WELBILT, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 . The financial position, results of operations, cash flows and other information included herein are not necessarily indicative of the financial position, results of operations and cash flows that may be expected in future periods. See "Cautionary Statements Regarding Forward-Looking Information" below for a discussion of uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Additionally, we use certain non-GAAP financial measures to evaluate our results of operations, financial condition and liquidity. For important information regarding the use of such non-GAAP measures, including reconciliations to the most comparable GAAP measure, see the section titled "Non-GAAP Financial Measures" below. The financial condition, results of operations and cash flows discussed in this Management's Discussion and Analysis of Financial Condition and Results of Operations are those ofWelbilt, Inc. and its consolidated subsidiaries, collectively, the "Company," "Welbilt ," "we," "our" or "us."
Overview
Business Overview
We design, manufacture and supply best-in-class equipment for the global commercial foodservice market with our suite of products capable of storing, cooking, holding, displaying, dispensing and serving in both hot and cold foodservice categories. Our portfolio of products is used by commercial and institutional foodservice operators including full-service restaurants, quick-service restaurant chains, hotels, resorts, cruise ships, caterers, supermarkets, convenience stores, hospitals, schools and other institutions. Our products, product-based services and aftermarket parts and service support are recognized by our customers and channel partners for their quality, reliability and durability which support our end customers by improving menus, enhancing operations and reducing costs. We manage our business in three geographic business segments:Americas , EMEA and APAC. TheAmericas segment includesthe United States ("U.S."),Canada andLatin America . The EMEA segment consists of markets inEurope , includingMiddle East ,Russia ,Africa and the Commonwealth of Independent States. The APAC segment consists primarily of markets inChina ,India ,Australia ,South Korea ,Singapore ,Philippines ,Japan ,Indonesia ,Malaysia ,Thailand ,Hong Kong ,Taiwan ,New Zealand andVietnam . We are required to prepare and present our consolidated financial statements in accordance with accounting principles generally accepted in theU.S. ("U.S. GAAP" or "GAAP"). These geographic business segments represent the level at which separate financial information is available and which is used by management to assess operating performance and allocate resources. In addition to GAAP financial measures, we also evaluate our segment performance based upon Adjusted Operating EBITDA (a non-GAAP measure). See the definition of Adjusted Operating EBITDA and other non-GAAP measures used by management within the section titled "Non-GAAP Financial Measures" of this Management's Discussion and Analysis of Financial Condition and Results of Operations. In addition, see Note 17, "Business Segments," of the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion of our geographic business segments.
Executive Summary
Merger with The Middleby Corporation
OnApril 20, 2021 , we entered into an Agreement and Plan of Merger ("Merger Agreement) with The Middleby Corporation ("Middleby"). Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Merger, each share of our common stock,$0.01 per share, issued and outstanding immediately prior to the effective time of the Merger will be converted into the right to receive 0.1240 shares of validly issued, fully paid and non-assessable shares of common stock, par value$0.01 per share, of Middleby common stock. Upon closing of the Merger, Middleby stockholders will own approximately 76% and our stockholders will own approximately 24% of the combined company. The Merger with Middleby is also referred to in this document as the "Transaction". Our board of directors and Middleby's board of directors have unanimously approved the Merger Agreement, our board of directors has agreed to recommend that our stockholders adopt the Merger Agreement and the board of directors of Middleby has agreed to recommend that Middleby's stockholders approve the issuance of the shares of Middleby Common Stock in connection with the Merger. The completion of the Merger is subject to the satisfaction or waiver of customary closing conditions, including: (i) expiration or termination of any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (ii) receipt of applicable approvals under certain foreign competition, antitrust or merger control laws, (iii) there being no law or order prohibiting consummation of the Merger, (iv) subject to specified materiality standards, the accuracy of the representations and warranties of the parties, (v) compliance by the parties in all material respects with their respective covenants, and (vi) the absence of a material adverse effect with respect to us and Middleby. The completion of the Merger is not conditioned upon receipt of financing by Middleby and the Merger is expected to close in late 2021.
Financial Results Highlights
Highlights of our financial results as of and for the three months endedMarch 31, 2021 , and for select line items, as compared to the same period of the prior year, are as follows:
•Net sales were
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•Organic net sales (a non-GAAP measure) were
•Gross profit (as a percentage of net sales) was 37.2% compared to 34.9% for the same quarter of 2020.
•Earnings from operations were
•Adjusted Operating EBITDA (a non-GAAP measure) was$49.8 million , an increase of 9.5% while Adjusted Operating EBITDA margin (a non-GAAP measure) was 15.7% compared to 13.8% for the same quarter of 2020.
•Net earnings were
•Diluted net earnings per share was
•As ofMarch 31, 2021 , our total liquidity was$353.7 million , consisting of$140.3 million of cash and cash equivalents and$213.4 million available for additional borrowing under our senior secured revolving credit facility, to the extent we are compliant with financial covenants which permit such borrowings. This compares to liquidity of$375.0 million as ofDecember 31, 2020 .
•Our total outstanding long-term debt, excluding finance leases, as of
The following is a summary of factors that impacted our operating results and
liquidity during the three months ended
Impact of COVID-19 Pandemic on our Business
The ongoing COVID-19 pandemic has resulted in governments around the world implementing stringent measures to help control the spread of the virus, including quarantines, "shelter in place" and "stay at home" orders, curfews, travel restrictions, border closures, limitations on public gatherings, social distancing measures and mandated business limitations and closures. These measures resulted in a disruption in the foodservice industry including substantial restaurant closures, and, as a result, in commercial foodservice equipment markets across the geographies in which we operate. The exact timing and pace of the recovery from the COVID-19 pandemic is indeterminable, as certain geographic markets have reopened, some of which have since experienced a resurgence of COVID-19 cases, including new strains of the virus, while others, particularly international markets, remain closed or are enforcing extended public health measures. The impact of the COVID-19 pandemic is fluid and continues to evolve, and the speed of recovery for the commercial foodservice equipment industry also remains uncertain. In order to protect the interests of our stakeholders and ensure the viability of our business, we have taken numerous actions during these disruptions in order to protect our employees, customers, suppliers and stockholders including: •implementing health and safety measures, •reviewing operating costs, adjusting budgets and reducing discretionary spending, •reducing hiring activities, adjusting compensation and benefits and furloughing employees consistent with reductions in product demand and manufacturing levels, •adjusting the operating schedules of our manufacturing plants based on governmental requirements, health, safety and demand factors, •canceling non-essential travel plans, •evaluating our supply chain, determining critical raw material requirements and identifying additional suppliers beyond our first-tier suppliers, •amending covenants governing our debt agreements to maintain compliance, and •obtaining government assistance, where applicable. During the three months endedMarch 31, 2021 , we met the requirements in certain jurisdictions to receive a total of$1.8 million of government assistance in the form of cash, cost abatements and retention credits, with$1.9 million of the total government assistance received recorded as a receivable atMarch 31, 2021 . Our Company's first quarter 2021 net sales, earnings from operations and cash flows all improved in comparison to the second quarter of 2020, which was the first full quarter of operations subsequent to theWorld Health Organization declaring the outbreak of COVID-19 as a global pandemic inMarch 2020 . While the commercial foodservice industry has continued to gradually recover from the negative impacts of the COVID-19 pandemic, the extent of the ultimate impact of the COVID-19 pandemic on our operational and financial performance will depend significantly on future developments, including the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact in each of the countries where we operate globally, the distribution of COVID-19 vaccines, emergence of new strains of the virus, and the timing of the resumption of economic activity to pre-pandemic levels. During the first quarter of 2021, we began to see increases in the cost of specific commodities, components and parts purchased, including the impact of rising inflation rates and tariffs, compared to the first three months of fiscal 2020. We anticipate that the average cost of commodities, components and parts purchased, including the impact of rising inflation and tariffs, for the remainder of fiscal 2021 will be higher than the costs experienced during the comparable period of the year endedDecember 31, 2020 . We continue to proactively monitor the developments surrounding COVID-19 and may take additional actions based on the requirements and recommendations of governmental and health authorities around the world in an attempt to protect our stakeholders. We are currently unable to quantify with certainty the ultimate severity or duration of the impact of the COVID-19 pandemic on our business. -39- -------------------------------------------------------------------------------- The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted onMarch 27, 2020 and includes measures intended to assist companies during the COVID-19 pandemic, including temporary changes to income and non-income-based tax laws, some of which had been enacted under the Tax Cuts and Jobs Act ("Tax Act") in 2017. As a result of the Tax Act and the CARES Act, additional legislative and regulatory guidance has been and may continue to be issued, including final regulations that could impact our effective tax rate in future periods.
The American Rescue Plan Act of 2021 was enacted on
Strategic Objectives
While our strategic objectives are long-term and remain intact, the execution of the Merger Agreement with Middleby and the uncertainty surrounding the COVID-19 pandemic will impact the extent and timing of our execution of these objectives. As such, our strategic objectives continue to include achieving sustainable growth globally and increased profitability by leveraging our position as a leading commercial foodservice equipment provider, while selectively pursuing longer-term strategic partnerships, growing our customer base and expanding the frontiers of foodservice innovation, as well as attracting and developing industry-leading talent.
Our specific strategic objectives include:
•Achieve profitable growth: We intend to grow sales organically with our
best-in-class foodservice equipment portfolio of products and an integrated
kitchen solution approach. While organic growth across all three of our regions
is our first priority, we may selectively pursue strategic partnerships as our
capital structure allows in the future. Our industry is fragmented, and we
believe there is significant opportunity for consolidation through partnerships
and other strategic relationships to drive growth.
•Business Transformation Program Update: We are continuing the execution of the
Business Transformation Program ("Transformation Program") to maintain and
increase productivity gains and material cost reductions. We are encouraged by
our progress to date and are committed to completing the activities included
within the scope of the Transformation Program by the end of 2021 as originally
planned. We remain confident in our ability to achieve the $75.0 million of
annualized savings when our sales and volume levels return to pre-pandemic
levels.
Our Transformation Program is structured in multiple phases extending through
2021 and is focused on specific areas of opportunity including strategic
sourcing, manufacturing facility workflow redesign, distribution and
administrative process efficiencies and optimizing our global brand platforms.
We expect to conclude the planned execution actions of the Transformation
Program by the end of 2021 and anticipate incurring total consulting costs,
restructuring charges, and other related transformation expenses of $70.0 to
$75.0 million from the inception of the program through 2021. However, the
timing of realizing the full savings will be delayed until sales and
manufacturing volumes return to pre-COVID levels. We may update our timing and
cost estimates as the circumstances surrounding the pandemic and the foodservice
industry recovery evolve.
In connection with the ongoing execution of the Transformation Program, we
incurred $2.2 million of consulting and other related Transformation Program
costs for the three months ended March 31, 2021 . We have also incurred $0.2
million of restructuring charges during the three months ended March 31, 2021 ,
intended to reduce operating expenses as a result of the improved efficiencies
gained from the execution of the Transformation Program. We have incurred total
costs of $69.8 million from the inception of the Transformation Program through
March 31, 2021 and have settled these costs primarily in cash. We intend to
continuously evaluate the total investment in, and financial benefits of, the
various initiatives associated with the Transformation Program.
•Create innovative products and solutions: To remain an industry leader and grow
our reputation as an innovative company, we continuously develop dynamic product
and system solutions for the entire kitchen. We leverage our suppliers and
customers to actively address product competitiveness and life cycle extensions.
We co-create innovation and refresh existing products with new, locally relevant
food-inspiring technologies, while simultaneously finding new ways to integrate
those technologies into global platforms in a cost-effective manner and create
cohesive kitchen systems for our customers.
•Enhance customer satisfaction: We believe our broad product portfolio and the
positioning of our industry-leading brands enables us to further grow the number
of customers we serve and improve overall customer satisfaction as a trusted
provider to the largest companies in the foodservice industry.
•Drive operational excellence: We are focused on productivity gains and cost
reductions across our business and plan to continue to leverage our global
footprint to drive greater efficiencies across our operations. We are executing
these cost reduction initiatives through our Transformation Program, focused on
specific areas of opportunity including strategic sourcing, manufacturing
facility workflow redesign, distribution and administrative process efficiencies
and optimizing our global brand platforms.
•Develop great people: We strive to make Welbilt an employer of choice in our
industry. We believe that we demonstrate a strong commitment to our people by
providing a diverse and inclusive culture and environment where employee input,
efforts and achievements are recognized and valued.
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Results of Operations for the Three Months Ended
The following table sets forth our consolidated financial results for the periods presented:
Three Months Ended March 31, Change
(in millions, except percentage data) 2021 2020 $ %
Net sales $ 316.8 $ 328.9 $ (12.1) (3.7) %
Cost of sales 199.0 214.1 (15.1) (7.1) %
Gross profit 117.8 114.8 3.0 2.6 %
Gross margin (% of Net sales) 37.2 % 34.9 % 2.3 %
Selling, general and administrative
expenses 76.0 86.5 (10.5) (12.1) %
Amortization expense 10.1 9.7 0.4 4.1 %
Restructuring and other expense 0.2 6.8 (6.6) (97.1) %
Loss from impairment and disposal of
assets - net - 11.2 (11.2) (100.0) %
Earnings from operations 31.5 0.6 30.9 5,150.0 %
Interest expense 18.7 22.4 (3.7) (16.5) %
Other expense (income) - net 3.0 (6.5) (9.5) (146.2) %
Earnings (loss) before income taxes 9.8 (15.3) 25.1 164.1 %
Income tax expense (benefit) 1.9 (0.2) 2.1 N/M
Net earnings (loss) $ 7.9 $ (15.1) $ 23.0 152.3 %
N/M - Not Meaningful
Analysis of Net Sales
"Net sales" for our geographic business segments consist of the following for
the periods presented:
Three Months Ended March 31, Change
(in millions) 2021 2020 $ %
Americas $ 246.4 $ 250.5 $ (4.1) (1.6) %
EMEA 93.4 90.0 3.4 3.8 %
APAC 48.7 51.3 (2.6) (5.1) %
Elimination of intersegment sales (71.7) (62.9) (8.8) (14.0) %
Total net sales $ 316.8 $ 328.9 $ (12.1) (3.7) %
Net sales totaled $316.8 million for the three months ended March 31, 2021
representing a decrease of $12.1 million , or 3.7%, compared to the same period
of the prior year. The decrease in net sales was primarily the result of
decreased volumes largely due to a decrease in general market demand and to a
much lesser extent decreased KitchenCare aftermarket sales, both of which were
negatively impacted by the ongoing COVID-19 pandemic on foodservice providers
globally and the resulting decrease in demand for our products. This decrease
was partially offset by increased net pricing and increased volumes related to
rollouts with large chain customers as we move forward with the growth and
expansion efforts that were disrupted as a result of the COVID-19 pandemic.
Foreign currency translation positively impacted third-party net sales for the
three months ended March 31, 2021 by $7.7 million as compared to the three
months ended March 31, 2020 .
Net sales in the Americas segment for the three months ended March 31, 2021
decreased $4.1 million , or 1.6%, compared to the same period of the prior year.
The decrease in net sales was primarily driven by decreased volumes largely due
to a decrease in general market demand and a $7.0 million decrease in
intersegment sales, both of which were significantly impacted by the ongoing
COVID-19 pandemic on foodservice providers in the Americas and the resulting
decrease in demand for our products. This decrease was partially offset by an
increase in third-party net sales of $2.9 million and an increase in net
pricing. The increase in third-party sales was primarily driven by an increase
in KitchenCare aftermarket sales and increased volumes related to rollouts with
large chain customers. Foreign currency translation positively impacted
third-party net sales for the three months ended March 31, 2021 by $1.4 million
as compared to the same period of the prior year.
Net sales in the EMEA segment for the three months ended March 31, 2021
increased $3.4 million , or 3.8%, compared to the same period of the prior year.
The increase in net sales was primarily driven by a $14.0 million increase in
intersegment sales due primarily to the America's rollout with large chain
customers discussed above. This increase was partially offset by a decrease in
third-party net sales of $10.6 million , which was primarily driven by decreased
volumes in the general market and decreased KitchenCare aftermarket sales, both
of which were significantly impacted by the ongoing COVID-19 pandemic on
foodservice providers in EMEA and the resulting decrease in demand for our
products. Foreign currency translation positively impacted third-party net sales
for the three months ended March 31, 2021 by $5.2 million .
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Net sales in the APAC segment for the three months ended March 31, 2021
decreased $2.6 million , or 5.1%, compared to the same period of the prior year.
The decrease in net sales was primarily driven by decreased third-party net
sales of $4.4 million driven by decreased volumes in the general market demand
and decreased KitchenCare aftermarket sales, which were significantly impacted
by the COVID-19 pandemic on foodservice providers and the resulting decrease in
demand for our products. The decrease was partially offset by an increase in
intersegment sales of $1.8 million . Foreign currency translation positively
impacted third-party net sales for the three months ended March 31, 2021 by $1.1
million as compared to the same period of the prior year.
Analysis of Earnings from Operations
Gross profit
"Gross profit" for the three months endedMarch 31, 2021 totaled$117.8 million , an increase of$3.0 million , or 2.6%, compared to the same period of the prior year. This increase was primarily driven by: (i)$7.7 million of favorable labor and other manufacturing costs and$5.4 million of favorable material costs, primarily driven by the realizations of our efforts associated with the Transformation Program which are partially offset by inflationary pressures experienced during the first quarter of 2021, (ii)$4.2 million of positive foreign currency translation impact, and (iii) a$3.2 million favorable impact from increased net pricing. These favorable impacts were partially offset by: (i) a$12.6 million unfavorable impact from decreased product volumes and mix, (ii) a$3.5 million unfavorable impact from increased inbound freight costs resulting from the macroeconomic impacts of the COVID-19 pandemic to the supply chain and (iii) a$1.2 million unfavorable impact from increased tariffs.
Selling, general and administrative expenses
"Selling, general and administrative expenses" for the three months endedMarch 31, 2021 totaled$76.0 million , a decrease of$10.5 million , or 12.1%, compared to the same period of the prior year. This decrease is primarily due to: (i)$9.1 million lower third-party consulting costs incurred in connection with our Transformation Program (ii)$2.5 million of lower travel and other controllable costs, (iii)$2.4 million of lower marketing and commission costs, primarily attributable to lower sales volumes, (iv)$0.7 million of lower professional fees and (v)$0.3 million lower of depreciation expense. The impact of these decreases were partially offset by$2.4 million of increased employee-related costs, comprised primarily of$2.2 million of increased stock compensation costs and a$1.8 million unfavorable foreign currency translation impact as compared to the same period of the prior year.
Restructuring and other expense
"Restructuring and other expense" for the three months endedMarch 31, 2021 were$0.2 million , as a result of a restructuring plan initiated during the first quarter of 2021 for the consolidation of a manufacturing facility in EMEA and final costs associated with a restructuring action initiated during the fourth quarter of 2019 in the APAC region. "Restructuring and other expenses" for the three months endedMarch 31, 2020 were$6.8 million , consisting of$3.7 million of severance and related costs and a$3.1 million loss contingency charge. The severance and related costs were associated with workforce reductions in theAmericas and Corporate and a limited management restructuring to reduce operating expenses in response to the negative impact of the global COVID-19 pandemic on our operations as well as restructuring actions initiated during the fourth quarter of 2019 in the EMEA and APAC regions. The loss contingency charge was associated with our voluntary review of certain errors in declarations to theU.S. Customs and Border Protection for customs duties, fees and interest owed for previously imported products. See Note 11, "Contingencies and Significant Estimates," for further information.
Analysis of Segment Adjusted Operating EBITDA
"Adjusted Operating EBITDA" (a non-GAAP measure) for our geographic segments consisted of the following for the periods presented:
Three Months Ended March 31, Change
(in millions, except percentage data) 2021 2020 $ %
Americas $ 50.3 $ 52.3 $ (2.0) (3.8) %
EMEA 14.6 13.6 1.0 7.4 %
APAC 6.8 8.2 (1.4) (17.1) %
Total Segment Adjusted Operating
EBITDA 71.7 74.1 (2.4) (3.2) %
Less: Corporate and unallocated
expenses (21.9) (28.6) 6.7 23.4 %
Total Adjusted Operating EBITDA $ 49.8 $ 45.5 $ 4.3 9.5 %
Adjusted Operating EBITDA margin (1) 15.7 % 13.8 % 1.9 %
(1) Adjusted Operating EBITDA margin is calculated by dividing the dollar amount of Adjusted Operating EBITDA by net sales.
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Adjusted Operating EBITDA in the Americas segment for the three months ended
March 31, 2021 decreased by $2.0 million , or 3.8%. This decrease was primarily
the result of $14.1 million of unfavorable product volumes and mix and $3.1
million of unfavorable inbound freight costs and $1.2 million of increased
tariffs, both resulting from the macroeconomic impacts to the supply chain as a
result of the COVID-19 pandemic. The impact of these decreases were partially
offset by (i) $5.4 million of lower in materials costs and $6.4 million of
decreases in labor and other manufacturing costs, both primarily driven by the
realizations of our efforts associated with the Transformation Program which are
partially offset by inflationary pressures experienced during the first quarter
of 2021, (ii) $2.2 million favorable impact from net pricing, (iii) $1.6 million
of lower marketing and commissions costs and (iv) $0.8 million of favorable
foreign currency translation impact.
Adjusted Operating EBITDA in the EMEA segment for the three months ended March
31, 2021 increased by $1.0 million , or 7.4%. This increase was primarily the
result of: (i) a $1.3 million of favorable foreign currency translation impact,
(ii) $1.1 million of lower employee-related travel and other controllable costs,
(iii) $0.7 million of lower marketing and commissions costs and (iv) $0.6
million of lower professional fees. The impact of these favorable items were
partially offset by $2.1 million of decreased net pricing and product volumes
and $0.9 million higher materials and other manufacturing costs.
Adjusted Operating EBITDA in the APAC segment for the three months ended March
31, 2021 decreased by $1.4 million , or 17.1%. This decrease was primarily driven
by $1.1 million lower product volumes and $0.5 million of unfavorable
manufacturing costs. These decreases were partially offset by $0.4 million of
favorable foreign currency translation impact.
Corporate and unallocated expenses reflect certain corporate-level expenses and
eliminations, which are not allocated to the geographic business segments. For
the three months ended March 31, 2021 , corporate and unallocated expenses
decreased by $6.7 million , or 23.4%. This decrease was primarily driven by an
$8.1 million decrease in the elimination of profit in inventory resulting from
lower intercompany inventory on hand and a $2.2 million decrease in travel and
other controllable costs. These decreases were partially offset by $3.6 million
of increased employee-related costs, comprised primarily of $2.2 million
increased stock compensation costs.
Analysis of Non-Operating Income Statement Items
For the three months ended
For the three months endedMarch 31, 2021 , "Other expense (income) - net" was an expense of$3.0 million , compared to income of$6.5 million for the same period of the prior year. The decrease of$9.5 million is primarily the result of higher net foreign currency losses compared to the same period of prior year.
Analysis of Income Taxes
For the three months endedMarch 31, 2021 , we recorded a$1.9 million income tax expense, reflecting a 19.4% effective tax rate, compared to a$0.2 million income tax benefit for the three months endedMarch 31, 2020 , reflecting a 1.3% effective tax rate. The change in the effective tax rate for the three months endedMarch 31, 2021 compared to the same period of the prior year is primarily the result of our increase in earnings, changes in discrete tax items as a result of the change in uncertain tax positions, CARES Act net operating loss carryback provisions enacted in 2020 and the relative weighting of jurisdictional income and loss. For the three months endedMarch 31, 2021 , the income tax provision is primarily related to the relative weighting of jurisdictional income and loss.
Liquidity and Capital Resources
Overview of Factors Affecting our Liquidity
We manage cash centrally, generally reinvest net earnings locally and meet our working capital requirements from cash and cash equivalents, cash flows from operations and capacity under our existing credit facilities. As ofMarch 31, 2021 , our total liquidity was$353.7 million , consisting of$140.3 million of cash and cash equivalents and$213.4 million available for additional borrowings under our senior secured revolving credit facility ("Revolving Credit Facility"), to the extent our compliance with financial covenants permits such borrowings, compared to total liquidity of$375.0 million as ofDecember 31, 2020 . Our liquidity generally decreases in the first quarter and increases in the remaining quarters of the year driven by our earnings cycle as well as the timing of large cash payments in the first quarter such as annual rebates, incentive compensation and the build-up of inventory in advance of the historically higher sales period in the spring and early summer months. As ofMarch 31, 2021 , approximately 90% of our cash and cash equivalents and restricted cash were held outside of theU.S. The majority of the cash generated in theU.S. is used to fund current and expected future working capital requirements and to fund debt service obligations. We maintain significant operations outside of theU.S. , and as a result, a significant portion of our cash is denominated in foreign currencies. We manage our worldwide cash requirements by reviewing available funds among our subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. Where local restrictions prevent an efficient intercompany transfer of funds, our intent is to maintain cash balances outside of theU.S. and to meet our liquidity needs through ongoing cash flows, external borrowings, or both. We plan to continue reinvesting foreign earnings indefinitely outside of theU.S. with certain limited exceptions. -43-
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The expectations for our future cash needs are currently expected to be primarily related to operating activities, inclusive of capital investments, working capital and debt service. We estimate that our capital expenditures will be between$33.0 million and$37.0 million for the year endingDecember 31, 2021 . The amount of actual capital expenditures may be impacted by general economic, financial or operational changes, including the future impact of the COVID-19 pandemic on our operating results, and competitive, legislative and regulatory factors, among other considerations. Our ability to satisfy our cash requirements depends on our ongoing ability to generate and, if necessary, raise cash. In response to the global COVID-19 pandemic throughout 2020 and the first quarter of 2021, we actioned contingency plans for our operations and took what we believe to be appropriate steps to reduce operating expenses and capital spending, including reductions in the size of our workforce and temporary employee furloughs. We expect that our future cash generated from operations, together with our capacity under our existing senior secured revolving credit facility and our access to capital markets, will provide adequate resources to meet our working capital needs and cash requirements for at least the next 12 months. Our access to, and the availability of, financing on acceptable terms in the future may be affected by many factors including the overall liquidity in the financial and capital markets, the state of the economy, the closing of the Merger Agreement with Middleby and our credit rating. The ongoing COVID-19 pandemic, which has continued to cause volatility in the capital markets, could also impact our ability to pursue additional financing opportunities in the future. Moreover, we are unable to quantify the ultimate severity or duration of the impact of the COVID-19 pandemic on our operational and financial performance, which could have an adverse impact on our results of operations, cash flows and financial position, potentially resulting in a default or an acceleration of indebtedness, and could otherwise negatively impact our liquidity and ability to make additional borrowings under our Revolving Credit Facility.
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