segment, Organic Net Sales were lower against strong sales of Merrychef ® high-speed ovens and Multiplex ® beverage system sales last year."

"Operationally, Adjusted Operating EBITDA increased year-over-year again for the 12th consecutive quarter driven by the continued solid execution of our Simplification and Right-Sizing initiatives, higher organic sales volumes and the acquisition of Crem International. Our Adjusted Operating EBITDA margin, excluding the dilutive impact from the acquired business, increased slightly as these benefits were offset by less favorable mix primarily from lower KitchenCare aftermarket sales and from ramp-up costs related to the new product rollouts that began this year. We see the impacts from mix and ramp-up costs as temporary. We continue to expect to deliver higher year-over-year Adjusted Operating EBITDA - both in absolute dollars and as a percent of sales - in 2018."

"We are increasing our 2018 annual net sales guidance today. We have increased our Organic Net Sales guidance range by 100 basis points as we expect to continue benefiting from increased sales to large chain customers and for demand from general market customers to continue improving as we progress through the year. We expect KitchenCare aftermarket sales will contribute to growth in the second half of 2018 as the high inventory levels at our channel partners are being worked through. We also adjusted our forecast for foreign currency translation, which we now expect to have a positive 2 percent impact on net sales."

"We are adjusting our 2018 Adjusted Operating EBITDA margin guidance range to now be between 19.1 and 20.1 percent. This new range reflects the expected 20 basis point dilutive impact from the Crem acquisition and the forecasted impact from the recently-enacted section 301 tariffs on purchased component costs. We expect improved mix in the second half of 2018 from higher KitchenCare aftermarket sales and for the ramp-up costs related to the new product roll-outs to subside. We expect the benefits from higher volumes to continue throughout the balance of the year. Net pricing is expected to improve following our recent price increase. These drivers, combined with our Simplification and Right-Sizing initiatives and hedging activities, are expected to offset the inflationary impacts from rising freight costs and from the section 232 tariffs on raw materials. In total, we expect to deliver another year of margin growth from organic businesses and earnings growth," concluded Muehlhaeuser.

Segment Discussion

Net sales in our Americas segment for the second quarter were $328.2 million, a 7.2 percent increase compared to $306.1 million in last year's second quarter. Third-party Net Sales were $294.8 million, an 8.4 percent increase (+7.9 percent organic, +0.5 percent foreign currency translation) compared to the prior year quarter. The Organic Net Sales increase was primarily driven by new product rollouts with large chains and higher general market sales driving increased sales of hot-side and cold-side products, partially offset by lower KitchenCare aftermarket sales. Year-to-date, Americas segment net sales were $608.4 million, a 6.1 percent increase over $573.6 million last year. Third party net sales were $544.7 million, a 6.9 percent increase (+6.4 percent organic, +0.5 percent foreign currency translation). Second quarter adjusted operating EBITDA in the Americas segment was $61.5 million compared to $59.1 million in the second quarter of 2017. As a percentage of net sales, adjusted operating EBITDA margin was 18.7 percent in the second quarter versus 19.3 percent in the same period last year, a decrease of 60 basis points. The decrease in adjusted operating EBITDA margin was primarily driven by unfavorable product mix, costs related to ramping up the new rollouts and intersegment pricing, which were partially offset by benefits from higher volume and savings from our Simplification and Right-Sizing initiatives. Year-to-date, Americas segment adjusted operating EBITDA was $109.1 million compared to $105.9 million in 2017. As a percentage of net sales, adjusted operating EBITDA margin was 17.9 percent in 2018 versus 18.5 percent in the same period last year.

Net sales in our EMEA segment for the second quarter were $99.3 million, a 30.5 percent increase versus $76.1 million in last year's second quarter. Third-party Net Sales were $79.6 million, a 28.2 percent increase (-1.8 percent organic, +23.2 percent acquisition, +6.8 percent foreign currency translation). The Organic Net Sales decrease was driven primarily by lower sales of hot-side and cold-side products, partially offset by higher sales KitchenCare aftermarket sales. Year-to-date, EMEA segment net sales were $180.3 million, a 25.3 percent increase over $143.9 million last year. Third party net sales were $143.7 million, a 23.9 percent increase (+1.2 percent organic, +12.4 percent acquisition, +10.3 percent foreign currency translation). Second quarter adjusted operating EBITDA in the EMEA segment was $22.4 million compared to $14.8 million in the second quarter of 2017. As a percentage of net sales, adjusted operating EBITDA margin was 22.6 percent in the second quarter versus 19.4 percent in the same period last year, an increase of 320 basis points. The adjusted operating EBITDA margin increase was primarily driven by savings from our Simplification and Right-Sizing initiatives, intersegment pricing and mix. Year-to-date, adjusted operating EBITDA in the EMEA segment was $36.5 million compared to $27.6 million in 2017. As a percentage of net sales, adjusted operating EBITDA margin was 20.2 percent in 2018 versus 19.2 percent in the same period last year.

Net sales in our APAC segment for the second quarter were $57.7 million, a 28.5 percent increase from $44.9 million in last year's second quarter. Third-party Net Sales were $46.3 million, a 24.8 percent increase (+10.0 percent organic, +11.3 percent acquisition, +3.5 percent foreign currency translation). The Organic Net Sales increase was driven primarily by higher sales of hot-side products. Year-to-date, APAC segment net sales were $101.2 million, a 16.9 percent increase from $86.6 million last year. Third party net sales were $82.7 million, a 12.5 percent increase (+3.4 percent organic, +5.7 percent acquisition, +3.4 percent foreign currency translation). Second quarter adjusted operating EBITDA in the APAC segment was $7.5 million compared to $6.2 million in the second quarter of 2017. As a percentage of net sales, adjusted operating EBITDA margin was 13.0 percent for the second quarter of 2018 versus 13.8 percent for the same period last year, a decrease of 80 basis points. The adjusted operating EBITDA margin decrease was primarily driven by intersegment pricing adjustments, higher compensation expense and higher overhead costs, partially offset by benefits from higher volumes and savings from our Simplification and Right-Sizing initiatives. Year-to-date, adjusted operating EBITDA in the APAC segment was $13.0 million compared to $11.7 million in 2017. As a percentage of net sales, adjusted operating EBITDA margin was 12.8 percent in 2018 versus 13.5 percent for the same period in the prior year.

Liquidity Discussion

Net cash used in operating activities in the second quarter was $134.5 million compared to $89.6 million in last year's second quarter. Net cash used in investing activities in the second quarter was $76.0 million compared to cash provided by investing activities of $144.1 million in last year's second quarter. Both the current year and prior year amounts for net cash used by operating activities and net cash provided by investing activities reflect the impact of the adoption of Accounting Standards Update 2016-15, which is applicable to accounts receivable securitization programs and requires gross presentation and classification changes between the operating and investing sections on the consolidated statements of cash flows including retrospective recasting of prior period information for comparability. Free Cash Flow was $15.1 million in the quarter versus $48.5 million in last year's second quarter. During the quarter, net borrowings on our debt agreements increased by $159.7 million, primarily for the acquisition of Crem International, compared to a decrease of $32.0 million for the same period last year. Our ending cash and cash equivalents balance was $103.9 million, a decrease of $49.9 million in the quarter primarily due to cash used for the acquisition of Crem International. The majority of our cash is held by our international subsidiaries. Year-to-date, net cash used in operating activities was $288.0 million compared to $254.0 million for the same period last year. Year-to-date, Free Cash Flow was a $10.3 million use of cash versus a $4.9 million use of cash in the same period last year.

Conference Call and Webcast

Welbilt will host a live conference call to discuss its 2018 second quarter earnings on Thursday, August 9, 2018 at 10:00 am ET. A live webcast, supplemental presentation slides and replay of the call can be accessed on the Investor Relations page at www.welbilt.com. The webcast replay will be available for 30 days from Thursday, August 9, 2018 at 1:00 pm ET. The information on our website is not a part of this release.

About Welbilt, Inc.

Welbilt, Inc. provides the world’s top chefs, premier chain operators and growing independents with industry-leading equipment and solutions. Our innovative products and solutions are powered by our deep knowledge, operator insights, and culinary expertise. Our portfolio of award-winning product brands includes Cleveland™, Convotherm ®, Crem ®, Delfield ®, Frymaster ®, Garland ®, Kolpak ®, Lincoln™, Manitowoc ® Ice, Merco ®, Merrychef ® and Multiplex ®. These product brands are supported by two service brands: FitKitchen ®, our fully-integrated kitchen systems brand, and KitchenCare ®, our aftermarket parts and service brand. Headquartered in the Tampa Bay region of Florida and operating 20 manufacturing facilities throughout the Americas, Europe and Asia, we sell through a global network of over 3,500 distributors and dealers in over 100 countries. We have approximately 5,800 employees and generated sales of $1.45 billion in 2017. 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, the Company’s expectations regarding future results, the Company’s full-year financial outlook, descriptions of our operating and strategic plans and any assumptions on which those expectations, outlook or plans are based. Certain of these forward-looking statements can be identified by the use of words such as "anticipates," "believes," "intends," "estimates," "targets," "expects," "could," "will," "may," "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 and speak only 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 acquisitions, including our ability to realize the benefits of acquisitions in a manner consistent with our expectations and general integration risks; risks related to our substantial levels of indebtedness, including our ability to comply with covenants contained in our debt agreements; world economic factors and ongoing economic and political uncertainty; realization of anticipated earnings enhancements, cost savings, strategic options and other synergies and the anticipated timing to realize those enhancements, savings, synergies, and options; our ability to source raw materials and commodities on favorable terms and successfully respond to and manage related price volatility; the ability to generate cash and manage working capital consistent with our stated goals; changes in the interest rate environment and currency fluctuations; the successful development and market acceptance of innovative new products; actions by competitors including competitive pricing; consumer and customer demand for products; 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 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, 2017, our Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2018 and June 30, 2018 and in our other filings with the Securities and Exchange Commission ("SEC"). We do not intend, and, except as required by law, we undertake no obligation, to update any of our forward-looking statements after the date 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.

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