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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Q & A
Analyst
Jeff Hammond

this transformation disruption is pretty temporary and would go away.

Executive
Marty Agard

Yeah, Jeff, it's Marty here. They intertwine a little bit, but roughly speaking, I would say, it's something like half and half. And then, we are going to work at the, what I'll call, the fixed cost overhang sort of immediately, we alluded to some headcount actions that we'll be taking and that'll continue kind of in steps across different facilities and that will help get rid of that. And then the transitory kind of stuff relative to transformation we think the lead plant will get through that sooner rather than the later maybe the fourth quarter. Other plants will step in a little bit. So, it will be with us a little while and we've kind of reflected that and how we talk about our targets for next year on an exit basis as opposed to the first half, there's all this lags of getting these things in place and getting the cost savings through inventory and on out [Phonetic] .

So we think we're going to probably operate sort of like this through the fourth quarter. The comparison gets a little easier in the fourth quarter, but some of these manufacturing issues will hang around a bit into the first half and then we really start to see the forward progress in the back half of next year.

Analyst
Jeff Hammond

Okay. And then just on the savings into 2020, I mean, it sounds like you're going to get de minimis this year, you'll exit $30 million, what's a good way to think about kind of incremental cost savings from the transformation in 2020 over 2019?

Executive
Marty Agard

Yeah. So, we talk about $30 million kind of exit basis. That's an annual run rate. So, think of that as something like $8 million a quarter on a $400 million sales base. So that's about 200 basis points. And so whether we get all of that in the third quarter. I don't know, we'll be working towards that's kind of a target, and certainly, by the fourth quarter, we'd be looking for that to be showing up.

Mean -- there are meanwhile moving parts around price and material cost and stuff, but all in, we are hoping for that kind of margin expansion as we get through -- into the back half of next year. And then the rest of the targets we set related to the second half of 2021 step up from there.

Analyst
Jeff Hammond

Okay. And then final -- couple of final cleanup questions, just -- KitchenCare just seems like it's very stubborn when do we start to see more consistent growth there? And just what's the implied 4Q tax rate? Thanks.

Executive
Marty Agard

And so on KitchenCare, it was kind of flat in the third quarter, the recent acquisition of Parts Town and Heritage coming together, we're trying to figure that out in terms of what that means, we don't see it -- we've been in contact with both companies. We don't see it