UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, ~~2017~~2018



o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number

1-37548

Welbilt, Inc.

(Exact name of registrant as specified in its charter)



Delaware		47-4625716
(State or other jurisdiction		(I.R.S. Employer
of incorporation)		Identification Number)

2227 Welbilt Boulevard
New Port Richey, FL		34655
(Address of principal executive offices)		(Zip Code)

(727) 375-7010

(Registrant's telephone number, including area code)

Indicate by check mark whether the ~~Registrant:~~registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the ~~Registrant~~registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer x		Accelerated filer o
Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)		Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. o

Indicate by check mark whether the ~~Registrant~~registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The number of shares outstanding of the registrant's ~~Common Stock~~common stock as of ~~April 28, 2017,~~May 4, 2018, the most recent practicable date, was ~~138,909,132.~~139,927,575.

WELBILT, INC.

Index to Quarterly Report on Form 10-Q

For the Quarterly Period Ended March 31, ~~2017~~2018



		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3
	Consolidated ~~(Condensed)~~ Statements of Operations	3
	Consolidated ~~(Condensed)~~ Statements of Comprehensive Income	4
	Consolidated ~~(Condensed)~~ Balance Sheets	5
	Consolidated ~~(Condensed)~~ Statements of Cash Flows	6
	Consolidated Statement of Equity	7
	Notes to Unaudited Consolidated ~~(Condensed)~~ Financial Statements	78
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3634
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	47

SIGNATURES		48

~~EXHIBIT INDEX~~		49

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

WELBILT, INC.

Consolidated ~~(Condensed)~~ Statements of Operations

~~For the Three Months Ended March 31, 2017~~(In millions, except share and ~~2016~~ per share data)

(Unaudited)


	Three months ended March 31,				Three Months Ended March 31,
Millions of dollars, except per share data	2017		2016
					2018			2017
Net sales	$	328.0	$	325.5	$	350.4		$	328.0
Cost of sales	205.0		207.9		224.2			205.0
Gross profit	123.0		117.6		126.2			123.0
Selling, general and administrative expenses	74.3		71.8		76.3			74.0
Amortization expense	7.8		7.8		7.9			7.8
Separation expense	0.9		3.0		0.1			0.9
Restructuring expense	4.6		1.3		0.4			4.6
Asset impairment expense	0.4		—
(Gain) loss from impairment or disposal of assets — net					(0.1		)	0.4
Earnings from operations	35.0		33.7		41.6			35.3
Interest expense	23.2		8.5		20.3			23.2
Interest expense on notes with MTW — net	—		0.1
Loss on early extinguishment of debt	3.2		—		—			3.2
Other expense — net	1.5		2.4		8.5			1.8
Earnings before income taxes	7.1		22.7		12.8			7.1
Income taxes	2.1		4.6		0.3			2.1
Net earnings	$	5.0	$	18.1	$	12.5		$	5.0
Per share data
Earnings per common share — Basic	$	0.04	$	0.13
Earnings per common share — Diluted	$	0.04	$	0.13
Earnings per share — Basic					$	0.09		$	0.04
Earnings per share — Diluted					$	0.09		$	0.04
Weighted average shares outstanding — Basic	138,759,075		137,016,712		139,708,723			138,759,075
Weighted average shares outstanding — Diluted	140,431,198		138,564,299		140,970,543			140,431,198

The accompanying notes are an integral part of these unaudited consolidated ~~(condensed)~~ financial statements.

WELBILT, INC.

Consolidated ~~(Condensed)~~ Statements of Comprehensive Income

~~For the Three Months Ended March 31, 2017 and 2016~~ (In millions)

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
Millions of dollars	2017			2016
							2018		2017
Net earnings	$	5.0		$	18.1		$	12.5	$	5.0
Other comprehensive income, net of tax:
Foreign currency translation adjustments	7.0			17.2			0.1		7.0
Unrealized (loss) gain on derivatives, net of income tax benefit (expense) of $0.3 and ($0.5), respectively	(0.6		)	0.9
Employee pension and post-retirement benefits, net of income tax (expense) benefit of ($0.1) and $5.9, respectively	0.4			(8.9		)
Unrealized gain (loss) on derivatives							2.0		(0.6		)
Employee pension and postretirement benefits							0.5		0.4
Total other comprehensive income, net of tax	6.8			9.2			2.6		6.8
Comprehensive income	$	11.8		$	27.3		$	15.1	$	11.8

The accompanying notes are an integral part of these unaudited consolidated ~~(condensed)~~ financial statements.

WELBILT, INC.

Consolidated ~~(Condensed)~~ Balance Sheets

~~As of March 31, 2017 (Unaudited)~~(In millions, except share and ~~December 31, 2016~~per share data)


	March 31,			December 31,			March 31,			December 31,
Millions of dollars, except share data	2017			2016
							2018			2017
							(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	82.6		$	53.8		$	153.8		$	128.4
Restricted cash	0.2			6.4			0.3			0.3
Accounts receivable, less allowances of $4.2 and $5.3, respectively	92.8			81.7
Accounts receivable, less allowance of $4.0 at March 31, 2018 and December 31, 2017							90.5			83.7
Inventories — net	171.0			145.6			177.4			152.3
Prepaids and other current assets	25.8			13.9			24.7			19.0
Current assets held for sale	7.2			6.8
Total current assets	379.6			308.2			446.7			383.7
Property, plant and equipment — net	107.7			109.1			112.6			112.2
Goodwill	845.6			845.3			846.6			846.1
Other intangible assets — net	477.9			484.4			455.7			461.4
Other non-current assets	26.3			22.1			37.2			37.0
Total assets	$	1,837.1		$	1,769.1		$	1,898.8		$	1,840.4
Liabilities and equity
Current liabilities:
Accounts payable	$	117.9		$	108.4		$	112.9		$	103.6
Accrued expenses and other liabilities	137.7			174.5			138.2			161.7
Short-term borrowings	4.0			—
Current portion of long-term debt and capital leases	0.6			1.6
Current portion of capital leases							0.7			0.7
Product warranties	24.6			27.9			26.2			24.1
Current liabilities held for sale	—			0.7
Total current liabilities	284.8			313.1			278.0			290.1
Long-term debt and capital leases	1,353.4			1,278.7			1,279.5			1,232.2
Deferred income taxes	136.3			137.8			91.7			92.3
Pension and postretirement health obligations	45.9			47.4			46.0			48.3
Other long-term liabilities	43.0			35.6			71.3			67.1
Total non-current liabilities	1,578.6			1,499.5			1,488.5			1,439.9
Commitments and contingencies (note 14)
Total (deficit) equity:
Common stock (300,000,000 shares authorized, 138,918,189 shares and 138,601,327 shares issued and 138,878,878 shares and 138,562,016 shares outstanding, respectively)	1.4			1.4
Commitments and contingencies (Note 13)
Total equity:
Common stock ($0.01 par value, 300,000,000 shares authorized, 139,910,969 shares and 139,491,860 shares issued and 139,910,969 shares and 139,440,470 shares outstanding at March 31, 2018 and December 31, 2017, respectively)							1.4			1.4
Additional paid-in capital (deficit)	(66.6		)	(72.0		)	(57.6		)	(63.3		)
Retained earnings	75.5			70.5			218.1			204.5
Accumulated other comprehensive loss	(36.6		)	(43.4		)	(29.4		)	(32.0		)
Total (deficit) equity	(26.3		)	(43.5		)
Treasury stock, at cost, 51,321 shares and 51,390 shares, respectively							(0.2		)	(0.2		)
Total equity							132.3			110.4
Total liabilities and equity	$	1,837.1		$	1,769.1		$	1,898.8		$	1,840.4

The accompanying notes are an integral part of these unaudited consolidated ~~(condensed)~~ financial statements.

WELBILT, INC.

Consolidated ~~(Condensed)~~ Statements of Cash Flows

~~For the Three Months Ended March 31, 2017 and 2016~~ (In millions)

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
Millions of dollars	2017			2016
Cash flows from operating activities:
							2018			2017
Cash flows from operating activities
Net earnings	$	5.0		$	18.1		$	12.5		$	5.0
Adjustments to reconcile net earnings to cash used in operating activities:
Depreciation	4.0			4.3			4.2			4.0
Amortization of intangible assets	7.8			7.8			7.9			7.8
Amortization of debt issuance costs	1.3			0.4			1.4			1.3
Loss on early extinguishment of debt	3.2			—			—			3.2
Deferred income taxes	(2.9		)	(2.9		)	(1.6		)	(2.9		)
Stock-based compensation expense	4.4			1.3			3.2			4.4
Asset impairment expense	0.4			—
Changes in operating assets and liabilities:
(Gain) loss from impairment or disposal of assets — net							(0.1		)	0.4
Changes in operating assets and liabilities, excluding the effects of business acquisitions or dispositions:
Accounts receivable	(6.0		)	(8.4		)	(134.8		)	(121.9		)
Inventories	(23.9		)	(15.8		)	(23.0		)	(23.9		)
Other assets	(3.5		)	(8.3		)	(1.5		)	(3.5		)
Accounts payable	8.6			(16.3		)	8.4			8.6
Other current and long-term liabilities	(49.0		)	(3.2		)	(30.1		)	(46.9		)
Net cash used in operating activities	(50.6		)	(23.0		)	(153.5		)	(164.4		)
Cash flows from investing activities:
Cash flows from investing activities
Cash receipts on beneficial interest in sold receivables							131.8			115.9
Capital expenditures	(4.9		)	(4.5		)	(3.7		)	(4.9		)
Changes in restricted cash	6.2			0.3
Net cash provided by (used in) investing activities	1.3			(4.2		)
Cash flows from financing activities:
Net cash provided by investing activities							128.1			111.0
Cash flows from financing activities
Proceeds from long-term debt and capital leases	78.9			1,431.4			74.0			78.9
Repayments on long-term debt and capital leases	(2.5		)	(0.2		)	(19.2		)	(2.5		)
Debt issuance costs	(1.4		)	(40.6		)	(0.1		)	(1.4		)
Change in short term borrowings	4.0			14.5
Dividend paid to MTW	—			(1,362.0		)
Net transactions with MTW	—			6.1
Proceeds from short-term borrowings							—			4.0
Exercises of stock options	0.9			0.1			2.5			0.9
Payments on tax withholdings for equity awards							(2.0		)	(2.1		)
Net cash provided by financing activities	79.9			49.3			55.2			77.8
Effect of exchange rate changes on cash	(1.8		)	0.5			(4.4		)	(1.8		)
Net increase in cash and cash equivalents	28.8			22.6
Net increase in cash and cash equivalents and restricted cash							25.4			22.6
Balance at beginning of period	53.8			32.0			128.7			60.2
Balance at end of period	$	82.6		$	54.6		$	154.1		$	82.8
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of refunds							$	10.4		$	10.2
Cash paid for interest, net of related hedge settlements							$	26.0		$	33.7
Supplemental disclosures of non-cash activities:
Non-cash investing activity:
Beneficial interest obtained in exchange for securitized receivables							$	169.6		$	169.9

The accompanying notes are an integral part of these unaudited consolidated ~~(condensed)~~financial statements.

WEBILT, INC.

Consolidated Statement of Equity

(In millions, except share data)

(Unaudited)



	Shares	Common Stock		Additional Paid-In Capital (Deficit)			Retained Earnings		Accumulated Other Comprehensive (Loss) Income			Treasury Stock			Total Equity
Balance at December 31, 2017	139,491,860	$	1.4	$	(63.3	)	$	204.5	$	(32.0	)	$	(0.2	)	$	110.4
Cumulative effect of accounting standards adoption (Note 2)	—	—		—			1.1		—			—			1.1
Net earnings	—	—		—			12.5		—			—			12.5
Issuance of common stock, stock-based compensation plans	419,109	—		2.5			—		—			—			2.5
Stock-based compensation expense	—	—		3.2			—		—			—			3.2
Other comprehensive income	—	—		—			—		2.6			—			2.6
Balance at March 31, 2018	139,910,969	$	1.4	$	(57.6	)	$	218.1	$	(29.4	)	$	(0.2	)	$	132.3

The accompanying notes are an integral part of these consolidated financial statements.

WELBILT, INC.

Notes to Unaudited Consolidated ~~(Condensed)~~ Financial Statements

1. Description of the Business ~~and Organization~~

~~The Spin-Off and Rebranding~~

On January 29, 2015, The Manitowoc Company, Inc. ("MTW") announced plans to create two independent public companies to separately operate its two businesses: its Cranes business and its Foodservice business. To effect the separation, MTW first undertook an internal reorganization, following which MTW held the Cranes business, and Manitowoc Foodservice, Inc. ("MFS" or the "Company") held the Foodservice business. Then on March 4, 2016, MTW distributed all the MFS common stock to MTW's shareholders on a pro rata basis, and MFS became an independent publicly traded company (the "Distribution"). In this Quarterly Report on Form 10-Q, “Spin-Off” refers to both the above described internal reorganization and the Distribution, collectively.

On February 6, 2017, MFS announced that it would rebrand the Company, its logo and its brand identity to Welbilt, Inc. The change was the final part of the Company's strategic repositioning after the Spin-Off. To meet its future growth objectives, the Company will focus on further developing its portfolio of 12 award-winning brands under the new corporate name.

On March 3, 2017, MFS filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation to effect a change of the Company’s name from "Manitowoc Foodservice, Inc." to "Welbilt, Inc." effective March 3, 2017 (the "Name Change"). In connection with the Name Change, the Company also amended and restated its bylaws, by substituting “Welbilt, Inc.” for “Manitowoc Foodservice, Inc.”

~~On March 6, 2017, shares of the Company commenced trading under the Company's new name, Welbilt, Inc., and a new New York Stock Exchange ticker symbol, “WBT.”~~

~~In these unaudited consolidated (condensed) financial statements, unless the context otherwise requires:~~

~~"Welbilt" and the "Company" refer to~~ Welbilt, Inc. and its consolidated subsidiaries, ~~after giving effect to~~collectively, the Spin-Off, or, in the case of information as of dates or for periods prior to its separation from MTW, the combined entities of the Foodservice business, and certain other assets and liabilities that were historically held at the MTW corporate level, but were specifically identifiable and attributable to the Foodservice business; and

"Company,"~~MTW" refers to The Manitowoc Company, Inc. and its consolidated subsidiaries, other than, for all periods following the Spin-Off, Welbilt.~~

~~Description of the Business~~

~~The Company~~ is one of the world’s leading commercial foodservice equipment companies. It designs and manufactures a complementary portfolio of hot and cold foodservice equipment products integrated under one operating company and is supported by ~~a growing~~the Company's aftermarket parts and repair service business. Its capabilities span refrigeration, ice-making, cooking, holding, food-preparation and beverage-dispensing technologies, which allow it to equip entire commercial kitchens and serve the world’s growing demand for food prepared away from home. The Company's suite of products is used by commercial and institutional foodservice operators including full-service restaurants, quick-service restaurant chains, hotels, caterers, supermarkets, convenience stores, business and ~~industry,~~industrial customers, hospitals, schools and other institutions. The Company's products and aftermarket parts and service support are recognized by its customers and channel partners for their quality, reliability and durability that ~~enable~~promote profitable growth for Welbilt end customers by improving their menus, enhancing operations and reducing costs.

The Company operates in three regional segments, the Americas (includes United States ("U.S."), Canada and Latin America), EMEA (markets in Europe, including Russia and the Commonwealth of Independent States, Middle East and Africa) and APAC (principally comprises markets in China, Australia, Japan, Philippines, South Korea, Singapore, Indonesia, Taiwan, Hong Kong, Thailand, Malaysia, and New Zealand).

2. Summary of Significant Accounting Policies and Basis of Presentation

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated ~~(condensed)~~ financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). All intercompany balances and transactions between the Company and its affiliates have been eliminated.

During the periods presented prior to the Spin-Off on March 4, 2016, the Company's financial statements were prepared on a combined standalone basis derived from the consolidated financial statements and accounting records of MTW. The Company functioned as part of the larger group of companies controlled by MTW. Accordingly, MTW performed certain corporate overhead functions for the Company. Therefore, certain costs related to the Company have been allocated from MTW for the period of January 1, 2016 up to the Spin-Off on March 4, 2016. These allocated costs are primarily related to: 1) corporate officers, 2) employee benefits and compensation, 3) share-based compensation and 4) certain administrative functions, which are not provided at the business level including, but not limited to, finance, treasury, tax, audit, legal, information technology, human resources and investor relations. Where possible, these costs were allocated based on direct usage, with the remainder allocated on a basis of revenue, headcount or other measures the Company determined to be reasonable.

Income tax expense in the accompanying consolidated (condensed) statement of operations for the periods prior to the Spin-Off is computed on a separate return basis, as if Welbilt was operating as a separate consolidated group and filed separate tax returns in the jurisdictions in which it operates. As a result of potential changes to the Company's business model and potential past and future tax planning, income tax expense included in the accompanying consolidated (condensed) financial statements for the period prior to the Spin-Off may not be indicative of Welbilt's future expected tax rate. In addition, cash tax payments and items of current and deferred taxes may not be reflective of Welbilt's actual tax balances prior to or subsequent to the Spin-Off.

Welbilt, as a stand-alone entity commencing with the Spin-Off, files U.S. federal and state tax returns on its own behalf. The responsibility for current income tax liabilities of US federal and state combined tax filings were deemed to settle immediately with MTW paying entities effective with the Spin-Off in the respective jurisdictions, whereas state tax returns for certain separate filing Welbilt entities were filed by Welbilt for periods prior to and after the Spin-Off. Cash tax payments commencing with the Spin-Off for the estimated liability are the actual cash taxes paid to the respective tax authorities in the jurisdictions wherever applicable.

Prior to the Spin-Off, the operations of Welbilt were generally included in the consolidated tax returns filed by the respective MTW entities, with the related income tax expense and deferred income taxes calculated on a separate return basis in the accompanying consolidated (condensed) financial statements. As a result, the effective tax rate and deferred income taxes of Welbilt may differ from those in periods prior to or subsequent to the Spin-Off.

Use of Estimates

The preparation of consolidated ~~(condensed)~~ financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts ~~reported in~~of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and ~~accompanying notes, including~~the reported amounts of revenue and expenses during the reporting periods. Significant items subject to such estimates and assumptions include inventory obsolescence costs, ~~allocated prior to~~warranty costs, product liability costs, employee benefit programs and the ~~Spin-Off.~~measurement of income tax assets and liabilities. The ~~accompanying unaudited consolidated (condensed) financial statements may not be indicative of the Company's future performance,~~Company bases its estimates on historical experience and ~~they do not necessarily include all of the actual expenses~~on various other assumptions that ~~would have been incurred by~~ the Company ~~and may not reflect~~believes to be reasonable under the ~~results of operations, financial position and cash flows had~~circumstances. On an ongoing basis, the Company ~~been a standalone Company during the entirety of the period presented prior to the Spin-Off.~~evaluates these assumptions, judgments and estimates. Actual results may differ from these estimates.

~~Accounting Policies~~

In the opinion of management, the ~~accompanying unaudited~~ consolidated ~~(condensed)~~ financial statements contain all adjustments necessary for a fair statement of the results of operations and comprehensive income for the three months ended March 31, 2018 and 2017, the financial position at March 31, 2018 and December 31, 2017, and ~~2016,~~ the results of cash flows for the three months ended March 31, ~~2017~~2018 and ~~2016, and the financial position at March 31,~~ 2017, ~~and December 31, 2016,~~ and except as otherwise discussed, such adjustments consist only of those of a normal recurring nature. The interim results are not necessarily indicative of results that may be achieved ~~for~~in a full ~~year performance.~~reporting year. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the ~~Security~~Securities and Exchange Commission's ("SEC") rules and regulations governing interim financial statements. However, the Company believes that the disclosures made in the ~~accompanying~~ unaudited consolidated ~~(condensed)~~ financial statements and related notes are adequate to make the information presented not misleading. These ~~unaudited~~consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and ~~the~~ notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

~~Reclassifications~~

~~Certain prior period amounts have been reclassified to conform to the current period presentation.~~ All dollar amounts, except share and per share amounts, are in millions of dollars throughout the tables included in these notes unless otherwise indicated.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation and include:

Reclassification of periodic pension and postretirement benefit costs totaling $0.3 million from "Selling, general and administrative expenses" to "Other expense — net" in the consolidated statement of operations for the three months ended March 31, 2017 as a result of the retrospective adoption of ASU 2017-07, "Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost."

Beginning and ending cash and cash equivalents shown on the consolidated statements of cash flows for the three months ended March 31, 2017 were increased for restricted cash of $6.4 million and $0.2 million, respectively, and cash flows provided by investing activities were reduced by $6.2 million as a result of adopting ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash."

As a result of the adoption of ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments," the Company reclassified consideration received for the beneficial interest obtained for transferring trade receivables in securitization transactions of $115.9 million from operating activities to investing activities on the consolidated statements of cash flows for the three months ended March 31, 2017.

Recently Adopted Accounting Pronouncements

In ~~January~~May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting ~~Standard~~Standards Update ("ASU") ~~2017-04, "Intangibles—Goodwill and Other~~2017-09, "Compensation—Stock Compensation (Topic ~~350)~~718): ~~Simplifying the Test for Goodwill Impairment,~~Scope of Modification Accounting," which ~~removes~~provides guidance about which changes to the ~~second step~~terms or conditions of ~~the annual goodwill impairment test.~~a share-based payment award require an entity to apply modification accounting pursuant to Topic 718. ASU ~~2017-04~~2017-09 is effective for fiscal years, and interim periods within those fiscal years, ~~for annual impairment tests~~ beginning after December 15, ~~2019.~~2017. Early adoption is ~~permitted in any interim or annual reporting period for impairment tests performed after January 1, 2017 and the~~permitted. The amendments in this ~~ASU should~~update are required to be applied ~~prospectively. The Company early adopted this~~prospectively to an award modified on or after the adoption date. This standard ~~as of January 1, 2017 and will apply the guidance from ASU 2017-04 beginning with its annual goodwill assessment performed as of June 30, 2017.~~

In March 2016, the FASB issued ASU 2016-09, "Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," which simplifies several aspects of the accounting for share-based payment award transactions. This ASU requires that all excess tax benefits and tax deficiencies be recognized as income tax expense or benefit on the income statement and that excess tax benefits be classified as an operating activity in the cash flow statement. While this new standard allows an entity to account for forfeitures as they occur, the Company elected to continue the current U.S. GAAP practice of estimating forfeitures when calculating stock-based compensation expense. This ASU became effective for the Company on January 1, ~~2017 and the adoption did not~~2018. The impact this standard will have ~~a significant impact~~ on the ~~Company’s~~Company's consolidated ~~(condensed)~~ financial statements and related ~~disclosures.~~disclosures will be dependent on the terms and conditions of any modifications made to share-based awards after January 1, 2018.

In ~~July 2015,~~March 2017, the FASB issued ASU ~~2015-11, "Inventory~~2017-07, "Compensation—Retirement Benefits (Topic ~~330)~~715): ~~Simplifying~~Improving the ~~Measurement~~Presentation of ~~Inventory.~~Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," ~~This~~which requires the employer to disaggregate the service cost component from the other components of net benefit cost. The ASU ~~changes the~~also provides explicit guidance on ~~accounting~~how to present the service cost component and the other components of net benefit cost in the income statement and allows only the service cost component of net benefit cost to be eligible for ~~inventory accounted for~~capitalization. As of January 1, 2018, the Company adopted this standard on a ~~first-in first-out ("FIFO")~~retrospective basis. ~~Under~~Prior to adoption, periodic benefit costs for both pensions and postretirement benefits were recorded in "Selling, general and administrative expenses" in the ~~revised standard,~~consolidated statement of operations. As a result of adopting this ASU, the Company recognized $0.4 million of periodic pension costs and $0.1 million of periodic postretirement benefit costs in "Other expense — net" in the consolidated statement of operations for the three months ended March 31, 2018. See Note 16, "Employee Benefit Plans" for further information.

In November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash," which requires an entity ~~should measure FIFO inventory at~~to reconcile the ~~lower~~changes in restricted cash as part of ~~cost~~total cash and ~~net realizable value. Net realizable value is the estimated selling price~~cash equivalents in ~~the ordinary course~~its statements of ~~business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured on a last-in, first-out ("LIFO") basis. ASU 2015-11~~cash flows. This standard became effective for the Company on January 1, ~~2017 and~~2018. The adoption of this standard was applied retrospectively. Other than the change in presentation of restricted cash within the consolidated statements of cash flows, the adoption of this ~~standard~~ASU did not have a ~~significant~~material impact on the Company’s consolidated ~~(condensed)~~ financial statements.

In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory," which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 became effective for the Company on January 1, 2018. Currently the Company does not have material intercompany transactions of non-inventory items, but to the extent that these business circumstances change in the future, there could be income tax impacts.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments," which clarifies the accounting guidance on how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This standard became effective for the Company on January 1, 2018. The adoption of this standard impacts the presentation of collections of the deferred purchase price from its sales of trade accounts receivables in the Company’s consolidated statements of cash flows. Subsequent to adoption, collection of these balances is reported in cash flows from investing activities rather than cash flows from operating activities with all retrospective periods reclassified to conform for comparability. In addition, the beneficial interest obtained in exchange for securitized receivables are reported as non-cash investing activity. See Note 7, "Accounts Receivable Securitization" for further discussion.

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" with additional updates subsequently issued (collectively, "ASU 2014-09"). This ASU creates a single, comprehensive revenue recognition model for all contracts with customers. The model is based on changes in contract assets (rights to receive consideration) and liabilities (obligations to provide a good or service). On January 1, 2018, the Company adopted ASU 2014-09. Either a retrospective or cumulative effect transition method, referred to as the modified retrospective method, is permitted. The Company used the modified retrospective method and recognized the cumulative effect of the initial application of the new revenue standard as an adjustment to the opening balance of retained earnings. Prior period results have not been restated and continue to be reported under the accounting standards in effect for those periods. In connection with the adoption of this guidance, the Company elected the following practical expedients: (i) significant financing component, (ii) sales taxes, (iii) costs of obtaining a contract, (iv) shipping and handling activities and (v) immaterial promised goods or services. The adoption of ASU 2014-09 did not have a material impact on the Company's consolidated balance sheet as of March 31, 2018 or the consolidated statement of operations or cash flows for the three months ended March 31, 2018. Subsequent to the adoption of ASU 2014-09, revenue is recognized based on the satisfaction of performance obligations, which occurs when control of a good or service transfers to a customer. A majority of the Company's net sales continue to be recognized when products are shipped from its manufacturing facilities.

The cumulative effect of the changes made to the Company's consolidated balance sheet as of January 1, 2018 for the adoption of ASU 2014-09 is related ~~disclosures.~~to the establishment of right to return assets in conjunction with its product return policy as shown below:



(in millions)	As of December 31, 2017		Adjustments Due to Adoption of ASU 2014-09		As of January 1, 2018
Balance Sheet
Assets:
Inventories — net	$	152.3	$	1.1	$	153.4
Equity:
Retained earnings	$	204.5	$	1.1	$	205.6

Substantially all of the Company's revenues comprise revenues from contracts with customers. These revenues are disaggregated by major source and geographic location, as the Company believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors. Net sales by product class and segment are as follows:



	Three Months Ended March 31, 2018
(in millions)	Commercial Foodservice Whole Goods		Aftermarket Parts and Support		Total
Americas	$	209.1	$	40.9	$	250.0
EMEA	51.7		12.4		64.1
APAC	29.2		7.1		36.3
Total net sales	$	290.0	$	60.4	$	350.4

For the majority of foodservice equipment and aftermarket parts and support, the transfer of control and revenue recognition materializes when the products are shipped from the manufacturing facility or the service is provided to the customer. The Company typically invoices its customers with payment terms of 30 days and our average collection cycle is generally less than 60 days. The amount of consideration received and revenue recognized varies with marketing incentives such as annual customer rebate programs and returns that are offered to customers. Variable consideration as a result of customer rebate programs are typically based on calendar-year purchases, and are determined using the expected value method in interim periods as prescribed in the guidance. Customers have the right to return eligible equipment and parts. The expected returns are based on an analysis of historical experience. The estimate of revenue is adjusted at the earlier of when the most likely amount of the expected consideration changes or when the consideration becomes fixed. The impact of such adjustments was not material in the three months ended March 31, 2018.

The Company also recognizes revenue for foodservice-based projects. Revenues are recognized either at the point-in-time in which control transfers to the customer and all other recognition criteria have been met or over-time as services are provided to the customer, depending on the nature of the performance obligations in each contract.

The Company sells separately-priced extended warranties that extend coverage beyond the standard product warranty by 12 to 60 months. Payments are at the inception of the contract and revenue is recognized over the term of the agreement on a straight-line basis, which the Company believes approximates the timing of costs expected to be incurred in satisfying the obligations of the contract. As of March 31, 2018 and December 31, 2017, there was $6.5 million and $6.7 million, respectively, of deferred revenues related to extended warranties. The Company expects to recognize $3.3 million of the deferred revenues in 2018, of which $0.4 million was recognized in the first quarter of 2018, $1.4 million in 2019, and $2.2 million thereafter. See additional discussion of product warranties in Note 14, "Product Warranties."

Recent Accounting Pronouncements Not Yet Adopted

In February 2018, the FASB issued ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,"to provide guidance on the presentation of certain income statement effects from the Tax Cuts and Jobs Act’s reduction in the corporate statutory tax rate. The ASU provides the option of reclassifying what are called the “stranded” tax effects within accumulated other comprehensive income (loss) to retained earnings and requires increased disclosures describing the accounting policy used to release the income tax effects from accumulated other comprehensive income (loss), whether the amounts reclassified are the stranded income tax effects from the Tax Cuts and Jobs Act, and information about the other effects on taxes from the reclassification. ASU 2018-02 may be adopted using one of two transition methods: (1) retrospective to each period (or periods) in which the income tax effects of the Tax Cuts and Jobs Act related to items remaining in accumulated other comprehensive income (loss) are recognized, or (2) at the beginning of the period of adoption. The ASU is effective for fiscal years beginning after December 15, 2018, and the quarterly and other interim periods in those years. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements and related disclosures.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities," which improves the financial reporting of hedging relationships to better align risk management activities in financial statements and make certain targeted improvements to simplify the application of current hedge accounting guidance in current GAAP. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements and related disclosures.

In March 2017, the FASB issued ASU 2017-08, "Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20),: Premium Amortization on Purchased Callable Debt Securities," which shortens the amortization period for certain callable debt securities held at a premium to the earliest call date. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated ~~(condensed)~~ financial statements and related disclosures.

In March 2017, the FASB issued ASU 2017-07, "Compensation—Retirement Benefits (Topic 715)," which requires the employer to disaggregate the service cost component from the other components of net benefit cost. The ASU also provides explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. It is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated (condensed) financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business," which clarifies the accounting guidance to assist entities in evaluating whether a transaction should be accounted for as acquisitions of assets or businesses. ASU 2017-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted in certain instances and the amendments in this ASU should be applied prospectively. The Company will evaluate the impact of this standard upon future acquisitions subsequent to the adoption of ASU 2017-01.

In November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash," which will require an entity to reconcile the changes in restricted cash as part of total cash and cash equivalents in its statements of cash flows. ASU 2016-18 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted in any interim or annual reporting period and the amendments in this ASU should be applied retrospectively. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated (condensed) financial statements and related disclosures.

In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory," which will require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated (condensed) financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments," which clarifies the accounting guidance on how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted in any interim or annual reporting period. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated (condensed) financial statements and related disclosures. The adoption of this standard may impact the presentation of certain cash proceeds received in connection with the Company's securitization program described in Note 9, "Accounts Receivable Securitization."

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)," which ~~requires~~will supersede the current guidance for lease accounting and will require lessees to recognize the right-of-use assets and lease ~~liability, initially measured at present value of the lease payments,~~liabilities, on its balance ~~sheet for leases with terms longer than 12 months and classified as either financing or operating leases.~~sheet. ASU 2016-02 requires a modified retrospective transition approach for ~~capital and operating~~ leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial ~~statements, and provides certain practical expedients that companies may elect.~~statements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years with early adoption permitted. ~~The~~While the Company is ~~currently~~still evaluating the impact ~~that the adoption of~~ this ASU will have on ~~its~~the consolidated ~~(condensed)~~ financial statements and related ~~disclosures.~~

~~In January 2016,~~disclosures, it has completed the ~~FASB issued ASU 2016-01, "Financial Instruments—Overall (Subtopic 825-10): Recognition~~initial impact assessment and ~~Measurement of Financial Assets and Financial Liabilities." This ASU provides guidance for~~ the recognition, measurement, presentation and disclosure of financial instruments. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and early adoption is not permitted. The Company ~~is currently evaluating~~has identified an accounting system to support the ~~impact that~~leasing accounting requirements in connection with the adoption of ASU 2016-02. At this ~~ASU will have on its consolidated (condensed) financial statements and related disclosures.~~

~~In May 2014,~~time, the ~~FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." This ASU provides~~Company is not yet in a ~~principles-based approach~~position to ~~revenue recognition to record~~reasonably estimate the ~~transfer of goods or services to customers~~expected increase in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU provides a five-step model to be applied to all contracts with customers. The five steps are to identify the contract(s) with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when each performance obligation is satisfied. The revenue standard is effective for the first interim period within fiscal years beginning after December 15, 2017 (as updated by the FASB in August 2015 in ASU 2015-14 and as updated by ASU-2016-20, ASU 2016-08, ASU 2016-10, ASU 2016-11 and ASU 2016-12), and can be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the update recognized at the date of initial application along with additional disclosures. Early adoption is permitted as of the original effective date—the first interim period within fiscal years beginning after December 15, 2016. The Company plans to adopt this standard on January 1, 2018 and is evaluating its customizable contracts, information technology contracts and other customer contracts that may impact its consolidated (condensed) financial statements and related disclosures.

~~3. Fair Value of Financial Instruments~~

~~The following tables set forth financial~~ assets and liabilities on the consolidated balance sheets upon adoption. The Company expects that ~~were accounted for at fair value~~the impact of recording the lease liabilities and the corresponding right of use assets will have a significant impact on ~~a recurring basis as of March 31, 2017 and December 31, 2016 by level within the fair value hierarchy. Financial~~total assets and liabilities ~~are classified in their entirety~~with minimal impact on equity and results of operations. The Company expects expanded financial statement disclosures to present additional details of the Company's leasing arrangements.

Recent accounting guidance not discussed above is not applicable, did not have, or is not expected to have a material impact on the Company.

3. Acquisitions

On April 19, 2018, the Company, through a wholly-owned subsidiary, acquired 100% of the share capital of Avaj International Holding AB ("Avaj") (the “Crem Acquisition”) for aggregate consideration of approximately 1,800 million Swedish Krona ("SEK") or $220.3 million based on the ~~lowest level~~exchange rate in effect on the closing date. The consideration comprised $157.4 million in cash, $2.4 million of ~~input that is significant~~interest on such amount for the period from December 31, 2017 to the ~~fair value measurement.~~

Fair Value as of March 31, 2017
(in millions) Level 1 Level 2 Level 3 Total
Current assets:

Foreign currency exchange contracts $ —
$ 1.0
$ —
$ 1.0
Commodity contracts —
1.0
—
1.0
Cross-currency swap contract —
1.1
—
1.1
Total current assets at fair value —
3.1
—
3.1
Non-current assets:

Commodity contracts —
0.4
—
0.4
Interest rate swap contracts —
1.2
—
1.2
Cross-currency swap contract —
2.2
—
2.2
Total non-current assets at fair value —
3.8
—
3.8
Total assets at fair value $ —
$ 6.9
$ —
$ 6.9
Current liabilities:

Foreign currency exchange contracts $ —
$ 0.6
$ —
$ 0.6
Interest rate swap contracts —
2.8
—
2.8
Total current liabilities at fair value —
3.4
—
3.4
Non-current liabilities:

Interest rate swap contracts —
5.7
—
5.7
Total non-current liabilities at fair value —
5.7
—
5.7
Total liabilities at fair value $ —
$ 9.1
$ —
$ 9.1
closing date of the Crem Acquisition and an aggregate $60.5 million for the repayment of certain indebtedness owed under third-party borrowings and shareholder loans. The Crem Acquisition was funded through cash on hand and additional borrowings under existing credit lines.

Fair Value as of December 31, 2016
(in millions) Level 1 Level 2 Level 3 Total
Current assets:

Foreign currency exchange contracts $ —
$ 0.6
$ —
$ 0.6
Commodity contracts —
0.9
—
0.9
Total current assets at fair value —
1.5
—
1.5
Non-current assets:

Commodity contracts —
0.2
—
0.2
Total non-current assets at fair value —
0.2
—
0.2
Total assets at fair value $ —
$ 1.7
$ —
$ 1.7
Current liabilities:

Foreign currency exchange contracts $ —
$ 1.0
$ —
$ 1.0
Commodity contracts —
0.1
—
0.1
Total current liabilities at fair value —
1.1
—
1.1
Total liabilities at fair value $ —
$ 1.1
$ —
$ 1.1

Crem International Holding AB (“Crem”), a wholly-owned subsidiary of Avaj, is a global manufacturer of professional coffee machines headquartered in Solna, Sweden. Crem develops, manufactures and markets a full suite of coffee machines under three brands: Coffee Queen^®, Expobar^® and Spengler for use in offices, restaurants, cafes and coffee shops, catering and convenience stores. The ~~fair value of~~Crem Acquisition provides the Company with an established presence in hot beverage equipment, a complementary product category, and it expects to realize operational synergies and cross-selling benefits. In addition, the Crem Acquisition supports the Company's ~~9.50% Senior Notes due 2024~~strategic objective of increasing its presence in Europe and Term Loan B under its Senior Secured Credit Facilities was approximately $491.0 million and $827.1 million as of March 31, 2017, respectively. The fair value of the Company's 9.50% Senior Notes due 2024 and Term Loan B under its Senior Secured Credit Facilities was approximately $496.2 million and $838.4 million as of December 31, 2016, respectively. See Note 10, "Debt," for a description of the debt instruments and their related carrying values.

Accounting Standards Codification ("ASC") Subtopic 820-10, "Fair Value Measurement," defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Subtopic 820-10 classifies the inputs used to measure fair value into the following hierarchy:


~~Level 1~~	~~Unadjusted quoted prices in active markets for identical assets or liabilities~~


~~Level 2~~	~~Unadjusted quoted prices in active markets for similar assets or liabilities, or~~

~~Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or~~

~~Inputs other than quoted prices that are observable for the asset or liability~~


~~Level 3~~	~~Unobservable inputs for the asset or liability~~

The Company endeavors to utilize the best available information in measuring fair value. The Company estimates the fair value of its Senior Notes due 2024 and Term Loan B based on quoted market prices of the instruments. Because these markets are typically thinly traded, the assets and liabilities are classified as Level 2 of the fair value hierarchy. The carrying values of cash and cash equivalents, accounts receivable, accounts payable and deferred purchase price notes on receivables sold (see Note 9, "Accounts Receivable Securitization"), approximate fair value, without being discounted as of March 31, 2017 and December 31, 2016 due to the short-term nature of these instruments.

As a result of its global operating and financing activities, the Company is exposed to market risks from changes in foreign currency exchange rates, commodity prices, and interest rates which may adversely affect its operating results and financial position. When deemed appropriate, the Company minimizes these risks through the use of derivative financial instruments. Derivative financial instruments are used to manage risk and are not used for trading or other speculative purposes, and the Company does not use leveraged derivative financial instruments. The foreign currency exchange, commodity contracts and interest rate swaps are valued through an independent valuation source which uses an industry standard data provider, with resulting valuations periodically validated through third-party or counterparty quotes. As such, these derivative instruments are classified as Level 2 of the fair value hierarchy.

~~4. Derivative Financial Instruments~~

The Company's risk management objective is to ensure that business exposures to risks that have been identified and measured and are capable of being controlled are minimized or managed using what it believes to be the most effective and efficient methods to eliminate, reduce or transfer such exposures. Operating decisions consider these associated risks and structure transactions to minimize or manage these risks whenever possible.

The use of derivative instruments is consistent with the overall business and risk management objectives of the Company. The Company uses derivative instruments to manage business risk exposures that have been identified through the risk identification and measurement process, provided that they clearly qualify as "hedging" activities as defined in its risk policy. It is the Company's policy to enter into derivative transactions only to the extent true exposures exist; the Company does not enter into derivative transactions for trading or other speculative purposes.

The primary risks the Company manages using derivative instruments are commodity price risk, interest rate risk and foreign currency exchange risk. Swap contracts on various commodities are used to manage the price risk associated with forecasted purchases of materials used in the Company's manufacturing process. The Company also enters into various foreign currency derivative instruments to help manage foreign currency risk associated with its projected purchases and sales and foreign currency denominated receivable and payable balances. Interest rate swaps are entered into to manage interest rate risk associated with the Company’s fixed and floating-rate borrowings. Cross-currency interest rate swaps are entered into to protect the value of the Company’s investments in its foreign subsidiaries.

ASC Subtopic 815-10, "Derivatives and Hedges," requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet. In accordance with ASC Subtopic 815-10, the Company designates commodity swaps and foreign currency exchange contracts as cash flow hedges of forecasted purchases of commodities and currencies, certain interest rate swaps as cash flow hedges of floating-rate borrowings, and the remainder as fair value hedges of fixed-rate borrowings, and certain cross-currency interest rate swaps as hedges of net investments in its foreign subsidiaries.

~~Cash flow hedging strategy~~

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative instruments representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. In the next twelve months, the Company estimates $0.9 million of unrealized gains, net of tax, related to commodity price and currency rate hedging, which will be reclassified from other comprehensive (loss) income into earnings. Foreign currency and commodity hedging is generally completed prospectively on a rolling basis for fifteen and thirty-six months, respectively, depending on the type of risk being hedged.Asia.

During the three months ended March 31, ~~2017,~~2018, the Company incurred approximately $1.2 million of professional services and other direct acquisition costs related to the Crem Acquisition that are included in "Selling, general and administrative expenses" in the consolidated statement of operations. In addition, the Company entered into ~~two interest rate swap agreements with~~ a ~~total notional amount of $600.0 million to manage interest rate risk exposure by converting the Company’s floating-rate debt to a fixed-rate basis~~foreign currency exchange contract for the ~~next two to three years, thus reducing the impact from fluctuations in interest rates on future interest expense. These agreements involve the receipt~~purchase price exposure of ~~floating rate amounts in exchange for fixed rate interest payments over the life~~SEK 1,800 million, which incurred a loss of the agreements without an exchange of the underlying principal. Approximately 43.0% of the Company’s outstanding long-term debt had its interest payments designated as cash flow hedges under these interest rate swap agreements as of March 31, 2017. The Company did not enter into any interest rate swap agreements$7.8 million during the three months ended March 31, ~~2016.~~2018 and is included in the consolidated statement of operations in "Other expense — net."

4. Inventories — Net

The components of "Inventories — net" at March 31, ~~2017~~2018 and December 31, ~~2016, the Company had the following outstanding commodity and currency forward contracts that were entered into~~2017 are summarized as ~~hedge forecasted transactions:~~

Units Hedged
Commodity March 31, 2017 December 31, 2016 Unit Type
Aluminum 2,115
1,663
MT Cash flow
Copper 709
746
MT Cash flow
Natural gas 26,523
56,416
MMBtu Cash flow
Steel 7,225
8,663
Short tons Cash flow

Units Hedged
Currency March 31, 2017 December 31, 2016 Type
Canadian Dollar 17,230,000
26,130,000
Cash flow
European Euro 15,782,119
11,261,848
Cash flow
British Pound 5,028,775
4,191,763
Cash flow
Mexican Peso 107,400,000
148,200,000
Cash flow
Thailand Baht 13,941,893
23,231,639
Cash flow
Singapore Dollar 3,775,000
4,375,000
Cash flow

For derivative instruments that are not designated as hedging instruments, the gains or losses on the derivatives are recognized in current earnings within "Other expense (income) — net" in the accompanying consolidated (condensed) statement of operations. As of March 31, 2017 and December 31, 2016, the Company had the following outstanding commodity and currency forward contracts that were not designated as hedging instruments:

Units Hedged
Commodity March 31, 2017 December 31, 2016 Unit Type
Aluminum 13
28
MT Cash flow
Steel 189
240
Short tons Cash flow

Units Hedged
Currency March 31, 2017 December 31, 2016 Recognized Location Purpose
Singapore Dollar 28,127,000
—
Other expense (income) — net Notes payable and receivable settlement
European Euro 75,300,000
16,000,000
Other expense (income) — net Notes and accounts payable and receivable settlement
British Pound 4,790,037
8,192,692
Other expense (income) — net Accounts payable and receivable settlement
Chinese Yuan 107,383,629
—
Other expense (income) — net Notes payable and receivable settlement
Swiss Franc 4,000,000
3,150,000
Other expense (income) — net Accounts payable and receivable settlement

~~Fair value hedging strategy~~

For derivative instruments that are designated and qualify as a fair value hedge (i.e., hedging the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk), the gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in the same line item associated with the hedged item in current earnings.

During the three months ended March 31, 2017, the Company entered into an interest rate swap agreement with a total notional amount of $425.0 million to manage interest rate risk exposure by converting the Company’s fixed-rate debt to a floating-rate basis for the next seven years. This agreement involves the receipt of fixed rate amounts in exchange for floating rate interest payments over the life of the agreement without an exchange of the underlying principal. Approximately 31.0% of the Company’s outstanding long-term debt had its interest payments designated as a fair value hedge under this interest rate swap agreement as of March 31, 2017. The Company did not enter into any interest rate swap agreements during the three months ended March 31, 2016.

~~Hedge of net investment in foreign operations strategy~~

For derivative instruments that are designated and qualify as a hedge of a net investment in a foreign currency, the gain or loss is reported in other comprehensive income as part of the cumulative translation adjustment to the extent it is effective. Any ineffective portions of net investment hedges are recognized in earnings during the period of change.

The Company entered into a cross-currency interest rate swap contract to protect the value of its net investments in Euro. The carrying value of the net investment in Euro that is designated as a hedging instrument is remeasured at each reporting date to reflect the changes in the foreign currency exchange spot rate, with changes since the last remeasurement date recorded in other comprehensive income. The Company uses the forward-rate method of assessing hedge effectiveness when cross-currency swap contracts are designated as hedging instruments.

~~The fair value of outstanding derivative contracts recorded as assets in the accompanying consolidated (condensed) balance sheets as of March 31, 2017 and December 31, 2016 was as~~ follows:

ASSET DERIVATIVES
(in millions) Balance Sheet Location Fair Value
March 31, 2017 December 31, 2016
Derivatives designated as hedging instruments:
Foreign currency exchange contracts Prepaids and other current assets $ 0.9
$ 0.6
Commodity contracts Prepaids and other current assets 1.0
0.9
Cross-currency swap contract Prepaids and other current assets 1.1
—
Commodity contracts Other non-current assets 0.4
0.2
Interest rate swap contracts Other non-current assets 1.2
—
Cross-currency swap contract Other non-current assets 2.2
—
Total derivatives designated as hedging instruments 6.8
1.7

Derivatives NOT designated as hedging instruments:
Foreign currency exchange contracts Prepaids and other current assets 0.1
—
Total derivatives NOT designated as hedging instruments 0.1
—

Total asset derivatives $ 6.9
$ 1.7

~~The fair values of outstanding derivative contracts recorded as liabilities in the accompanying consolidated (condensed) balance sheets as of March 31, 2017 and December 31, 2016 were as follows:~~

LIABILITY DERIVATIVES
(in millions) Balance Sheet Location Fair Value
March 31, 2017 December 31, 2016
Derivatives designated as hedging instruments:
Foreign currency exchange contracts Accrued expenses and other liabilities $ 0.4
$ 0.8
Commodity contracts Accrued expenses and other liabilities —
0.1
Interest rate swap contracts Accrued expenses and other liabilities 2.8
—
Interest rate swap contracts Other long-term liabilities 5.7
—
Total derivatives designated as hedging instruments 8.9
0.9

Derivatives NOT designated as hedging instruments:
Foreign currency exchange contracts Accrued expenses and other liabilities 0.2
0.2
Total derivatives NOT designated as hedging instruments 0.2
0.2

Total liability derivatives $ 9.1
$ 1.1

The effects of derivative instruments in the accompanying consolidated (condensed) statements of operations for the three months ended March 31, 2017 and 2016 for gains or losses initially recognized in "Accumulated other comprehensive loss" ("AOCI") in the accompanying consolidated (condensed) balance sheets were as follows:

Derivatives in cash flow hedging relationships (in millions) Amount of gain (loss) recognized in AOCI on derivative (effective portion, net of tax) Location of gain (loss) reclassified from AOCI into income (effective portion) Amount of gain (loss) reclassified from AOCI into income (effective portion)
Three Months Ended March 31, Three Months Ended March 31,
2017 2016 2017 2016
Foreign exchange contracts $ 0.4
$ 0.1
Cost of sales $ 0.2
$ (0.1 )
Commodity contracts —
0.8
Cost of sales 0.2
(0.9 )
Interest rate swap contracts (1.0 ) —
Selling, general and administrative expenses —
—
Cross-currency swap contract ⁽¹⁾
3.3
—
Selling, general and administrative expenses —
—
Total $ 2.7
$ 0.9
$ 0.4
$ (1.0 )

⁽¹⁾The amount of gain recognized in AOCI for the cross-currency swap contract is included in other comprehensive income as part of the cumulative translation adjustment in the accompanying unaudited consolidated (condensed) statements of comprehensive income.

Derivatives relationships (in millions) Amount of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing) Location of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
Three Months Ended March 31,
2017 2016
Commodity contracts $ 0.3
$ —
Cost of sales
Total $ 0.3
$ —

Derivatives NOT designated as hedging instruments (in millions) Amount of gain (loss) recognized in income on derivative Location of gain (loss) recognized in income on derivative
Three Months Ended March 31,
2017 2016
Foreign exchange contracts $ (0.3 ) $ (0.1 ) Other expense (income) — net
Commodity contracts —
0.5
Other expense (income) — net
Total $ (0.3 ) $ 0.4



	March 31,			December 31,
(in millions)	2018			2017
Inventories — gross:
Raw materials	$	77.0		$	73.9
Work-in-process	19.1			18.9
Finished goods	109.9			86.9
Total inventories — gross	206.0			179.7
Excess and obsolete inventory reserve	(24.7		)	(23.5		)
Net inventories at FIFO cost	181.3			156.2
Excess of FIFO costs over LIFO value	(3.9		)	(3.9		)
Inventories — net	$	177.4		$	152.3

5. ~~Inventories — Net~~

~~The components of inventories — net at March 31, 2017 and December 31, 2016 are summarized as follows:~~

March 31, December 31,
(in millions) 2017 2016
Inventories — gross:

Raw materials $ 73.8
$ 68.2
Work-in-process 20.3
18.3
Finished goods 104.4
85.1
Total inventories — gross 198.5
171.6
Excess and obsolete inventory reserve (24.0 ) (22.5 )
Net inventories at FIFO cost 174.5
149.1
Excess of FIFO costs over LIFO value (3.5 ) (3.5 )
Inventories — net $ 171.0
$ 145.6

6. Property, Plant and Equipment — Net

The components of ~~property,~~"Property, plant and equipment — ~~net~~net" at March 31, ~~2017~~2018 and December 31, ~~2016~~2017 are summarized as follows:


	March 31,			December 31,			March 31,			December 31,
(in millions)	2017			2016			2018			2017
Land	$	7.1		$	7.3		$	9.9		$	9.5
Building and improvements	87.3			91.3			89.7			88.9
Machinery, equipment and tooling	217.5			215.1			228.7			227.3
Furniture and fixtures	5.6			5.8			6.4			6.0
Computer hardware and software	53.4			52.9			56.4			55.1
Construction in progress	12.9			11.2			17.5			15.7
Total cost	383.8			383.6			408.6			402.5
Less accumulated depreciation	(276.1		)	(274.5		)	(296.0		)	(290.3		)
Property, plant and equipment — net	$	107.7		$	109.1		$	112.6		$	112.2

~~7. Goodwill and Other Intangible Assets~~

The Company has three reportable segments: Americas; Europe, Middle East and Africa ("EMEA"); and Asia Pacific ("APAC"). The Americas segment includes the U.S., Canada and Latin America. The EMEA segment is made up of markets in Europe, Middle East and Africa, including Russia and the Commonwealth of Independent States. The APAC segment is principally comprised of markets in China, Singapore, Australia, New Zealand, India, Malaysia, Indonesia, Thailand, Japan, South Korea and the Philippines. The changes in the carrying amount of goodwill by reportable segment for the three months ended March 31, 2017 are as follows:

(in millions) Americas EMEA APAC Total
Balance as of December 31, 2016 $ 832.6
$ 4.7
$ 8.0
$ 845.3
Foreign currency impact —
0.1
0.2
0.3
Balance as of March 31, 2017 $ 832.6
$ 4.8
$ 8.2
$ 845.6

The Company accounts for goodwill and other intangible assets under the guidance of ASC Topic 350, "Intangibles - Goodwill and Other." The Company performs an annual impairment test or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company tests its reporting units and indefinite-lived intangible assets using a fair-value method based on the present value of future cash flows, which involves management's judgments and assumptions about the amounts of those cash flows and the discount rates used. The estimated fair value is then compared with the carrying amount of the reporting unit, including recorded goodwill, or indefinite-lived intangible asset. The intangible asset is then subject to risk of write-down to the extent that the carrying amount exceeds the estimated fair value.

As of June 30, 2016, the Company performed the annual impairment test for its reporting units, which were Americas, EMEA, and APAC, as well as its indefinite-lived intangible assets, and based on those results, the fair value of each of the Company's reporting units exceeded their respective carrying values and no impairment was indicated.

The Company early adopted ASU 2017-04, "Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," as of January 1, 2017 and will apply the guidance from this standard beginning with its annual goodwill assessment performed as of June 30, 2017.

~~The gross carrying amount and accumulated amortization of the Company's intangible assets other than goodwill are as follows as of March 31, 2017~~ ~~and~~ ~~December 31, 2016:~~

March 31, 2017 December 31, 2016
(in millions)
Gross
Carrying
Amount

Accumulated
Amortization
Amount

Net
Book
Value

Gross
Carrying
Amount

Accumulated
Amortization
Amount

Net
Book
Value
Trademarks and tradenames $ 173.4
$ —
$ 173.4
$ 172.4
$ —
$ 172.4
Customer relationships 415.2
(176.6 ) 238.6
415.2
(171.4 ) 243.8
Patents 1.6
(1.6 ) —
1.6
(1.6 ) —
Other intangibles 141.4
(75.5 ) 65.9
140.7
(72.5 ) 68.2
Total $ 731.6
$ (253.7 ) $ 477.9
$ 729.9
$ (245.5 ) $ 484.4

~~Amortization expense for the three months ended March 31, 2017 and 2016 was $7.8 million.~~

8.6. Accounts Payable and Accrued Expenses and Other Liabilities

"Accounts ~~payable~~payable" and ~~accrued~~"Accrued expenses and other ~~liabilities~~liabilities" at March 31, ~~2017~~2018 and December 31, ~~2016~~2017 are summarized as follows:


	March 31,		December 31,		March 31,		December 31,
(in millions)	2017		2016		2018		2017
Accounts payable:
Trade accounts payable	$	117.9	$	108.4	$	112.9	$	103.6
Total accounts payable	$	117.9	$	108.4	$	112.9	$	103.6
Accrued expenses and other liabilities:
Interest payable	$	5.0	$	15.7	$	2.3	$	7.8
Income taxes payable	4.6		2.5		3.1		6.1
Employee related expenses	32.0		29.8		30.9		30.8
Restructuring expenses	4.3		3.3		3.4		5.0
Profit sharing and incentives	6.2		14.2		7.0		11.5
Accrued rebates	31.3		56.0		32.3		50.0
Deferred revenue - current	4.5		4.4		3.8		4.2
Customer advances	4.7		7.4		2.9		2.6
Product liability	2.1		2.3		1.5		1.4
Miscellaneous accrued expenses	43.0		38.9		51.0		42.3
Total accrued expenses and other liabilities	$	137.7	$	174.5	$	138.2	$	161.7

9.7. Accounts Receivable Securitization

~~Prior to the Spin-Off, the~~

The Company sold accounts receivable through an accounts receivable securitization facility, ("the Prior Securitization Program"), comprised of two funding entities: Manitowoc Funding, LLC ("U.S. Seller") and Manitowoc Cayman Islands Funding Ltd. ("Cayman Seller"). The U.S. Seller historically serviced domestic entities of both the Foodservice and Cranes segments of MTW and remitted all funds received directly to MTW. The Cayman Seller historically serviced solely Welbilt foreign entities and remitted all funds to Welbilt entities. The U.S. Seller remained with MTW subsequent to the Spin-Off, while the Cayman Seller was transferred to Welbilt subsequent to the Spin-Off. As the U.S. Seller is not directly attributable to Welbilt, only the receivables which were transferred to the U.S. Seller but not sold are reflectedparticipates in the Company's accompanying consolidated (condensed) balance sheets. A portion of the U.S. Seller's historical expenses related to bond administration fees and settlement fees was allocated to the Company. As the Cayman Seller is directly attributable to Welbilt, the assets, liabilities, income and expenses of the Cayman Seller are included in the Company's accompanying consolidated (condensed) statements of operations and balance sheets. The Company's cost of funds under the facility used a ~~London Interbank Offered Rate ("LIBOR") index rate plus a 1.25% fixed spread.~~

~~On March 3, 2016, the Company entered into a new~~ $110.0 million accounts receivable securitization program (the "2016 Securitization Facility") among the Cayman Seller, as seller, Welbilt, Garland Commercial Ranges Limited, Convotherm Elektrogeräte GmbH, Welbilt Deutschland GmbH, Welbilt UK Limited, Welbilt Asia Pacific Private Limited and the other persons who may be from time to time, a party thereto, as servicers, with Wells Fargo Bank, National Association, as purchaser and agent, whereby the Company ~~will sell~~sells certain of its domestic trade accounts receivable and certain of its non-U.S. trade accounts receivable to a wholly-owned, bankruptcy-remote, foreign special purpose entity, which in turn, ~~will sell, convey, transfer~~sells, conveys, transfers and ~~assign~~assigns to a third-party financial institution (the “Purchaser”), all of the rights, title and interest in and to its pool of receivables. ~~The Purchaser will receive ownership~~Under this program, the Company generally receives cash consideration up to a certain limit and records a non-cash exchange for sold receivables for the remainder of the ~~pool~~purchase price ("deferred purchase price"). The sale of these receivables qualifies for sale accounting treatment. The Company maintains a "beneficial interest," or right to collect cash, in the sold receivables. Cash receipts from the Purchaser at the time of the sale are classified as operating cash while cash receipts from the beneficial interest on sold receivables are classified as investing activities on the consolidated statements of cash flows.

The Company, along with certain of its subsidiaries, ~~acts~~act as servicers of the ~~receivables and as such~~sold receivables. The servicers administer, collect and otherwise enforce ~~the receivables. The servicers will be~~these receivables and are compensated for doing so on terms that are generally consistent with what would be charged by an unrelated servicer. AsThe servicers ~~they will~~ initially receive payments made by obligors on the receivables but ~~will be~~are required to remit those payments in accordance with athe receivables purchase agreement. ~~The~~Upon termination of the program, the Purchaser will have no recourse for uncollectible receivables. The ~~2016 Securitization Facility~~securitization program also contains customary affirmative and negative covenants. Among other restrictions, these covenants require the Company to meet specified financial tests, which include a Consolidated Interest Coverage Ratio and a Consolidated Total Leverage Ratio that are the same as the covenant ratios required under the 2016 Credit Agreement. The accounts receivable securitization program was amended on February 2, 2018 in conjunction with an amendment to the 2016 Credit Agreement ~~as described in~~to provide for certain conforming changes including amending the Consolidated Total Leverage Ratio required thereunder. See Note ~~10, "Debt."~~8, "Debt" for additional details of the 2016 Credit Agreement and related amendments.

Due to a short average collection cycle of less than 60 days for such accounts receivable as well as the Company's collection history, the fair value of its ~~deferred purchase price notes approximated~~beneficial interest in the sold receivables approximates book ~~value. The fair~~ value ~~of the deferred purchase price notes~~and, as of March 31, ~~2017~~2018 and December 31, ~~2016 was $73.1~~2017, totaled $70.9 million and ~~$60.0~~$62.9 million, respectively and is ~~included~~recorded in "Accounts receivable, less ~~allowances"~~allowance" in the ~~accompanying~~ consolidated ~~(condensed)~~ balance sheets.

~~Trade accounts receivables sold to the Purchaser and being serviced by the Company totaled $88.0 million and $96.7 million at March 31, 2017 and December 31, 2016, respectively.~~

Transactions under the 2016 Securitization Facility and the Prior Securitization Program were accounted for as sales in accordance with ASC Topic 860, "Transfers and Servicing." Sales of trade receivables to the Purchaser are reflected as a reduction of accounts receivable in the accompanying consolidated (condensed) balance sheets and the proceeds received, including collections on the deferred purchase price notes, are included in cash flows from operating activities in the accompanying consolidated (condensed) statements of cash flows. The Company deems the interest rate risk related to ~~the deferred purchase price notes~~this beneficial interest to be de minimis, primarily due to the short average collection cycle of the related receivables.

The carrying value of trade receivables ~~(i.e., 60 days) as noted above.~~removed from the Company's consolidated balance sheets in connection with the accounts receivable securitization program was $88.0 million and $99.5 million at March 31, 2018 and December 31, 2017, respectively.

~~10.~~

8. Debt

Outstanding debt at March 31, 2018 and December 31, 2017 is summarized as follows:



	March 31,			December 31,
(in millions)	2018			2017
Revolving credit facility	$	80.0		$	25.0
Term Loan B facility	815.0			815.0
9.50% Senior Notes due 2024	425.0			425.0
Capital leases	2.6			2.7
Total debt and capital leases, including current portion	1,322.6			1,267.7
Less current portion of capital leases	(0.7		)	(0.7		)
Less unamortized debt issuance costs ⁽¹⁾	(25.2		)	(26.4		)
Less hedge accounting fair value adjustment ⁽²⁾	(17.2		)	(8.4		)
Total long-term debt and capital leases	$	1,279.5		$	1,232.2

⁽¹⁾ Total outstanding debt issuance costs, net of amortization as of March 31, 2018 and December 31, 2017 was $27.4 million and $28.6 million, respectively, of which $2.2 million at each date was related to the revolving credit facility and recorded in "Other non-current assets" in the consolidated balance sheets.

⁽²⁾Represents the change in fair value due to changes in benchmark interest rates related to the Company's 9.50% Senior ~~Secured Credit Facilities~~Notes due 2024 ("Senior Notes"). Refer to Note 9, "Derivative Financial Instruments," for additional information on the Company's interest rate swap designated as a fair value hedge.

On March 3, 2016, the Company entered into a credit agreement ~~(the~~(as amended, restated, supplemented or otherwise modified from time to time the "2016 Credit Agreement") for a ~~new~~$1,200.0 million senior secured credit facility consisting of (i) a senior secured revolving credit facility in an aggregate principal amount of $225.0 million (the "Revolving Facility") and (ii) a senior secured Term Loan B facility in an aggregate principal amount of $975.0 million (the "Term Loan B Facility" and, together with the Revolving Facility, the "Senior Secured Credit Facilities") with JPMorgan Chase Bank, ~~N.A,~~N.A., as administrative agent and collateral agent, J.P. Morgan Securities LLC, Goldman Sachs Bank USA, HSBC Securities (USA) Inc., and Citigroup Global Markets Inc., on behalf of certain of its affiliates, as joint lead arrangers and joint bookrunners, and certain lenders, as lenders. The Revolving Facility includes (i) a $20.0 million sublimit for the issuance of letters of credit on customary terms, and (ii) a $40.0 million sublimit for swingline loans on customary terms. The Company entered into security and other agreements relating to the 2016 Credit Agreement.

During the ~~three months ended March 31,~~first quarter of 2017, the Company recorded an out-of-period adjustment of $2.7 million to correct for the loss incurred on the prepayments made in 2016 on the Term Loan B Facility related to unamortized debt issuance costs, which is included in "Loss on early extinguishment of debt" in the ~~accompanying~~ consolidated ~~(condensed) statements~~statement of operations. The related income tax benefit of $1.0 million was recognized ~~as a discrete item~~ in "Income taxes" in the ~~accompanying~~ consolidated ~~(condensed) statements~~statement of ~~operations during the first quarter of 2017.~~operations. Management ~~has~~ determined the error correction iswas not material to the periods of origination nor the period of correction.

~~On March 6, 2017,~~

In February 2018, the Company entered into an amendment to the 2016 Credit Agreement, ~~was amended providing~~which increased the Consolidated Total Leverage Ratio for ~~a decrease~~each of the quarters ended December 31, 2017, March 31, 2018 and June 30, 2018 to 5.25:1.00. The required ratio level will then reduce 0.25 each subsequent quarter until the ratio reaches 4.00:1.00 in the quarter ending September 30, 2019.

In April 2018, the Company entered into an Incremental Revolving Facility Amendment to the ~~maximum applicable margin~~2016 Credit Agreement whereby the aggregate revolving commitments were increased by $50.0 million to $275.0 million.

As of March 31, 2018, the Company had $80.0 million of borrowings outstanding under the Revolving Facility, $3.3 million in outstanding stand-by letters of credit and $141.7 million in available borrowings. During the three months ended March 31, 2018, the highest daily borrowing was $95.0 million and the average borrowing was $70.0 million, while the weighted average interest rate was 4.8% per annum. The interest rate fluctuates based upon LIBOR or an alternate base rate plus a spread, which is based upon the Consolidated Total Leverage Ratio of the Company. As of March 31, 2018, the spreads for LIBOR and ~~Alternate Base Rate (“ABR”) loans by 1.75%~~alternate base rate borrowings were 2.25% and 1.25%, respectively, given the Company's effective Consolidated Total Leverage Ratio.

The interest rate on the Term Loan B Facility ~~(the "Amendment"). The repricing was completed at par, and establishes for six months~~also fluctuates based on LIBOR or a 1.0% premium in the case of another repricing event. JPMorgan Chase Bank, N.A., as administrative agent, and JPMorgan Chase Bank, N.A. and Goldman Sachs Bank, USA were joint bookrunners on the repricing. In connection with the Amendment, the Company incurred costs of $1.4 million during the three months endedPrime rate plus a spread. At March 31, 2017, which were recorded in "Long-term debt and capital leases" in the accompanying consolidated (condensed) balance sheets and are being amortized over the remaining term of the Term Loan B Facility. Additionally, the Company recorded a loss on early extinguishment of debt of $0.5 million during the three months ended March 31, 2017 related to unamortized debt issuance costs.

~~Subsequent to the Amendment, the borrowings under the Senior Secured Credit Facilities bear~~2018, this facility bore interest at a rate per annum equal to, at the option of the Company, ~~(i)~~ LIBOR plus ~~the~~an applicable margin of ~~3.00%~~2.75% for term loans subject to a 1.00% LIBOR floor, ~~and 1.50% - 2.75% for revolving loans, based on consolidated total leverage,~~ or ~~(ii)~~ an alternate base rate plus the applicable margin, ~~which~~that will be 1.00% lower than for LIBOR loans. The weighted average interest rate for the Term Loan B Facility was 4.9% per annum.

The 2016 Credit Agreement contains financial covenants including (a) a Consolidated Interest Coverage Ratio, which measures the ratio of (i) Consolidated EBITDA, ~~as defined in the 2016 Credit Agreement,~~ to (ii) Consolidated Cash Interest Expense, and (b) a Consolidated Total Leverage Ratio, which measures the ratio of (i) Consolidated Indebtedness to (ii) Consolidated EBITDA for the most recent four ~~fiscal quarters.~~quarters, in each case, as defined in the 2016 Credit Agreement. The current covenant levels of the financial covenants under the Senior Secured Credit Facilities are set forth below:



~~Fiscal~~ Quarter Ending	Consolidated Total Leverage Ratio (less than)	Actual Consolidated Total Leverage Ratio	Consolidated Interest Coverage Ratio (greater than)	Actual Consolidated Interest Coverage Ratio
March 31, ~~2017~~2018	~~5.50:~~5.25:1.00	~~5.20:~~4.65:1.00	~~2.50:~~3.00:1.00	~~2.71:~~3.41:1.00

Obligations of the Company under the Senior Secured Credit Facilities are jointly and severally guaranteed by certain of its existing and future direct and indirectly wholly-owned U.S. subsidiaries (but excluding (i) unrestricted subsidiaries, (ii) immaterial subsidiaries, and (iii) special purpose securitization vehicles).

There is a first priority perfected lien on substantially all of the assets and property of the Company and guarantors and proceeds therefrom excluding certain excluded assets. The liens securing the obligations of the Company under the Senior Secured Credit Facilities are pari passu.

~~Senior Notes~~

On February 18, 2016, the Company issued 9.50% Senior Notes due 2024 in an aggregate principal amount of $425.0 million (the "Senior Notes") under an indenture with Wells Fargo Bank, National Association, as trustee (the "Trustee"). The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by each of the Company's domestic restricted subsidiaries that is a borrower or guarantor under the Senior Secured Credit Facilities. The Senior Notes and the subsidiary guarantees are unsecured, senior obligations.

The Senior Notes were initially sold to qualified institutional buyers pursuant to Rule 144A (and outside the United States in reliance on Regulation S) under the Securities Act of 1933, as amended (the "Securities Act"). In September 2016, the Company completed an exchange offer pursuant to which all of the initial Senior Notes were exchanged for new Senior Notes, the issuance of which was registered pursuant under the Securities Act.

The notes are redeemable, at the Company's option, in whole or in part from time to time, at any time prior to February 15, 2019, at a price equal to 100.0% of the principal amount thereof plus a “make-whole” premium and accrued but unpaid interest to the date of redemption. In addition, the Company may redeem the notes at its option, in whole or in part, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the 12-month period commencing on February 15 of the years set forth below:

Year Percentage
2019 107.1 %
2020 104.8 %
2021 102.4 %
2022 and thereafter 100.0 %

The Company must generally offer to repurchase all of the outstanding Senior Notes upon the occurrence of certain specific change of control events at a purchase price equal to 101.0% of the principal amount of Senior Notes purchased plus accrued and unpaid interest to the date of purchase. The indenture provides for customary events of default. Generally, if an event of default occurs (subject to certain exceptions), the Trustee or the holders of at least 25.0% in aggregate principal amount of the then-outstanding Senior Notes may declare all the Senior Notes to be due and payable immediately.

~~Outstanding debt at March 31, 2017 and December 31, 2016 is summarized as follows:~~

March 31, December 31,
(in millions) 2017 2016
Revolving credit facility $ 140.0
$ 63.5
Term Loan B 825.0
825.0
Senior Notes due 2024 425.0
425.0
Other 7.1
3.3
Total debt and capital leases, including current portion 1,397.1
1,316.8
Less current portion and short-term borrowings (4.6 ) (1.6 )
Less unamortized debt issuance costs and debt discount (33.4 ) (36.5 )
Less fair value of the interest rate swap (5.7 ) —
Total long-term debt and capital leases $ 1,353.4
$ 1,278.7

As of March 31, ~~2017, the Company had outstanding $7.1 million of other indebtedness that has a weighted-average interest rate for the three months ended March 31, 2017 of approximately 3.11% per annum.~~

As of March 31, 2017, the Company had $140.0 million of borrowings outstanding under the Revolving Facility. During the quarter ended March 31, 2017, the highest daily borrowing was $172.0 million and the average borrowing was $130.7 million, while the average interest rate was 3.34% per annum. The interest rate fluctuates based upon LIBOR or a Prime rate plus a spread, which is based upon the Consolidated Total Leverage Ratio of the Company. As of March 31, 2017, the spreads for LIBOR and Prime borrowings were 2.50% and 1.50%, respectively, given the Company's effective Consolidated Total Leverage Ratio for this period.

~~As of March 31, 2017,~~2018 the Company was in compliance with all affirmative and negative covenants in its debt instruments, inclusive of the financial covenants pertaining to the ~~Senior Secured~~2016 Credit ~~Facilities~~Agreement and the Senior Notes. ~~Based upon management's current plans and outlook, management believes~~

As of March 31, 2018, borrowings under the Senior Notes totaled $425.0 million with a weighted average interest rate of 9.90% per annum.

As of March 31, 2018, the Company had outstanding $2.6 million of capital lease indebtedness that had a weighted-average interest rate for the three months ended March 31, 2018 of approximately 4.16% per annum.

9. Derivative Financial Instruments

The Company's risk management objective is to ensure that business exposures to risks that have been identified and measured and are capable of being controlled are minimized or managed using what it believes to be the most effective and efficient methods to eliminate, reduce or transfer such exposures. Operating decisions consider these associated risks and the Company structures transactions to minimize or manage these risks whenever possible.

The primary risks the Company manages using derivative instruments are interest rate risk, commodity price risk and foreign currency exchange risk. Interest rate swaps are entered into to manage interest rate risk associated with the Company’s fixed and floating-rate borrowings. Cross-currency interest rate swaps are entered into to protect the value of the Company’s investments in its foreign subsidiaries. Swap contracts on various commodities are used to manage the price risk associated with forecasted purchases of materials used in the Company's manufacturing process. The Company also enters into various foreign currency derivative instruments to help manage foreign currency risk associated with its projected purchases and sales and foreign currency denominated receivable and payable balances.

The Company recognizes all derivative instruments as either assets or liabilities at fair value in the consolidated balance sheets. Commodity swaps and foreign currency exchange contracts are designated as cash flow hedges of forecasted purchases of commodities and currencies, certain interest rate swaps as cash flow hedges of floating-rate borrowings, and the remainder as fair value hedges of fixed-rate borrowings, and certain cross-currency interest rate swaps as hedges of net investments in its foreign subsidiaries.

Cash flow hedging strategy

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of "Accumulated other comprehensive loss" and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative instruments representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. In the next twelve months, the Company estimates $1.9 million of unrealized gains, net of tax, related to currency rate and commodity price hedging will be ~~able~~reclassified from "Accumulated other comprehensive loss" into earnings. Foreign currency and commodity hedging is generally completed prospectively on a rolling basis for 15 and 36 months, respectively, depending on the type of risk being hedged.

During the first quarter of 2017, the Company entered into two interest rate swap agreements with a total notional amount of $600.0 million to ~~comply~~manage interest rate risk exposure by converting the Company’s floating-rate debt to a fixed-rate basis, thus reducing the impact from fluctuations in interest rates on future interest expense. These agreements involve the receipt of floating rate amounts in exchange for fixed rate interest payments over the life of the agreements without an exchange of the underlying principal and have termination dates of March 2019 for $175.0 million notional amount and March 2020 for the remaining $425.0 million notional amount. Approximately 45.5% of the Company’s total outstanding debt had its interest payments designated as cash flow hedges under these interest rate swap agreements as of March 31, 2018. As of March 31, 2018, the total notional amount of the Company’s receive-variable/pay-fixed interest rate swaps was $600.0 million.

As of March 31, 2018 and December 31, 2017, the Company had the following outstanding commodity and currency forward contracts that were entered into as hedges of forecasted transactions:



	Units Hedged
Commodity	March 31, 2018	December 31, 2017	Unit
Aluminum	2,306	1,620	MT
Copper	684	667	MT
Steel	13,781	7,713	Short tons



	Units Hedged
Currency	March 31, 2018	December 31, 2017
Canadian Dollar	21,880,000	18,080,000
European Euro	22,150,000	8,545,000
British Pound	19,462,497	7,807,744
Mexican Peso	335,000,000	126,400,000
Singapore Dollar	3,820,000	1,765,000

The effects of derivative instruments on the consolidated statements of comprehensive income and consolidated statements of operations for the three months ended March 31, 2018 and 2017 for gains or losses initially recognized in "Accumulated other comprehensive loss" ("AOCI") in the consolidated balance sheets were as follows:



Derivatives in cash flow hedging relationships (in millions)	Pretax gain (loss) recognized in AOCI (effective portion)						Location of gain (loss) reclassified from AOCI into income (effective portion)	Pretax gain (loss) reclassified from AOCI into income (effective portion)
	Three Months Ended March 31,							Three Months Ended March 31,
	2018			2017				2018		2017
Foreign currency exchange contracts	$	0.8		$	0.7		Cost of sales	$	0.5	$	0.2
Commodity contracts	(0.5		)	0.4			Cost of sales	0.5		0.2
Interest rate swap contracts	3.1			(1.6		)	Interest expense	—		—
Total	$	3.4		$	(0.5	)		$	1.0	$	0.4



Derivatives in cash flow hedging relationships (in millions)	Amount of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)				Location of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
	Three Months Ended March 31,
	2018		2017
Commodity contracts	$	0.1	$	0.3	Cost of sales
Total	$	0.1	$	0.3

Fair value hedging strategy

During the first quarter of 2017, the Company entered into an interest rate swap agreement with a total notional amount of $425 million to manage interest rate risk exposure by converting the Company’s fixed-rate debt to a floating-rate basis. This agreement involved the receipt of fixed rate amounts in exchange for floating rate interest payments over the life of the agreement without an exchange of the underlying principal. In June 2017, this interest rate swap agreement was terminated and the Company received $7.7 million, the fair value of the swap

including accrued interest. Accordingly, hedge accounting was discontinued and the hedge accounting adjustment to the Company's Senior Notes of $0.3 million will be amortized to "Interest expense" in the consolidated statements of operations through February 2024.

On October 3, 2017, the Company entered into an interest rate swap agreement with a total notional amount of $425.0 million to manage interest rate risk exposure by converting the Company’s fixed-rate debt to a floating-rate basis. This agreement involves the receipt of fixed rate amounts in exchange for floating rate interest payments over the life of the agreement without an exchange of the underlying principal and terminates in February 2024. Approximately 32.2% of the Company’s total outstanding debt had its interest payments designated as a fair value hedge under this interest rate swap agreement as of March 31, 2018.

The gain or loss on the hedged items (that is, fixed-rate borrowing of the Senior Notes) attributable to the hedged benchmark interest rate risk (risk of changes in the applicable LIBOR swap rate) and the offsetting gain or loss on the related interest rate swap is as follows:



Derivatives in fair value hedging relationships (in millions)	Loss on Swap						Income Statement Classification	Gain on Borrowings
	Three Months Ended March 31,							Three Months Ended March 31,
	2018			2017				2018		2017
Interest rate swap contract	$	(8.5	)	$	(5.7	)	Interest Expense	$	8.8	$	5.7
Total	$	(8.5	)	$	(5.7	)		$	8.8	$	5.7

The difference of $0.3 million represents hedge ineffectiveness for the three months ended March 31, 2018. There was no hedge ineffectiveness recorded for the same period in 2017. The net swap settlements that accrue each period are reported in "Interest expense" in the consolidated statements of operations. As of March 31, 2018, the total notional amount of the Company’s receive-fixed/pay-variable interest rate swap was $425.0 million.

Hedge of net investment in foreign operations strategy

For derivative instruments that are designated and qualify as a hedge of a net investment in a foreign currency, the gain or loss is reported in AOCI as part of the cumulative translation adjustment to the extent it is effective. Any ineffective portions of net investment hedges are recognized in earnings during the ~~subsequent 12 months.~~period of change.

During the first quarter of 2017, the Company entered into a three-year cross-currency interest rate swap contract for a notional value of €50.0 million to protect the value of its net investment in Euros. The carrying value of the net investment in Euros that is designated as a hedging instrument is remeasured at each reporting date to reflect the changes in the foreign currency exchange spot rate, with changes since the last remeasurement date recorded in "Accumulated other comprehensive loss." The Company uses the forward-rate method of assessing hedge effectiveness when cross-currency swap contracts are designated as hedging instruments. At March 31, 2018, the total notional amount of cross-currency interest rate swap contract designated in net investment hedges was €50.0 million.

The effects of derivative instruments on the consolidated statements of comprehensive income and consolidated statements of operations for the three months ended March 31, 2018 and 2017 for gains or losses initially recognized in AOCI in the consolidated balance sheets were as follows:



Derivatives in net investments hedging relationships (in millions)	Pretax gain (loss) recognized in AOCI (effective portion)					Location of gain (loss) reclassified from AOCI into income (effective portion)	Amount of gain (loss) reclassified from AOCI into income (effective portion)
	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2018		2017
Interest rate swap contract	$	(2.0	)	$	3.3	Selling, general and administrative expenses	$	—	$	—
Total	$	(2.0	)	$	3.3		$	—	$	—

Derivatives Not Designated as Hedging Instruments

The Company enters into foreign currency exchange contracts that are not designated as hedge relationships to offset, in part, the impact of certain intercompany transactions and to further mitigate certain other short-term currency impacts as identified. For derivative instruments that are not designated as hedging instruments, the gains or losses on the derivatives are recognized in current earnings within "Other expense — net" in the consolidated statements of operations.

During the first quarter of 2018, the Company entered into a short-term foreign currency exchange contract to purchase SEK 1,800.0 million and sell $223.8 million with maturity dates ranging from March 1, 2018 to April 5, 2018 ("SEK Contract"). The purpose of this contract was

to mitigate the impact of currency price fluctuations on the contracted price of the Crem Acquisition (see Note 3, "Acquisitions" for additional discussion of the Crem Acquisition). As of March 31, 2018, the SEK Contract was in a short-term liability position of $7.8 million and was included in "Accrued expenses and other liabilities" in the consolidated balance sheet. In April 2018, the Company settled the SEK Contract and realized a loss of $10.0 million. The incremental loss of $2.2 million will be recognized in the second quarter of 2018.

As of March 31, 2018 and December 31, 2017, the Company had the following outstanding currency forward contracts that were not designated as hedging instruments:



	Units Hedged
Currency	March 31, 2018	December 31, 2017	Purpose
Singapore Dollar	28,127,000	28,127,000	Notes payable and receivable settlement
European Euro	72,325,720	69,300,000	Notes and accounts payable and receivable settlement
British Pound	2,113,271	14,912,019	Accounts payable and receivable settlement
Swiss Franc	2,700,000	4,800,000	Accounts payable and receivable settlement
Swedish Krona	1,800,000,000	—	Crem Acquisition



Derivatives NOT designated as hedging instruments (in millions)	Amount of gain (loss) recognized in income on derivative						Location of gain (loss) recognized in income on derivative
	Three Months Ended March 31,
	2018			2017
Foreign currency exchange contracts	$	(12.9	)	$	(0.3	)	Other expense — net
Total	$	(12.9	)	$	(0.3	)

The fair value of outstanding derivative contracts recorded as assets in the consolidated balance sheets as of March 31, 2018 and December 31, 2017 was as follows:



	Asset Derivatives
(in millions)	Balance Sheet Location	Fair Value
		March 31, 2018		December 31, 2017
Derivatives designated as hedging instruments:
Foreign currency exchange contracts	Prepaids and other current assets	$	1.4	$	1.1
Commodity contracts	Prepaids and other current assets	1.9		1.7
Interest rate swap contracts	Prepaids and other current assets	3.8		1.7
Commodity contracts	Other non-current assets	0.3		0.6
Interest rate swap contracts	Other non-current assets	3.3		2.3
Total derivatives designated as hedging instruments		10.7		7.4

Derivatives NOT designated as hedging instruments:
Foreign currency exchange contracts	Prepaids and other current assets	0.6		—
Total derivatives NOT designated as hedging instruments		0.6		—

Total asset derivatives		$	11.3	$	7.4

The fair value of outstanding derivative contracts recorded as liabilities in the consolidated balance sheets as of March 31, 2018 and December 31, 2017 was as follows:



	Liability Derivatives
(in millions)	Balance Sheet Location	Fair Value
		March 31, 2018		December 31, 2017
Derivatives designated as hedging instruments:
Foreign currency exchange contracts	Accrued expenses and other liabilities	$	0.7	$	0.6
Commodity contracts	Accrued expenses and other liabilities	0.3		0.1
Commodity contracts	Other long-term liabilities	0.6		—
Interest rate swap contracts	Other long-term liabilities	28.2		17.7
Total derivatives designated as hedging instruments		29.8		18.4

Derivatives NOT designated as hedging instruments:
Foreign currency exchange contracts	Accrued expenses and other liabilities	7.8		0.5
Total derivatives NOT designated as hedging instruments		7.8		0.5

Total liability derivatives		$	37.6	$	18.9

10. Fair Value of Financial Instruments

In accordance with the Company's policy, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The policy classifies the inputs used to measure fair value into the following hierarchy:


Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities


Level 2	Unadjusted quoted prices in active markets for similar assets or liabilities, or

Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or

Inputs other than quoted prices that are observable for the asset or liability


Level 3	Unobservable inputs for the asset or liability

The Company endeavors to utilize the best available information in measuring fair value. The Company estimates the fair value of its Senior Notes and Term Loan B Facility based on quoted market prices of the instruments. Because these markets are typically thinly traded, the assets and liabilities are classified as Level 2 of the fair value hierarchy. The carrying values of cash and cash equivalents, accounts receivable, accounts payable and beneficial interest in sold receivables (see Note 7, "Accounts Receivable Securitization"), approximate fair value, without being discounted as of March 31, 2018 and December 31, 2017 due to the short-term nature of these instruments.

The fair value of the Company's Senior Notes was approximately $474.4 million and $483.8 million as of March 31, 2018 and December 31, 2017, respectively. The fair value of the Company's Term Loan B Facility was approximately $821.6 million and $818.1 million as of March 31, 2018 and December 31, 2017, respectively. The related carrying values are disclosed in Note 8, "Debt."

The following tables set forth financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2018 and December 31, 2017 by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.



	Fair Value as of
	March 31, 2018
(in millions)	Level 1		Level 2		Level 3		Total
Current assets:
Foreign currency exchange contracts	$	—	$	2.0	$	—	$	2.0
Commodity contracts	—		1.9		—		1.9
Interest rate swap contracts	—		3.8		—		3.8
Total current assets at fair value	—		7.7		—		7.7
Non-current assets:
Commodity contracts	—		0.3		—		0.3
Interest rate swap contracts	—		3.3		—		3.3
Total non-current assets at fair value	—		3.6		—		3.6
Total assets at fair value	$	—	$	11.3	$	—	$	11.3
Current liabilities:
Foreign currency exchange contracts	$	—	$	8.5	$	—	$	8.5
Commodity contracts	—		0.3		—		0.3
Total current liabilities at fair value	—		8.8		—		8.8
Non-current liabilities:
Commodity contracts	—		0.6		—		0.6
Interest rate swap contracts	—		28.2		—		28.2
Total non-current liabilities at fair value	—		28.8		—		28.8
Total liabilities at fair value	$	—	$	37.6	$	—	$	37.6



	Fair Value as of
	December 31, 2017
(in millions)	Level 1		Level 2		Level 3		Total
Current assets:
Foreign currency exchange contracts	$	—	$	1.1	$	—	$	1.1
Commodity contracts	—		1.7		—		1.7
Interest rate swap contracts	—		1.7		—		1.7
Total current assets at fair value	—		4.5		—		4.5
Non-current assets:
Commodity contracts	—		0.6		—		0.6
Interest rate swap contracts	—		2.3		—		2.3
Total non-current assets at fair value	—		2.9		—		2.9
Total assets at fair value	$	—	$	7.4	$	—	$	7.4
Current liabilities:
Foreign currency exchange contracts	$	—	$	1.1	$	—	$	1.1
Commodity contracts	—		0.1		—		0.1
Total current liabilities at fair value	—		1.2		—		1.2
Non-current liabilities:
Interest rate swap contracts	—		17.7		—		17.7
Total non-current liabilities at fair value	—		17.7		—		17.7
Total liabilities at fair value	$	—	$	18.9	$	—	$	18.9

11. Income Taxes

For the three months ended March 31, 2018, the Company recorded a $0.3 million income tax provision, reflecting a 2.3% effective tax rate, which was inclusive of a $3.7 million discrete tax benefit. The $3.7 million discrete tax benefit primarily consisted of tax balances that were adjusted upon filing the Company’s U.S. federal and state corporate income tax returns for 2016 that were timely filed in the first quarter of 2018.

For the three months ended March 31, 2017, the Company recorded a $2.1 million income tax provision, reflecting a 29.6%effective tax ~~rate, compared to an $4.6~~rate. The $2.1 million income tax provision ~~reflecting~~included a ~~20.3% effective~~$1.0 million income tax ~~rate~~benefit recognized as a discrete item related to the $2.7 million out-of-period adjustment for unamortized debt issuance costs for the ~~three months ended March 31, 2016.~~ Term Loan B Facility.

The ~~increase~~decrease in the Company's effective tax rate for the three months ended March 31, ~~2017,~~2018, relative to the three months ended March 31, ~~2016,~~2017, was primarily due to the ~~geographic shift of global earnings~~reduction in the U.S. federal statutory rate to 21.0% for 2018 as compared to 35.0% for 2017 and an increase in discrete tax benefits.

The Company’s effective tax rate for the three months ended March 31, 2018 varies from ~~lower-rate foreign jurisdictions to higher-rate~~the 21.0% U.S. ~~source income. Additionally, $2.9 million in tax related out-of-period balance sheet adjustments related~~federal statutory rate primarily due to the ~~Spin-Off were recognized as a~~ discrete tax benefit, in the Tax Cuts and Jobs Act (the “Tax Act”), relative weighting of foreign earnings before income taxes and taxes on foreign income. The Company’s effective tax ~~provision~~rate for the ~~first quarter of 2016, whereas a $1.0 million income tax benefit was recognized as a discrete item during the first quarter of~~three months ended March 31, 2017 ~~related to the $2.7 million out-of-period adjustment for unamortized debt issuance costs of the Term Loan B facility as discussed in Note 10, "Debt."~~

~~In connection with the Spin-Off, tax account balances will be adjusted as necessary upon filing of the 2016 Welbilt and MTW’s U.S. corporate tax returns.~~

~~The Company's effective tax rate~~ varies from the 35.0% U.S. federal statutory rate due to the discrete tax benefit, relative weighting of foreign earnings before income taxes and taxes on foreign ~~effective tax rates that are generally lower than the U.S. federal statutory rate.~~income. Foreign earnings are generated from operations in the ~~Company's~~Company’s three reportable segments of Americas, EMEA and APAC.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act. The SEC staff issued Staff Accounting Bulletin (“SAB”) No. 118, which provided guidance for the tax effects of items enacted in December 2017, providing a measurement period not extending beyond one year from the Tax Act enactment date. There were no changes for the three months ended March 31, 2018 related to the provisional estimates recorded in the Company’s consolidated financial statements for the year ended December 31, 2017. The Tax Act included a new provision, effective in 2018, designated as global intangible low-taxed income (“GILTI”). The Company is allowed to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into the measurement of deferred taxes (the “deferred method”). The Company has adopted the period cost method for the GILTI computation and, accordingly, deferred taxes will not be recorded for GILTI.

The Tax Act also included other provisions effective in 2018, designated as (1) foreign derived intangible income (“FDII”), (2) interest disallowance and (3) base erosion anti-abuse tax (“BEAT”), that were calculated, as relevant, for computation of the income tax provision for the three months ended March 31, 2018.

As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view regarding future realization of deferred tax assets. The Company will continue to periodically evaluate its valuation allowance requirements in light of changing facts and circumstances, and may adjust its deferred tax asset valuation allowances accordingly. It is reasonably possible that the Company will either add to, or reverse a portion of its existing deferred tax asset valuation allowances in the future. Such changes in the deferred tax asset valuation allowances will be reflected in ~~the~~ current operations through the ~~Company's~~Company’s income tax provision, and could have a material effect on operating results.

The Company's unrecognized tax benefits, including interest and penalties, were ~~$12.3 million and $12.6~~$12.5 million as of March 31, ~~2017~~2018, and December 31, ~~2016,~~2017, respectively. ~~The decrease is due to the release of unrecognized tax benefit that is no longer uncertain and which is partially offset by the interest accrual.~~ During the next twelve months, it is reasonably possible that federal, state and foreign tax resolutions could change unrecognized tax benefits and income tax expense in the range of $0.1 million to $0.5 million.

The Company regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves. As of March 31, ~~2017,~~2018, the Company believes that it is more likely than not that the tax positions it has taken will be sustained upon the resolution of its audits resulting in no material impact on its consolidated financial position and the results of operations and cash flows. However, the final determination with respect to any tax audits, and any related litigation, could be materially different from the Company's estimates and/or from its historical income tax provisions and accruals and could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments.

12. ~~Equity~~Accumulated Other Comprehensive Loss

~~On March 4, 2016, MTW distributed 137.0 million shares~~

The components of ~~Welbilt common stock to MTW's shareholders on a pro rata basis, and Welbilt became an independent publicly traded company with each shareholder receiving one share~~"Accumulated other comprehensive loss" as of its common stock for each share of MTW common stock held by the shareholder on February 22, 2016, the record date for the distribution. Any fractional shares of its common stock otherwise issuable to MTW shareholders were aggregated into whole shares and sold on the open market, and the fractional shareholders will receive a pro rata share of the proceeds of the sale, after deducting any taxes required to be withheld and after deducting an amount equal to all brokerage fees and other costs attributed to the sale.

On March 3, 2016, prior to the completion of the Spin-Off, the Company paid a one-time cash dividend to MTW of $1,362.0 million. The Company did not declare or pay any other dividends to its stockholders during the three months ended March 31, ~~2017~~2018 and ~~2016.~~

~~The following is a roll-forward of equity for the three months ended March~~December 31, 2017 :are as follows:

(in millions, except share data) Shares Common Stock Additional Paid-In Capital (Deficit) Retained Earnings Accumulated Other Comprehensive (Loss) Income Total Equity (Deficit)
Balance at December 31, 2016 138,601,327
$ 1.4
$ (72.0 ) $ 70.5
$ (43.4 ) $ (43.5 )
Net earnings —
—
—
5.0
—
5.0
Issuance of common stock, equity-based compensation plans 316,862
—
1.0
—
—
1.0
Stock-based compensation expense —
—
4.4
—
—
4.4
Other comprehensive income —
—
—
—
6.8
6.8
Balance at March 31, 2017 138,918,189
$ 1.4
$ (66.6 ) $ 75.5
$ (36.6 ) $ (26.3 )



(in millions)	March 31, 2018			December 31, 2017
Foreign currency translation, net of income tax benefit of $3.3 million and $2.8 million at March 31, 2018 and December 31, 2017, respectively	$	4.5		$	4.4
Derivative instrument fair market value, net of income tax expense of $2.2 million and $1.8 million at March 31, 2018 and December 31, 2017, respectively	5.6			3.6
Employee pension and postretirement benefit adjustments, net of income tax benefit of $6.4 million and $6.5 million at March 31, 2018 and December 31, 2017, respectively	(39.5		)	(40.0		)
	$	(29.4	)	$	(32.0	)

~~Reconciliations for~~A summary of the changes in ~~accumulated~~"Accumulated other comprehensive ~~income (loss),~~loss," net of tax, by component for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017 are as follows:

(in millions) Foreign Currency Translation Gains and Losses on Cash Flow Hedges Pension & Postretirement Total
Balance at December 31, 2016 $ (9.8 ) $ 0.8
$ (34.4 ) $ (43.4 )
Other comprehensive income (loss) before reclassifications 7.0
(0.4 ) —
6.6
Amounts reclassified from accumulated other comprehensive income (loss) —
(0.2 ) 0.4
0.2
Net current period other comprehensive income (loss) 7.0
(0.6 ) 0.4
6.8
Balance at March 31, 2017 $ (2.8 ) $ 0.2
$ (34.0 ) $ (36.6 )

(in millions) Foreign Currency Translation Gains and Losses on Cash Flow Hedges Pension & Postretirement Total
Balance at December 31, 2015 $ (7.9 ) $ (1.8 ) $ (34.8 ) $ (44.5 )
Other comprehensive income (loss) before reclassifications 17.2
0.3
(9.4 ) 8.1
Amounts reclassified from accumulated other comprehensive income (loss) —
0.6
0.5
1.1
Net current period other comprehensive income (loss) 17.2
0.9
(8.9 ) 9.2
Balance at March 31, 2016 $ 9.3
$ (0.9 ) $ (43.7 ) $ (35.3 )



(in millions)	Foreign Currency Translation⁽¹⁾			Gains and Losses on Cash Flow Hedges			Pension & Postretirement			Total
Balance at December 31, 2017	$	4.4		$	3.6		$	(40.0	)	$	(32.0	)
Other comprehensive (loss) income before reclassifications	(0.4		)	3.4			—			3.0
Amounts reclassified out	—			(1.0		)	0.6			(0.4		)
Tax effect	0.5			(0.4		)	(0.1		)	—
Net current period other comprehensive income	0.1			2.0			0.5			2.6
Balance at March 31, 2018	$	4.5		$	5.6		$	(39.5	)	$	(29.4	)



(in millions)	Foreign Currency Translation⁽¹⁾			Gains and Losses on Cash Flow Hedges			Pension & Postretirement			Total
Balance at December 31, 2016	$	(9.8	)	$	0.8		$	(34.4	)	$	(43.4	)
Other comprehensive income (loss) before reclassifications	7.0			(0.5		)	—			6.5
Amounts reclassified out	—			(0.4		)	0.5			0.1
Tax effect	—			0.3			(0.1		)	0.2
Net current period other comprehensive income (loss)	7.0			(0.6		)	0.4			6.8
Balance at March 31, 2017	$	(2.8	)	$	0.2		$	(34.0	)	$	(36.6	)

~~The following is a~~⁽¹⁾ Income taxes are not provided for foreign currency translation relating to permanent investments in international subsidiaries, but tax effects within cumulative translation does include the impact of the net investment hedge transaction. Reclassification adjustments are made to avoid double counting in comprehensive income items that are also recorded as part of net income.

A reconciliation of the reclassifications out of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2018 and 2017:

Three Months Ended March 31, 2017
(in millions) Amount Reclassified from Accumulated Other Comprehensive (Income) Loss Recognized Location
Gains and losses on cash flow hedges
  Foreign currency exchange contracts $ 0.2
Cost of sales
  Commodity contracts 0.2
Cost of sales
0.4
Total before tax
(0.2 ) Tax benefit
$ 0.2
Net of tax
Amortization of pension and postretirement items
  Actuarial losses $ (0.5 ) (a)
(0.5 ) Total before tax
0.1
Tax expense
$ (0.4 ) Net of tax

Total reclassifications for the period, net of tax $ (0.2 ) Net of tax

~~The following is a reconciliation of the reclassifications out of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2016:~~



	Three Months Ended March 31,
(in millions)	2018			2017			Recognized Location
Gains (losses) on cash flow hedges:
Foreign currency exchange contracts	$	0.5		$	0.2		Cost of sales
Commodity contracts	0.5			0.2			Cost of sales
	1.0			0.4			Total
	(0.3		)	(0.2		)	Income taxes
	$	0.7		$	0.2		Net of tax
Amortization of pension and postretirement items:
Actuarial losses	$	(0.6	)	$	(0.5	)	See Note 16
	(0.6		)	(0.5		)	Total before tax
	0.2			0.1			Income taxes
	$	(0.4	)	$	(0.4	)	Net of tax

Total reclassifications for the period	$	0.3		$	(0.2	)	Net of tax

Three Months Ended March 31, 2016
(in millions) Amount Reclassified from Accumulated Other Comprehensive (Income) Loss Recognized Location
Gains and losses on cash flow hedges
  Foreign currency exchange contracts $ (0.1 ) Cost of sales
  Commodity contracts (0.9 ) Cost of sales
(1.0 ) Total before tax
0.4
Tax expense
$ (0.6 ) Net of tax
Amortization of pension and postretirement items
  Actuarial losses $ (0.6 ) (a)
(0.6 ) Total before tax
0.1
Tax expense
$ (0.5 ) Net of tax

Total reclassifications for the period, net of tax $ (1.1 ) Net of tax

(a) These other comprehensive income (loss) components are included in the net periodic pension cost (see Note 17, "Employee Benefit Plans," for further details).

13. ~~Stock-Based Compensation~~

The Company's employees historically participated in MTW's stock-based compensation plans. Stock-based compensation expense relating to awards under MTW's stock-based compensation plans has been allocated to the Company based on the awards and terms previously granted to its employees. Until consummation of the Spin-Off, the Company continued to participate in MTW's stock-based compensation plans and record stock-based compensation expense based on the stock-based awards granted to the Company's employees.

The Company adopted the 2016 Omnibus Incentive Compensation Plan (the "2016 Plan") in March 2016, under which it makes equity-based and cash-based incentive awards to attract, retain, focus and motivate executives and other selected employees, directors, consultants and advisors. The 2016 Plan is intended to accomplish these objectives by offering participants the opportunity to acquire shares of Welbilt common stock, receive monetary payments based on the value of such common stock or receive other incentive compensation under the 2016 Plan. In addition, the 2016 Plan permits the issuance of awards ("Replacement Awards") in partial substitution for awards relating to shares of common stock of MTW that were outstanding immediately prior to the Spin-Off.

The Company's Compensation Committee administers the 2016 Plan (the "Administrator"). The 2016 Plan authorizes the Administrator to interpret the provisions of the 2016 Plan; prescribe, amend and rescind rules and regulations relating to the 2016 Plan; correct any defect, supply any omission, or reconcile any inconsistency in the 2016 Plan, any award or any agreement covering an award; and make all other determinations necessary or advisable for the administration of the 2016 Plan, in each case in its sole discretion.

The 2016 Plan permits the granting of stock options (including incentive stock options), stock appreciation rights, restricted stock awards, restricted stock units, performance shares, performance units, annual cash incentives, long-term cash incentives, dividend equivalent units and other types of stock-based awards. Under the 2016 Plan, 16.2 million shares of Welbilt common stock have been reserved for issuance, all of which may be issued upon the exercise of incentive stock options. These numbers may be adjusted in the event of certain corporate transactions or other events specified in the 2016 Plan.

Following the Spin-Off on March 4, 2016, the Company granted long-term stock-based incentive awards under the 2016 Plan to its executive officers. The long-term stock-based incentive awards consisted of stock options with 4-year ratable vesting (25% of the aggregate grant value of the long-term incentive award) and performance shares (75% of the aggregate grant value of the long-term incentive award) that will be earned or forfeited based on performance as measured by cumulative fully diluted earnings per share and return on invested capital over a 3-year performance period. The details of these awards to the Company's named executive officers is disclosed as required by applicable SEC regulations in the Company's proxy statement.

The Company recognized total stock-based compensation of $4.4 million during the three months ended March 31, 2017. Of this amount, $2.0 million was recognized in "Restructuring expense" in the accompanying consolidated (condensed) statements of operations for the accelerated vesting of certain equity awards in connection with the retirement of two executives as described in Note 16, "Restructuring," and the remaining $2.4 million is included in "Selling, general and administrative expenses." Total stock-based compensation expense was $1.3 million for the three months ended March 31, 2016, which includes $0.5 million of separation expense recorded in "Separation expense" in the accompanying consolidated (condensed) statements of operations as a result of the modification of certain MTW restricted stock unit awards to pay out at target upon consummation of the Spin-Off and the remaining $0.8 million is included in "Selling, general and administrative expenses." The Company recognizes stock-based compensation expense based on fair value of the award on the grant date over the requisite service period and estimates forfeitures when calculating compensation expense.

The Company granted options to acquire 0.3 million shares of common stock to employees during the three months ended March 31, 2017 and 2016. In addition, the Company issued a total of 0.4 million restricted stock units to employees and directors during the three months ended March 31, 2017, and 0.3 million restricted stock units to employees and directors during the three months ended March 31, 2016. The restricted stock units granted to employees vest on the third anniversary of the grant date. The restricted stock units granted to directors vest on the second anniversary of the grant date.

~~14.~~ Contingencies and Significant Estimates

As of March 31, 2018 and December 31, 2017, the Company held reserves for environmental matters related to certain locations of approximately ~~$0.5~~$0.8 million. At certain of the Company's other facilities, it has identified potential contaminants in soil and groundwater. The ultimate cost of any remediation required will depend upon the results of future investigation and is not reasonably estimable. Based upon available information, the Company does not expect the ultimate costs at any of these locations will have a material adverse effect on its financial condition, results of ~~operation,~~operations or cash flows individually or in the aggregate.

The Company believes that it has obtained and is in substantial compliance with those material environmental permits and approvals necessary to conduct its various businesses. Based on the facts presently known, itthe Company does not expect environmental compliance costs to have a material adverse effect on its financial condition, results of operations or cash flows.

As of March 31, ~~2017,~~2018, various product-related lawsuits were pending. To the extent permitted under applicable law, all of these are insured with self-insurance retention levels. The Company's self-insurance retention levels vary by business, and have fluctuated over the last 10 years. The current range of the Company's ~~current~~ self-insured retention levels is $0.1 million to $0.3 million per occurrence and $1.3 million in the aggregate. As of March 31, ~~2017,~~2018, the largest self-insured retention level for new occurrences currently maintained by the Company was $0.3 million per occurrence and applied to product liability claims for the hot category products manufactured in the United States.

Product liability reserves are included in "Accrued expenses and other liabilities" in the ~~accompanying~~ consolidated ~~(condensed)~~ balance sheets at March 31, ~~2017~~2018 and December 31, ~~2016~~2017 and were ~~$2.1~~$1.5 million and ~~$2.3~~$1.4 million, respectively; ~~$0.5~~$0.4 million and ~~$0.7~~$0.4 million, respectively, was reserved specifically for actual cases, and ~~$1.6~~$1.1 million and $1.0 million, respectively, for claims incurred but not reported, which were estimated using actuarial methods. Based on the Company's experience in defending product liability claims, management believes the current reserves are adequate for estimated case resolutions on aggregate self-insured claims and insured claims. Any recoveries from insurance carriers are dependent upon the legal sufficiency of claims and solvency of insurance carriers.

At March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company had reserved ~~$24.6~~$26.2 million and ~~$27.9~~$24.1 million, respectively, for warranty claims expected to be paid out within a year or less, which are included in "Product warranties" in the ~~accompanying~~ consolidated ~~(condensed)~~ balance sheets. At March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company had reserved ~~$11.3~~$11.4 million and ~~$8.4~~$11.9 million, respectively, for warranty claims expected to be paid out after a year, which are included in "Other long-term liabilities" in the ~~accompanying~~ consolidated ~~(condensed)~~ balance sheets. Certain of these warranty and other related claims involve matters in dispute that ultimately are resolved by negotiations, arbitration or litigation. See Note ~~15,~~14, “Product Warranties,” for further information.

It is reasonably possible that the estimates for environmental remediation, product liability and warranty costs may change in the near future based upon new information that may arise or matters that are beyond the scope of ~~its~~the Company's historical experience. Presently, there are no reliable methods to estimate the amount of any such potential changes.

The Company is also subject to litigation claims arising in the ordinary course of business. The Company believes that it has adequately accrued for legal matters as appropriate. The Company records litigation accruals for legal matters which are both probable and estimable and

for related legal costs as incurred. The Company does not reduce these liabilities for potential insurance or third-party recoveries and any insurance recoveries are recorded in "Accounts receivable, less allowances" in the accompanying consolidated (condensed) balance sheets with a corresponding reduction to "Selling, general and administrative expenses" in the accompanying consolidated (condensed) statements of operations. In the opinion of management, the ultimate resolution of all current litigation matters is not expected to have, individually or in the aggregate, a material adverse effect on the Company's financial condition, results of operations or cash flows.

~~15.~~

14. Product Warranties

In the normal course of business, the Company provides its customers product warranties covering workmanship, and in some cases materials, on products manufactured by the Company. Such product warranties generally provide that products will be free from defects for periods ranging from 12 months to 60 months with certain equipment having longer-term warranties. If a product fails to comply with the Company's warranty, the Company may be obligated, at its expense, to correct any defect by repairing or replacing such defective products. The Company provides for an estimate of costs that may be incurred under its warranty at the time product revenue is recognized. These costs primarily include labor and materials, as necessary, associated with repair or replacement. The primary factors that affect its warranty liability include the number of units shipped and historical and anticipated warranty claims. As these factors are impacted by actual experience and future expectations, the Company assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary.

Below is a table summarizing the product ~~warranties~~warranty activity for the three months ended March 31, ~~2017:~~2018:


	March 31,
(in millions)	2017
Balance at the beginning of the period	$	36.3
Balance at December 31, 2017⁽¹⁾				$	36.0
Accruals for warranties issued	8.6			9.9
Settlements made (in cash or in kind)	(9.1		)	(8.5		)
Currency translation impact	0.1			0.2
Balance at the end of the period	$	35.9
Balance at March 31, 2018 ⁽¹⁾				$	37.6

⁽¹⁾ Long-term warranty liabilities are included in "Other long-term liabilities" and totaled $11.4 million and $11.9 million at March 31, 2018 and December 31, 2017, respectively.

The Company also offers extended warranties, which are recorded as deferred revenue and are amortized to ~~income~~"Net sales" on a straight-line basis over a period equal to that of the warranty period. The short-term portion of deferred revenue on warranties included in "Accrued expenses and other liabilities" in the ~~accompanying~~ consolidated ~~(condensed)~~ balance sheets at March 31, ~~2017~~2018 and December 31, ~~2016~~2017 was ~~$2.9~~$3.1 million and ~~$2.8~~$3.1 million, respectively. The long-term portion of deferred revenue on warranties included in "Other long-term liabilities" in the ~~accompanying~~ consolidated ~~(condensed)~~ balance sheets at March 31, ~~2017~~2018 and December 31, ~~2016~~2017 was ~~$3.2~~$3.4 million and ~~$3.3~~$3.6 million, respectively.

~~16.~~15. Restructuring

~~Certain restructuring activities have been undertaken~~

The Company periodically takes action to ~~recognize~~improve operating efficiencies, typically in connection with recognizing cost synergies and ~~rationalize~~rationalizing the cost structure of the Company. ~~In 2016,~~The Company's footprint and headcount reductions and organizational integration actions relate to discrete, unique restructuring events, primarily reflected in the ~~Company recorded restructuring costs primarily related to a company-wide~~approved plans for reduction in force and the closing of its Cleveland, Singapore and Sellersburg facilities. In 2017, the Company recorded additional amounts related primarily to one-time expenses for severance and other related benefits upon the retirement of two executive officers of the Company.("RIF").

The following is a rollforward of all restructuring activities for the three months ended March 31, ~~2017:~~2018:

March 31,
(in millions) 2017
Balance at the beginning of the period $ 14.4
Restructuring charges 4.6
Use of reserve (1.5 )
Non-cash adjustment ⁽¹⁾
(2.0 )
Balance at the end of the period $ 15.5

⁽¹⁾This non-cash adjustment represents the non-cash stock-based compensation expense recognized during the three months ended March 31, 2017 resulting from the accelerated vesting of certain restricted stock units and stock options upon the retirement of two executive officers.



(in millions)
Balance at December 31, 2017	$	16.1
Restructuring charges	0.4
Use of reserve	(2.3		)
Balance at March 31, 2018	$	14.2

As of March 31, 2018 and December 31, 2017, the short-term ~~term~~ portion of the liability of ~~$4.3~~$3.4 million and $5.0 million, respectively, was reflected in "Accrued expenses and other liabilities" in the ~~accompanying~~ consolidated ~~(condensed)~~ balance ~~sheets.~~sheet. The long-term portion of the liability of ~~$11.2~~$10.8 million and $11.1 million as of March 31, 2018 and December 31, 2017, respectively, was reflected in "Other long-term liabilities" in the ~~accompanying~~ consolidated ~~(condensed)~~ balance sheets and relates ~~primarily~~ to the long-term portion of the pension withdrawal obligation incurred in connection with the reorganization and plant restructuring of the Company's former Lincoln Foodservice ~~operations.~~

During the fourth quarter of 2015 and through the first half of 2016, the Company relocated its manufacturing, warehousing and distribution operations conducted at its Cleveland, Ohio plant and subsequently closed this facility. The Company sold the related building for a net purchase price of $2.2 million in April 2017 and recognized an asset impairment charge of $0.4 million during the three months ended March 31, 2017, which is included in "Asset impairment charge" in the accompanying consolidated (condensed) statements of operations. These actions relate entirely to the Company's Americas reportable segment.

On August 11, 2016, the Company announced that it will transfer the products manufactured at its Singapore plant to its plants in Prachinburi, Thailand and Foshan, China and subsequently close the Singapore plant, which occurred by the end of September 2016. This action relates entirely to the Company's APAC reportable segment. In March 2017, the Company received government approval to proceed with the sale of the Singapore facility and plans to sell the related asset within the next 6 months.

On August 11, 2016, the Company announced that it will transfer the products manufactured at its Sellersburg, Indiana plant to its plants in Tijuana and Monterrey, Mexico and subsequently close the Sellersburg plant. During the first quarter of 2017, manufacturing ceased and the Sellersburg plant was ready for immediate sale as of March 31, 2017.

As of March 31, 2017, the property, plant and equipment - net of $1.9 million, $2.6 million and $2.7 million related to the Cleveland, Singapore and Sellersburg plant closures, respectively, met the criteria to be classified as held for sale and are presented as "Current assets held for sale" in the accompanying consolidated (condensed) balance sheets. The Company expects to incur total restructuring costs associated with the aforementioned plant closures of approximately $3.5 million. Of this amount, $0.8 million was recorded during the three months ended ended March 31, 2017. These charges are presented separately in "Restructuring expense" in the accompanying consolidated (condensed) statements of operations.

Effective January 2, 2017, Maurice Jones, the Company's former Senior Vice President, General Counsel and Secretary, retired from the Company and pursuant to the terms of his employment agreement, the Company is required to provide severance and other related benefits over the subsequent 18-month period. The Company incurred a total one-time cost of $2.2 million, including $1.1 million of additional ~~equity-based~~stock-based compensation expense resulting from the accelerated vesting of certain restricted stock units and stock options, that was recorded during the ~~three months ended March 31,~~first quarter of 2017 in "Restructuring expense" in the ~~accompanying~~ consolidated ~~(condensed) statements~~statement of operations. Mr. Jones will also receive the amount of vested benefits of $2.5 million plus interest at the rate of 9.0% from the Company’s Supplemental Executive Retirement Plan (“SERP”) that will be paid over 5five annual installments.

~~On February 20,~~

Effective May 5, 2017, ~~the Company announced that~~ John Stewart, the Company's Senior Vice President and Chief Financial Officer, ~~will retire~~retired from the ~~Company on April 28, 2017. The retirement date was subsequently extended to May 5, 2017.~~Company. Pursuant to the terms of his employment agreement, the Company is required to provide severance and other related benefits over the next 12-month period. The Company incurred a total one-time cost of $2.5 million, including $1.5 million of additional ~~equity-based~~stock-based compensation resulting from the accelerated vesting of certain restricted stock units and stock options. Of this amount, $1.5 million and $1.0 million were recognized during the first and second quarters of 2017, respectively, in "Restructuring expense" in the consolidated statements of operations.

The Company completed a limited management restructuring within its EMEA region in March 2018. In connection with this action, the Company incurred severance and related costs of $0.4 million, which was recognized during the ~~three months ended March 31, 2017~~first quarter of 2018 in "Restructuring expense" ~~and the remaining $1.0 million will be recognized~~ in the ~~second quarter~~consolidated statements of ~~2017.~~operations.

~~17.~~16. Employee Benefit Plans

The Company maintains several different retirement plans for its operations in the United States, Europe and Asia. This footnote describes those retirement plans that are maintained for the Company's U.S.-based employees. The current plans are based largely upon benefit plans that MTW maintained prior to the Spin-Off. The Company has established a Retirement Plan Committee to manage the operations and administration of all retirement plans and related trusts.

~~Defined Benefit Plans~~

Prior to December 31, 2015, MTW maintained two defined benefit pension plans for its eligible employees and retirees: (1) The Manitowoc Company, Inc. Pension Plan (the “MTW Pension Plan”); and (2) The Manitowoc Company, Inc. Supplemental Executive Retirement Plan (the “MTW SERP”). The MTW Pension Plan and the MTW SERP (together, the “MTW DB Plans”) covered eligible employees of MTW, including MTW's Cranes business and Foodservice business. The MTW Pension Plan is frozen to new participants and future benefit accruals.

Effective January 1, 2016, a portion of each MTW DB Plan was spun off to create separate plans for MTW's Foodservice business, for which "MFS" was substituted with "Welbilt" in the following plans due to the Name Change: (1) the Welbilt Pension Plan (the “Welbilt Pension Plan”); and (2) the Welbilt Supplemental Executive Retirement Plan (the “Welbilt SERP”). The Welbilt Pension Plan and the Welbilt SERP (together, the “Welbilt DB Plans”) were initially sponsored by Manitowoc FSG U.S. Holding, LLC (name of the entity changed to Welbilt FSG U.S. Holdings, LLC effective April 19, 2017). The Company assumed sponsorship of the Welbilt DB Plans on March 4, 2016. The Company no longer participates in the MTW DB Plans. The Welbilt DB Plans are substantially similar to the former MTW DB Plans.

When comparing the current financial information to financial statements for prior years, it is important to distinguish between: (1) the defined benefit plan that also covered employees of MTW and other MTW subsidiaries (the “Shared Plans”); and (2) the defined benefit plans which are sponsored directly by the Company or its subsidiaries and offered only to the Company employees or retirees (the “Direct Plans”).

The Company accounted for the Shared Plans for the purpose of the consolidated (condensed) financial statements as a multiemployer plan. Accordingly, the Company did not record an asset or liability to recognize the funded status of the Shared Plans. However, the costs associated with these Shared Plans of $0.1 million for the three months ended March 31, 2016 are reflected in the accompanying consolidated (condensed) statements of operations. This expense reflects an approximation of the Company's portion of the costs of the Shared Plans as well as costs attributable to MTW corporate employees, which have been allocated to the consolidated (condensed) statements of operations based on methodology deemed reasonable by management.

During the three months ended March 31, 2016, the Company assumed certain pension obligations of $55.6 million and related plan assets of $34.1 million, and certain postretirement health obligations of $6.8 million, to newly-created single employer plans for the Company's employees and certain other MTW-sponsored pension plans, as described above. This net transfer of approximately $28.3 million was treated as a non-cash transaction between the Company and MTW. The Company also assumed after-tax deferred gains of $6.1 million related to these plans, which were recorded in AOCI.

~~Direct Plans~~ The Direct Plans are accounted for as defined benefit plans. Accordingly, the funded and unfunded position of each Direct Plan is recorded in the accompanying consolidated (condensed) balance sheets and the income and expenses are recorded in the accompanying consolidated (condensed) statements of operations. Actuarial gains and losses that have not yet been recognized through income are recorded in "Accumulated other comprehensive (loss) income, net of taxes" until they are amortized as a component of net periodic benefit cost. The determination of benefit obligations and the recognition of expenses related to the Direct Plans are dependent on various assumptions. The major assumptions primarily relate to discount rates, long-term expected rates of return on plan assets, and future compensation increases. Management develops each assumption using relevant company experience in conjunction with market-related data for each individual country in which such plans exist.

The components of periodic benefit costs for the ~~Direct Plans~~defined benefit plans for the three months ended March 31, 2018 and 2017 ~~and 2016 are~~were as follows:



	Three Months Ended March 31,
	2018					2017
(in millions)	Pension Plans			Postretirement Health and Other Plans		Pension Plans			Postretirement Health and Other Plans
Interest cost of projected benefit obligation	$	1.3		$	0.1	$	1.3		$	0.1
Expected return on assets	(1.5		)	—		(1.5		)	—
Amortization of actuarial net loss	0.6			—		0.5			—
Net periodic benefit cost	$	0.4		$	0.1	$	0.3		$	0.1

The components of periodic benefit costs are recorded in "Other expense — net" in the consolidated statements of operations.

Three Months Ended Three Months Ended
March 31, 2017 March 31, 2016
(in millions) Pension Plans Postretirement
Health and
Other Plans Pension Plans Postretirement
Health and
Other Plans
Interest cost of projected benefit obligations $ 1.3
$ 0.1
$ 2.2
$ 0.1
Expected return on plan assets (1.5 ) —
(1.6 ) —
Amortization of actuarial net loss 0.5
—
0.6
—
Net periodic benefit costs $ 0.3
$ 0.1
$ 1.2
$ 0.1

~~Defined Contribution Plans~~

Prior to December 31, 2015, MTW maintained three defined contribution retirement plans for its eligible employees and retirees: (1) The Manitowoc Company, Inc. 401(k) Retirement Plan (the “MTW 401(k) Retirement Plan”); (2) The Manitowoc Company, Inc. Retirement Savings Plan (the “MTW Retirement Savings Plan”); and (3) The Manitowoc Company, Inc. Deferred Compensation Plan (the “MTW Deferred Compensation Plan”). The MTW 401(k) Retirement Plan, the MTW Retirement Savings Plan and the MTW Deferred Compensation Plan (together, the “MTW DC Plans”) covered eligible employees of MTW, including MTW's Cranes business and Foodservice business.

Effective January 1, 2016, a portion of each MTW DC Plan was spun off to create separate plans for MTW's Foodservice business, for which "MFS" was substituted with "Welbilt" in the following plans due to the Name Change: (1) the Welbilt 401(k) Retirement Plan (the “Welbilt 401(k) Retirement Plan”); (2) the Welbilt Retirement Savings Plan (the “Welbilt Retirement Savings Plan”); and (3) the Welbilt Deferred Compensation Plan (the “Welbilt Deferred Compensation Plan”). The Welbilt 401(k) Retirement Plan, the Welbilt Retirement Savings Plan and the Welbilt Deferred Compensation Plan (together, the “Welbilt DC Plans”) were initially sponsored by Manitowoc FSG U.S. Holding, LLC. The Company assumed sponsorship of the Welbilt DC Pension Plans on March 4, 2016. The Company no longer participates in the MTW DC Plans. The Welbilt DC Plans are substantially similar to the former MTW DC Plans.

The MTW DC Plans and the Welbilt DC Plans result in individual participant balances that reflect a combination of amounts contributed by MTW and Welbilt or deferred by the participant, amounts invested at the direction of either the Company or the participant, and the continuing reinvestment of returns until the accounts are distributed.

~~18.~~17. Business Segments

The Company identifies its segments using the “management approach,” which designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company's reportable segments. Management organizes the business based on geography, and has designated the regions Americas, EMEA, and APAC as reportable segments.

The accounting policies of the Company's reportable segments are the same as those described in the summary of accounting policies in Note 2, "Summary of Significant Accounting Policies and Basis of Presentation," except that certain corporate-level expenses are not allocated to the segments. These unallocated expenses include corporate overhead, stock-based compensation expense, amortization expense of intangible assets with definite lives, separation expense, restructuring expense and other non-operating expenses. ~~For the period prior to the Spin-Off, certain additional MTW corporate overhead expenses that were allocated to the Company were also not allocated to the segments.~~

The Company evaluates segment performance based upon earnings before interest, taxes, other ~~(income)~~ expense -— net, depreciation and amortization expense and is adjusted for certain other non-cash or non-recurring items, including ~~asset~~gain or loss from impairment or disposal of assets, restructuring expense, separation ~~charges and~~expense, loss on early extinguishment of debt and acquisition-related transaction costs ("Adjusted Operating EBITDA"). ~~The~~Adjusted Operating EBITDA is a non-GAAP measure, and the Company's presentation of Adjusted Operating EBITDA may not be comparable to similar measures used by other companies. Beginning in January 2017, the Company updated its performance measure and definition of Adjusted Operating EBITDA (previously titled "Operating EBITA") to additionally exclude at the segment level depreciation expense, asset impairment, restructuring, separation charges and loss on early extinguishment of debt. All prior segment information has been recast to reflect these changes for consistency of presentation.

Financial information relating to the Company's reportable segments for the three months ended March 31, 2018 and 2017 ~~and 2016~~respectively is as follows:


	Three Months Ended March 31,							Three Months Ended March 31,
(in millions)	2017			2016
(in millions, except percentage data)								2018			2017
Net sales:
Americas	$	267.5		$	263.6			$	280.2		$	267.5
EMEA	67.8			68.6				81.0			67.8
APAC	41.7			38.9				43.5			41.7
Elimination of intersegment sales	(49.0		)	(45.6		)		(54.3		)	(49.0		)
Total net sales	$	328.0		$	325.5			$	350.4		$	328.0

Segment Adjusted Operating EBITDA:
Americas	$	46.8		$	49.8			$	47.6		$	46.8
EMEA	12.8			7.6				14.1			12.8
APAC	5.5			3.7				5.5			5.5
Total Segment Adjusted Operating EBITDA	65.1			61.1				67.2			65.1
Corporate and unallocated	(12.4		)	(11.0		)		(11.9		)	(12.1		)
Amortization expense	(7.8		)	(7.8		)		(7.9		)	(7.8		)
Depreciation expense	(4.0		)	(4.3		)		(4.2		)	(4.0		)
Transaction costs								(1.2		)	—
Separation expense	(0.9		)	(3.0		)		(0.1		)	(0.9		)
Restructuring expense	(4.6		)	(1.3		)		(0.4		)	(4.6		)
Asset impairment expense	(0.4		)	—
Gain (loss) from impairment or disposal of assets — net								0.1			(0.4		)
Earnings from operations	35.0			33.7				41.6			35.3
Interest expense	(23.2		)	(8.5		)		(20.3		)	(23.2		)
Interest expense on notes with MTW — net	—			(0.1		)
Loss on early extinguishment of debt	(3.2		)	—				—			(3.2		)
Other expense — net	(1.5		)	(2.4		)		(8.5		)	(1.8		)
Earnings before income taxes	$	7.1		$	22.7			$	12.8		$	7.1

Adjusted Operating EBITDA % by segment ⁽¹⁾:
Americas	17.5		%	18.9		%		17.0		%	17.5		%
EMEA	18.9		%	11.1		%		17.4		%	18.9		%
APAC	13.2		%	9.5		%		12.6		%	13.2		%
⁽¹⁾Adjusted Operating EBITDA % in the section above is calculated by dividing the dollar amount of Adjusted Operating EBITDA by net sales for each respective segment.
⁽¹⁾Adjusted Operating EBITDA % in the section above is calculated by dividing Adjusted Operating EBITDA by net sales for each respective segment.							⁽¹⁾Adjusted Operating EBITDA % in the section above is calculated by dividing Adjusted Operating EBITDA by net sales for each respective segment.

Net sales by geographic area ⁽²⁾ :
United States	$	215.0		$	212.1			$	223.4		$	215.0
Other Americas	23.0			23.0				28.5			23.0
EMEA	54.0			57.2				62.1			54.0
APAC	36.0			33.2				36.4			36.0
Total net sales by geographic area	$	328.0		$	325.5			$	350.4		$	328.0
⁽²⁾Net sales in the section above are attributed to geographic regions based on location of customer.							⁽²⁾Net sales in the section above are attributed to geographic regions based on location of customer.

As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, total assets by reportable segment are as follows:

(in millions) March 31, 2017 December 31, 2016
Total assets by segment:
Americas $ 1,479.1
$ 1,463.7
EMEA 112.7
102.6
APAC 116.7
110.8
Corporate 128.6
92.0
Total assets $ 1,837.1
$ 1,769.1

~~19. Net Parent Company Investment and Related Party Transactions~~

~~Related Party Transactions and Cash Management Prior to the Spin-Off~~

The Company does not enter into transactions with related parties to purchase and/or sell goods or services in the ordinary course of business. Transactions between the Company and MTW are reflected in the accompanying consolidated (condensed) statements of cash flows as a financing activity in “Net transactions with MTW.” Prior to the Spin-Off, the Company participated in MTW's centralized cash management program in which cash was swept each day and held in a centralized account at the corporate level.

~~Corporate Cost Allocations Prior to the Spin-Off~~

Prior to the Spin-Off, MTW performed certain general and corporate functions on the Company's behalf. The related costs included, but were not limited to, accounting, treasury, tax, legal, human resources, audit, and information technology (“general corporate expenses”). For purposes of preparing the combined financial statements for the period prior to the Spin-Off, these costs were allocated on a basis of direct usage, where identifiable, or through the use of allocation methodologies based on percentage of sales, headcount, or other methodologies deemed appropriate by management. These general corporate expenses were included within “Selling, general and administrative expenses." Management believes the assumptions associated with allocating these costs are reasonable. Nevertheless, the combined financial statements may not include all of the actual expense that would have been incurred and may not represent the Company's results of operations, financial position, or cash flows had it been a stand-alone company during the periods prior to the Spin-Off. Actual costs that would have been incurred if the Company had been a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. General corporate expenses allocated to the Company during the three months ended March 31, 2016, were $1.6 million.

The total effect of the settlement of these intercompany transactions is reflected as a financing activity in the consolidated (condensed) statements of cash flows. However, the interest income and expense related to the notes with MTW is presented on a net basis in the consolidated (condensed) statements of operations. Interest expense on the notes with MTW was $0.1 million for the three months ended March 31, 2016.

~~Guarantees Prior to the Spin-Off~~

Certain of MTW's subsidiaries, which includes selected entities that are part of the Company, entered into guarantee agreements with MTW's lenders whereby these subsidiaries guaranteed the obligations under, and/or pledged their assets as collateral, with respect to such MTW debt. However, none of these Company subsidiaries were named as obligors in the debt agreements held in the name of MTW. For that reason, MTW did not historically allocate debt balances and/or charge out third-party debt related expenses to the Company and thus no financing costs or interest expense associated with MTW's debt was allocated to the Company's consolidated (condensed) financial statements for the period prior to the Spin-Off.

~~Post Spin-Off Activity~~

In connection with the Spin-Off, the Company entered into a series of agreements with MTW, which are intended to govern the relationship between the Company and MTW and to facilitate an orderly separation of the Company from MTW. These agreements include a Master Separation and Distribution Agreement ("Separation Agreement"), Transition Services Agreement ("TSA"), Employee Matters Agreement, Intellectual Property Matters Agreement, and Tax Matters Agreement.

In accordance with the Separation Agreement, at the time of the Spin-Off, MTW contributed its net investment in the Company and certain assets and liabilities in exchange for a $1,362.0 million cash distribution that was funded through the long-term debt incurred by the Company. In addition, separation related adjustments are included in additional paid-in capital (deficit) on the consolidated (condensed) balance sheet consisting of net liabilities assumed by the Company related to the pension plans of $21.5 million, post-retirement medical obligations of $6.8 million and income taxes payable of $0.6 million.

The Separation Agreement included provisions on the allocation of assets and liabilities between legal entities that were being split into a separate MTW and Welbilt legal entity as part of the Spin-Off. The Separation Agreement also included provisions on the split of joint administrative costs that were incurred post Spin-Off.

Under the TSA, the Company and MTW will provide each other certain specified services on a transitional basis, including, among others, payroll and other human resource services, information systems, insurance, legal, finance and other corporate services, as well as procurement and sourcing support. The charges for the transition services are generally intended to allow the providing company to fully recover the allocated direct costs of providing the services, plus all out-of-pocket costs and expenses, generally without profit except where required by local law. The Company had substantially completed its use of these transition services by the end of the first quarter of 2017.



(in millions)	March 31, 2018		December 31, 2017
Total assets by segment:
Americas	$	1,470.3	$	1,445.6
EMEA	121.2		112.1
APAC	121.6		128.7
Corporate	185.7		154.0
Total assets	$	1,898.8	$	1,840.4

~~20.~~18. Earnings Per Share

~~Basic~~

The Company computes basic earnings per share ~~("EPS") measures~~based on the ~~performance~~weighted average number of ~~an entity over the reporting period. Diluted EPS measures the performance of an entity over the reporting period while giving effect to all potentially dilutive~~ common ~~shares related to the Company's stock options, restricted stock units and performance~~ shares that were outstanding during the period.

On March 4, 2016, MTW distributed 137.0 million shares of Welbilt common stock to MTW shareholders, thereby completing the Spin-Off. Basic and diluted earnings per common share and the average number of common shares outstanding were retrospectively restated for the number of Welbilt shares outstanding immediately following this transaction. The same number of shares were used to calculate basic and diluted Diluted earnings per share ~~for~~includes the ~~prior periods presented, since no equity~~dilutive effect of common stock equivalents consisting of stock options, restricted stock awards, ~~were outstanding prior to~~restricted stock units and performance share units, using the ~~Spin-Off.~~treasury stock method. Performance share units are considered dilutive when the related performance criterion has been met.

The following is a reconciliation of the weighted average shares outstanding used to compute basic and diluted earnings per ~~share.~~share:

Three Months Ended March 31,
2017 2016
Basic weighted average common shares outstanding 138,759,075
137,016,712
Effect of dilutive securities 1,672,123
1,547,587
Diluted weighted average common shares outstanding 140,431,198
138,564,299



	Three Months Ended March 31,
	2018	2017
Weighted average shares outstanding — Basic	139,708,723	138,759,075

Effect of dilutive securities:
Stock options	736,518	867,111
Unvested restricted stock	390,226	219,777
Unvested performance share units	135,076	585,235
Effect of dilutive securities	1,261,820	1,672,123

Weighted average shares outstanding — Diluted	140,970,543	140,431,198

~~For~~

Dilutive securities outstanding, not included in the computation of earnings of share because their effect was antidilutive, for the three months ended March 31, 2018, and 2017 ~~0.8~~totaled 1.6 million ~~of common shares issuable upon the exercise of stock options were anti-dilutive~~ and ~~were excluded from the calculation of diluted shares.~~1.1 million, respectively.

On March 3, 2016, prior to the completion of the Spin-Off, the Company paid a one-time cash dividend to MTW of approximately $1,362.0 million. The Company did not declare or pay any other dividends to its stockholders during the three months ended March 31, 2017 and 2016.

~~21.~~19. Subsidiary Guarantors of Senior Notes ~~due 2024~~

The following tables present consolidating ~~(condensed)~~ financial information for (a) Welbilt; (b) the guarantors of the Senior Notes, which include substantially all of the domestic, 100% owned subsidiaries of Welbilt ("~~Subsidiary Guarantors"~~Guarantor Subsidiaries"); and (c) the wholly ~~and partially~~ owned foreign subsidiaries of Welbilt, which do not guarantee the Senior Notes ("Non-Guarantor Subsidiaries"). The information includes elimination entries necessary to consolidate the ~~Subsidiary Guarantors~~Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. Investments in subsidiaries are accounted for using the equity method of accounting. The principal elimination entries eliminate investments in subsidiaries, equity and intercompany balances and transactions. Separate financial statements of the ~~Subsidiary Guarantors~~Guarantor Subsidiaries are not presented because the guarantors are fully and unconditionally, jointly and severally liable under the guarantees, except for normal and customary release provisions.

WELBILT, INC.

Consolidating ~~(Condensed)~~ Statement of Operations

~~For the Three Months Ended March 31, 2017~~ (Unaudited)


														Three Months Ended March 31, 2018
(in millions)	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated		Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net sales	$	—		$	241.4		$	173.0	$	(86.4	)	$	328.0	$	—		$	252.1		$	204.2	$	(105.9	)	$	350.4
Cost of sales	0.9			169.7			120.8		(86.4		)	205.0		0.8			191.4			137.9		(105.9		)	224.2
Gross profit	(0.9		)	71.7			52.2		—			123.0		(0.8		)	60.7			66.3		—			126.2
Selling, general and administrative expenses	10.1			40.8			23.4		—			74.3		8.9			37.6			29.8		—			76.3
Amortization expense	—			7.1			0.7		—			7.8		—			7.1			0.8		—			7.9
Separation expense	0.9			—			—		—			0.9		0.1			—			—		—			0.1
Restructuring expense	3.7			0.9			—		—			4.6		—			(0.1		)	0.5		—			0.4
Asset impairment expense	—			0.2			0.2		—			0.4
Gain from impairment or disposal of assets — net														—			(0.1		)	—		—			(0.1		)
(Loss) earnings from operations	(15.6		)	22.7			27.9		—			35.0		(9.8		)	16.2			35.2		—			41.6
Interest expense	22.2			0.3			0.7		—			23.2		19.1			0.3			0.9		—			20.3
Loss on early extinguishment of debt	3.2			—			—		—			3.2
Other (income) expense — net	(2.9		)	(5.3		)	9.7		—			1.5		(3.6		)	(2.9		)	15.0		—			8.5
Equity in earnings (loss) of subsidiaries	30.0			12.6			—		(42.6		)	—		26.7			13.2			—		(39.9		)	—
(Loss) earnings before income taxes	(8.1		)	40.3			17.5		(42.6		)	7.1
Income (benefit) taxes	(13.1		)	10.3			4.9		—			2.1
Earnings (loss) before income taxes														1.4			32.0			19.3		(39.9		)	12.8
Income tax (benefit) expense														(11.1		)	5.3			6.1		—			0.3
Net earnings (loss)	$	5.0		$	30.0		$	12.6	$	(42.6	)	$	5.0	$	12.5		$	26.7		$	13.2	$	(39.9	)	$	12.5
Total other comprehensive income (loss), net of tax	6.8			4.4			3.9		(8.3		)	6.8		2.6			0.7			1.4		(2.1		)	2.6
Comprehensive income (loss)	$	11.8		$	34.4		$	16.5	$	(50.9	)	$	11.8	$	15.1		$	27.4		$	14.6	$	(42.0	)	$	15.1

WELBILT, INC.

Consolidating ~~(Condensed)~~ Statement of Operations

~~For the Three Months Ended March 31, 2016~~ (Unaudited)


															Three Months Ended March 31, 2017
(in millions)	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated		Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net sales	$	—		$	243.1		$	164.1		$	(81.7	)	$	325.5	$	—		$	241.4		$	173.0	$	(86.4	)	$	328.0
Cost of sales	0.3			169.8			119.5			(81.7		)	207.9		0.9			169.7			120.8		(86.4		)	205.0
Gross profit	(0.3		)	73.3			44.6			—			117.6		(0.9		)	71.7			52.2		—			123.0
Selling, general and administrative expenses	10.0			34.7			27.1			—			71.8		9.9			40.7			23.4		—			74.0
Amortization expense	—			7.1			0.7			—			7.8		—			7.1			0.7		—			7.8
Separation expense	3.0			—			—			—			3.0		0.9			—			—		—			0.9
Restructuring expense	—			1.1			0.2			—			1.3		3.7			0.9			—		—			4.6
Asset impairment expense															—			0.2			0.2		—			0.4
(Loss) earnings from operations	(13.3		)	30.4			16.6			—			33.7		(15.4		)	22.8			27.9		—			35.3
Interest expense	7.8			0.7			—			—			8.5		22.2			0.3			0.7		—			23.2
Interest expense on notes with MTW — net	—			—			0.1			—			0.1
Other expense (income) — net	9.9			45.0			(52.5		)	—			2.4
Loss on early extinguishment of debt															3.2			—			—		—			3.2
Other (income) expense — net															(2.7		)	(5.2		)	9.7		—			1.8
Equity in earnings (loss) of subsidiaries	36.5			46.7			—			(83.2		)	—		30.0			12.6			—		(42.6		)	—
Earnings (loss) before income taxes	5.5			31.4			69.0			(83.2		)	22.7
Income (benefit) taxes	(12.6		)	(5.1		)	22.3			—			4.6
(Loss) earnings before income taxes															(8.1		)	40.3			17.5		(42.6		)	7.1
Income tax (benefit) expense															(13.1		)	10.3			4.9		—			2.1
Net earnings (loss)	$	18.1		$	36.5		$	46.7		$	(83.2	)	$	18.1	$	5.0		$	30.0		$	12.6	$	(42.6	)	$	5.0
Total other comprehensive income (loss), net of tax	9.2			19.8			25.8			(45.6		)	9.2		6.8			4.4			3.9		(8.3		)	6.8
Comprehensive income (loss)	$	27.3		$	56.3		$	72.5		$	(128.8	)	$	27.3	$	11.8		$	34.4		$	16.5	$	(50.9	)	$	11.8

WELBILT, INC.

Consolidating ~~(Condensed)~~ Balance Sheet

~~As of March 31, 2017~~ (Unaudited)


															March 31, 2018
(in millions)	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated			Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	0.9		$	—	$	82.6		$	(0.9	)	$	82.6		$	10.6	$	—	$	143.3		$	(0.1	)	$	153.8
Restricted cash	—			—		0.2			—			0.2			—		—		0.3			—			0.3
Accounts receivable — net	—			0.5		93.4			(1.1		)	92.8			—		—		92.1			(1.6		)	90.5
Inventories — net	—			83.5		87.5			—			171.0			—		84.5		92.9			—			177.4
Prepaids and other current assets	13.1			4.3		11.6			(3.2		)	25.8			8.1		6.6		10.0			—			24.7
Current assets held for sale	—			4.6		2.6			—			7.2
Total current assets	14.0			92.9		277.9			(5.2		)	379.6			18.7		91.1		338.6			(1.7		)	446.7
Property, plant and equipment — net	1.4			64.9		41.4			—			107.7			0.5		68.5		43.6			—			112.6
Goodwill	—			832.4		13.2			—			845.6					832.5		14.1			—			846.6
Other intangible assets — net	—			416.4		61.5			—			477.9			—		389.2		66.5			—			455.7
Intercompany long-term note receivable	—			20.0		—			(20.0		)	—			—		20.0		—			(20.0		)	—
Due from affiliates	—			3,071.1		—			(3,071.1		)	—					3,229.6		—			(3,229.6		)	—
Investment in subsidiaries	3,810.3			—		—			(3,810.3		)	—			4,042.4		—		—			(4,042.4		)	—
Other non-current assets	7.2			5.2		19.7			(5.8		)	26.3			10.4		4.7		31.2			(9.1		)	37.2
Total assets	$	3,832.9		$	4,502.9	$	413.7		$	(6,912.4	)	$	1,837.1		$	4,072.0	$	4,635.6	$	494.0		$	(7,302.8	)	$	1,898.8
Liabilities and equity
Current liabilities:
Accounts payable	$	1.2		$	60.9	$	56.9		$	(1.1	)	$	117.9		$	0.2	$	59.2	$	55.1		$	(1.6	)	$	112.9
Accrued expenses and other liabilities	21.9			68.7		47.1			—			137.7			13.6		68.7		55.9			—			138.2
Short-term borrowings	—			0.9		4.0			(0.9		)	4.0
Current portion of long-term debt and capital leases	—			0.4		0.2			—			0.6
Current portion of capital leases															—		0.5		0.2			—			0.7
Product warranties	—			18.4		9.4			(3.2		)	24.6			—		17.2		9.0			—			26.2
Total current liabilities	23.1			149.3		117.6			(5.2		)	284.8			13.8		145.6		120.2			(1.6		)	278.0
Long-term debt and capital leases	1,350.9			1.6		0.9			—			1,353.4			1,277.6		1.1		0.8			—			1,279.5
Deferred income taxes	118.6			—		17.7			—			136.3			72.9		—		18.8			—			91.7
Pension and postretirement health obligations	46.8			4.9		—			(5.8		)	45.9			50.5		4.7		—			(9.2		)	46.0
Intercompany long-term note payable	15.7			—		4.3			(20.0		)	—			15.7		—		4.3			(20.0		)	—
Due to affiliates	2,286.5			—		784.6			(3,071.1		)	—			2,466.6		—		763.0			(3,229.6		)	—
Investment in subsidiaries	—			512.0		—			(512.0		)	—			—		417.6		—			(417.6		)	—
Other long-term liabilities	17.6			24.8		0.6			—			43.0			42.6		24.2		4.5			—			71.3
Total non-current liabilities	3,836.1			543.3		808.1			(3,608.9		)	1,578.6			3,925.9		447.6		791.4			(3,676.4		)	1,488.5
Total (deficit) equity:
Total (deficit) equity	(26.3		)	3,810.3		(512.0		)	(3,298.3		)	(26.3		)
Total equity (deficit):
Total equity (deficit)															132.3		4,042.4		(417.6		)	(3,624.8		)	132.3
Total liabilities and equity	$	3,832.9		$	4,502.9	$	413.7		$	(6,912.4	)	$	1,837.1		$	4,072.0	$	4,635.6	$	494.0		$	(7,302.8	)	$	1,898.8

WELBILT, INC.

Consolidating ~~(Condensed)~~ Balance Sheet

~~As of December 31, 2016~~ (Audited)


															December 31, 2017
(in millions)	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated			Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	0.4		$	2.3	$	51.1		$	—		$	53.8		$	8.8	$	—	$	120.4		$	(0.8	)	$	128.4
Restricted cash	—			—		6.4			—			6.4			—		—		0.3			—			0.3
Accounts receivable — net	0.5			—		86.1			(4.9		)	81.7			—		—		84.7			(1.0		)	83.7
Inventories — net	—			74.3		71.3			—			145.6			—		69.8		82.5			—			152.3
Prepaids and other current assets	0.9			4.5		8.5			—			13.9			5.3		5.9		7.8			—			19.0
Current assets held for sale	—			2.3		4.5			—			6.8
Total current assets	1.8			83.4		227.9			(4.9		)	308.2			14.1		75.7		295.7			(1.8		)	383.7
Property, plant and equipment — net	1.2			67.9		40.0			—			109.1			0.5		68.7		43.0			—			112.2
Goodwill	—			832.4		12.9			—			845.3			—		832.4		13.7			—			846.1
Other intangible assets — net	—			423.5		60.9			—			484.4			—		396.3		65.1			—			461.4
Intercompany long-term note receivable	—			20.0		—			(20.0		)	—			—		20.0		—			(20.0		)	—
Due from affiliates	—			3,085.8		—			(3,085.8		)	—			—		3,239.8		—			(3,239.8		)	—
Investment in subsidiaries	3,780.3			—		—			(3,780.3		)	—			4,015.6		—		—			(4,015.6		)	—
Other non-current assets	2.7			5.1		19.7			(5.4		)	22.1			10.8		5.2		28.7			(7.7		)	37.0
Total assets	$	3,786.0		$	4,518.1	$	361.4		$	(6,896.4	)	$	1,769.1		$	4,041.0	$	4,638.1	$	446.2		$	(7,284.9	)	$	1,840.4
Liabilities and equity
Current liabilities:
Accounts payable	$	0.1		$	64.6	$	48.6		$	(4.9	)	$	108.4		$	0.2	$	58.2	$	47.0		$	(1.8	)	$	103.6
Accrued expenses and other liabilities	14.1			97.5		62.9			—			174.5			19.1		86.1		56.5			—			161.7
Current portion of capital leases	—			0.5		1.1			—			1.6			—		0.5		0.2			—			0.7
Product warranties	—			18.4		9.5			—			27.9			—		16.2		7.9			—			24.1
Current liabilities held for sale	—			—		0.7			—			0.7
Total current liabilities	14.2			181.0		122.8			(4.9		)	313.1			19.3		161.0		111.6			(1.8		)	290.1
Long-term debt and capital leases	1,277.0			1.7		—			—			1,278.7			1,230.2		1.2		0.8			—			1,232.2
Deferred income taxes	120.5			—		17.3			—			137.8			74.7		—		17.6			—			92.3
Pension and postretirement health obligations	47.9			4.9		—			(5.4		)	47.4			51.3		4.7		—			(7.7		)	48.3
Intercompany long-term note payable	15.7			—		4.3			(20.0		)	—			15.7		—		4.3			(20.0		)	—
Due to affiliates	2,344.8			—		741.0			(3,085.8		)	—			2,501.4		—		738.4			(3,239.8		)	—
Investment in subsidiaries	—			524.6		—			(524.6		)	—			—		430.8		—			(430.8		)	—
Other long-term liabilities	9.4			25.6		0.6			—			35.6			38.0		24.8		4.3			—			67.1
Total non-current liabilities	3,815.3			556.8		763.2			(3,635.8		)	1,499.5			3,911.3		461.5		765.4			(3,698.3		)	1,439.9
Total (deficit) equity:
Total (deficit) equity	(43.5		)	3,780.3		(524.6		)	(3,255.7		)	(43.5		)
Total equity (deficit):
Total equity (deficit)															110.4		4,015.6		(430.8		)	(3,584.8		)	110.4
Total liabilities and equity	$	3,786.0		$	4,518.1	$	361.4		$	(6,896.4	)	$	1,769.1		$	4,041.0	$	4,638.1	$	446.2		$	(7,284.9	)	$	1,840.4

WELBILT, INC.

Consolidating ~~(Condensed)~~ Statement of Cash Flows

~~For the Three Months Ended March 31, 2017~~ (Unaudited)


																Three Months Ended March 31, 2018
(in millions)	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated			Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities
Net cash used in operating activities	$	(16.9	)	$	(15.6	)	$	(18.1	)	$	—		$	(50.6	)
Net cash (used in) provided by operating activities																$	(18.7	)	$	(8.0	)	$	(127.5	)	$	0.7		$	(153.5	)
Cash flows from investing activities
Cash receipts on beneficial interest sold in receivables																—			—			131.8			—			131.8
Capital expenditures	(0.3		)	(2.2		)	(2.4		)	—			(4.9		)	(0.1		)	(2.1		)	(1.5		)	—			(3.7		)
Changes in restricted cash	—			—			6.2			—			6.2
Intercompany investment	(58.3		)	—			—			58.3			—			—			10.2			24.6			(34.8		)	—
Net cash (used in) provided by investing activities	(58.6		)	(2.2		)	3.8			58.3			1.3			(0.1		)	8.1			154.9			(34.8		)	128.1
Cash flows from financing activities
Proceeds from long-term debt and capital leases	78.0			—			0.9			—			78.9			74.0			—			—			—			74.0
Repayments on long-term debt and capital leases	(1.5		)	(0.1		)	(0.9		)	—			(2.5		)	(19.0		)	(0.1		)	(0.1		)	—			(19.2		)
Debt issuance costs	(1.4		)	—			—			—			(1.4		)	(0.1		)	—			—			—			(0.1		)
Changes in short-term borrowings	—			0.9			4.0			(0.9		)	4.0
Exercises of stock options	0.9			—			—			—			0.9			2.5			—			—			—			2.5
Payments on tax withholdings for equity awards																(2.0		)	—			—			—			(2.0		)
Intercompany financing	—			14.7			43.6			(58.3		)	—			(34.8		)	—			—			34.8			—
Net cash provided by (used in) financing activities	76.0			15.5			47.6			(59.2		)	79.9			20.6			(0.1		)	(0.1		)	34.8			55.2
Effect of exchange rate changes on cash	—			—			(1.8		)	—			(1.8		)	—			—			(4.4		)	—			(4.4		)
Net increase (decrease) in cash and cash equivalents	0.5			(2.3		)	31.5			(0.9		)	28.8
Net increase in cash and cash equivalents and restricted cash																1.8			—			22.9			0.7			25.4
Balance at beginning of period	0.4			2.3			51.1			—			53.8			8.8			—			120.7			(0.8		)	128.7
Balance at end of period	$	0.9		$	—		$	82.6		$	(0.9	)	$	82.6		$	10.6		$	—		$	143.6		$	(0.1	)	$	154.1

WELBILT, INC.

Consolidating ~~(Condensed)~~ Statement of Cash Flows

~~For the Three Months Ended March 31, 2016~~ (Unaudited)


																Three Months Ended March 31, 2017
(in millions)	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated			Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities
Net cash provided by (used in) operating activities	$	14.0		$	(39.8	)	$	2.8		$	—		$	(23.0	)
Net cash used in operating activities																$	(14.8	)	$	(15.6	)	$	(134.0	)	$	—		$	(164.4	)
Cash flows from investing activities
Cash receipts on beneficial interest in sold receivables																—			—			115.9			—			115.9
Capital expenditures	(0.9		)	(1.6		)	(2.0		)	—			(4.5		)	(0.3		)	(2.2		)	(2.4		)	—			(4.9		)
Changes in restricted cash	—			—			0.3			—			0.3
Intercompany investment	(40.5		)	—			—			40.5			—			(58.3		)	—			—			58.3			—
Net cash (used in) provided by investing activities	(41.4		)	(1.6		)	(1.7		)	40.5			(4.2		)	(58.6		)	(2.2		)	113.5			58.3			111.0
Cash flows from financing activities
Proceeds from long-term debt and capital leases	1,424.0			0.2			7.2			—			1,431.4			78.0			—			0.9			—			78.9
Repayments on long-term debt and capital leases	—			(0.2		)	—			—			(0.2		)	(1.5		)	(0.1		)	(0.9		)	—			(2.5		)
Debt issuance costs	(40.6		)	—			—			—			(40.6		)	(1.4		)	—			—			—			(1.4		)
Changes in short-term borrowings	—			1.6			14.5			(1.6		)	14.5			—			0.9			4.0			(0.9		)	4.0
Dividend paid to MTW	(1,362.0		)	—			—			—			(1,362.0		)
Net transactions with MTW	6.1			—			—			—			6.1
Exercises of stock options	0.1			—			—			—			0.1			0.9			—			—			—			0.9
Payments on tax withholdings for equity awards																(2.1		)	—			—			—			(2.1		)
Intercompany financing	—			36.3			4.2			(40.5		)	—			—			14.7			43.6			(58.3		)	—
Net cash provided by (used in) financing activities	27.6			37.9			25.9			(42.1		)	49.3			73.9			15.5			47.6			(59.2		)	77.8
Effect of exchange rate changes on cash	—			—			0.5			—			0.5			—			—			(1.8		)	—			(1.8		)
Net increase (decrease) in cash and cash equivalents	0.2			(3.5		)	27.5			(1.6		)	22.6
Net increase (decrease) in cash and cash equivalents and restricted cash																0.5			(2.3		)	25.3			(0.9		)	22.6
Balance at beginning of period	—			3.5			28.5			—			32.0			0.4			2.3			57.5			—			60.2
Balance at end of period	$	0.2		$	—		$	56.0		$	(1.6	)	$	54.6		$	0.9		$	—		$	82.8		$	(0.9	)	$	82.8

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of ~~the~~our financial condition and results of ~~our~~ operations should be read in conjunction with ~~the~~our unaudited consolidated ~~(condensed)~~ financial statements and ~~the~~ related notes ~~of Welbilt, Inc.~~ included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with ~~the~~our audited consolidated financial statements and ~~the~~ related notes ~~of Welbilt, Inc.~~ included in our ~~most recent~~ Annual Report on Form ~~10-K.~~10-K for the fiscal year ended December 31, 2017. The ~~financial~~results of operations and other information included herein ~~may~~are not necessarily ~~reflect our~~indicative of the financial condition, results of operations and cash flows that may be expected in ~~the~~ future ~~or what our financial condition, results of operation and cash flows would have been had Welbilt, Inc. been an independent, publicly-traded company prior to March 4, 2016.~~periods. This Quarterly Report on Form 10-Q, including matters discussed under this "Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,"contains forward-looking statements ~~as described~~relating to our plans, estimates and beliefs that involve important risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Information" for a discussion of the risks, uncertainties and assumptions that may cause actual results to differ materially from those discussed in ~~“Cautionary Statements about Forward-Looking Information."~~

~~Business Overview~~

On January 29, 2015, The Manitowoc Company, Inc. ("MTW") announced plans to create two independent public companies to separately operate its two businesses: its Cranes business and its Foodservice business. To effect the separation, MTW first undertook an internal reorganization, following which MTW held the Cranes business, and Manitowoc Foodservice, Inc. ("MFS") held the Foodservice business. Then on March 4, 2016, MTW distributed all the MFS common stock to MTW's shareholders on a pro rata basis, and MFS became an independent publicly traded company.

On March 6, 2017, we rebranded the Company, our logo and our brand identity to Welbilt, Inc. The change was the final part of our strategic repositioning after the Spin-Off. To meet our future growth objectives, we will focus on further developing our portfolio of 12 award-winning brands under our new corporate name.forward -looking statements. The financial condition and results of operations 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,” “we,” “our”~~"Company," "Welbilt," "we," "our" or ~~“us.”~~"us."

Business Overview

We are one of the world’s leading commercial foodservice equipment companies. We design and manufacture a complementary portfolio of hot and cold foodservice equipment products integrated under one operating company and supported by ~~a growing~~the Company's aftermarket parts and repair service business. Our capabilities span refrigeration, ice-making, cooking, holding, food-preparation and beverage-dispensing technologies, which allow us to equip entire commercial kitchens and serve the world’s growing demand for food prepared away from home. Our suite of products is used by commercial and institutional foodservice operators including full-service restaurants, quick-service restaurant chains, hotels, caterers, supermarkets, convenience stores, business and industry, hospitals, schools and other institutions. Our products and aftermarket parts and service support are recognized by our customers and channel partners for their quality, reliability and durability that ~~enable~~promote profitable growth for our end customers ~~profitable growth~~ by improving their menus, enhancing operations and reducing costs.

Our products are sold in over 100 countries globally, across the Americas; Europe, Middle East and Africa ("EMEA"); and Asia Pacific ("APAC"). Our products, services and solutions are marketed through a worldwide network of over 3,000 dealers and distributors under our portfolio of 12 award-winning brands, including Cleveland™, Convotherm®, Delfield®, fitkitchen^SM, Frymaster®, Garland®, Kolpak®, Lincoln™, Manitowoc® Ice, Merco®, Merrychef® and Multiplex®. All of our products are supported by KitchenCare®, our aftermarket parts and repair service business.

We manage our business in three geographic reportable segments: Americas, ~~EMEA,~~Europe, Middle East and ~~APAC.~~Africa ("EMEA"), and Asia Pacific ("APAC"). The Americas segment includes the United States ("U.S."), Canada and Latin America. The EMEA segment is made up of markets in Europe, ~~Middle East and Africa,~~ including Russia and the Commonwealth of Independent ~~States.~~States, Middle East and Africa. The APAC segment is principally ~~comprised of~~comprises markets in China, ~~India, Singapore, Malaysia, Thailand,~~Australia, Japan, Philippines, ~~Indonesia, Japan,~~ South Korea, ~~Australia~~Singapore, Indonesia, Taiwan, Hong Kong, Thailand, Malaysia and New Zealand. These segments represent the level at which separate financial information is available and which is used by management to assess performance and allocate resources. The Company evaluates segment performance based upon earnings before interest, taxes, other ~~(income)~~ expense - net, depreciation and amortization expense and is adjusted for certain other non-cash or non-recurring items, including ~~asset~~gain or loss from impairment or disposal of assets, restructuring expense, separation ~~charges and~~expense, loss on early extinguishment of debt and acquisition-related transaction costs ("Adjusted Operating EBITDA"). See Note ~~18,~~17, "Business Segments," included ~~elsewhere~~ in Item 1 of Part I of this Quarterly Report on Form 10-Q for further discussion on our reportable segments.

Global and regional markets for food and foodservice are growing. On a global scale, the demand for affordable dining is expected to continue increasing. Market growth is expected to be driven by, among other factors, disposable income, increased employment, investment in new establishments and the underlying trend for increased convenience.

Overall, we believe that continued growth in demand for foodservice equipment will result from the development of new restaurant concepts in the U.S., the expansion of U.S. and foreign chains into international markets, the replacement and upgrade of existing equipment, and new equipment requirements resulting from menu changes as well as waste reduction. We expect to benefit from these trends, and grow market penetration alongside our customers as they expand into new service categories and geographies. We believe we are well-positioned to take advantage of worldwide growth opportunities with global and regional new product introductions, improvement in operational performance and other strategic initiatives.

Our 2018 strategic objectives include continued execution of our Simplification and Right-Sizing initiatives that include 80/20 pricing, product-line and customer-line simplification, product cost take out, lean manufacturing implementation, strategic sourcing, KitchenCare® operational improvements, manufacturing capacity reduction and reduction in workforce in order to further realize margin improvements.

Our specific objectives include:

Achieve profitable growth;

Create innovative products and solutions;

Guarantee customer satisfaction;

Drive operational excellence; and

Develop great people.

We intend to achieve sustainable growth globally and drive increased profitability by leveraging our position as a leading commercial foodservice equipment provider, while selectively pursuing strategic acquisitions and partnerships, growing our customer base, expanding the frontiers of foodservice innovation and continuing to attract and grow industry-leading talent.

We continue to focus on developing new product and system solutions to support future revenues, reducing long-term debt obligations and developing our acquisition pipeline. General market conditions in the second half of 2017 were soft, however, have begun stabilizing in the first quarter of 2018. We expect this stabilization to continue through the second quarter and gradually improve in the second half of 2018. We remain focused on pursuing sales that support our margin objectives and will continue the 80/20 customer line simplification actions as necessary to protect against margin-dilutive sales. We expect these actions will take place in the second half of 2018. We also expect that increased demand from large chain customers, improved market conditions, new product rollouts and the initial rollouts of our FitKitchen^® systems will help drive increased sales in 2018. Our Simplification and Right-Sizing initiatives, hedging activities and additional price increases are anticipated to offset the inflationary impacts from rising material and freight costs.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). Components of the Tax Act that are effective in 2018, include reduction of the U.S. federal corporate statutory tax rate to 21%, new provisions designated as global intangible low-taxed income (“GILTI”), foreign derived intangible income ("FDII"), interest disallowance and base erosion anti-abuse tax ("BEAT"). As a result of the complex changes included in the Tax Act, additional legislative and regulatory guidance is expected to be issued, which could impact our effective tax rate in future periods.

On April 19, 2018, we acquired 100% of the share capital of Avaj International Holding AB ("Avaj") (the “Crem Acquisition”) for aggregate consideration of approximately 1,800 million Swedish Krona ("SEK") or $220.3 million based on the exchange rate in effect on the closing date. Crem International Holding AB (“Crem”), a wholly-owned subsidiary of Avaj, develops, manufactures and markets a full suite of coffee machines under three brands: Coffee Queen^®, Expobar^® and Spengler for use in offices, restaurants, cafes and coffee shops, catering and convenience stores. This acquisition provides us with an established presence in hot beverage equipment, a complementary product category, and we expect to realize operational synergies and cross-selling benefits. In addition, the acquisition supports our strategic objective of increasing our presence in Europe and Asia. This acquisition was funded through cash on hand and additional borrowings under existing credit lines.

We are exploring additional acquisition opportunities that complement our product lines, allow us to expand our presence in international markets, enable us to leverage our distribution capabilities, provide us with selective technologies and/or otherwise support the expansion of our business in a manner that is consistent with our strategic goals.

Results of Operations for the Three Months Ended March 31, ~~2017~~2018 and ~~2016~~2017

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


	Three months ended March 31,				Change					Three Months Ended March 31,					Change
Millions of dollars, except per share data	2017		2016		$			%
(in millions)										2018			2017		$			%
Net sales	$	328.0	$	325.5	$	2.5		0.8	%	$	350.4		$	328.0	$	22.4		6.8	%
Cost of sales	205.0		207.9		(2.9		)	(1.4	)%	224.2			205.0		19.2			9.4	%
Gross profit	123.0		117.6		5.4			4.6	%	126.2			123.0		3.2			2.6	%
Selling, general and administrative expenses	74.3		71.8		2.5			3.5	%	76.3			74.0		2.3			3.1	%
Amortization expense	7.8		7.8		—			—	%	7.9			7.8		0.1			1.3	%
Separation expense	0.9		3.0		(2.1		)	(70.0	)%	0.1			0.9		(0.8		)	(88.9	)%
Restructuring expense	4.6		1.3		3.3			253.8	%	0.4			4.6		(4.2		)	(91.3	)%
Asset impairment expense	0.4		—		0.4			100.0	%
(Gain) loss from impairment or disposal of assets — net										(0.1		)	0.4		(0.5		)	N/M
Earnings from operations	35.0		33.7		1.3			3.9	%	41.6			35.3		6.3			17.8	%
Interest expense	23.2		8.5		14.7			172.9	%	20.3			23.2		(2.9		)	(12.5	)%
Interest expense on notes with MTW — net	—		0.1		(0.1		)	(100.0	)%
Loss on early extinguishment of debt	3.2		—		3.2			100.0	%	—			3.2		(3.2		)	N/M
Other expense — net	1.5		2.4		(0.9		)	(37.5	)%	8.5			1.8		6.7			372.2	%
Earnings before income taxes	7.1		22.7		(15.6		)	(68.7	)%	12.8			7.1		5.7			80.3	%
Income taxes	2.1		4.6		(2.5		)	(54.3	)%	0.3			2.1		(1.8		)	(85.7	)%
Net earnings	$	5.0	$	18.1	$	(13.1	)	(72.4	)%	$	12.5		$	5.0	$	7.5		150.0	%
N/M = Not Meaningful

Analysis of Net Sales

Net sales for our reportable segments comprised the following for the periods presented:


	Dollars of Sales													Percent of Sales
	Three Months Ended March 31,						Dollar Change Fav / (Unfav)				Percent Change Fav / (Unfav)			Three Months Ended March 31,						Three Months Ended March 31,						Dollar Change Fav / (Unfav)			Percent Change Fav / (Unfav)
(in millions)	2017			2016						2017				2016			2018				2017					Dollar Change Fav / (Unfav)			Percent Change Fav / (Unfav)
Net sales:							Dollar Change Fav / (Unfav)
Americas	$	267.5		$	263.6		$	3.9			Percent Change Fav / (Unfav)	1.5	%		81.6	%		81.0	%		$	280.2		$	267.5		$	12.7		4.7	%
EMEA	67.8			68.6			(0.8		)		(1.2	)%		20.7	%		21.1	%		81.0			67.8			13.2			19.5	%
APAC	41.7			38.9			2.8				7.2	%		12.7	%		11.9	%		43.5			41.7			1.8			4.3	%
Elimination of intersegment sales	(49.0		)	(45.6		)	(3.4		)		7.5	%		(15.0	)%		(14.0	)%		(54.3		)	(49.0		)	(5.3		)	10.8	%
Total net sales	$	328.0		$	325.5		$	2.5			0.8	%		100.0	%		100.0	%		$	350.4		$	328.0		$	22.4		6.8	%

Consolidated net sales totaled ~~$328.0~~$350.4 million for the three months ended March 31, ~~2017,~~2018, representing ~~a $2.5~~an increase of $22.4 million, or ~~0.8%~~6.8%, ~~increase~~ compared to the prior year period. ~~Foreign~~The increase was primarily driven by higher volumes from new product rollouts with large chain customers. Additionally, foreign currency translation ~~negatively~~favorably impacted net sales for the three months ended March 31, ~~2017~~2018 by ~~$5.0~~$10.3 million, or ~~1.5%~~3.1%.

Net sales in the Americas segment for the three months ended March 31, ~~2017~~2018 increased ~~$3.9~~$12.7 million, or ~~1.5%, which consisted~~4.7% as a result of higher third-party net sales of $12.1 million and higher intersegment sales of ~~$3.5 million and an increase in third party~~$0.6 million. The third-party net sales ~~of $0.4 million. Third party net sales increased~~increase was primarily ~~due to improved KitchenCare® sales and increased~~driven by higher sales of ~~cold-side~~hot-side products ~~which were partially~~for new rollouts by large chain customers offset in part by ~~lower hot-side product sales and lost sales from 80/20 product line simplification.~~decreased KitchenCare^® aftermarket sales. Foreign currency translation had a ~~$0.5~~favorable impact of $1.4 million ~~positive impact~~ on ~~third party~~third-party net sales for the three months ended March 31, ~~2017.~~2018.

Net sales in the EMEA segment for the three months ended March 31, ~~2017 decreased $0.8~~2018 increased $13.2 million, or ~~1.2%~~19.5%, which consisted of ~~a decrease in third party~~higher third-party net sales of ~~$1.3~~$10.3 million ~~offset by higher~~and an increase in intersegment sales of ~~$0.5~~$2.9 million. ~~Third party~~Third-party net sales ~~decreased~~increased primarily due to ~~the negative impact from foreign~~higher sales of hot-side products for a new rollout with a large chain customer and improved KitchenCare^®aftermarket sales. Foreign currency translation had a positive impact of ~~$5.0~~$7.7 million on third-party net sales for the three months ended March 31, 2017 and lost sales from 80/20 product line simplification. This was offset by increased sales of our hot-side products primarily driven by the continued roll-out of our Merrychef® e2 high-speed ovens and increased sales of our beverage systems.2018.

Net sales in the APAC segment for the three months ended March 31, ~~2017~~2018 increased ~~$2.8~~$1.8 million, or ~~7.2%~~4.3%, which consisted of ~~an increase in third party~~higher intersegment sales of $1.8 million. Third-party net sales ~~of $3.4 million,~~includes increased hot-side product sales offset by lower ~~intersegment~~Fabristeel project sales ~~of $0.6 million. Third party net sales increased primarily due to higher sales of hot-side products~~ and ~~KitchenCare® parts.~~a decrease in KitchenCare^® aftermarket sales. Foreign currency translation had a ~~$0.5~~positive impact of $1.2 million ~~negative impact~~ on ~~third party~~third-party net sales for the three months ended March 31, ~~2017.~~2018.

Analysis of Earnings from Operations

~~The following table presents earnings from operations for our consolidated results for the periods presented:~~

Dollars of Earnings from Operations
Three months ended March 31, Dollar
Change
Fav / (Unfav) Percent Change
Fav / (Unfav)
(in millions) 2017 2016
Earnings from operations:
Total earnings from operations $ 35.0
$ 33.7
$ 1.3
3.9 %

Consolidated earnings from operations for the three months ended March 31, ~~2017~~2018 totaled ~~$35.0~~$41.6 million, an increase of ~~$1.3~~$6.3 million, or ~~3.9%~~17.8%, compared to the prior year period, which was principally driven byby: (i) savings from the Simplification and Right-Sizing Initiatives of ~~approximately $9.9~~$10.2 million, (ii) $6.8 million favorable impact from increased volumes, (iii) a positive foreign currency translation impact of $2.5 million and (iv) a ~~decrease~~reduction in ~~separation~~restructuring costs ~~incurred in connection with the Spin-Off~~ of ~~$2.1~~$4.2 million. ~~This was~~These favorable impacts were partially offset by ~~one-time restructuring charges associated with executive retirement, as well as material price inflation~~(i) an unfavorable product mix impact of $10.9 million, (ii) $4.0 million of increased compensation expenses and ~~higher compensation. Our Simplification~~(iii) an increase of $2.3 million in selling, general and Right-Sizing Initiatives include 80/20 pricing, product and customer rationalization, product cost take out, lean implementation, strategic sourcing, manufacturing capacity reduction and reduction in workforce.administrative expenses.

Total selling, general and administrative expenses amounted to ~~$74.3~~$76.3 million for the three months ended March 31, ~~2017,~~2018, an increase of ~~$2.5~~$2.3 million, or ~~3.5%~~3.1%, compared to the prior year period. ~~The~~This increase was principally due to ~~higher spending on innovation~~an unfavorable impact from foreign currency translation of $2.6 million and ~~new product development of $2.5 million, $1.5~~$1.2 million of professional services and other direct costs incurred ~~for~~in connection with the ~~2017 NAFEM biennial event and $0.8 million from additional headcount.~~acquisition of Crem. These increases were partially offset by ~~the impact~~lower employee related expenses of ~~foreign currency translation of $1.0~~$1.4 million ~~a reduction~~resulting from company-wide workforce reductions completed in ~~incentive compensation accruals of $0.6 million and cost containment savings of $0.5 million.~~2017.

Analysis of Segment Adjusted Operating EBITDA

Adjusted Operating EBITDA for our reportable segments comprised the following for the periods presented:


	Dollars of Segment Adjusted Operating EBITDA
	Three months ended March 31,				Dollar Change Fav / (Unfav)			Percent Change Fav / (Unfav)			Three Months Ended March 31,					Dollar Change Fav / (Unfav)		Percent Change Fav / (Unfav)
(in millions)	2017		2016					Percent Change Fav / (Unfav)		2018			2017			Dollar Change Fav / (Unfav)		Percent Change Fav / (Unfav)
Segment Adjusted Operating EBITDA:					Dollar Change Fav / (Unfav)
Americas	$	46.8	$	49.8	$	(3.0	)	(6.0	)%		$	47.6		$	46.8	$	0.8	1.7	%
EMEA	12.8		7.6		5.2			68.4	%		14.1			12.8		1.3		10.2	%
APAC	5.5		3.7		1.8			48.6	%		5.5			5.5		—		—	%
Total Segment Adjusted Operating EBITDA	$	65.1	$	61.1	$	4.0		6.5	%		$	67.2		$	65.1	$	2.1	3.2	%

Adjusted Operating EBITDA in the Americas segment for the three months ended March 31, ~~2017 decreased~~2018 increased by ~~$3.0~~$0.8 million, or ~~6.0%, despite the~~1.7%. This increase ~~in net sales. This decrease~~ was primarily driven ~~by the negative impact from lower sales volume and material price inflation, partially offset by $8.5~~by: (i) savings of $7.4 million ~~of savings~~ from the Simplification and Right-Sizing ~~Initiatives.~~Initiatives, (ii) favorable product volumes of $3.3 million and (iii) $2.8 million of general spending decreases. These increases were partially offset by $11.1 million of unfavorable product mix and $2.6 million of compensation cost increases.

Adjusted Operating EBITDA in the EMEA segment for the three months ended March 31, ~~2017~~2018 increased ~~by $5.2~~by: $1.3 million, or ~~68.4%~~10.2%, which was primarily driven by ~~better pricing, higher sales volume and~~ savings from the Simplification and Right-Sizing Initiatives of ~~approximately $0.8~~$2.2 million and favorable foreign currency translation impact of $1.7 million. These increases were partially offset by ~~the negative impact from foreign currency translation.~~higher compensation costs and increased overhead costs.

Adjusted Operating EBITDA in the APAC segment for the three months ended March 31, ~~2017 increased by $1.8 million, or 48.6%,~~2018 was consistent period over period, which ~~was primarily driven~~comprises an increase in overhead costs offset by higher ~~sales volume, operating efficiency improvements and savings from the Simplification and Right-Sizing Initiatives of $0.6 million.~~

product volumes.

Analysis of Non-Operating Income Statement Items

For the three months ended March 31, ~~2017,~~2018, interest expense was ~~$23.2~~$20.3 million, a ~~$14.7~~$2.9 million ~~increase~~decrease from the prior year period, which was primarily due to ~~interest expense being recorded for only a portion~~two repricing events of ~~the first quarter of 2016 as we issued $1,400.0 million of long-term debt~~our Term Loan B facility in ~~March 2016. See "—Liquidity and Capital Resources"~~2017, as well as Note 10, "Debt," to our unaudited consolidated (condensed) financial statements included elsewhere in this Quarterly Reporting on Form 10-Q for further discussion on our long-term debt and related future interest obligations.reduced borrowings period over period. The loss on early extinguishment of debt of $3.2 million recognized in the first quarter of 2017 includes the correction of an error: during the the first quarter of 2017, we recorded an out-of-period adjustment of $2.7 million for the loss incurred on prepayments made on our Term Loan B Facility (as defined herein) in 2016 related to unamortized debt issuance costs; we also recorded an associated income tax benefit of $1.0 million that was recognized as a discrete adjustment in the income tax provision for the first quarter of 2017. ~~The remaining "Other~~See "—Liquidity and Capital Resources" as well as Note 8, "Debt," in Item 1 of Part I of this Quarterly Report on Form 10-Q for further discussion on our long-term debt.

"Other expense—net" primarily reflects ~~primarily amortization~~the loss of ~~debt issuance costs~~$7.8 million on the ~~aforementioned long-term debt, gains and losses on the disposal of businesses and~~ foreign currency ~~gains and losses.~~hedge for the Crem Acquisition purchase price.

Analysis of Income Taxes

Our effective tax rate for the three months ended March 31, 2018 and 2017 was 2.3% and ~~2016 was~~ 29.6% ~~and 20.3%~~, respectively. The ~~increase~~decrease in the Company's effective tax rate for the three months ended March 31, ~~2017,~~2018 relative to the three months ended March 31, ~~2016,~~2017, was primarily due to the ~~geographic shift of global earnings from lower-rate foreign jurisdictions to higher-rate U.S. source income. Additionally, $2.9 million~~reduction in ~~tax related out-of-period balance sheet adjustments related to~~ the Spin-Off were recognized as a discrete benefit in the income tax provision for the first quarter of 2016, whereas a $1.0 million income tax benefit was recognized as a discrete item during the first quarter of 2017 related to the $2.7 million out-of-period adjustment for unamortized debt issuance costs of the Term Loan B facility as discussed in Note 10, "Debt," to our unaudited consolidated (condensed) financial statements included elsewhere in this Quarterly Report on Form 10-Q.

~~In connection with the Spin-Off, tax account balances will be adjusted as necessary upon filing of the 2016 Welbilt and MTW’s U.S. corporate tax returns.~~

~~The Company's effective tax rate varies from the 35.0%~~ U.S. federal statutory rate ~~due~~ to ~~the relative weighting of foreign earnings before income taxes~~21.0% for 2018 as compared to 35.0% for 2017 and ~~foreign effective~~an increase in discrete tax ~~rates that are generally lower than the U.S. federal statutory rate. Foreign earnings are generated from operations in our three reportable segments of Americas, EMEA, and APAC.~~benefits.

Liquidity and Capital Resources

Overview of Factors Affecting our Liquidity

Cash is managed centrally with net earnings reinvested locally and working capital requirements met from cash and cash equivalents, cash flows from operations and capacity under our existing credit facilities. At March 31, 2018, we had $153.8 million of cash and cash equivalents, 93% of which was outside of the U.S. Given debt service requirements in the U.S. and our international operations, a significant portion of our cash is denominated in foreign currencies. We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. Management’s intent is to reinvest the earnings of foreign subsidiaries indefinitely outside the U.S., irrespective of the Tax Act. The ~~Company's~~Tax Act includes the Deemed Repatriation Transition Tax provision ("Transition Tax") that imposes a tax on foreign earnings whether or not such earnings are repatriated to the U.S. As a result of the Transition Tax, management is reviewing the current position on the reinvestment of the earnings of foreign subsidiaries outside of the U.S. This review may be impacted by a number of additional considerations, including but not limited to the issuance of additional regulations, ongoing analysis of the Tax Act and gathering additional information to make a more informed decision for our intent to reinvest earnings of foreign subsidiaries indefinitely outside the U.S.

Our primary future cash needs ~~will~~are currently expected to be centered on operating activities, working capital, ~~and~~debt service, capital investments ~~including potential investments~~and acquisitions. On April 19, 2018, we acquired Crem for ~~future acquisitions.~~total consideration of $220.3 million, which was funded through cash on hand and additional borrowings under existing credit lines. We estimate that our capital expenditures will be approximately $40.0 million in 2018. The ~~Company's~~amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things. Our ability to fund ~~its~~our cash needs depends on ~~its~~our ongoing ability to generate and raise cash. ~~Although the Company believes~~We believe that ~~its~~our future cash from operations, together with ~~its~~our access to capital markets, will provide adequate resources to fund ~~its~~our operating and financing ~~needs, its~~needs; however, our access to, and the availability of financing on acceptable terms in the future will be affected by many factors including: (i) ~~its credit rating,~~overall liquidity in the capital markets, (ii) the ~~liquidity of the overall capital markets and (iii) the then-current~~ state of the ~~economy.~~economy and (iii) our credit rating. There can be no assurances that ~~the Company~~we will have future access to the capital markets on acceptable terms.

Sources and Uses of Cash

The following summarizes our cash flows for the three months ended March 31, ~~2017~~2018 and ~~2016:~~2017:

Three Months Ended March 31,
(in millions) 2017 2016 Change
Cash provided by (used in):
Operating activities $ (50.6 ) $ (23.0 ) $ (27.6 )
Investing activities 1.3
(4.2 ) 5.5
Financing activities 79.9
49.3
30.6
Effect of exchange rate changes on cash (1.8 ) 0.5
(2.3 )
Net change in cash and cash equivalents $ 28.8
$ 22.6
$ 6.2

~~Three Months Ended March 31, 2017 and 2016~~



	Three Months Ended March 31,
(in millions)	2018			2017			Change
Cash provided by (used in):
Operating activities	$	(153.5	)	$	(164.4	)	$	10.9
Investing activities	128.1			111.0			17.1
Financing activities	55.2			77.8			(22.6		)
Effect of exchange rate changes on cash	(4.4		)	(1.8		)	(2.6		)
Net change in cash, cash equivalents and restricted cash	$	25.4		$	22.6		$	2.8

Cash, ~~and~~ cash equivalents and restricted cash as of March 31, ~~2017~~2018 totaled ~~$82.6~~$154.1 million, an increase of ~~$28.8~~$25.4 million from the December 31, ~~2016~~2017 balance of ~~$53.8~~$128.7 million. Cash flows used in operating activities for the three months ended March 31, ~~2017~~2018 were ~~$50.6~~$153.5 million compared to ~~cash flows used in operating activities of $23.0~~$164.4 million for the three months ended March 31, ~~2016.~~2017. The ~~increase~~primary drivers of the use of cash in each of these periods relates to our accounts receivable securitization program whereby we sell substantially all of our trade receivables to a third-party financial institution in exchange for a combination of cash ~~used~~and beneficial interest in the securitized receivables. Effective January 1, 2018, new accounting guidance became effective requiring us to reflect cash receipts from such beneficial interest as cash inflows from investing activities rather than cash inflows from operating activities as was previously reported. Cash inflows from such beneficial interest totaled $131.8 million and $115.9 million for the three months ended March 31, 2018 and 2017, respectively, resulting in an increased usage of ~~$27.6~~cash of $15.9 million. Offsetting this increased use of cash was: (i) a reduction in the use of cash for other current and long-term liabilities of $16.8 million ~~was~~ primarily ~~attributable to~~as a result of the increase in our derivative liability positions and a reduction of annual employee incentive payments, (ii) a $7.5 million increase in net earnings from operations and (iii) a reduction in the use of cash ~~paid~~ for ~~interest on our long-term debt of $33.3~~other receivables totaling $3.0 million.

Cash flows provided by investing activities for the three months ended March 31, ~~2017~~2018 were ~~$1.3~~$128.1 million as compared to ~~cash flows used in investing activities of $4.2~~$111.0 million for the three months ended March 31, ~~2016.~~2017. The increase in cash provided by investing activities was primarily attributable to ~~changes in restricted~~increased cash ~~of $5.9 million,~~receipts from the beneficial interest on securitized receivables discussed above. These inflows were partially offset by ~~the increase in~~ capital expenditures of ~~$0.4 million.~~$3.7 million and $4.9 million in the three months ended March 31, 2018 and 2017, respectively.

Cash flows provided by financing activities for the three months ended March 31, 2018 and 2017 were ~~$79.9~~$55.2 million ~~compared to cash flows provided by financing activities of $49.3~~and $77.8 million, ~~for the three months ended March 31, 2016.~~respectively. The ~~increase~~decrease in cash provided by financing activities was primarily attributable to an increase in repayments on outstanding borrowings of ~~$76.5~~$16.7 million ~~during the first quarter of 2017 on our Revolving Facility (as defined herein). During the first quarter of 2016, we received proceeds from the issuance of debt~~and an $8.9 million reduction in ~~March 2016 of $1,431.4 million, net of cash paid for debt issuance costs of $40.6 million. We used the~~ proceeds from long-term ~~debt to make the $1,362.0 million dividend payment to MTW in connection with the Spin-Off.~~and short-term borrowings.

Financing Resources

Senior Secured Credit Facilities

On March 3, 2016, ~~the Company~~we entered into a credit agreement ~~(the~~(as amended, restated, supplemented or otherwise modified from time to time the "2016 Credit Agreement") for a ~~new~~$1,200.0 million senior secured credit facility consisting of (i) a senior secured revolving credit facility in an aggregate principal amount of $225.0 million (the "Revolving Facility") and (ii) a senior secured Term Loan B facility in an aggregate principal amount of $975.0 million (the "Term Loan B Facility" and, together with the Revolving Facility, the "Senior Secured Credit Facilities") with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, J.P. Morgan Securities LLC, Goldman Sachs Bank USA, HSBC Securities (USA) Inc., and Citigroup Global Markets Inc., on behalf of certain of its affiliates, as joint lead arrangers and joint bookrunners, and certain lenders, as lenders. The Revolving Facility includes (i) a $20.0 million sublimit for the issuance of letters of credit on customary terms, and (ii) a $40.0 million sublimit for swingline loans on customary terms. ~~The Company~~We entered into security and other agreements relating to the 2016 Credit Agreement.

~~On March 6, 2017, the Company~~

In February 2018, we entered into an amendment to ~~its~~the 2016 Credit Agreement, which increases the Consolidated Total Leverage Ratio for each of the quarters ended December 31, 2017, March 31, 2018 and June 30, 2018 to ~~reprice~~5.25:1.00. The required ratio level will then reduce 0.25 each subsequent quarter until the ~~outstanding~~ratio reaches 4.00:1.00 in the quarter ending September 30, 2019.

In April 2018, we entered into an Incremental Revolving Facility Amendment to the 2016 Credit Agreement whereby the aggregate revolving commitments were increased by $50.0 million to $275.0 million.

The interest rate on the Term Loan B Facility ~~of $825.0 million, providing for~~also fluctuates based on LIBOR or a ~~decrease to the maximum applicable margin for London Interbank Offered Rate (“LIBOR”) and Alternate Base Rate (“ABR”) loans by 1.75% (the “Amendment”) .~~

~~Subsequent to the Amendment, borrowings under the Senior Secured Credit Facilities bear~~Prime rate plus a spread. At March 31, 2018, this facility bore interest at a rate per annum equal to, at the option of the Company, ~~(i)~~ LIBOR plus ~~the~~an applicable margin of ~~3.00%~~2.75% for term loans subject to a 1.00% LIBOR floor, ~~and 1.50% - 2.75% for revolving loans, based on consolidated total leverage,~~ or ~~(ii)~~ an alternate base rate plus the applicable margin, ~~which~~that will be 1.00% lower than for LIBOR loans. As of March 31, 2018, the spreads for LIBOR and alternate base rate borrowings were 2.25% and 1.25%, respectively, given the Company's effective Consolidated Total Leverage Ratio. The weighted average interest rate for the Term Loan B Facility was 4.9% per annum.

At March 31, 2018, borrowings under the 2016 Credit Agreement consisted of a Term Loan B balance of $815.0 million with a weighted average interest rate of 4.9% per annum and a Revolving Facility balance of $80.0 million with a weighted average interest rate of 4.8% per annum. Under the Revolving Facility, there were outstanding standby letters of credit totaling $3.3 million million. As of April 19, 2018, after giving effect to the April 2018 amendment and borrowings incurred in connection with the Crem Acquisition, $41.6 million was available for future borrowings under our Revolving Facility.

The 2016 Credit Agreement contains financial covenants including, but not limited to, (a) a Consolidated Interest Coverage Ratio, which measures the ratio of (i) Consolidated EBITDA, ~~as defined in the 2016 Credit Agreement,~~ to (ii) Consolidated Cash Interest Expense, and (b) a Consolidated Total Leverage Ratio, which measures the ratio of (i) Consolidated Indebtedness to (ii) Consolidated EBITDA for the most recent four ~~fiscal quarters.~~quarters, in each case, as defined in the 2016 Credit Agreement. The current covenant levels of the financial covenants under the Senior Secured Credit Facilities are as set forth below:



Fiscal Quarter Ending	Consolidated Total Leverage Ratio (less than)	Actual Consolidated Total Leverage Ratio	Consolidated Interest Coverage Ratio (greater than)	Actual Consolidated Interest Coverage Ratio
March 31, ~~2017~~2018	~~5.50:~~5.25:1.00	~~5.20:~~4.65:1.00	~~2.50:~~3.00:1.00	~~2.71:~~3.41:1.00

~~Obligations of the Company~~The 2016 Credit Agreement also includes negative covenants that, among other things, limit our ability to incur indebtedness; grant liens; engage in mergers, consolidations and liquidations; make asset dispositions, restricted payments including dividends and investments; enter into transactions with affiliates; and amend, modify or prepay certain indebtedness.

Our obligations under the Senior Secured Credit Facilities are jointly and severally guaranteed by certain of ~~its~~our existing and future direct and ~~indirectly~~indirect wholly-owned U.S. subsidiaries (but excluding (i) unrestricted subsidiaries, (ii) immaterial subsidiaries and (iii) special purpose securitization vehicles).

There is a first priority perfected lien on substantially all of ~~the~~our assets and property ~~of the Company and guarantors~~ and proceeds therefrom excluding certain excluded assets. The liens securing ~~the~~our obligations ~~of the Company~~ under the Revolving Facility and the Term Loan B Facility are pari passu.

Based upon management's current plans and outlook, management believes we will be able to comply with these covenants during the subsequent 12 months.

Senior Notes

On February 18, 2016, ~~the Company~~we issued 9.50% Senior Notes due 2024 in an aggregate principal amount of $425.0 million (the ~~“Senior Notes”~~"Senior Notes") under an indenture with Wells Fargo Bank, National Association, as trustee (the ~~“Trustee”~~"Trustee"). The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by each of ~~the Company's~~our domestic restricted subsidiaries that is a borrower or guarantor under the Senior Secured Credit Facilities. The Senior Notes and the subsidiary guarantees are unsecured, senior obligations.

The Senior Notes were initially sold to qualified institutional buyers pursuant to Rule 144A (and outside the ~~United States~~U.S. in reliance on Regulation S) under the Securities Act. In September 2016, ~~the Company~~we completed an exchange offer pursuant to which all of the initial Senior Notes were exchanged for new Senior Notes, the issuance of which was registered pursuant under the Securities Act of 1933, as amended.

As of March 31, 2018, borrowings under the Senior Notes totaled $425.0 million with a weighted average interest rate of 9.90% per annum.

The notes are redeemable, at ~~the Company's~~our option, in whole or in part from time to time, at any time prior to February 15, 2019, at a price equal to 100% of the principal amount thereof plus a ~~“make-whole”~~"make-whole" premium and accrued but unpaid interest to the date of redemption. ~~In addition, the Company~~We may redeem the notes at ~~its~~our option, in whole or in part, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the 12-month period commencing on February 15 of the years set forth below:


Year	Percentage		Percentage
2019	107.1	%	107.125	%
2020	104.8	%	104.750	%
2021	102.4	%	102.375	%
2022 and thereafter	100.0	%	100.000	%

~~The Company~~

At any time, or from time to time, on or prior to February 15, 2019, we may, at our option, use the net cash proceeds of one or more underwritten public equity offerings of qualified capital stock to redeem up to 35% of the principal amount of the Senior Notes at a redemption price of 109.500% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption, upon the terms and subject to the conditions set forth in the indenture governing the Senior Notes.

We must generally offer to repurchase all of the outstanding Senior Notes upon the occurrence of certain specific change of control events at a purchase price equal to 101% of the principal amount of Senior Notes purchased plus accrued and unpaid interest to the date of purchase. The indenture provides for customary events of default. Generally, if an event of default occurs (subject to certain exceptions), the Trustee or the holders of at least 25% in aggregate principal amount of the then-outstanding Senior Notes may declare all the Senior Notes to be due and payable immediately.

~~Outstanding debt at March 31, 2017 and December 31, 2016 is summarized as follows:~~

Off-Balance Sheet Arrangements

~~The Company's~~

Our disclosures concerning transactions, arrangements and other relationships with uncombined entities or other persons that are reasonably likely to materially affect liquidity or the availability of or requirements for capital resources ~~are as follows:~~

~~The Company disclosed its~~include our accounts receivable securitization arrangement and assets leased under operating leases.

We have disclosed our accounts receivable securitization program in Note 9,7, "Accounts Receivable Securitization," toin the ~~unaudited~~ consolidated ~~(condensed)~~ financial statements included ~~elsewhere~~ in Part I, Item I of this Quarterly Report on Form 10-Q.

~~The Company leases~~

We lease various assets under operating leases. The future estimated payments under these arrangements have not materially changed since being disclosed in Note 21, "Leases," to the audited consolidated financial statements in our ~~latest~~ Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2017.

On March 3, 2016, the Company entered into a new $110.0 million accounts receivable securitization program (the “2016 Securitization Facility”) with Wells Fargo Bank, National Association, as purchaser and agent, whereby the Company sells certain of its domestic trade accounts receivable and certain of its non-U.S. trade accounts receivable to a wholly-owned, bankruptcy-remote, foreign special purpose entity, which entity, in turn, sells, conveys, transfers and assigns to a third-party financial institution (a “Purchaser”), all of the right, title and interest in and to its pool of receivables to the Purchaser. The Purchaser receives ownership of the pools of receivables. The Company, along with certain of its subsidiaries, acts as servicers of the receivables and as such administer, collect and otherwise enforce the receivables. The servicers are compensated for doing so on terms that are generally consistent with what would be charged by an unrelated servicer. As servicers, they initially receive payments made by obligors on the receivables but are required to remit those payments in accordance with a receivables purchase agreement. The Purchaser has no recourse for uncollectible receivables. The 2016 Securitization Facility also contains customary affirmative and negative covenants. Among other restrictions, these covenants require the Company to meet specified financial tests, which include a Consolidated Interest Coverage Ratio and a Consolidated Total Leverage Ratio that are the same as the covenant ratios required per the 2016 Credit Agreement.

Non-GAAP Financial Measures

~~The Securities and Exchange Commission (“SEC”) has adopted rules to regulate the~~

We use ~~in filings with the SEC and in public disclosures of~~certain non-GAAP financial measures discussed below to evaluate our results of operations, financial condition and liquidity. We believe that ~~are not~~the presentation of these non-GAAP financial measures, when viewed as a supplement to our results prepared in accordance with U.S. ~~generally accepted accounting principles (“U.S. GAAP”),~~GAAP, provides useful information to investors in evaluating the ongoing performance of our operating businesses, provides greater transparency into our results of operations and is consistent with how management evaluates our operating performance and liquidity. In addition, these non-GAAP measures address questions we routinely receive from analysts and investors and, in order to ensure that all investors have access to similar data we have determined that it is appropriate to make this data available to all investors. None of the ~~ratios related thereto. These~~non-GAAP measures ~~are~~presented should be considered as an alternative to net earnings, earnings from operations, net cash used in operating activities, net sales or any other measures derived ~~on the basis of methodologies other than~~ in accordance with U.S. GAAP. ~~Generally, a~~These non-GAAP ~~financial measure is a numerical measure of financial performance that excludes (or includes) amounts that are included~~measures have important limitations as analytical tools and should not be considered in ~~(or excluded from) the most directly comparable measure calculated and presented in accordance with U.S. GAAP. The non-GAAP financial measures should be viewed~~isolation or as ~~a supplement to, and not a substitute~~substitutes for financial measures presented in accordance with U.S. GAAP. ~~The Company's non-GAAP~~Our use of these terms may vary from the use of similarly-titled measures ~~may not be comparable to similarly titled measures used~~ by other ~~companies.~~companies due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.

~~The Company's non-GAAP measures include~~

Free Cash Flow

We refer to Free Cash Flow, which represents net cash used in operating activities less capital expenditures plus cash receipts on our beneficial interest in sold receivables. We believe this non-GAAP financial measure is useful to investors in measuring our ability to generate cash internally to fund initiatives such as debt repayment, acquisitions, dividends and share repurchases. During the first quarter of 2018, we updated our definition of Free Cash Flow to include cash receipts on beneficial interest in sold receivables, which is now recorded in net cash provided by investing activities with the adoption of the accounting guidance in Accounting Standards Update 2016-15 effective January 1, 2018. Free Cash Flow reconciles to net cash used in operating activities presented in accordance with U.S. GAAP as follows:



	Three Months Ended March 31,
(in millions)	2018			2017
Free Cash Flow:
Net cash used in operating activities	$	(153.5	)	$	(164.4	)
Capital expenditures	(3.7		)	(4.9		)
Cash receipts on beneficial interest in sold receivables	131.8			115.9
Free Cash Flow	$	(25.4	)	$	(53.4	)

Adjusted Operating EBITDA

In addition to analyzing our results on a U.S. GAAP basis, management also reviews our results on an “Adjusted Operating EBITDA” basis. Adjusted Operating EBITDA is defined as net earnings before interest, income taxes, other expense - net, depreciation and amortization plus certain items such as gain or loss from impairment or disposal of assets, restructuring expense, separation expense, loss on early extinguishment of debt and acquisition-related transaction costs. Management uses Adjusted Operating EBITDA as the basis on which it evaluates our financial performance and makes resource allocation and other operating decisions. Management considers it important that investors review the same operating information that it uses. Adjusted Operating EBITDA reconciles to net earnings presented in accordance with U.S. GAAP as follows:



	Three Months Ended March 31,
(in millions, except percentage data)	2018			2017
Adjusted Operating EBITDA:
Net earnings	$	12.5		$	5.0
Income taxes	0.3			2.1
Other expense — net ⁽¹⁾	8.5			1.8
Loss on early extinguishment of debt	—			3.2
Interest expense	20.3			23.2
Earnings from operations	41.6			35.3
(Gain) loss from impairment or disposal of assets — net	(0.1		)	0.4
Restructuring expense	0.4			4.6
Separation expense	0.1			0.9
Amortization expense	7.9			7.8
Depreciation	4.2			4.0
Transaction costs⁽²⁾	1.2			—
Total Adjusted Operating EBITDA	$	55.3		$	53.0

Adjusted Operating EBITDA margin ⁽³⁾	15.8		%	16.2		%

⁽¹⁾ Prior year presentation adjusted for $0.3 million of periodic pension costs that have been reclassified from Selling, general and administrative expenses to Other expense - net in accordance with the adoption of accounting guidance in Accounting Standards Update 2017-07.

⁽²⁾Transaction costs of $1.2 million include professional services and other direct acquisition costs in connection with the acquisition of Crem.

⁽³⁾Adjusted Operating EBITDA margin in the section above is calculated by dividing Adjusted Operating EBITDA by net sales.

Adjusted Net Earnings and Adjusted Diluted Net Earnings Per Share

We refer to Adjusted Net Earnings and ~~Organic Third Party~~Adjusted Diluted Net Sales, and the related ratios. Free Cash Flow represents operating cash flows less property, plant and equipment additions. We define Adjusted Operating EBITDA as Operating EBITDA (net earnings before interest, income taxes, other (income) expense - net, depreciation and amortization), adjusted for the impact of certain items that we do not consider representative of our ongoing operating performance, including asset impairment, restructuring, separation charges and loss on early extinguishment of debt.Earnings Per Share. We define Adjusted Net Earnings as net earnings before the impact of certain items, including ~~asset~~gain or loss from impairment or disposal of assets, restructuring expense, separation ~~charges and~~expense, loss on early extinguishment of debt and acquisition-related transaction costs, net of taxes. ~~The tax effect of these adjustments is determined using the effective tax rates for the countries comprising such adjustments, which is primarily the U.S.~~ Adjusted Diluted Net Earnings Per Share represents Adjusted Net Earnings while giving effect to all potentially dilutive common shares that were outstanding during the respective period. ~~For~~We believe these measures are helpful to investors in assessing the ~~three months ended March 31, 2016,~~ongoing performance of our underlying businesses before the impact of certain items. Adjusted Net Earnings and Adjusted Diluted Net Earnings Per Share ~~was retrospectively restated~~reconcile to net earnings and diluted net earnings per share, respectively, presented in accordance with U.S. GAAP as follows:



	Three Months Ended March 31,
(in millions, except share data)	2018			2017
Adjusted Net Earnings:
Net earnings	$	12.5		$	5.0
(Gain) loss from impairment or disposal of assets — net	(0.1		)	0.4
Restructuring expense	0.4			4.6
Separation expense	0.1			0.9
Loss on early extinguishment of debt	—			3.2
Transaction costs⁽¹⁾	9.0			—
Tax effect of adjustments⁽²⁾	(0.1		)	(3.5		)
Total Adjusted Net Earnings	$	21.8		$	10.6

Adjusted Diluted Net Earnings Per Share:
Diluted net earnings per share	$	0.09		$	0.04
(Gain) loss from impairment or disposal of assets — net per share	—			—
Restructuring expense per share	—			0.03
Separation expense per share	—			0.01
Loss on early extinguishment of debt per share	—			0.02
Transaction costs per share ⁽¹⁾	0.06			—
Tax effect of adjustments per share ⁽²⁾	—			(0.02		)
Total Adjusted Diluted Net Earnings Per Share	$	0.15		$	0.08

⁽¹⁾ Transaction costs include a loss of $7.8 million related to a foreign currency hedge of the acquisition purchase price for Crem and $1.2 million of professional services and other direct acquisition costs.

⁽²⁾The tax effect of adjustments is determined using the statutory tax rates for the ~~number of shares outstanding immediately following the Spin-Off.~~ countries comprising such adjustments.

Organic ~~Third Party~~ Net Sales ~~(previously titled "Organic Third Party~~

We refer to Organic Net Sales. Organic Net Sales ~~in Constant Currency")~~ reflect net sales before the impact ~~of acquisitions, divestitures and foreign currency translation. The impact~~ from foreign currency translation which is calculated by translating current period balances at prior period rates. During the first quarter of 2017, we updated our definition of Adjusted Operating EBITDA (previously titled "Adjusted Operating EBITA") to exclude depreciation expense and loss on early extinguishment of debt. We also updated our definition of Adjusted Net Earnings and Adjusted Diluted Net Earnings per Share to exclude loss on early extinguishment of debt and loss on early extinguishment of debt per share, respectively. The prior period has been revised as necessary to reflect these changes for consistency of presentation.

~~The Company believes that these measures are~~believe this measure is helpful to investors in ~~evaluating~~assessing the ongoing performance of our ~~operating businesses and provides greater transparency into our results of operations. In addition, these non-GAAP measures provide a comparison~~underlying businesses. Organic Net Sales reconciles to ~~commonly used financial metrics within the professional investing community which do not include items outside of our core operations.~~

~~Non-GAAP measures have limitations as an analytical tool, and you should not consider these non-GAAP measures either~~net sales presented in ~~isolation or as a substitute for analyzing our results as reported under~~accordance with U.S. ~~GAAP.~~

~~A reconciliation of~~ GAAP ~~financial measures to non-GAAP financial measures is~~ as follows:

Three Months Ended March 31,
(in millions) 2017 2016
Free Cash Flow
Net cash used in operating activities $ (50.6 ) $ (23.0 )
Net capital expenditures (4.9 ) (4.5 )
Free Cash Flow $ (55.5 ) $ (27.5 )



	Three Months Ended March 31,
(in millions)	2018			2017
Net sales (as reported)	$	350.4		$	328.0
Foreign currency translation	(10.3		)	—
Organic Net Sales	$	340.1		$	328.0

Three Months Ended March 31,
(in millions, except percentage data) 2017 2016
Adjusted Operating EBITDA:
Net earnings $ 5.0
$ 18.1
Income taxes 2.1
4.6
Other expense — net 1.5
2.4
Loss on early extinguishment of debt 3.2
—
Interest expense on notes with MTW — net —
0.1
Interest expense 23.2
8.5
Earnings from operations 35.0
33.7
Asset impairment expense 0.4
—
Restructuring expense 4.6
1.3
Separation expense 0.9
3.0
Amortization expense 7.8
7.8
Depreciation expense 4.0
4.3
Total Adjusted Operating EBITDA $ 52.7
$ 50.1

Adjusted Operating EBITDA margin ⁽¹⁾
16.1 % 15.4 %
⁽¹⁾Adjusted Operating EBITDA margin in the section above is calculated by dividing the dollar amount of Adjusted Operating EBITDA by net sales.

Three Months Ended March 31,
(in millions, except share data) 2017 2016
Adjusted Net Earnings ⁽¹⁾:

Net earnings $ 5.0
$ 18.1
Asset impairment expense 0.4
—
Restructuring expense 4.6
1.3
Separation expense 0.9
3.0
Loss on early extinguishment of debt 3.2
—
Tax effect of adjustments⁽²⁾
(3.5 ) (1.5 )
Total Adjusted Net Earnings $ 10.6
$ 20.9
⁽¹⁾ Adjusted net earnings represents net earnings before the impact of certain items such as asset impairment, restructuring, separation charges and loss on early extinguishment of debt.
⁽²⁾The tax effect of adjustments is determined using the effective tax rates for the countries comprising such adjustments, which is primarily the U.S.

Adjusted Diluted Net Earnings Per Share:
Diluted net earnings per share $ 0.04
$ 0.13
Asset impairment expense per share —
—
Restructuring expense per share 0.03
0.01
Separation expense per share 0.01
0.02
Loss on early extinguishment of debt per share 0.02
—
Tax effect of adjustments per share (0.02 ) (0.01 )
Total Adjusted Diluted Net Earnings Per Share $ 0.08
$ 0.15

Three Months Ended March 31,
(in millions, except percentage data) 2017 2016
Organic Third Party Net Sales:
Total sales $ 377.0
$ 371.1
Less: Intersegment sales (49.0 ) (45.6 )
Third party net sales (as reported) 328.0
325.5
Less: Latin America Kysor Panel Systems sales —
(0.7 )
Less: China field service sales —
(0.7 )
Foreign currency translation 5.0
—
Organic Third Party Net Sales $ 333.0
$ 324.1

Critical Accounting Policies

~~The Company's~~Our critical accounting policies have not materially changed since itwe filed ~~its~~our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017 with the exception of the adoption of Accounting Standards Update 2014-09 "Revenue from Contracts with Customers (Topic 606)," as discussed in Note 2, "Summary of Significant Accounting Policies and Basis of Presentation," to the consolidated financial statements included in Part I, Item I of this Quarterly Report on Form 10-Q.

New Accounting Pronouncements

See Note 2, "Summary of Significant Accounting Policies and Basis of Presentation," to ~~our unaudited~~the consolidated ~~(condensed)~~ financial statements included ~~elsewhere~~ in Part I, Item I of this Quarterly Report on Form 10-Q for recently issued accounting pronouncements applicable to us and the effect of those standards on our consolidated ~~(condensed)~~ financial statements and related disclosures.

Cautionary ~~Statements about~~Note Regarding Forward-Looking Information

~~Statements~~

Certain statements contained in this Quarterly Report on Form 10-Q, including matters discussed under the heading "Management’s Discussion and ~~in other Company communications that are not historical facts are forward-looking statements, which are based upon the Company's current expectations,~~Analysis of Financial Condition and Results of Operations," constitute "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.

~~These~~ Statements that are not historical fact are forward-looking statements ~~involve risks~~ and ~~uncertainties that could cause actual results to differ materially from what appears within this Quarterly Report on Form 10-Q.~~

~~Forward-looking statements~~ include, for example, descriptions of our plans and objectives for future operations and assumptions on which those plans or objectives are based. Certain of these forward-looking statements can be identified by the ~~assumptions behind those plans. The~~use of words such as "anticipates," "believes," "intends," "estimates," "targets," "expects," "could," "will," ~~"may"~~"may," "plans," "projects," "assumes," "should" or other similar ~~expressions, usually identify~~expressions. Such forward-looking statements involve known and unknown risks and uncertainties, and our actual results could differ materially from future results expressed or implied in these forward-looking statements. ~~Any~~The forward-looking statements included in this report are based on our current beliefs and ~~all projections~~expectations and speak only as of the date of this report. These statements are not guarantees or indicators of future ~~performance are forward-looking statements.~~

~~In addition to the~~performance. Important assumptions ~~uncertainties,~~ and other ~~information referred to specifically in the forward-looking statements, a number of~~important factors that could cause actual results to ~~be significantly different~~differ materially from ~~what is presented~~those forward-looking statements include, but are not limited to, those risks, uncertainties and factors described below and in more detail under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2017, this Quarterly Report on Form ~~10-Q. Those factors include, without limitation,~~10-Q for the ~~following:~~



	•	unanticipated issues that may arise under the Master Separation and Distribution Agreement, the Transition Services Agreement, the Tax Matters Agreement, the Employee Matters Agreement, the Intellectual Property Matters Agreement and/or any other agreement with MTW entered into in connection with the Spin-Off;
	•	~~efficiencies and capacity utilization of facilities;~~
	•	issues relating to the ability to timely and efficiently execute on manufacturing strategies, including issues relating to new plant start-ups, plant closings, workforce reductions or ramp-ups, and/or consolidations of existing facilities and operations;
	•	~~the Company's ability to retain its executive management team and to attract qualified new personnel;~~
	•	~~realization of anticipated earnings enhancements, cost savings, strategic options and other synergies, and the anticipated timing to realize those enhancements, savings, synergies, and options;~~
	•	~~availability of certain raw materials;~~
	•	~~growth of general and administrative expenses, including health care and postretirement costs;~~
	•	~~changes in raw material prices, commodity prices and hedges in place;~~
	•	~~actions of competitors, including competitive pricing;~~
	•	~~the successful development of innovative products and market acceptance of new and innovative products;~~
	•	~~the ability to focus and capitalize on product quality and reliability;~~
	•	~~unanticipated issues associated with the quality of materials and components sourced from third parties and resolution of those issues;~~
	•	~~unanticipated issues associated with refresh/renovation plans, new product rollouts and/or new equipment~~ ~~by national restaurant accounts and global chains;~~
	•	~~consumer demand for products from the quick-service restaurant chains;~~
	•	~~growth in demand for foodservice equipment by customers in emerging markets;~~
	•	~~global expansion of customers;~~
	•	~~changes in the markets the Company serves;~~
	•	~~unanticipated changes in consumer spending;~~
	•	~~unfavorable outcomes in product liability lawsuits, or an increase in the volume of product liability lawsuits;~~
	•	~~unexpected costs incurred in protecting its intellectual property;~~
	•	~~weather;~~
	•	~~changes in domestic and international economic and industry conditions;~~
	•	~~work stoppages, labor negotiations, rates and temporary labor;~~
	•	~~the availability of local suppliers and skilled labor;~~
	•	~~unanticipated changes in capital and financial markets;~~
	•	~~the ability to generate cash and manage working capital consistent with our stated goals;~~
	•	~~changes in the interest rate environment;~~
	•	~~pressure of financing leverage;~~
	•	~~compliance with debt covenants and maintenance of credit ratings as well as the impact of interest and principal repayment of its debt obligations;~~
	•	~~foreign currency fluctuations and their impact on reported results and hedges in place;~~
	•	~~unexpected issues affecting its effective tax rate, including, but not limited to, global tax policies, tax reform, and tax legislation;~~
	•	~~unanticipated issues associated with the resolution or settlement of uncertain tax positions or unfavorable resolution of tax audits;~~

quarterly period ended March 31, 2018 and in our other filings with the SEC. We do not intend, and, except as required by law, we undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect any future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.



	•	the tax treatment of the Distribution and the restrictions on post-Distribution activities imposed on the Company under the Tax Matters Agreement with The Manitowoc Company, Inc. in order to preserve the tax-free treatment of the Spin-Off;
	•	~~actions of activist shareholders;~~
	•	~~costs associated with unanticipated environmental liabilities;~~
	•	~~risks associated with data security and technology systems and protections;~~
	•	~~world-wide political risk;~~
	•	~~health outbreaks or natural disasters disrupting commerce in one or more regions of the world;~~
	•	~~acts of terrorism;~~
	•	~~geographic factors and economic risks;~~
	•	~~potential global events resulting in market instability, including financial bailouts and defaults of sovereign nations;~~
	•	~~changes in laws and regulations, as well as their enforcement, throughout the world;~~
	•	~~changes in the costs of compliance with laws regarding trade, export controls and foreign corrupt practices;~~
	•	~~foodservice equipment replacement cycles in the U.S. and other mature markets;~~
	•	the ability to compete and appropriately integrate, and/or transition, restructure and consolidate acquisitions, divestitures, strategic alliances, joint ventures and other strategic alternatives and otherwise capitalize on key strategic opportunities;
	•	in connection with acquisitions, divestitures, strategic alliances and joint ventures, the finalization of the price and other terms, the realization of contingencies consistent with any established reserves, and unanticipated issues associated with transitional services; and
	•	~~other events outside the Company's control.~~

Important risks, uncertainties and other factors that could affect our future results and could cause actual results to differ materially from those expressed or implied in the forward-looking statements included in this report include, but are not limited to:

our ability to timely and efficiently execute on manufacturing strategies, including reducing excess manufacturing capacity, opening or closing plants in a manner consistent with our strategy, executing workforce reductions, and/or consolidating existing facilities and operations;

our ability to realize anticipated earnings enhancements, cost savings, strategic options and other synergies, and the anticipated timing to realize those enhancements, savings, synergies, and options;

risks relating to the acquisition and integration of businesses or products, including: our ability to successfully identify, finance, acquire and integrate acquisition targets; our ability to complete divestitures, strategic alliances, joint ventures and other strategic alternatives on favorable terms; and uncertainties and unanticipated costs in completing such strategic transactions;

risks related to our substantial levels of indebtedness, including our ability to comply with covenants contained in our debt agreements, generate sufficient cash to comply with principal and interest repayment obligations, and refinance such indebtedness on favorable terms;

our ability to compete against companies that are larger and have greater financial and other resources than we do;

changes in the competitive conditions in the markets and countries in which we operate, including the impact of competitive pricing by our competitors or consolidation of dealers or distributors;

the successful development of innovative products and market acceptance of new and innovative products;

factors affecting demand for foodservice equipment, including: foodservice equipment replacement cycles in the U.S. and other mature markets; unanticipated changes in consumer spending impacting the foodservice industry; and population and income growth in emerging markets;

our ability to source raw materials and commodities on favorable terms and respond to volatility in the price of raw materials and commodities, including through the use of hedging transactions;

risks associated with manufactured products, including issues related to product quality and reliability, our reliance on third-party sourced components and costs associated with product liability and product warranty claims;

unanticipated issues associated with refresh/renovation plans, new product rollouts and/or new equipment by national restaurant accounts and global chains;

natural disasters, acts of war, terrorism and other events that may disrupt the supply chain or distribution network in one or more regions of the world or otherwise cause instability of financial markets throughout the world;

general world-wide political and economic risks, uncertainties and adverse events resulting in instability, including financial bailouts and defaults of sovereign nations;

changes in domestic and international economic and industry conditions;

unanticipated changes in capital and financial markets, including unfavorable changes in the interest rate environment;

foreign currency fluctuations and their impact on reported results and hedges in place;

issues related to compliance with complex and evolving laws, rules and regulations affecting our business, including increased costs of compliance, potentially conflicting laws among the countries in which we operate and our ability to quickly respond to changes in such laws;

adverse changes in domestic or international tax laws, export and import controls or trade regulations, including new tariffs imposed by the U.S. government on imported steel and aluminum, the adoption of trade restrictions affecting the Company's products or suppliers, a U.S. withdrawal from, or significant renegotiation of, existing trade agreements such as the North America Free Trade Agreement, or the occurrence of trade wars;

the risk that our products could cause, or be alleged to cause, personal injury and adverse effects, leading to an increase in the volume of product liability lawsuits, unfavorable outcomes in such lawsuits and/or withdrawals of products from the market;

the expense, timing and outcome of legal and regulatory proceedings, arbitrations, investigations, tax audits and other regulatory audits;

our ability to comply with evolving and complex accounting rules, many of which involve significant judgment and assumptions;

the availability of, and our ability to obtain and maintain, adequate insurance coverage and/or our ability to cover or insure against the total amount of the claims and liabilities we face, whether through third-party insurance or self-insurance;

unexpected costs incurred in protecting our intellectual property rights and defending against challenges to such rights;

costs associated with unanticipated environmental liabilities;

our ability to generate cash and manage working capital consistent with our stated goals;

our ability to recruit and retain highly qualified executives and other key personnel;

risks associated with our labor relations, including work stoppages, delays in renewing labor agreements and our inability to renegotiate labor rates on favorable terms, as well as the availability of skilled and temporary labor at our manufacturing facilities and other locations;

risks associated with data security and technology systems and protections;

actions of activist shareholders;

unexpected issues affecting our current and future effective tax rate, including, but not limited to, tariffs, global tax policies, tax reform, and tax legislation;

our ability to effectively transfer cash between foreign entities and/or jurisdictions, including in a manner that is consistent with our strategic goals and priorities;

unanticipated issues associated with the resolution or settlement of uncertain tax positions or unfavorable resolution of tax audits;

the tax treatment of our separation from our former parent company and the restrictions imposed upon us under the Tax Matters Agreement in order to preserve the tax-free treatment of the spin-off; and

other events outside the Company's control.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's market risk disclosures have not materially changed since its Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 was filed. The Company's quantitative and qualitative disclosures about market risk are incorporated by reference from Part II, Item 7A of the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company's disclosure controls and procedures as ~~such term is~~ defined in ~~Rules~~Rule 13a-15(e) ~~and 15(d)-15(e)~~ under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of ~~the period covered by~~ this ~~report.~~reporting period. Based on ~~such~~this evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of ~~such~~this reporting period, the Company's disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure.were effective.

Changes in Internal Control Over Financial Reporting

There was no change in our internal ~~control~~controls over financial reporting ~~identified~~(as defined in ~~connection with the evaluation required by Rules 13a-15(d) and 15d-15(d)~~Rule 13a-15(f) of the Exchange ~~Act~~Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~Our global operations are governed by laws addressing the protection~~From time to time, we become involved in various lawsuits, claims and proceedings arising out of, the environment and employee safety and health. Under various circumstances, these laws impose civil and criminal penalties and fines, as well as injunctive and remedial relief, for noncompliance. They also may require remediation at sites where Company related substances have been released into the environment.

~~We have expended substantial resources globally, both financial and managerial,~~or incident to, ~~comply with the applicable laws and regulations, and to protect the environment and~~ our workers. We believe we are in substantial compliance with such laws and regulations and we maintain procedures designed to foster and ensure compliance. However, we have been and may in the future be subject to formal or informal enforcement actionsordinary course of business, including lawsuits, claims, investigations or proceedings ~~regarding noncompliance~~pertaining to product liability, patent infringement, environmental matters, commercial disputes, warranty claims, trade practices and employment matters. While we cannot predict the outcome of any lawsuit, claim, investigation or proceeding with ~~such laws~~certainty, our management does not believe that the ultimate disposition of any pending matter is likely to have a material adverse effect on our consolidated financial position, liquidity, or ~~regulations, whether or not determined~~results of operations. For information concerning other contingencies and uncertainties, see Note 13, "Contingencies and Significant Estimates" to ~~be ultimately responsible~~the consolidated financial statements included in ~~the normal course~~Part I, Item 1 of ~~business.~~this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

~~Please see~~

There have been no material changes to the risk factors described under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2016 (the "2016 Annual Report") for a discussion of our potential~~2017. You should carefully consider the risks, uncertainties and cautionary statements described therein, together with the other disclosures in this Form 10-Q. Any such risks and ~~uncertainties. There have been no material changes in~~uncertainties, as well as risks and uncertainties not currently known to us or that we currently deem to be immaterial, may materially adversely affect our ~~risk factors from the risk factors disclosed in the 2016 Annual Report.~~

business, financial condition and operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

~~See exhibit index following the signature page of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.~~



Exhibit No.	Description	Filings Referenced for Incorporation by Reference
10.1	Incremental Revolving Facility Amendment to Credit Agreement, dated April 13, 2018, among Welbilt, Inc., the subsidiary borrowers party thereto, JPMorgan Chase Bank, N.A., individually and as administrative agent and the other lenders party thereto.	Exhibit 10.1 to Current Report on Form 8-K filed April 18, 2018
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Furnished herewith
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Furnished herewith
101	The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statement of Equity and (vi) related notes.	Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized:

Date: May ~~9, 2017~~8, 2018



Welbilt, Inc.

/s/ Hubertus M. Muehlhaeuser
Hubertus M. Muehlhaeuser
President and Chief Executive Officer
(Principal Executive ~~Officer and Director)~~Officer)

/s/ Haresh Shah
Haresh Shah
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)

~~WELBILT, INC.~~

~~EXHIBIT INDEX TO FORM 10-Q~~

~~FOR QUARTERLY PERIOD ENDED MARCH 31, 2017~~



~~Exhibit No.~~	~~Description~~	~~Filed/Furnished~~ ~~Herewith~~
~~3.1~~	Amended and Restated Certificate of Formation of Welbilt, Inc. (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-37548), filed on March 9, 2017 and incorporated herein by reference).
~~3.2~~	Amended and Restated Bylaws of Welbilt, Inc., effective as of March 3, 2017 (filed as Exhibit 3.3 to the Company’s Current Report on Form 8-K (File No. 001-37548), filed on March 9, 2017 and incorporated herein by reference).

~~10.1~~	Amendment No. 2 to Credit Agreement, dated March 6, 2017, among Welbilt, Inc., the subsidiary borrowers party thereto, JPMorgan Chase Bank, N.A., individually and as administrative agent and the other financial institutions party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-37548), filed on March 9, 2017 and incorporated herein by reference).
~~31.1~~	~~Rule 13a - 14(a)/15d - 14(a) - Chief Executive Officer Certification~~	~~X(1)~~
~~31.2~~	~~Rule 13a - 14(a)/15d - 14(a) - Chief Financial Officer Certification~~	~~X(1)~~
~~32.1~~	~~Certification of CEO pursuant to 18 U.S.C. Section 1350~~	~~X(2)~~
~~32.2~~	~~Certification of CFO pursuant to 18 U.S.C. Section 1350~~	~~X(2)~~
~~101~~	The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated (Condensed) Statements of Operations, (ii) the Consolidated (Condensed) Statements of Comprehensive Income (iii) the Consolidated (Condensed) Balance Sheets, (iv) the Consolidated (Condensed) Statements of Cash Flows and (v) related notes.	~~X(1)~~

~~(1) Filed herewith~~

~~(2) Furnished herewith~~

~~-49-~~-48-



	Fair Value as of March 31, 2017
(in millions)	Level 1		Level 2		Level 3		Total
Current assets:
Foreign currency exchange contracts	$	—	$	1.0	$	—	$	1.0
Commodity contracts	—		1.0		—		1.0
Cross-currency swap contract	—		1.1		—		1.1
Total current assets at fair value	—		3.1		—		3.1
Non-current assets:
Commodity contracts	—		0.4		—		0.4
Interest rate swap contracts	—		1.2		—		1.2
Cross-currency swap contract	—		2.2		—		2.2
Total non-current assets at fair value	—		3.8		—		3.8
Total assets at fair value	$	—	$	6.9	$	—	$	6.9
Current liabilities:
Foreign currency exchange contracts	$	—	$	0.6	$	—	$	0.6
Interest rate swap contracts	—		2.8		—		2.8
Total current liabilities at fair value	—		3.4		—		3.4
Non-current liabilities:
Interest rate swap contracts	—		5.7		—		5.7
Total non-current liabilities at fair value	—		5.7		—		5.7
Total liabilities at fair value	$	—	$	9.1	$	—	$	9.1



	Fair Value as of December 31, 2016
(in millions)	Level 1		Level 2		Level 3		Total
Current assets:
Foreign currency exchange contracts	$	—	$	0.6	$	—	$	0.6
Commodity contracts	—		0.9		—		0.9
Total current assets at fair value	—		1.5		—		1.5
Non-current assets:
Commodity contracts	—		0.2		—		0.2
Total non-current assets at fair value	—		0.2		—		0.2
Total assets at fair value	$	—	$	1.7	$	—	$	1.7
Current liabilities:
Foreign currency exchange contracts	$	—	$	1.0	$	—	$	1.0
Commodity contracts	—		0.1		—		0.1
Total current liabilities at fair value	—		1.1		—		1.1
Total liabilities at fair value	$	—	$	1.1	$	—	$	1.1



	Units Hedged
Commodity	March 31, 2017	December 31, 2016	Unit	Type
Aluminum	2,115	1,663	MT	Cash flow
Copper	709	746	MT	Cash flow
Natural gas	26,523	56,416	MMBtu	Cash flow
Steel	7,225	8,663	Short tons	Cash flow



Derivatives in cash flow hedging relationships (in millions)	Amount of gain (loss) recognized in AOCI on derivative (effective portion, net of tax)					Location of gain (loss) reclassified from AOCI into income (effective portion)	Amount of gain (loss) reclassified from AOCI into income (effective portion)
	Three Months Ended March 31,						Three Months Ended March 31,
	2017			2016			2017		2016
Foreign exchange contracts	$	0.4		$	0.1	Cost of sales	$	0.2	$	(0.1	)
Commodity contracts	—			0.8		Cost of sales	0.2		(0.9		)
Interest rate swap contracts	(1.0		)	—		Selling, general and administrative expenses	—		—
Cross-currency swap contract ⁽¹⁾	3.3			—		Selling, general and administrative expenses	—		—
Total	$	2.7		$	0.9		$	0.4	$	(1.0	)



Derivatives relationships (in millions)	Amount of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)				Location of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
	Three Months Ended March 31,
	2017		2016
Commodity contracts	$	0.3	$	—	Cost of sales
Total	$	0.3	$	—



	Three Months Ended March 31, 2017
(in millions)	Amount Reclassified from Accumulated Other Comprehensive (Income) Loss				Recognized Location
Gains and losses on cash flow hedges
Foreign currency exchange contracts	$	0.2			Cost of sales
Commodity contracts	0.2				Cost of sales
	0.4				Total before tax
	(0.2		)		Tax benefit
	$	0.2			Net of tax
Amortization of pension and postretirement items
Actuarial losses	$	(0.5	)	(a)
	(0.5		)		Total before tax
	0.1				Tax expense
	$	(0.4	)		Net of tax

Total reclassifications for the period, net of tax	$	(0.2	)		Net of tax



	Three Months Ended March 31, 2016
(in millions)	Amount Reclassified from Accumulated Other Comprehensive (Income) Loss				Recognized Location
Gains and losses on cash flow hedges
Foreign currency exchange contracts	$	(0.1	)		Cost of sales
Commodity contracts	(0.9		)		Cost of sales
	(1.0		)		Total before tax
	0.4				Tax expense
	$	(0.6	)		Net of tax
Amortization of pension and postretirement items
Actuarial losses	$	(0.6	)	(a)
	(0.6		)		Total before tax
	0.1				Tax expense
	$	(0.5	)		Net of tax

Total reclassifications for the period, net of tax	$	(1.1	)		Net of tax

(a) These other comprehensive income (loss) components are included in the net periodic pension cost (see Note 17, "Employee Benefit Plans," for further details).



	Three Months Ended					Three Months Ended
	March 31, 2017					March 31, 2016
(in millions)	Pension Plans			Postretirement Health and Other Plans		Pension Plans			Postretirement Health and Other Plans
Interest cost of projected benefit obligations	$	1.3		$	0.1	$	2.2		$	0.1
Expected return on plan assets	(1.5		)	—		(1.6		)	—
Amortization of actuarial net loss	0.5			—		0.6			—
Net periodic benefit costs	$	0.3		$	0.1	$	1.2		$	0.1



	Dollars of Earnings from Operations
	Three months ended March 31,				Dollar Change Fav / (Unfav)		Percent Change Fav / (Unfav)
(in millions)	2017		2016		Dollar Change Fav / (Unfav)		Percent Change Fav / (Unfav)
Earnings from operations:
Total earnings from operations	$	35.0	$	33.7	$	1.3	3.9	%