Diversey Holdings, Ltd. ("Diversey") (NASDAQ: DSEY) announces third
quarter results.
“We delivered strong top line growth in the quarter of 17% in
constant currency, driven by high customer retention, new business
wins and accelerating pricing,” said Phil Wieland, Diversey’s Chief
Executive Officer. “We executed well. However, we are operating in
an unprecedented environment with underlying results impacted by
continued rising inflation and the effect of currency exchange
rates associated with a strengthening US dollar. We are pricing for
inflation and once the current challenges recede we expect to see
revenue and margins improve and accelerate.”
Unaudited |
Third Quarter Ended September 30 |
(millions) |
2022 |
|
|
2021 |
|
% Change |
|
Net sales |
689.0 |
|
$ |
664.9 |
|
3.6 % |
|
Loss before taxes |
(35.4 |
) |
|
(22.9 |
) |
(54.6)% |
|
Net loss |
(36.5 |
) |
|
(42.1 |
) |
13.3 % |
|
Adjusted net income(1) |
27.6 |
|
|
28.8 |
|
(4.2)% |
|
|
|
|
|
|
Adjusted EBITDA(1) |
88.0 |
|
|
106.6 |
|
(17.4)% |
|
% Margin(1) |
12.8 |
% |
|
16.0 |
% |
(320) bps |
|
(1) See the “Non-GAAP Financial Information and Segment Adjusted
EBITDA” section herein for explanations of these financial
measures.
Third Quarter 2022 Consolidated Results
Net sales increased 3.6% versus prior year or 17.3% when
adjusting for currency, showing positive momentum in volume growth
and pricing. Each segment continues to win new customers while
passing through pricing to combat high cost inflation.
Loss before taxes of $35.4 million in the third quarter of 2022
included Special Items (as defined below) impact of $54.8 million
and compared to loss before taxes of $22.9 million in third quarter
2021 including Special Items impact of $57.0 million. Adjusted net
income in the third quarter 2022 was $27.6 million compared to
$28.8 million in the same quarter 2021 and Adjusted EPS of $0.09 in
second quarter 2022 compared to $0.10 in the same quarter 2021.
In an inflationary environment with increased foreign exchange
headwinds, Adjusted EBITDA for the third quarter 2022 was $88.0
million, representing a decline of 17.4% versus the period in 2021
as reported or a decline of 2.5% when adjusting for currency.
Adjusted EBITDA margin declined 320 basis points compared to the
same period 2021. In the third quarter, pricing accounted for more
than 12% revenue growth and the level of pricing is expected to
increase further throughout the year. However, accelerating pricing
and increased volume were more than offset by higher costs and
foreign exchange pressures in the period.
Segment Review
Institutional
Unaudited |
Third Quarter Ended September 30 |
|
(millions) |
|
2022 |
|
|
2021 |
|
% Change |
Net sales |
$ |
479.4 |
|
$ |
487.2 |
|
(1.6)% |
Adjusted EBITDA |
|
68.8 |
|
|
84.3 |
|
(18.4)% |
% Margin |
|
14.4 |
% |
|
17.3 |
% |
(290) bps |
Net sales of $479.4 million in the Institutional segment were
1.6% below Q3 2021 or 11.6% above when adjusting for currency.
Growth in the quarter reflects a combination of new client wins,
innovation, pricing, and continued expansion with our existing
customers as we progress towards a return to pre-pandemic levels.
Adjusted EBITDA of $68.8 million declined 18.4% compared to Q3 2021
or 3.4% when adjusting for currency. Adjusted EBITDA margin
declined 290 basis points vs Q3 2021 due to cost pressures, but has
grown 320 basis points sequentially from Q1 2022 as pricing has
gained traction. Acquisitions contributed $12.9 million to sales
growth and $1.6 million to Adjusted EBITDA.
Food & Beverage
Unaudited |
Third Quarter Ended September 30 |
|
(millions) |
|
2022 |
|
|
2021 |
|
% Change |
Net sales |
$ |
209.6 |
|
$ |
177.7 |
|
18.0 % |
Adjusted EBITDA |
|
26.9 |
|
|
34.3 |
|
(21.6)% |
% Margin |
|
12.8 |
% |
|
19.3 |
% |
(650) bps |
Net sales of $209.6 million in the Food & Beverage segment
were 18.0% above Q3 2021 or 32.9% above when adjusting for
currency. This strong growth was driven by high win rates, pricing
and success with the water treatment offering. Adjusted EBITDA of
$26.9 million declined 21.6% and margin declined 650 basis points
compared to the same 2021 period, impacted by high input cost
inflation, particularly in Europe due to the Russia-Ukraine war.
Aggressive pricing actions are being taken to address the
price-cost gap and Adjusted EBITDA margins have improved by 100
basis points sequentially from Q1 2022. Acquisitions contributed
$13.4 million to sales growth and $1.9 million to Adjusted
EBITDA.
Outlook
Diversey continues to be encouraged by the resiliency of the
core business and the ability to grow while implementing pricing
actions reflective of the inflationary environment. The macro
background is unpredictable and the volatility in global exchange
rates continues to impact the Company's strong execution.
Accordingly, Diversey believes it is appropriate to update its full
year revenue guide to mid-single digit percent growth over 2021,
which would be mid-teen percent growth in constant currency.
Diversey is updating its current outlook for Adjusted EBITDA to be
at least $330 million to reflect the exchange rate environment and
additional input cost headwind.
About Diversey
Diversey’s mission is to protect and care for people through
leading hygiene, infection prevention, and cleaning solutions. We
develop and deliver innovative products, services, and technologies
that save lives and protect our environment. Over the course of 95
years, the Diversey brand has become synonymous with product
quality, service, and innovation.
For more information about Diversey,
visit www.diversey.com or follow us on LinkedIn,
Facebook, or Twitter @diversey.
Diversey Holdings, Ltd.Investor Contact:Grant
Graverir@diversey.com
Conference Call and Webcast Information
Management will host a webcast and conference call today,
November 3, 2022 at 8:30 am ET to discuss the results for Q3
2022.
The event will be available live via webcast which can be
accessed here. Interested parties may also access the conference
call by dialing 1-877-407-0784 (Toll Free) or 1-201-689-8560
(Toll/International) and requesting the Diversey Third Quarter 2022
Earnings Conference Call. Participants are asked to dial in 10
minutes prior to the call in order to register for the event.
An audio replay of the conference call will be available
approximately three hours after the scheduled conference call until
11:59 pm ET on November 17, 2022 and can be accessed by dialing
1-844-512-2921 (domestic) or 1-412-317-6671 (international) and
providing the passcode 13730600.
Cautionary Statements Regarding Forward-Looking
Information
This communication contains forward-looking statements that are
subject to substantial risks and uncertainties. All statements
other than statements of historical fact included in this
communication, including statements regarding our business
strategy, future operations and results thereof, future financial
position, future revenue, projected costs, prospects, current and
prospective products, current and prospective collaborations,
timing and likelihood of success, plans and objectives of
management, expected market growth and future results of current
and anticipated products are forward-looking statements. You can
identify forward-looking statements by the fact that they do not
relate strictly to historical or current facts. These statements
may include words such as “anticipate”, “estimate”, “expect”,
“project”, “plan”, "potential", "predict", “intend”, “believe”,
“may”, "might", “will”, "would", “should”, “can have”, "could",
"continue", "contemplate", "target", “likely” and other words and
terms of similar meaning in connection with any discussion of the
timing or nature of future operating or financial performance or
other events although not all forward-looking statements contain
these identifying words. For example, all statements we make
relating to our estimated and projected costs, expenditures, cash
flows, growth rates and financial results or our plans and
objectives for future operations, growth initiatives, or strategies
are forward-looking statements. All forward-looking statements
involve unknown risks, and other important factors that may cause
actual results performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements,
including:
- the continuation of the COVID-19 pandemic may cause disruptions
to our operations, customer demand, and our suppliers’ ability to
support us;
- uncertain global economic conditions which have had and could
continue to have an adverse effect on our consolidated financial
condition and results of operations;
- the global nature of our operations exposes us to numerous
risks that could materially adversely affect our consolidated
financial condition and results of operations;
- fluctuations between non-U.S. currencies and the U.S. dollar
could materially impact our consolidated financial condition or
results of operations;
- political and economic instability and risk of government
actions affecting our business and our customers or suppliers may
adversely impact our business, results of operations and cash
flows;
- raw material pricing, availability and allocation by suppliers
as well as energy-related costs may negatively impact our results
of operations, including our profit margins;
- if we do not develop new and innovative products or if
customers in our markets do not accept them, our results would be
negatively affected;
- cyber risks and the failure to maintain the integrity of our
operational or security systems or infrastructure;
- the introduction of the Organization for Economic Cooperation
and Development’s Base Erosion and Profit Shifting may adversely
affect our effective rate of tax in future periods;
- the consolidation of customers may adversely affect our
business, consolidated financial condition or results of
operations;
- we experience competition in the markets for our products and
services and in the geographic areas in which we operate;
- instability and uncertainty in the credit and financial markets
could adversely impact the availability of credit that we and our
customers need to operate our business;
- new and stricter regulations may affect our business and
consolidated condition and results of operations; and
- the other risks described under “Risk Factors” in Diversey’s
Form 10-K filed with the Securities and Exchange Commission.
We derive many of our forward-looking statements from our
operating budgets and forecasts, which are based on many detailed
assumptions. While we believe that our assumptions are reasonable,
we caution that it is very difficult to predict the impact of known
factors, and it is impossible for us to anticipate all factors that
could affect our actual results. All written and oral
forward-looking statements attributable to us, or persons acting on
our behalf, are expressly qualified in their entirety by these
cautionary statements as well as other cautionary statements that
are made from time to time in our other SEC filings and public
communications. You should evaluate all forward-looking statements
in the context of these risks and uncertainties.
We caution you that the important factors referenced above may
not contain all of the factors that are important to you. In
addition, we cannot assure you that we will realize the results or
developments we expect or anticipate or, even if substantially
realized, that they will result in the consequences or affect us or
our operations in the way we expect. The forward-looking statements
included herein are made only as of the date hereof. We undertake
no obligation to update or revise any forward-looking statement as
a result of new information, future events or otherwise, except as
otherwise required by law.
Non-GAAP Financial Information
We present financial information that conforms to generally
accepted accounting principles in the United States (“U.S. GAAP").
We also present financial information that does not conform to U.S.
GAAP ("Non-GAAP"), as our management believes it is useful to
investors.
The Non-GAAP financial metrics exclude items that we consider to
be certain specified items (“Special Items”), such as restructuring
charges, transaction and integration costs, certain transaction and
other charges related to acquisitions and divestitures, gains and
losses related to acquisitions and divestitures, and certain other
items. We evaluate unusual or Special Items on an individual basis.
Our evaluation of whether to exclude an unusual or Special Item for
purposes of determining our Non-GAAP financial measures considers
both the quantitative and qualitative aspects of the item,
including among other things (i) its nature, (ii) whether or not it
relates to our ongoing business operations, and (iii) whether or
not we expect it to occur as part of our normal business on a
regular basis.
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are supplemental measures that are
not required by, or presented in accordance with, U.S. GAAP. We
define EBITDA as income (loss) before income tax provisions
(benefit), interest expense, and depreciation and amortization, and
Adjusted EBITDA, as EBITDA adjusted for other items to (i)
eliminate certain non-operating income or expense items, (ii)
eliminate the impact of certain non-cash and other items that are
included in net income (loss) that we do not consider indicative of
our ongoing operating performance, and (iii) eliminate certain
unusual and non-recurring items impacting results in a particular
period.
EBITDA and Adjusted EBITDA are not measures of our financial
performance under U.S. GAAP and should not be considered as an
alternative to revenues, net income (loss), income (loss) before
income tax provision or any other performance measures derived in
accordance with U.S. GAAP, nor should they be considered as
alternatives to cash flows from operating activities as a measure
of liquidity in accordance with U.S. GAAP. In addition, our method
of calculating EBITDA and Adjusted EBITDA may vary from the methods
used by other companies.
Our management considers EBITDA and Adjusted EBITDA to be key
indicators of our financial performance. Additionally, we believe
EBITDA and Adjusted EBITDA are frequently used by securities
analysts, investors and other interested parties in the evaluation
of companies in our industry. We also believe that investors,
analysts and rating agencies consider EBITDA and Adjusted EBITDA
useful means of measuring our ability to meet our debt service
obligations and evaluating our financial performance, and
management uses these measures for one or more of these purposes.
Our presentation of EBITDA and Adjusted EBITDA should not be
construed as an inference that our future results will be
unaffected by unusual or nonrecurring items. EBITDA and Adjusted
EBITDA have important limitations as analytical tools and you
should not consider them in isolation or as a substitute for
analysis of our results as reported under U.S. GAAP. The use of
EBITDA and Adjusted EBITDA instead of net income has limitations as
an analytical tool.
Adjusted Net Income
Adjusted Net Income (as defined below) and Adjusted Earnings
(Loss) Per Share (“Adjusted EPS”) are Non-GAAP financial measures.
We define Adjusted Net Income as net income (loss) adjusted to (i)
eliminate certain non-operating income or expense items, (ii)
eliminate the impact of certain non-cash and other items that are
included in net income that we do not consider indicative of our
ongoing operating performance, (iii) eliminate certain unusual and
non-recurring items impacting results in a particular period, and
(iv) reflect the tax effect of items (i) through (iii) and other
tax special items.
We believe that in addition to our results determined in
accordance with GAAP, Adjusted Net Income and Adjusted EPS are
useful in evaluating our business, results of operations and
financial condition. We believe that Adjusted Net Income and
Adjusted EPS may be helpful to investors because they provide
consistency and comparability with past financial performance and
facilitate period to period comparisons of our operations and
financial results, as they eliminate the effects of certain
variables from period to period for reasons that we do not believe
reflect our underlying operating performance or are unusual or
infrequent in nature. However, Adjusted Net Income and Adjusted EPS
are presented for supplemental informational purposes only and
should not be considered in isolation or as a substitute or
alternative for financial information presented in accordance with
GAAP.
Adjusted Net Income and Adjusted EPS have limitations as
analytical tools.
Diversey Holdings,
Ltd.Condensed Consolidated Balance
Sheets(Unaudited)
(in
millions except per share amounts) |
September 30, 2022 |
December 31, 2021 |
Assets |
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
249.1 |
|
$ |
207.6 |
|
|
Trade receivables, net of
allowance for doubtful accounts of $22.0 and $23.5 |
|
416.4 |
|
|
414.3 |
|
|
Other receivables |
|
68.2 |
|
|
59.3 |
|
|
Inventories |
|
368.7 |
|
|
337.6 |
|
|
Prepaid expenses and other
current assets |
|
121.7 |
|
|
69.4 |
|
|
Total current
assets |
|
1,224.1 |
|
|
1,088.2 |
|
Property and
equipment, net |
|
226.6 |
|
|
210.7 |
|
Goodwill |
|
441.4 |
|
|
471.5 |
|
Intangible assets,
net |
|
1,869.7 |
|
|
2,147.3 |
|
Other non-current
assets |
|
381.2 |
|
|
382.3 |
|
|
Total
assets |
$ |
4,143.0 |
|
$ |
4,300.0 |
|
|
|
|
|
Liabilities and stockholders' equity |
|
|
Current
liabilities: |
|
|
|
Short-term borrowings |
$ |
6.6 |
|
$ |
10.7 |
|
|
Current portion of long-term
debt |
|
11.5 |
|
|
10.9 |
|
|
Accounts payable |
|
479.2 |
|
|
434.3 |
|
|
Accrued restructuring
costs |
|
14.0 |
|
|
16.7 |
|
|
Other current liabilities |
|
393.9 |
|
|
384.5 |
|
|
Total current
liabilities |
|
905.2 |
|
|
857.1 |
|
Long-term debt,
less current portion |
|
1,969.9 |
|
|
1,973.0 |
|
Deferred
taxes |
|
151.0 |
|
|
164.3 |
|
Other non-current
liabilities |
|
450.8 |
|
|
520.0 |
|
|
Total
liabilities |
|
3,476.9 |
|
|
3,514.4 |
|
Commitments and
contingencies |
|
|
Stockholders' equity: |
|
|
|
Ordinary shares, $0.01 par
value per share; 1,000,000,000 shares authorized, 324,315,963 and
324,369,517 shares outstanding in 2022 and 2021 |
|
— |
|
|
— |
|
|
Preferred shares, $0.0001 par
value per share, 200,000,000 shares authorized, 0 shares
outstanding in 2022 and 2021 |
|
— |
|
|
— |
|
|
Additional paid-in
capital |
|
1708.1 |
|
|
1,662.7 |
|
|
Accumulated deficit |
|
(829.9 |
) |
|
(720.1 |
) |
|
Accumulated other
comprehensive loss |
|
(212.1 |
) |
|
(157.0 |
) |
|
Total stockholders'
equity |
|
666.1 |
|
|
785.6 |
|
|
Total liabilities and stockholders' equity |
$ |
4,143.0 |
|
$ |
4,300.0 |
|
Diversey Holdings,
Ltd.Condensed Consolidated Statements of
Operations(Unaudited)
|
Three Months EndedSeptember 30, |
Nine Months EndedSeptember 30, |
(in millions except per share amounts) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net sales |
$ |
689.0 |
|
$ |
664.9 |
|
$ |
2,064.3 |
|
$ |
1,946.5 |
|
Cost of sales |
|
447.3 |
|
|
405.2 |
|
|
1,349.5 |
|
|
1,174.8 |
|
Gross profit |
|
241.7 |
|
|
259.7 |
|
|
714.8 |
|
|
771.7 |
|
Selling, general and
administrative expenses |
|
191.3 |
|
|
193.2 |
|
|
614.7 |
|
|
642.5 |
|
Transaction and integration
costs |
|
12.5 |
|
|
4.4 |
|
|
26.1 |
|
|
24.6 |
|
Management fee |
|
— |
|
|
— |
|
|
— |
|
|
19.4 |
|
Amortization of intangible
assets |
|
21.5 |
|
|
24.2 |
|
|
68.5 |
|
|
72.6 |
|
Restructuring and exit
costs |
|
39.4 |
|
|
21.6 |
|
|
67.6 |
|
|
29.6 |
|
Operating income (loss) |
|
(23.0 |
) |
|
16.3 |
|
|
(62.1 |
) |
|
(17.0 |
) |
Interest expense |
|
25.7 |
|
|
25.8 |
|
|
83.0 |
|
|
97.4 |
|
Foreign currency gain related
to hyperinflationary subsidiaries |
|
(2.0 |
) |
|
(2.9 |
) |
|
(3.6 |
) |
|
(2.7 |
) |
Loss on extinguishment of
debt |
|
— |
|
|
15.6 |
|
|
— |
|
|
15.6 |
|
Other (income) expense,
net |
|
(11.3 |
) |
|
0.7 |
|
|
(35.2 |
) |
|
4.8 |
|
Loss before income tax provision |
|
(35.4 |
) |
|
(22.9 |
) |
|
(106.3 |
) |
|
(132.1 |
) |
Income tax provision |
|
1.1 |
|
|
19.2 |
|
|
3.5 |
|
|
7.0 |
|
Net loss |
$ |
(36.5 |
) |
$ |
(42.1 |
) |
$ |
(109.8 |
) |
$ |
(139.1 |
) |
|
|
|
|
|
Basic and diluted loss per
share |
$ |
(0.11 |
) |
$ |
(0.14 |
) |
$ |
(0.34 |
) |
$ |
(0.49 |
) |
Basic and diluted weighted
average shares outstanding |
|
320.2 |
|
|
301.6 |
|
|
319.9 |
|
|
283.4 |
|
Diversey Holdings,
Ltd.Condensed Consolidated Statements of Cash
Flows(Unaudited)
(in
millions) |
Nine Months EndedSeptember 30, 2022 |
Nine Months EndedSeptember 30, 2021 |
Operating
activities: |
|
|
|
Net loss |
$ |
(109.8 |
) |
$ |
(139.1 |
) |
|
Adjustments to reconcile net
loss to cash provided by (used in) operating activities: |
|
|
|
Depreciation and
amortization |
|
138.2 |
|
|
141.6 |
|
|
Amortization of deferred financing costs and original issue
discount |
|
5.4 |
|
|
21.6 |
|
|
Loss on extinguishment of
debt |
|
— |
|
|
15.6 |
|
|
(Gain) loss on
derivatives |
|
(0.6 |
) |
|
2.3 |
|
|
Deferred taxes |
|
(17.6 |
) |
|
(15.6 |
) |
|
Non-cash foreign currency
exchange (gain) loss |
|
(8.9 |
) |
|
5.2 |
|
|
Share-based compensation |
|
45.4 |
|
|
67.1 |
|
|
Impact of highly inflationary
subsidiaries |
|
(3.6 |
) |
|
(2.7 |
) |
|
Provision for (recovery of)
bad debts |
|
2.8 |
|
|
(1.9 |
) |
|
Provision for slow moving
inventory |
|
16.2 |
|
|
4.1 |
|
|
Non-cash pension benefit |
|
(10.3 |
) |
|
(12.0 |
) |
|
Non-cash restructuring and exit costs |
|
— |
|
|
16.9 |
|
|
Non-cash tax receivable agreement adjustments |
|
(16.7 |
) |
|
4.1 |
|
|
Changes in operating assets and liabilities: |
|
|
|
Trade receivables, net |
|
(58.3 |
) |
|
(96.8 |
) |
|
Inventories, net |
|
(72.4 |
) |
|
(52.8 |
) |
|
Accounts payable |
|
95.6 |
|
|
1.9 |
|
|
Income taxes, net |
|
(11.0 |
) |
|
(5.8 |
) |
|
Other assets and liabilities, net |
|
40.0 |
|
|
(64.6 |
) |
Cash
provided by (used in) operating activities |
|
34.4 |
|
|
(110.9 |
) |
Investing
activities: |
|
|
|
Business acquired in purchase
transactions, net of cash acquired |
|
(41.4 |
) |
|
(9.4 |
) |
|
Acquisition of intellectual
property |
|
— |
|
|
(3.0 |
) |
|
Dosing and dispensing
equipment |
|
(57.7 |
) |
|
(47.8 |
) |
|
Capital expenditures |
|
(36.2 |
) |
|
(22.2 |
) |
|
Collection of deferred
factored receivables |
|
— |
|
|
40.1 |
|
Cash used
in investing activities |
|
(135.3 |
) |
|
(42.3 |
) |
Financing
activities: |
|
|
|
Contingent consideration
payments |
|
— |
|
|
(0.3 |
) |
|
Proceeds from (payments on)
short-term borrowings |
|
(2.8 |
) |
|
16.7 |
|
|
Proceeds from revolving credit
facility |
|
50.0 |
|
|
109.0 |
|
|
Payments on revolving credit
facility |
|
(50.0 |
) |
|
(109.0 |
) |
|
Proceeds from long-term
borrowings |
|
— |
|
|
2,000.0 |
|
|
Payments on long-term
borrowings |
|
(13.2 |
) |
|
(2,667.8 |
) |
|
Payment of deferred financing
costs |
|
— |
|
|
(35.1 |
) |
|
Payment of bond redemption
premium |
|
— |
|
|
(7.6 |
) |
|
Issuance of ordinary shares
sold in IPO, net of offering costs |
|
— |
|
|
725.7 |
|
|
Proceeds from termination of
derivatives |
|
186.1 |
|
|
— |
|
Cash
provided by financing activities |
|
170.1 |
|
|
31.6 |
|
Exchange rate
changes on cash |
|
(27.7 |
) |
|
(4.0 |
) |
|
Increase (decrease) in cash,
cash equivalents and restricted cash |
|
41.5 |
|
|
(125.6 |
) |
Cash, cash
equivalents and restricted cash at beginning of period |
|
208.2 |
|
|
201.7 |
|
Cash, cash
equivalents and restricted cash at end of period |
$ |
249.7 |
|
$ |
76.1 |
|
|
|
|
Supplemental Cash
Flow Information: |
|
|
|
Interest payments |
$ |
57.8 |
|
$ |
99.3 |
|
|
Income tax payments |
$ |
33.5 |
|
$ |
27.0 |
|
|
Conversion of preferred equity
certificates to equity |
$ |
— |
|
$ |
620.9 |
|
|
Beneficial interest obtained
for factored receivables |
$ |
— |
|
$ |
25.6 |
|
The following table reconciles loss before income tax provision
to EBITDA and Adjusted EBITDA for the periods presented:
|
Three Months Ended September 30, |
(in millions) |
|
2022 |
|
|
2021 |
|
Loss before income tax
provision |
$ |
(35.4 |
) |
$ |
(22.9 |
) |
Interest expense |
|
25.7 |
|
|
25.8 |
|
Interest income |
|
(1.4 |
) |
|
(0.8 |
) |
Amortization expense of
intangible assets |
|
21.5 |
|
|
24.2 |
|
Depreciation expense included
in cost of sales |
|
20.6 |
|
|
20.4 |
|
Depreciation expense included
in selling, general and administrative expenses |
|
2.2 |
|
|
2.9 |
|
EBITDA |
|
33.2 |
|
|
49.6 |
|
Transaction and integration
costs(1) |
|
12.5 |
|
|
4.4 |
|
Restructuring and exit
costs(2) |
|
39.4 |
|
|
21.6 |
|
Foreign currency (gain) loss
related to hyperinflationary subsidiaries(3) |
|
(2.0 |
) |
|
(2.9 |
) |
Adjustment for tax
indemnification asset(4) |
|
0.3 |
|
|
0.1 |
|
Acquisition accounting
adjustments(5) |
|
— |
|
|
— |
|
Bain Capital management
fee(6) |
|
— |
|
|
— |
|
Non-cash pension and other
post-employment benefit plan(7) |
|
(3.3 |
) |
|
(4.3 |
) |
Unrealized foreign currency
exchange (gain) loss(8) |
|
(3.6 |
) |
|
(2.4 |
) |
Factoring and securitization
fees(9) |
|
1.7 |
|
|
1.4 |
|
Share-based
compensation(10) |
|
13.9 |
|
|
16.0 |
|
Tax receivable agreement
adjustments(11) |
|
(3.7 |
) |
|
— |
|
Loss on extinguishment of
debt(12) |
|
— |
|
|
15.6 |
|
Realized foreign currency
exchange loss on debt refinancing(13) |
|
— |
|
|
4.5 |
|
COVID-19 inventory
charges(14) |
|
— |
|
|
— |
|
Other items |
|
(0.4 |
) |
|
3.0 |
|
Consolidated Adjusted
EBITDA |
$ |
88.0 |
|
$ |
106.6 |
|
|
Nine Months Ended September 30, |
(in millions) |
|
2022 |
|
|
2021 |
|
Loss before income tax
provision |
$ |
(106.3 |
) |
$ |
(132.1 |
) |
Interest expense |
|
83.0 |
|
|
97.4 |
|
Interest income |
|
(2.8 |
) |
|
(2.9 |
) |
Amortization expense of
intangible assets |
|
68.5 |
|
|
72.6 |
|
Depreciation expense included
in cost of sales |
|
62.1 |
|
|
62.0 |
|
Depreciation expense included
in selling, general and administrative expenses |
|
7.6 |
|
|
6.9 |
|
EBITDA |
|
112.1 |
|
|
103.9 |
|
Transaction and integration
costs(1) |
|
26.1 |
|
|
24.6 |
|
Restructuring and exit
costs(2) |
|
67.6 |
|
|
29.6 |
|
Foreign currency (gain) loss
related to hyperinflationary subsidiaries(3) |
|
(3.6 |
) |
|
(2.7 |
) |
Adjustment for tax
indemnification asset(4) |
|
0.7 |
|
|
1.4 |
|
Acquisition accounting
adjustments(5) |
|
1.3 |
|
|
— |
|
Bain Capital management
fee(6) |
|
— |
|
|
19.4 |
|
Non-cash pension and other
post-employment benefit plan(7) |
|
(10.3 |
) |
|
(12.0 |
) |
Unrealized foreign currency
exchange (gain) loss(8) |
|
(8.9 |
) |
|
5.2 |
|
Factoring and securitization
fees(9) |
|
3.9 |
|
|
3.6 |
|
Share-based
compensation(10) |
|
46.7 |
|
|
99.3 |
|
Tax receivable agreement
adjustments(11) |
|
(16.7 |
) |
|
4.1 |
|
Loss on extinguishment of
debt(12) |
|
— |
|
|
15.6 |
|
Realized foreign currency
exchange loss on debt refinancing(13) |
|
— |
|
|
4.5 |
|
COVID-19 inventory
charges(14) |
|
17.4 |
|
|
— |
|
Other items |
|
0.4 |
|
|
4.1 |
|
Consolidated Adjusted
EBITDA |
$ |
236.7 |
|
$ |
300.6 |
|
The following table reconciles net loss to Adjusted Net Income
and basic and diluted earnings (loss) per share to Adjusted EPS for
the periods presented:
|
Three Months Ended September 30, |
|
|
2022 |
|
|
2021 |
|
|
(in millions, except
per share amounts) |
Net Income(Loss) |
Basic anddiluted EPS(18) |
Net Income(Loss) |
Basic anddiluted EPS(18) |
|
Reported (GAAP) |
$ |
(36.5 |
) |
$ |
(0.11 |
) |
$ |
(42.1 |
) |
$ |
(0.14 |
) |
|
Amortization expense of
intangible assets acquired |
|
21.5 |
|
|
0.07 |
|
|
24.2 |
|
|
0.08 |
|
|
Transaction and integration
costs(1) |
|
12.5 |
|
|
0.04 |
|
|
4.4 |
|
|
0.01 |
|
|
Restructuring and exit
costs(2) |
|
39.4 |
|
|
0.12 |
|
|
21.6 |
|
|
0.07 |
|
|
Foreign currency (gain) loss
related to hyperinflationary subsidiaries(3) |
|
(2.0 |
) |
|
(0.01 |
) |
|
(2.9 |
) |
|
(0.01 |
) |
|
Adjustment for tax
indemnification asset(4) |
|
0.3 |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
Acquisition accounting
adjustments(5) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Bain Capital management
fee(6) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Non-cash pension and other
post-employment benefit plan(7) |
|
(3.3 |
) |
|
(0.01 |
) |
|
(4.3 |
) |
|
(0.01 |
) |
|
Unrealized foreign currency
exchange (gain) loss(8) |
|
(3.6 |
) |
|
(0.01 |
) |
|
(2.4 |
) |
|
(0.01 |
) |
|
Share-based
compensation(10) |
|
13.9 |
|
|
0.04 |
|
|
16.0 |
|
|
0.05 |
|
|
Tax receivable agreement
adjustments(11) |
|
(3.7 |
) |
|
(0.01 |
) |
|
— |
|
|
— |
|
|
Loss on extinguishment of
debt(12) |
|
— |
|
|
— |
|
|
15.6 |
|
|
0.05 |
|
|
Realized foreign currency
exchange loss on debt refinancing(13) |
|
— |
|
|
— |
|
|
4.5 |
|
|
0.01 |
|
|
COVID-19 inventory
charges(14) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Accelerated expense of
deferred financing and original issue discount costs(15) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Other items |
|
(0.4 |
) |
|
— |
|
|
3.0 |
|
|
0.01 |
|
|
Tax effects related to
non-GAAP adjustments(16) |
|
(23.3 |
) |
|
(0.07 |
) |
|
(18.2 |
) |
|
(0.04 |
) |
|
Discrete tax
adjustments(17) |
|
12.8 |
|
|
0.04 |
|
|
9.3 |
|
|
0.03 |
|
|
Adjusted
(Non-GAAP) |
$ |
27.6 |
|
$ |
0.09 |
|
$ |
28.8 |
|
$ |
0.10 |
|
|
|
Nine Months Ended September 30, |
|
|
2022 |
|
|
2021 |
|
|
(in millions, except
per share amounts) |
Net Income(Loss) |
Basic anddiluted EPS(18) |
Net Income(Loss) |
Basic anddiluted EPS(18) |
|
Reported (GAAP) |
$ |
(109.8 |
) |
$ |
(0.34 |
) |
$ |
(139.1 |
) |
$ |
(0.49 |
) |
|
Amortization expense of
intangible assets acquired |
|
68.5 |
|
|
0.21 |
|
|
72.6 |
|
|
0.26 |
|
|
Transaction and integration
costs(1) |
|
26.1 |
|
|
0.08 |
|
|
24.6 |
|
|
0.09 |
|
|
Restructuring and exit
costs(2) |
|
67.6 |
|
|
0.21 |
|
|
29.6 |
|
|
0.10 |
|
|
Foreign currency (gain) loss
related to hyperinflationary subsidiaries(3) |
|
(3.6 |
) |
|
(0.01 |
) |
|
(2.7 |
) |
|
(0.01 |
) |
|
Adjustment for tax
indemnification asset(4) |
|
0.7 |
|
|
— |
|
|
1.4 |
|
|
— |
|
|
Acquisition accounting
adjustments(5) |
|
1.3 |
|
|
— |
|
|
— |
|
|
— |
|
|
Bain Capital management
fee(6) |
|
— |
|
|
— |
|
|
19.4 |
|
|
0.07 |
|
|
Non-cash pension and other
post-employment benefit plan(7) |
|
(10.3 |
) |
|
(0.03 |
) |
|
(12.0 |
) |
|
(0.04 |
) |
|
Unrealized foreign currency
exchange (gain) loss(8) |
|
(8.9 |
) |
|
(0.03 |
) |
|
5.2 |
|
|
0.02 |
|
|
Share-based
compensation(10) |
|
46.7 |
|
|
0.15 |
|
|
99.3 |
|
|
0.35 |
|
|
Tax receivable agreement
adjustments(11) |
|
(16.7 |
) |
|
(0.05 |
) |
|
4.1 |
|
|
0.01 |
|
|
Loss on extinguishment of
debt(12) |
|
— |
|
|
— |
|
|
15.6 |
|
|
0.06 |
|
|
Realized foreign currency
exchange loss on debt refinancing(13) |
|
— |
|
|
— |
|
|
4.5 |
|
|
0.02 |
|
|
COVID-19 inventory
charges(14) |
|
17.4 |
|
|
0.05 |
|
|
— |
|
|
— |
|
|
Accelerated expense of
deferred financing and original issue discount costs(15) |
|
— |
|
|
— |
|
|
14.0 |
|
|
0.05 |
|
|
Other items |
|
0.4 |
|
|
— |
|
|
4.1 |
|
|
0.01 |
|
|
Tax effects related to
non-GAAP adjustments(16) |
|
(49.0 |
) |
|
(0.14 |
) |
|
(42.6 |
) |
|
(0.16 |
) |
|
Discrete tax
adjustments(17) |
|
29.7 |
|
|
0.09 |
|
|
2.6 |
|
|
0.01 |
|
|
Adjusted
(Non-GAAP) |
$ |
60.1 |
|
$ |
0.19 |
|
$ |
100.6 |
|
$ |
0.35 |
|
|
(1) These costs consist primarily of
professional and consulting services which are non-operational in
nature, costs related to strategic initiatives, acquisition-related
costs, and costs incurred in preparing to become a publicly traded
company.
(2) Includes costs related to restructuring
programs and business exit activities. Refer to Note 16 —
Restructuring and Exit Activities in the Notes to our Condensed
Consolidated Financial Statements included elsewhere in the
Quarterly Report on Form 10-Q for additional information.
(3) Argentina and Turkey were deemed to have
highly inflationary economies and the functional currencies for our
Argentina and Turkey operations were changed from the Argentine
peso and Turkish lira to the United States dollar and remeasurement
charges/credits are recorded in our Condensed Consolidated
Statements of Operations rather than as a component of Cumulative
Translation Adjustment on our Condensed Consolidated Balance
Sheets.
(4) In connection with the Diversey Acquisition,
the purchase agreement governing the transaction includes
indemnification provisions with respect to tax liabilities. The
offset to this adjustment is included in income tax provision.
(5) In connection with various acquisitions we
recorded fair value increases to our inventory. These amounts
represent the amortization of this increase.
(6) Represents fees paid to Bain Capital
pursuant a management agreement whereby we have received general
business consulting services; financial, managerial and operational
advice; advisory and consulting services with respect to selection
of advisors; advice in different fields; and financial and
strategic planning and analysis. The management agreement was
terminated in March 2021 pursuant to its terms upon the
consummation of the IPO, and we recorded a termination fee of $17.5
million during the first quarter of 2021.
(7) Represents the net impact of the expected
return on plan assets, interest cost, and settlement cost
components of net periodic defined benefit income related to our
defined benefit pension plans.
(8) Represents the unrealized foreign currency
exchange impact on our operations, primarily attributed to the
valuation of the U.S. Dollar-denominated debt held by our European
entity.
(9) Represents the fees to complete the sale of
the receivables without recourse under our accounts receivable
factoring and securitization agreements. Refer to Note 5 —
Financial Statement Details in the Notes to our Condensed
Consolidated Financial Statements included elsewhere in the
Quarterly Report on Form 10-Q for additional information.
(10) Represents compensation expense associated
with our share-based equity and liability awards. See Note 15 —
Share-Based Compensation in the Notes to our Condensed Consolidated
Financial Statements included elsewhere in the Quarterly Report on
Form 10-Q for additional information.
(11) Represents the adjustment to our tax
receivable agreement liability due to changes in valuation
allowances that impact the realizability of the attributes of the
tax receivable agreement.
(12) Represents the costs incurred in connection
with the redemption of the 2017 Senior Notes on September 29,
2021.
(13) During 2021, the Company incurred a
realized foreign currency exchange loss related to the refinancing
of the Senior Secured Credit Facilities.
(14) Represents a charge in the second quarter
of 2022 for excess inventory and estimated disposal costs related
to COVID-19.
(15) Represents accelerated non-cash expense of
deferred financing costs and original issue discount costs as
certain debt facilities were fully repaid or paid down
significantly in March 2021 using proceeds from the IPO.
(16) The tax rate used to calculate the tax
impact of the pre-tax adjustments is based on the jurisdiction in
which the charge was recorded.
(17) Represents adjustments related to discrete
tax items including uncertain tax provisions, impacts from rate
changes in certain jurisdictions and changes in our valuation
allowance.
(18) For purposes of calculating earnings (loss)
per share the Company has retrospectively presented earnings (loss)
per share as if the Reorganization Transactions had occurred at the
beginning of the earliest period presented. Such retrospective
presentation reflects an increase of approximately 47.4 million
shares due to the exchange of shares in Constellation for shares in
the Company.
The following table represents net sales by
segment:
(in millions, except
percentages) |
Institutional |
Food & Beverage |
Total |
Q3 2021 Net
Sales |
$ |
487.2 |
|
73.3 % |
$ |
177.7 |
|
26.7 % |
$ |
664.9 |
|
|
Organic change (non-GAAP) |
|
43.6 |
|
8.9 % |
|
45.1 |
|
25.4 % |
|
88.7 |
|
13.3 % |
Acquisition |
|
12.9 |
|
2.6 % |
|
13.4 |
|
7.5 % |
|
26.3 |
|
4.0 % |
Constant dollar change
(non-GAAP) |
|
56.5 |
|
11.6 % |
|
58.5 |
|
32.9 % |
|
115.0 |
|
17.3 % |
Foreign currency
translation |
|
(64.3 |
) |
(13.2)% |
|
(26.6 |
) |
(15.0)% |
|
(90.9 |
) |
(13.7)% |
Total change |
|
(7.8 |
) |
(1.6)% |
|
31.9 |
|
18.0 % |
|
24.1 |
|
3.6 % |
Q3 2022 Net
Sales |
$ |
479.4 |
|
69.6 % |
$ |
209.6 |
|
30.4 % |
$ |
689.0 |
|
|
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