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Dynamic quotes 
OFFON

WELBILT, INC.

(WBT)
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WELBILT, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

11/02/2021 | 04:06pm EST
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited consolidated
financial statements and the related notes included in Item 1 of Part I of this
Quarterly Report on Form 10-Q and with our audited consolidated financial
statements and related notes included in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2020. The financial position, results of
operations, cash flows and other information included herein are not necessarily
indicative of the financial position, results of operations and cash flows that
may be expected in future periods. See "Cautionary Statements Regarding
Forward-Looking Information" below for a discussion of uncertainties and
assumptions that may cause actual results to differ materially from those
expressed or implied in the forward-looking statements. Additionally, we use
certain non-GAAP financial measures to evaluate our results of operations,
financial condition and liquidity. For important information regarding the use
of such non-GAAP measures, including reconciliations to the most comparable GAAP
measure, see the section titled "Non-GAAP Financial Measures" below. The
financial condition, results of operations and cash flows discussed in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations are those of Welbilt, Inc. and its consolidated subsidiaries,
collectively, the "Company," "Welbilt," "we," "our" or "us."

Overview

Business Overview


We design, manufacture and supply best-in-class equipment for the global
commercial foodservice market with our suite of products capable of storing,
cooking, holding, displaying, dispensing and serving in both hot and cold
foodservice categories. Our portfolio of products is used by commercial and
institutional foodservice operators including full-service restaurants,
quick-service restaurant chains, hotels, resorts, cruise ships, caterers,
supermarkets, convenience stores, hospitals, schools and other institutions. Our
products, product-based services and aftermarket parts and service support are
recognized by our customers and channel partners for their quality, reliability
and durability which support our end customers by improving menus, enhancing
operations and reducing costs.

We manage our business in three geographic business segments: Americas, EMEA and
APAC. The Americas segment includes the United States ("U.S."), Canada and Latin
America. The EMEA segment consists of markets in Europe, including Middle East,
Russia, Africa and the Commonwealth of Independent States. The APAC segment
consists primarily of markets in China, India, Australia, South Korea,
Singapore, Philippines, Japan, Indonesia, Malaysia, Thailand, Hong Kong, Taiwan,
New Zealand and Vietnam. We are required to prepare and present our consolidated
financial statements in accordance with accounting principles generally accepted
in the U.S. ("U.S. GAAP" or "GAAP"). These geographic business segments
represent the level at which separate financial information is available and
which is used by management to assess operating performance and allocate
resources. In addition to GAAP financial measures, we also evaluate our segment
performance based upon Adjusted Operating EBITDA (a non-GAAP measure). See the
definition of Adjusted Operating EBITDA and other non-GAAP measures used by
management within the section titled "Non-GAAP Financial Measures" of this
Management's Discussion and Analysis of Financial Condition and Results of
Operations. In addition, see Note 17, "Business Segments," of the Notes to the
Consolidated Financial Statements included in Part I, Item 1 of this Quarterly
Report on Form 10-Q for further discussion of our geographic business segments.

Executive Summary

Merger with Ali Holding S.r.l.


On July 14, 2021, our company and Ali Holding S.r.l. ("Ali Group"), a
significant and diversified global foodservice equipment manufacturer and
distributor, entered into a merger agreement under which Ali Group will acquire
our company in an all-cash transaction for $24.00 per share, or approximately
$3.5 billion in aggregate equity value and $4.8 billion in enterprise value. The
merger agreement has been unanimously approved by our company's board of
directors and on September 30, 2021, was unanimously approved by our
stockholders.

In accordance with the terms of the merger agreement and immediately prior to the merger:


(i)   all of our company's outstanding and unvested common stock options and
restricted stock units will become vested and exchanged for the right to receive
cash equal to the $24.00 per share consideration (less the exercise per share of
common stock for the common stock options), and

(ii) all of our company's outstanding performance share units will also be exchanged, as determined assuming the maximum level of performance is achieved, for the right to receive cash equal to the $24.00 per share consideration,

Upon completion of the transaction, our company's shares will no longer trade on The New York Stock Exchange.


The Ali Group merger agreement provides that our company may be required to pay
Ali Group a termination fee equal to $110.0 million if the merger agreement is
terminated:

(a) by Ali Group due to a breach of a covenant or agreement by our company that causes the failure of a condition to closing, or


(b)   by either party if the Merger has not been consummated prior to July 14,
2022 (subject to extension if certain approvals have not been obtained by such
date) or
                                      -44-
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if, in the case of clauses (a) or (b), an alternative proposal has been publicly
disclosed, announced or otherwise made public and has not been withdrawn and
within twelve months of such termination our company enters into a definitive
agreement with respect to, or consummates, an alternative proposal.

Welbilt and Ali Group have submitted regulatory filings in all required
jurisdictions, including the U.S., United Kingdom, and European Union. The
companies have decided that they will proceed with divesting the Company's
Manitowoc ice brand ("Ice business") and the companies are confident that this
step will ensure regulatory approval. The companies expect to complete the sale
of the Ice business in early 2022 and then close the acquisition of Welbilt by
Ali Group shortly thereafter.

As of September 30, 2021, our company had not identified a buyer or begun
marketing the Ice business for sale and concluded that the Ice business does not
meet the criteria to be classified as an asset held for sale or its operations
to be classified as discontinued operations.

Financial Results Highlights

Highlights of our financial results as of and for the three months ended September 30, 2021, as compared to the same period of the prior year, are as follows:

•Net sales were $411.5 million, an increase of 37.9%.

•Organic net sales (a non-GAAP measure) were $406.4 million, an increase of 36.1%.

•Gross profit (as a percentage of net sales) was 35.8% compared to 35.3% for the same quarter of 2020.

•Earnings from operations were $52.6 million, an increase of $31.4 million.


•Adjusted Operating EBITDA (a non-GAAP measure) was $75.1 million, an increase
of 64.7%, while Adjusted Operating EBITDA margin (a non-GAAP measure) was 18.3%
compared to 15.3% for the same quarter of 2020.

•Net earnings were $24.9 million and Adjusted Net Earnings (a non-GAAP measure) were $29.9 million.

•Diluted net earnings per share was $0.17 and Adjusted Diluted Net Earnings Per Share (a non-GAAP measure) was $0.21.


•As of September 30, 2021, our total liquidity was $397.3 million, consisting of
$111.9 million of cash and cash equivalents and $285.4 million available for
additional borrowing under our senior secured revolving credit facility, to the
extent we are compliant with financial covenants which permit such borrowings.
This compares to liquidity of $392.2 million as of June 30, 2021, $353.7 million
as of March 31, 2021 and $375.0 million as of December 31, 2020.

•Our total outstanding long-term debt, excluding finance leases, as of September 30, 2021 was $1,388.0 million.

The following is a summary of factors that impacted our operating results and liquidity during the three months ended September 30, 2021.

Impact of Global COVID-19 Pandemic on our Business


The global economic conditions will continue to be volatile as long as the
global COVID-19 pandemic remains a public health threat. The ongoing COVID-19
pandemic has resulted in governments around the world implementing stringent
measures to help control the spread of the virus and new strains of the virus,
including quarantines, "shelter in place" and "stay at home" orders, curfews,
travel restrictions, border closures, limitations on public gatherings,
vaccination mandates, social distancing measures and mandated business
limitations and closures. These measures have resulted in a disruption in the
foodservice industry, including substantial restaurant closures and, as a
result, in commercial foodservice equipment markets across the geographies in
which we operate. We expect global economic performance and the performance of
our businesses to vary by geography and discipline until the impact of the
COVID-19 pandemic on the global economy subsides.

Our Company's third quarter 2021 net sales, earnings from operations and cash
flows all improved significantly in comparison to the third quarter of 2020.
While the commercial foodservice industry has continued to gradually recover
from the negative impacts of the COVID-19 pandemic, the extent of the ultimate
impact of the COVID-19 pandemic, including supply chain disturbances and
shipping and logistics delays, on our operational and financial performance will
depend significantly on future developments, including the duration, scope and
severity of the pandemic, the actions taken to contain, mitigate or recover from
its impact in each of the countries where we operate globally (including actions
taken to ease supply chain backlogs), the vaccination rates and the
effectiveness of vaccinations, emergence of new strains of the virus, and the
timing of the resumption of economic activity to pre-pandemic levels.

Throughout each of the three quarters in the periods ended March 31, June 30,
and September 30, 2021, we continued to see increases in the cost of specific
commodities, components and parts purchased as compared to both the previous
quarters of the current year and the same periods of the prior year, including
the impact of rising inflation rates and tariffs, as challenges in the supply
chain and shipping and logistics
                                      -45-
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delays continue to persist. We expect that the average cost of commodities,
components and parts purchased, including the impact of rising inflation and
tariffs, for fiscal 2021 will be higher than the costs experienced during the
year ended December 31, 2020.

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted
in March 2020 and includes measures intended to assist companies during the
global COVID-19 pandemic, including temporary changes to income and
non-income-based tax laws, some of which had been enacted under the Tax Cuts and
Jobs Act ("Tax Act") in 2017. As a result of the Tax Act and the CARES Act,
additional legislative and regulatory guidance has been and may continue to be
issued, including final regulations that could impact our effective tax rate in
future periods.

The American Rescue Plan Act of 2021 was enacted on March 11, 2021 and, among
other things, included a second extension, through June 30, 2021, of the payroll
support program provided under the CARES Act. We were not eligible for this
incentive during the six months ended June 30, 2021.

On September 9th, 2021 President Biden announced a proposed new rule which would
mandate the COVID-19 vaccine or weekly testing for most U.S. employees, which
would include our employees.This rule is expected be implemented through an
Emergency Temporary Standard ("ETS") that will be promulgated by the
Occupational Safety and Health Administration. If the ETS is ultimately issued
and implemented, we expect there would be further disruptions to our operations,
such as inability to maintain adequate staffing at our facilities, difficulties
in replacing disqualified employees with temporary employees or new hires,
increased costs and diminished availability of raw materials and component
parts, and increased compliance burdens, including financial costs, diversion of
administrative resources, and increased downtimes to accommodate for weekly
COVID-19 testing, resulting in delays in the manufacturing process, which would
negatively impact our future sales and ongoing customer relationships.

We continue to proactively monitor the developments surrounding COVID-19 and may
take additional actions based on the requirements and recommendations of
governmental and health authorities around the world in an attempt to protect
our stakeholders. Although we are currently unable to quantify with certainty
the ultimate severity or duration of the impact of the global COVID-19 pandemic
on our business, we expect that the challenges in the supply chain and shipping
and logistics delays will likely have a continued impact on our operating
results and financial condition in fiscal 2022.

Strategic Objectives


While our strategic objectives are long-term and remain intact, the execution of
the merger with Ali Group and the uncertainty surrounding the global COVID-19
pandemic will impact the extent and timing of our execution of these objectives.
As such, our strategic objectives continue to include achieving sustainable
growth globally and increased profitability by leveraging our position as a
leading commercial foodservice equipment provider, while selectively pursuing
longer-term strategic partnerships, growing our customer base and expanding the
frontiers of foodservice innovation, as well as attracting and developing
industry-leading talent.

Our specific strategic objectives include:


•Achieve profitable growth: We intend to grow sales organically with our
best-in-class foodservice equipment portfolio of products and an integrated
kitchen solution approach. While organic growth across all three of our regions
is our first priority, we may selectively pursue strategic partnerships as our
capital structure allows in the future. Our industry is fragmented, and we
believe there is significant opportunity for consolidation through partnerships
and other strategic relationships to drive growth.

•Business Transformation Program Update: Our Business Transformation Program
("Transformation Program") focuses on specific areas of opportunity including
strategic sourcing, manufacturing facility workflow redesign, distribution and
administrative process efficiencies and optimizing our global brand platforms.
We are executing the final phases of the Transformation Program and expect to
complete these activities by the end of 2021, as originally planned. Total
consulting costs, restructuring charges, and other related transformation
expenses incurred from the inception of the program through 2021 are expected to
be approximately $73.0 million and we remain confident in our ability to achieve
the $75.0 million of annualized savings previously quantified when our sales and
volume levels return to pre-pandemic levels.

In connection with the ongoing execution of the Transformation Program, we
incurred $0.9 million and $4.4 million of consulting and other related
Transformation Program costs for the three and nine months ended September 30,
2021, respectively. We also incurred $0.4 million and $0.7 million of
restructuring charges for the three and nine months ended September 30, 2021,
respectively, intended to reduce future operating expenses as a result of the
improved efficiencies gained from the execution of the Transformation Program.
We have incurred total costs of $72.5 million from the inception of the
Transformation Program through September 30, 2021 and have settled these costs
primarily in cash. We continue to evaluate the total investment in, and
financial benefits of, the various initiatives associated with the
Transformation Program.

•Create innovative products and solutions: To remain an industry leader and grow
our reputation as an innovative company, we continuously develop dynamic product
and system solutions for the entire kitchen. We invest in our research and
development resources and work with our suppliers and customers to actively
address product competitiveness and life cycle extensions. We co-create
innovation and refresh existing products with new, locally relevant
food-inspiring technologies, while simultaneously finding new ways to integrate
those technologies into global platforms in a cost-effective manner and create
cohesive kitchen systems for our customers.

                                      -46-
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•Enhance customer satisfaction: We believe our broad product portfolio and the
positioning of our industry-leading brands enables us to further grow the number
of customers we serve and improve overall customer satisfaction as a trusted
provider to the largest companies in the foodservice industry.

•Drive operational excellence: We are focused on productivity gains and cost
reductions across our business and plan to continue to leverage our global
footprint to drive greater efficiencies across our operations. We are executing
these cost reduction initiatives through our Transformation Program, focused on
specific areas of opportunity including strategic sourcing, manufacturing
facility workflow redesign, distribution and administrative process efficiencies
and optimizing our global brand platforms.

•Develop great people: We strive to make our company, and our successor company,
an employer of choice in our industry. We believe that we demonstrate a strong
commitment to our people by providing a diverse and inclusive culture and
environment where employee input, efforts and achievements are recognized and
valued.


Results of Operations for the Three Months Ended September 30, 2021 and 2020

The following table sets forth our consolidated financial results for the periods presented:


                                                Three Months Ended September 30,                        Change
(in millions, except percentage data)               2021                  2020                  $                    %
Net sales                                    $        411.5$    298.5$    113.0                  37.9  %
Cost of sales                                         264.0                193.2                70.8                  36.6  %
Gross profit                                          147.5                105.3                42.2                  40.1  %
Gross margin (% of Net sales)                          35.8   %             35.3  %                                    0.5  %
Selling, general and administrative
expenses                                               84.6                 72.3                12.3                  17.0  %
Amortization expense                                    9.9                  9.9                   -                     -  %

Restructuring and other expense                         0.3                  1.5                (1.2)                (80.0) %
Loss from impairment and disposal of
assets - net                                            0.1                  0.4                (0.3)                (75.0) %

Earnings from operations                               52.6                 21.2                31.4                 148.1  %
Interest expense                                       18.8                 19.6                (0.8)                 (4.1) %

Other expense (income) - net                            0.4                 (2.1)                2.5                 119.0  %
Earnings before income taxes                           33.4                  3.7                29.7                 802.7  %
Income tax expense (benefit)                            8.5                 (1.2)                9.7                 808.3  %

Net earnings                                 $         24.9           $      4.9$     20.0                 408.2  %



Analysis of Net Sales

"Net sales" for our geographic business segments consist of the following for
the periods presented:

                                                Three Months Ended September 30,                          Change
(in millions)                                       2021                   2020                  $                    %
Americas                                    $           318.9          $    221.8$     97.1                   43.8  %
EMEA                                                    121.2                73.9                47.3                   64.0  %
APAC                                                     68.2                48.0                20.2                   42.1  %
Elimination of intersegment sales                       (96.8)              (45.2)              (51.6)                (114.2) %
Total net sales                             $           411.5          $    298.5$    113.0                   37.9  %



Net sales totaled $411.5 million for the three months ended September 30, 2021
representing an increase of $113.0 million, or 37.9%, compared to the same
period of the prior year. The increase in net sales was primarily the result of:
(i) increased volumes largely due to an increase in general market demand, (ii)
increased volumes due to rollouts with large chain customers and (iii) increased
KitchenCare aftermarket sales, all of which were the result of our continued
recovery from the global COVID-19 pandemic, and to a much lesser extent,
increased net pricing. Foreign currency translation positively impacted
third-party net sales for the three months ended September 30, 2021 by $5.1
million as compared to the three months ended September 30, 2020.

                                      -47-
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Net sales in the Americas segment for the three months ended September 30, 2021
increased $97.1 million, or 43.8%, compared to the same period of the prior
year. The increase was primarily driven by increased third-party net sales of
$80.3 million and a $16.8 million increase in intersegment sales. The increase
in third-party net sales was primarily the result of: (i) increased volumes
primarily due to an increase in general market demand, (ii) increased volumes
due to rollouts with large chain customers and (iii) increased KitchenCare
aftermarket sales, all of which were the result of our continued recovery from
the global COVID-19 pandemic in the region, and to a much lesser extent,
increased net pricing. Foreign currency translation positively impacted
third-party net sales for the three months ended September 30, 2021 by $1.7
million as compared to the same period of the prior year.

Net sales in the EMEA segment for the three months ended September 30, 2021
increased $47.3 million, or 64.0%, compared to the same period of the prior
year. The increase was primarily driven by increased third-party net sales of
$21.9 million and a $25.4 million increase in intersegment sales. The increase
in third-party net sales was primarily the result of increased volumes primarily
due to the increase in general market demand and the increase in intersegment
sales is primarily due to increases in sales to the America's region related to
rollouts with large chain customers discussed above and an increase in general
market demand, both of which were the result of our continued recovery from the
ongoing global COVID-19 pandemic, and to a much lesser extent, increased net
pricing. Foreign currency translation positively impacted third-party net sales
for the three months ended September 30, 2021 by $2.2 million.

Net sales in the APAC segment for the three months ended September 30, 2021
increased $20.2 million, or 42.1%, compared to the same period of the prior
year. The increase was primarily driven by increased third-party net sales of
$10.8 million and a $9.4 million increase in intersegment sales. The increase in
third-party net sales was primarily driven by increased volumes largely due to
an increase in general market demand and increased KitchenCare aftermarket
sales, both of which were the result of our continued recovery from the ongoing
global COVID-19 pandemic. Foreign currency translation positively impacted
third-party net sales for the three months ended September 30, 2021 by $1.2
million as compared to the same period of the prior year.

Analysis of Earnings from Operations

Gross profit


"Gross profit" for the three months ended September 30, 2021 totaled $147.5
million, an increase of $42.2 million, or 40.1%, compared to the same period of
the prior year. This increase in gross profit was primarily driven by: (i) a
$43.1 million favorable impact resulting from increased product volumes and mix,
(ii) a $8.8 million favorable impact from increased net pricing and (iii) $3.6
million of positive foreign currency translation impact. These favorable impacts
were partially offset by: (i) $5.5 million of unfavorable material costs,
primarily driven by continued broad-based inflationary pressures experienced
during the third quarter of 2021, partially offset by the procurement sourcing
savings associated with the Transformation Program, (ii) a $4.9 million
unfavorable impact from increased inbound freight costs resulting from both
higher volumes and the continued macroeconomic impacts of the COVID-19 pandemic
on the supply chain, (iii) $1.2 million of increased tariff costs, (iv) $1.1
million of unfavorable labor and other manufacturing costs, primarily driven by
production inefficiencies resulting from supply chain disruptions related to the
global pandemic and (v) $0.3 million of higher depreciation costs.

Selling, general and administrative expenses


"Selling, general and administrative expenses" for the three months ended
September 30, 2021 totaled $84.6 million, an increase of $12.3 million, or
17.0%, compared to the same period of the prior year. This increase is primarily
due to: (i) $5.9 million of increased employee-related costs, reflecting the
non-recurrence of government subsidies and other measures taken in 2020 to
manage the impact of the COVID-19 pandemic, along with higher incentives related
to stronger operational performance in 2021, (ii) $5.2 of transaction expenses
related to the pending sale of our company, (iii) $3.8 million of higher travel
and other controllable costs, (iv) $3.6 million of higher marketing and
commission costs primarily resulting from increased sales volumes and (v) a $0.9
million unfavorable foreign currency translation impact as compared to the same
period of the prior year. The impact of these increases was partially offset by:
$6.1 million of lower third-party consulting costs incurred in connection with
our Transformation Program and $0.9 million of lower professional fees.

Restructuring and other expense

"Restructuring and other expenses" for the three months ended September 30, 2021 were $0.3 million, primarily as a result of a restructuring plan initiated during the first quarter of 2021 for the consolidation of a manufacturing facility in EMEA.


"Restructuring and other expenses" for the three months ended September 30, 2020
were $1.5 million, consisting of $1.3 million of severance and related costs and
a $0.2 million loss contingency charge. The severance and related costs were
associated with workforce reductions as a result of the improved efficiencies
gained from the execution of the Transformation Program as well as actions
initiated during the fourth quarter of 2019 in the EMEA and APAC regions. The
loss contingency charge was associated with our voluntary review of certain
errors in declarations to the U.S. Customs and Border Protection for customs
duties, fees and interest owed for previously imported products. See Note 11,
"Contingencies and Significant Estimates," for further information.
                                      -48-
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Analysis of Segment Adjusted Operating EBITDA

"Adjusted Operating EBITDA" (a non-GAAP measure) for our geographic segments consisted of the following for the periods presented:


                                                Three Months Ended September 30,                          Change
(in millions, except percentage data)               2021                   2020                  $                    %
Americas                                    $          56.7            $     34.8$     21.9                   62.9  %
EMEA                                                   27.6                  10.5                17.1                  162.9  %
APAC                                                   11.1                   8.4                 2.7                   32.1  %
Total Segment Adjusted Operating
EBITDA                                                 95.4                  53.7                41.7                   77.7  %
Less: Corporate and unallocated
expenses                                              (20.3)                 (8.1)              (12.2)                (150.6) %
Total Adjusted Operating EBITDA             $          75.1            $     45.6$     29.5                   64.7  %

Adjusted Operating EBITDA margin (1)                   18.3    %             15.3  %                                     3.0  %



(1) Adjusted Operating EBITDA margin is calculated by dividing the dollar amount of Adjusted Operating EBITDA by net sales.


Adjusted Operating EBITDA in the Americas segment for the three months ended
September 30, 2021 increased by $21.9 million, or 62.9%. This increase was
primarily driven by: (i) a $27.9 million favorable impact from increased product
volumes and mix, (ii) $10.5 million of favorable impact from net pricing, (iii)
a $0.8 million favorable foreign currency translation impact, (iv) $0.6 million
of lower research and development fees and (v) $0.2 million of lower
professional fees. The impact of these increases was partially offset by: (i)
$5.8 million of unfavorable material costs, primarily driven by continued
broad-based inflationary pressures experienced during the third quarter of 2021,
partially offset by the procurement sourcing savings associated with the
Transformation Program, (ii) $4.2 million of higher employee-related expenses,
including higher incentives resulting from improved operating results, (iii)
$3.2 million of higher marketing and commissions costs, primarily attributable
to increased sales, (iv) $3.1 million unfavorable impact from increased inbound
freight costs resulting from both higher volumes and the continued macroeconomic
impacts of COVID-19 pandemic on the supply chain, (v) a $1.1 million unfavorable
impact from increased tariffs and (vi) $0.7 million of unfavorable labor and
other manufacturing costs, primarily driven by continued production
inefficiencies resulting from supply chain disruptions related to the global
pandemic.

Adjusted Operating EBITDA in the EMEA segment for the three months ended
September 30, 2021 increased by $17.1 million, or 162.9%. This increase was
primarily driven by: (i) a $14.3 million favorable impact from increased product
volumes and mix, (ii) $2.7 million of favorable labor and other manufacturing
costs, (iii) $2.4 million of favorable impact from net pricing, (iv) a $1.2
million favorable foreign currency translation impact and (v) $0.3 million of
lower professional fees. The impact of these increases was partially offset by:
(i) a $1.7 million unfavorable impact from increased inbound freight costs
resulting from both higher volumes and the continued supply chain challenges,
(ii) $1.3 million of higher research and development costs, (iii) $0.4 million
of higher material costs, primarily driven by continued inflationary pressures
experienced during the third quarter of 2021 and (iv) $0.3 million of higher
marketing and commissions costs attributable primarily to increased sales.

Adjusted Operating EBITDA in the APAC segment for the three months ended
September 30, 2021 increased by $2.7 million, or 32.1%. This increase was
primarily driven by: (i) $2.3 million of favorable product volumes and mix, (ii)
$0.8 million of lower research and development costs, (iii) $0.7 million of
lower material costs, (iv) a $0.6 million favorable foreign currency translation
impact and (v) $0.6 million of favorable impact from net pricing. These
increases were partially offset by: (i) $1.4 million of higher employee-related,
costs, (ii) $0.5 million of unfavorable labor and other manufacturing costs,
primarily driven by continued broad-based inflationary pressures experienced
during the third quarter of 2021 and (iii) a $0.2 million unfavorable impact
from increased tariffs.

Corporate and unallocated expenses reflect certain corporate-level expenses and
eliminations that are not allocated to the geographic business segments. For the
three months ended September 30, 2021, corporate and unallocated expenses
increased by $12.2 million, or 150.6%. This increase was primarily driven by a
$9.1 million increase in the elimination of profit in inventory resulting from
higher intercompany inventory on hand and $3.7 million of increased
employee-related expenses, including higher incentives resulting from improved
operating results and increased stock compensation expense resulting from an
increase in the expected achievement percentage for certain tranches of our
performance share units. These increases were partially offset by $0.5 million
of lower professional fees.

Analysis of Non-Operating Income Statement Items


For the three months ended September 30, 2021, "Interest expense" was $18.8
million, a $0.8 million decrease as compared to the same period of the prior
year, primarily driven by a decrease in the average borrowings outstanding and
an overall decrease in the weighted average interest rates of outstanding debt
resulting from a decrease in LIBOR during the current period.

For the three months ended September 30, 2021, "Other expense (income) - net"
was an expense of $0.4 million, compared to an income of $2.1 million for the
same period of the prior year. The decrease in income of $2.5 million is
primarily the result of higher net foreign currency losses compared to the same
period of prior year.

                                      -49-
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Analysis of Income Taxes


For the three months ended September 30, 2021, we recorded an $8.5 million
income tax expense, reflecting a 25.4% effective tax rate, compared to a $1.2
million income tax benefit for the three months ended September 30, 2020,
reflecting a (32.4)% effective tax rate. The change in the effective tax rate
for the three months ended September 30, 2021 compared to the same period of the
prior year is primarily due to our increase in earnings before income taxes and
the relative weighting of jurisdictional income and loss, which was partially
offset by the CARES Act net operating loss carryback provisions, changes for
income tax returns filed, and deferred taxes related to stock compensation and
repatriation of foreign earnings. For the three months ended September 30, 2021,
the income tax provision includes a net discrete tax benefit of $0.3 million
primarily related to the changes for income tax returns filed, and the changes
in deferred taxes related to stock compensation and repatriation of foreign
earnings, as compared to the income tax provision for the three months ended
September 30, 2020, which includes a net discrete benefit of $1.2 million
primarily related to the uncertain tax position for net interest deduction
limitations and the CARES Act net operating loss carryback provisions.
                                      -50-
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Results of Operations for the Nine Months Ended September 30, 2021 and 2020

The following table sets forth our consolidated financial results for the periods presented:


                                                 Nine Months Ended September 30,                          Change
(in millions, except percentage data)                2021                   2020                  $                    %
Net sales                                    $        1,123.9$    833.4$    290.5                  34.9  %
Cost of sales                                           713.7                544.9               168.8                  31.0  %
Gross profit                                            410.2                288.5               121.7                  42.2  %
Gross margin (% of Net sales)                            36.5   %             34.6  %                                    1.9  %
Selling, general and administrative
expenses                                                245.6                215.6                30.0                  13.9  %
Amortization expense                                     29.7                 29.2                 0.5                   1.7  %

Restructuring and other expense                           0.5                  9.5                (9.0)                (94.7) %
Loss from impairment and disposal of
assets - net                                              0.1                 11.7               (11.6)                (99.1) %

Earnings from operations                                134.3                 22.5               111.8                 496.9  %
Interest expense                                         56.5                 62.4                (5.9)                 (9.5) %

Other expense (income) - net                              6.3                 (3.1)                9.4                 303.2  %
Earnings (loss) before income taxes                      71.5                (36.8)              108.3                 294.3  %
Income tax expense (benefit)                             15.0                 (9.2)               24.2                 263.0  %

Net earnings (loss)                          $           56.5           $    (27.6)$     84.1                 304.7  %



Analysis of Net Sales

"Net sales" for our geographic business segments consist of the following for
the periods presented:

                                             Nine Months Ended September 30,                       Change
(in millions)                                    2021                2020                  $                    %
Americas                                    $     870.0$    630.9$    239.1                  37.9  %
EMEA                                              326.9               209.5               117.4                  56.0  %
APAC                                              180.7               141.5                39.2                  27.7  %
Elimination of intersegment sales                (253.7)             (148.5)             (105.2)                (70.8) %
Total net sales                             $   1,123.9$    833.4$    290.5                  34.9  %



Net sales totaled $1,123.9 million for the nine months ended September 30, 2021
representing an increase of $290.5 million, or 34.9%, compared to the same
period of the prior year. The increase in net sales was primarily the result of:
(i) increased volumes largely due to an increase in general market demand, (ii)
increased volumes related to rollouts with large chain customers, and (iii)
increased KitchenCare aftermarket sales, all of which were the result of our
continued recovery from the global COVID-19 pandemic, and to a much lesser
extent, increased net pricing. Foreign currency translation positively impacted
third-party net sales for the nine months ended September 30, 2021 by $25.7
million as compared to the nine months ended September 30, 2020.

Net sales in the Americas segment for the nine months ended September 30, 2021
increased $239.1 million, or 37.9%, compared to the same period of the prior
year. The increase was primarily the result of increased third-party net sales
of $209.1 million and a $30.0 million increase in intersegment sales. The
increase in third-party net sales was primarily the result of: (i) increased
volumes largely due to an increase in general market demand, (ii) increased
volumes related to rollouts with large chain customers and (iii) increased
KitchenCare aftermarket sales, all of which were the result of our continued
recovery from the global COVID-19 pandemic, and to a much lesser extent,
increased net pricing. Foreign currency translation positively impacted
third-party net sales for the nine months ended September 30, 2021 by $6.2
million as compared to the same period of the prior year.

Net sales in the EMEA segment for the nine months ended September 30, 2021
increased $117.4 million, or 56.0%, compared to the same period of the prior
year. The increase was primarily the result of increased third-party net sales
of $56.9 million and a $60.5 million increase in intersegment sales. The
increase in third-party net sales was primarily the result of increased volumes
in the general market and the increase in intersegment sales was primarily due
to increases in sales to the America's region related to rollouts with large
chain customers discussed above, both of which were the result of our continued
recovery from the ongoing global COVID-19 pandemic. Foreign currency translation
positively impacted third-party net sales for the nine months ended September
30, 2021 by $15.3 million.

                                      -51-
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Net sales in the APAC segment for the nine months ended September 30, 2021
increased $39.2 million, or 27.7%, compared to the same period of the prior
year. The increase was primarily the result of increased third-party net sales
of $24.5 million and a $14.7 million increase in intersegment sales. The
increase in third-party net sales was primarily driven by increased volumes in
the general market and increased KitchenCare aftermarket sales, both of which
were the result of our continued recovery from the global COVID-19 pandemic.
Foreign currency translation positively impacted third-party net sales for the
nine months ended September 30, 2021 by $4.2 million as compared to the same
period of the prior year.

Analysis of Earnings from Operations

Gross profit


"Gross profit" for the nine months ended September 30, 2021 totaled $410.2
million, an increase of $121.7 million, or 42.2%, compared to the same period of
the prior year. This increase was primarily driven by: (i) a $100.2 million
favorable impact from increased product volumes and mix, (ii) a $16.2 million
favorable impact from increased net pricing, (iii) $14.9 million of positive
foreign currency translation impact and (iv) $8.8 million of favorable labor and
other manufacturing costs, primarily due improved operating efficiencies related
to higher volumes and equipment investments in our plants associated with the
Transformation Program. These favorable impacts were partially offset by: (i)
$11.9 million of increased inbound freight costs resulting from both higher
volumes and the continued macroeconomic impacts of the COVID-19 pandemic on the
supply chain, (ii) a $3.3 million unfavorable impact from increased tariffs,
(iii) $1.8 million of unfavorable material costs, resulting from broad-based
inflation along with the continued macroeconomic impacts of the COVID-19
pandemic on the supply chain, partially offset by the procurement sourcing
savings associated with the Transformation Program and (iv) $1.3 million of
higher depreciation costs.

Selling, general and administrative expenses


"Selling, general and administrative expenses" for the nine months ended
September 30, 2021 totaled $245.6 million, an increase of $30.0 million, or
13.9%, compared to the same period of the prior year. This increase is primarily
driven by: (i) $24.3 million of increased employee-related costs, reflecting the
non-recurrence of government subsidies and other measures taken in 2020 to
manage the impact of the COVID-19 pandemic, along with higher incentives related
to stronger operational performance in 2021, (ii) $13.5 million of increased
transaction expenses related to the pending sale of our Company, (iii) $6.0
million of higher marketing and commission costs, primarily attributable to
increased sales volumes, (iv) a $5.3 million unfavorable foreign currency
translation impact as compared to the same period of the prior year and (v) $2.5
million of higher travel and other controllable costs. The impact of these
increases was partially offset by: (i) $16.8 million of lower third-party
consulting costs incurred in connection with our Transformation Program, (ii)
$3.1 million of lower professional fees and (iii) a $2.0 million recovery of
funds from an incident in 2018, involving one of our EMEA locations .

Restructuring and other expense

"Restructuring and other expenses" for the nine months ended September 30, 2021 were $0.5 million, primarily as a result of a restructuring plan initiated during the first quarter of 2021 for the consolidation of a manufacturing facility in EMEA.


"Restructuring and other expenses" for the nine months ended September 30, 2020
were $9.5 million, consisting of $5.9 million of severance and related costs and
a $3.6 million loss contingency charge. The severance and related costs were
associated with workforce reductions executed throughout 2020 in the Americas
region and Corporate and a limited management restructuring to reduce operating
expenses as a result of the improved efficiencies gained from the execution of
the Transformation Program as well as actions initiated during the fourth
quarter of 2019 in the EMEA and APAC regions. The loss contingency charge was
associated with our voluntary review of certain errors in declarations to the
U.S. Customs and Border Protection for customs duties, fees and interest owed
for previously imported products. See Note 11, "Contingencies and Significant
Estimates," for further information.

Loss from impairment and disposal of assets - net


Loss from impairment and disposal of assets - net for the nine months ended
September 30, 2020 was $11.7 million and consisted primarily of an impairment
charge of $11.1 million on trademark and trade names in our EMEA segment. See
Note 5, "Goodwill and Other Intangible Assets - Net." of the Notes to the
Consolidated Financial Statements for additional details.
                                      -52-
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Analysis of Segment Adjusted Operating EBITDA

"Adjusted Operating EBITDA" (a non-GAAP measure) for our geographic segments consisted of the following for the periods presented:


                                               Nine Months Ended September 30,                         Change
(in millions, except percentage data)              2021                  2020                  $                    %
Americas                                    $        166.7$    105.8$     60.9                  57.6  %
EMEA                                                  63.2                 29.6                33.6                 113.5  %
APAC                                                  26.9                 22.3                 4.6                  20.6  %
Total Segment Adjusted Operating
EBITDA                                               256.8                157.7                99.1                  62.8  %
Less: Corporate and unallocated
expenses                                             (58.4)               (46.8)              (11.6)                (24.8) %
Total Adjusted Operating EBITDA             $        198.4$    110.9$     87.5                  78.9  %

Adjusted Operating EBITDA margin (1)                  17.7   %             13.3  %                                    4.4  %



(1) Adjusted Operating EBITDA margin is calculated by dividing the dollar amount of Adjusted Operating EBITDA by net sales.


Adjusted Operating EBITDA in the Americas segment for the nine months ended
September 30, 2021 increased by $60.9 million, or 57.6%. This increase was
primarily driven by: (i) $60.5 million of favorable product volumes and mix,
(ii) $18.7 million of favorable impact from net pricing, (iii) $6.9 million of
favorable labor and other manufacturing costs, primarily due to improved
operating efficiencies related to higher volumes and equipment investments in
our plants associated with the Transformation Program, slightly offset by
continued inflationary pressures experienced during the first nine months of
2021, (iv) $3.5 million of favorable foreign currency translation impact and (v)
$0.4 million of lower research and development costs. The impact of these
increases was partially offset by: (i) $10.4 million of higher employee-related
expenses, including higher incentives resulting from improved operating results
in 2021, (ii) $8.4 million of unfavorable inbound freight costs resulting from
both higher volumes and the continued on the supply chain challenges, (iii) $5.9
of higher marketing and commissions costs attributable primarily to increased
sales, (iv) $3.2 million of increased tariffs and (v) $1.5 million of higher
materials costs, primarily driven by continued inflationary pressures
experienced during the first nine months of 2021, slightly offset by the
procurement sourcing savings associated with the Transformation Program.

Adjusted Operating EBITDA in the EMEA segment for the nine months ended
September 30, 2021 increased by $33.6 million, or 113.5%. This increase was
primarily driven by: (i) $33.9 million of favorable product volumes and mix,
(ii) $4.5 million of favorable foreign currency translation impact, (iii) $3.4
million of favorable labor and other manufacturing costs primarily due to
improved operating efficiencies related to higher volumes and equipment
investments in our plants, and (iv) a $0.7 million decrease in professional
fees. The impact of these increases was partially offset by: (i) $3.5 million of
unfavorable inbound freight costs resulting from both higher volumes and the
continued supply chain challenges, (ii) $1.6 million of unfavorable impact from
net pricing due to transfer pricing, (iii) $1.5 million of higher
employee-related, travel and other controllable costs, (iv) $1.4 million of
higher materials costs primarily driven by continued inflationary pressures
experienced during the first nine months of 2021 and (v) $0.8 million of higher
research and development costs.

Adjusted Operating EBITDA in the APAC segment for the nine months ended
September 30, 2021 increased by $4.6 million, or 20.6%. This increase was
primarily driven by: (i) $4.0 million of favorable product volumes and mix, (ii)
$1.6 million of favorable foreign currency translation impact, (iii) $1.1
million of lower material costs, (iv) $0.5 million of favorable impact from net
pricing and (v) $0.4 million lower research and development costs. These
increases were partially offset by $2.9 million of higher employee-related,
travel and other controllable costs.

Corporate and unallocated expenses reflect certain corporate-level expenses and
eliminations that are not allocated to the geographic business segments. For the
nine months ended September 30, 2021, corporate and unallocated expenses
increased by $11.6 million, or 24.8%. This increase was primarily driven by
$12.6 million of increased employee-related expenses, including higher
incentives resulting from improved operating results, and increased stock
compensation expense resulting from an increase in the expected achievement
percentage for certain tranches of our performance share units, and a $1.3
million increase in the elimination of profit in inventory resulting from higher
intercompany inventory on hand. These decreases were partially offset by a $2.4
million decrease in professional fees.

Analysis of Non-Operating Income Statement Items


For the nine months ended September 30, 2021, "Interest expense" was $56.5
million, a $5.9 million decrease as compared to the same period of the prior
year, primarily driven by a decrease in the average borrowings outstanding and
an overall decrease in the weighted average interest rate of outstanding debt
resulting from a decrease in LIBOR during the current period.

For the nine months ended September 30, 2021, "Other expense (income) - net" was
an expense of $6.3 million, compared to income of $3.1 million for the same
period of the prior year. The decrease in income of $9.4 million is primarily
the result of higher net foreign currency losses compared to the same period of
prior year.

                                      -53-
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Analysis of Income Taxes


For the nine months ended September 30, 2021, we recorded a $15.0 million income
tax expense, reflecting a 21.0% effective tax rate, compared to a $9.2 million
income tax benefit for the nine months ended September 30, 2020, reflecting a
(25.0)% effective tax rate. The change in the effective tax rate for the nine
months ended September 30, 2021 compared to the same period of the prior year is
primarily due to the result of our increase in earnings before income taxes and
the relative weighting of jurisdictional income and loss, partially offset by
the changes in net discrete tax items resulting from recently enacted foreign
income tax rates, CARES Act net operating loss carryback provisions and the
changes in uncertain tax positions. For the nine months ended September 30,
2021, the income tax provision includes net discrete benefit of $2.6 million
primarily related to the recently enacted tax rate increase in the UK Finance
Act 2021 and corresponding increase in jurisdictional net deferred tax assets,
as compared to the income tax benefit for the nine months ended September 30,
2020, which includes a net discrete expenses of $5.0 million primarily related
to the provisions of the CARES Act and changes in uncertain tax positions.

Liquidity and Capital Resources

Overview of Factors Affecting our Liquidity


We manage cash centrally, generally reinvest net earnings locally and meet our
working capital requirements from cash and cash equivalents, cash flows from
operations and capacity under our existing credit facilities. As of
September 30, 2021, our total liquidity was $397.3 million, consisting of $111.9
million of cash and cash equivalents and $285.4 million available for additional
borrowings under our senior secured revolving credit facility ("Revolving Credit
Facility"), to the extent our compliance with financial covenants permits such
borrowings, compared to total liquidity of $392.2 million as of June 30, 2021,
$353.7 million as of March 31, 2021 and $375.0 million as of December 31, 2020.
Our liquidity generally decreases in the first quarter and increases in the
remaining quarters of the year driven by our earnings cycle as well as the
timing of large cash payments in the first quarter such as annual rebates,
incentive compensation and the build-up of inventory in advance of the
historically higher sales period in the spring and early summer months. The
improvement in our Company's total liquidity in the quarter ended September 30,
2021 was limited by higher inventory levels of raw materials primarily due to
increased purchases of critical components needed to manufacture our commercial
foodservice equipment that have been impacted by supply chain disruptions.
Inventory of finished goods also increased primarily due to delays from
third-party shipping companies picking up equipment from our facilities.

As of September 30, 2021, approximately 94% of our cash and cash equivalents and
restricted cash were held outside of the U.S. The majority of the cash generated
in the U.S. is used to fund current and expected future working capital
requirements and to fund debt service obligations. We maintain significant
operations outside of the U.S., and as a result, a significant portion of our
cash is denominated in foreign currencies. We manage our worldwide cash
requirements by reviewing available funds among our subsidiaries through which
we conduct our business and the cost effectiveness with which those funds can be
accessed. Where local restrictions prevent an efficient intercompany transfer of
funds, our intent is to maintain cash balances outside of the U.S. and to meet
our liquidity needs through ongoing cash flows, external borrowings, or both. We
plan to continue reinvesting foreign earnings indefinitely outside of the U.S.
with certain limited exceptions.

Our future cash needs are currently expected to be primarily related to
operating activities, inclusive of capital investments, working capital and debt
service. We estimate that our capital expenditures will be between $25.0 million
and $30.0 million for the year ending December 31, 2021. The amount of actual
capital expenditures may be impacted by general economic, financial or
operational changes, including the future impact of the global COVID-19 pandemic
on our operating results, the success and timing of the closing of the merger
with Ali Group, the anticipated sale of our Company's Ice business, and
competitive, legislative and regulatory factors, among other considerations. In
response to the global COVID-19 pandemic throughout 2020 and the first half of
2021, we implemented contingency plans for our operations and took what we
believe were appropriate steps to reduce operating expenses and capital
spending, including reductions in the size of our workforce and the temporary
furlough of employees during 2020. We expect that our future cash generated from
operations, together with our capacity under our existing senior secured
revolving credit facility and our access to capital markets, will provide
adequate resources to meet our working capital needs and cash requirements for
at least the next 12 months.

Our access to, and the availability of, financing on acceptable terms in the
future may be affected by many factors including the overall liquidity in the
financial and capital markets, the state of the economy, success in closing the
merger with Ali Group and the timing of such closing, and our credit rating. The
ongoing global COVID-19 pandemic, which has continued to cause volatility in the
capital markets, could also impact our ability to pursue additional financing
opportunities in the future. Moreover, we are unable to quantify the ultimate
severity or duration of the impact of the global COVID-19 pandemic on our
operational and financial performance, which could have an adverse impact on our
results of operations, cash flows and financial position, potentially resulting
in a default or an acceleration of indebtedness, and could otherwise negatively
impact our liquidity and ability to make additional borrowings under our
Revolving Credit Facility.
                                      -54-

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