Welbilt, Inc. (NYSE:WBT) Q3 2019 Earnings Conference Call - Final Transcript

Nov 05, 2019 • 10:00 am ET

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Welbilt, Inc. (NYSE:WBT) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by and welcome to Welbilt third Quarter 2019 Earnings Call. [Operator Instructions]. I would now like to hand the conference over to Mr. Richard Sheffer, Vice President of Investor Relations. Please go ahead, sir.

Executive
Richard Sheffer

Good morning, and welcome to Welbilt's 2019 third quarter earnings call and webcast. Joining me on the call today is Bill Johnson, our President and Chief Executive Officer; Marty Agard, our Chief Financial Officer; and Josef Matosevic, our Chief Operating Officer. Before we begin our discussion, please refer to our Safe Harbor statement on Slide 2 of the presentation slides which can be found in the Investor Relations section of our website www.welbilt.com. Any statements in this call regarding our business that are not historical facts are forward-looking statements and our future results could differ materially from any expressed or implied projections or forward-looking statements made today.

Our actual results may be affected by many important factors, including risks and uncertainties identified in our press release and in our SEC filings. We do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or other circumstances.

Today's presentation and discussion will include both GAAP and non-GAAP measures, please refer to our earnings release for our non-GAAP reconciliations, another important information regarding the use of non-GAAP financial measures.

Now I'd like to turn the call over to Bill.

Executive
BiIl Johnson

Thanks, Rich, and good morning. As you saw in today's earnings release and on Slide 3 of our presentation, we are pleased with our operating results in Q3 despite facing softer-than-expected end market conditions in the Americas and EMEA. Organic net sales increased 0.6% in the quarter. The foreign currency translation headwind of 1.2% resulted in a 0.6% decrease in net sales.

Operationally, adjusted operating EBITDA decreased $4.6 million or 5.3% and the margin decreased 100 basis points. We have positive contribution from price and material costs and tariffs in the quarter offset unfavorable manufacturing variances due to the softer-than-expected sales and inefficiencies in those plants that are currently participating in the transformation program. There was also a favorable incentive compensation adjustment in last year's third quarter that created a negative comparison in this year's third quarter. I'll let Marty to dive deeper into margin variances in his comments.

Moving to Slide 4, our Transformation Program remains on schedule for achieving the key objectives we outlined at our Investor Day. As an example, our procurement team has been very active and initiating sourcing events that will cover all of our addressable material spend by year end. As the RFQ process has one of the longest timelines of any of our activities and represents 40% of our anticipated savings. We decided to bring forward the RFQs from all the waves to have them issued by December 31, a full six months ahead of schedule. This increase is the likelihood that we will achieve our targeted savings from procurement within our original timeline.

We've