JBT MAREL Corp 10-Q for FY2021 Q3
JBT MAREL Corp (JBTM)
10-Q
2021-10-29
For: 2021-09-30
View Original
Added on
April 07, 2026
About this 10-Q
JBT MAREL Corp filed this 10-Q on October 29, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $477.4M
- up 13.9% from $419.2M a year earlier
- Net income
- $29.3M
- up 70.3% from net income of $17.2M a year earlier
- Diluted EPS
- $0.91
- up 68.5% from $0.54 a year earlier
| UNITED STATES | ||
| SECURITIES AND EXCHANGE COMMISSION | ||
| Washington, D.C. 20549 | ||
| FORM | |||||
| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||||||
For the quarterly period ended September 30, 2021
or
| 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 1-34036
| (Exact name of registrant as specified in its charter) | |||||||||||||||||||||||
| (State or other jurisdiction of | (I.R.S. Employer | ||||||||||||||||||||||
| incorporation or organization) | Identification No.) | ||||||||||||||||||||||
| (Address of principal executive offices) | (Zip code) | ||||||||||||||||||||||
(312 ) 861-5900
(Registrant’s telephone number, including area code)
| Securities registered pursuant to section 12(b) of the Act: | ||||||||||||||
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the 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 was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
| 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. | ☐ | ||||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at October 22, 2021 | |||||||
| Common Stock, par value $0.01 per share | ||||||||
1
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JOHN BEAN TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In millions, except per share data) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Product revenue | $ | $ | $ | $ | |||||||||||||||||||
| Service revenue | |||||||||||||||||||||||
| Total revenue | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Cost of products | |||||||||||||||||||||||
| Cost of services | |||||||||||||||||||||||
| Selling, general and administrative expense | |||||||||||||||||||||||
| Restructuring expense | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Pension expense, other than service cost | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
| Income from continuing operations before income taxes | |||||||||||||||||||||||
| Income tax provision | |||||||||||||||||||||||
| Income from continuing operations | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Basic earnings per share: | |||||||||||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings per share: | |||||||||||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
2
JOHN BEAN TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive (loss) income, net of income taxes | |||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ||||||||||||||||||||
| Pension and other postretirement benefits adjustments | |||||||||||||||||||||||
| Derivatives designated as hedges | ( | ( | |||||||||||||||||||||
| Other comprehensive (loss) income | ( | ( | |||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
3
JOHN BEAN TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (In millions, except per share data and number of shares) | September 30, 2021 | December 31, 2020 | |||||||||
| Assets: | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Trade receivables, net of allowances | |||||||||||
| Contract assets | |||||||||||
| Inventories | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
Property, plant and equipment, net of accumulated depreciation of $ | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Total Assets | $ | $ | |||||||||
| Liabilities and Stockholders' Equity: | |||||||||||
| Current Liabilities: | |||||||||||
| Short-term debt | $ | $ | |||||||||
| Accounts payable, trade and other | |||||||||||
| Advance and progress payments | |||||||||||
| Accrued payroll | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Accrued pension and other postretirement benefits, less current portion | |||||||||||
| Other liabilities | |||||||||||
| Commitments and contingencies (Note 13) | |||||||||||
| Stockholders' Equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Common stock held in treasury, at cost September 30, 2021: | ( | ||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders' equity | |||||||||||
| Total Liabilities and Stockholders' Equity | $ | $ | |||||||||
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
4
JOHN BEAN TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended September 30, | |||||||||||
| (In millions) | 2021 | 2020 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile income from continuing operations to cash provided by continuing operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Stock-based compensation | |||||||||||
| Other | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Trade receivables, net and contract assets | ( | ||||||||||
| Inventories | ( | ||||||||||
| Accounts payable, trade and other | ( | ||||||||||
| Advance and progress payments | |||||||||||
| Accrued pension and other postretirement benefits, net | ( | ( | |||||||||
| Other assets and liabilities, net | ( | ||||||||||
| Cash provided by continuing operating activities | |||||||||||
| Cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisitions, net of cash acquired | ( | ( | |||||||||
| Capital expenditures | ( | ( | |||||||||
| Proceeds from disposal of assets | |||||||||||
| Cash required by investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Net payments on short-term debt | ( | ( | |||||||||
| Net payments from domestic credit facilities | ( | ( | |||||||||
| Proceeds from issuance of 2026 convertible senior notes, net of issuance costs | |||||||||||
| Purchase of convertible bond hedge | ( | ||||||||||
| Proceeds from sale of warrants | |||||||||||
| Settlement of taxes withheld on stock-based compensation awards | ( | ( | |||||||||
| Payment of acquisition date earnout liability | ( | ||||||||||
| Dividends | ( | ( | |||||||||
| Cash provided (required) by financing activities | ( | ||||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | ( | ( | |||||||||
| Increase in cash and cash equivalents | |||||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
5
JOHN BEAN TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
| Three Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||
| (In millions) | Common Stock | Common Stock Held in Treasury | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Equity | |||||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
Common stock cash dividends, $ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Foreign currency translation adjustments, net of income taxes of $ | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Derivatives designated as hedges, net of income taxes of $ | — | — | — | — | |||||||||||||||||||||||||||||||
Pension and other postretirement liability adjustments, net of income taxes of $ | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Taxes withheld on issuance of stock-based awards | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||
| (In millions) | Common Stock | Common Stock Held in Treasury | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Equity | |||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Issuance of treasury stock | — | ( | — | — | |||||||||||||||||||||||||||||||
Common stock cash dividends, $ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Foreign currency translation adjustments, net of income taxes of $ | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Derivatives designated as hedges, net of income taxes of $ | — | — | — | — | |||||||||||||||||||||||||||||||
| Proceeds from sale of warrants | — | — | — | — | |||||||||||||||||||||||||||||||
Purchase of convertible bond hedge, net of income tax of $( | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
Pension and other postretirement liability adjustments, net of income taxes of $ | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Taxes withheld on issuance of stock-based awards | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
6
| Three Months Ended September 30, 2020 | |||||||||||||||||||||||||||||||||||
| (In millions) | Common Stock | Common Stock Held in Treasury | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Equity | |||||||||||||||||||||||||||||
| Balance at June 30, 2020 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Issuance of treasury stock | — | ( | — | — | |||||||||||||||||||||||||||||||
Common stock cash dividends, $ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Foreign currency translation adjustments, net of income taxes of $ | — | — | — | — | |||||||||||||||||||||||||||||||
Derivatives designated as hedges, net of income taxes of $( | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Pension and other postretirement liability adjustments, net of income taxes of $ | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Nine Months Ended September 30, 2020 | |||||||||||||||||||||||||||||||||||
| (In millions) | Common Stock | Common Stock Held in Treasury | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Equity | |||||||||||||||||||||||||||||
| Balance at December 31, 2019 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Issuance of treasury stock | — | ( | — | — | |||||||||||||||||||||||||||||||
Common stock cash dividends, $ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Foreign currency translation adjustments, net of income taxes of $ | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Derivatives designated as hedges, net of income taxes of $( | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Pension and other postretirement liability adjustments, net of income taxes of $ | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Taxes withheld on issuance of stock-based awards | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
7
JOHN BEAN TECHNOLOGIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
John Bean Technologies Corporation and its majority-owned consolidated subsidiaries (the “Company,” “JBT,” “our,” “us,” or “we”) provide global technology solutions to high-value segments of the food and beverage and air transportation industries. The Company designs, produces and services sophisticated products and systems for multi-national and regional customers through JBT FoodTech and JBT AeroTech segments. The Company has manufacturing operations worldwide that are strategically located to facilitate delivery of its products and services to its customers.
Basis of Presentation
In accordance with Securities and Exchange Commission (“SEC”) rules for interim periods, the accompanying unaudited condensed consolidated financial statements (the “interim financial statements”) do not include all of the information and notes for complete financial statements as required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). As such, the accompanying interim financial statements should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2020, which provides a more complete description of the Company’s accounting policies, financial position, operating results, business, properties, and other matters. The year-end condensed consolidated Balance Sheet was derived from audited financial statements, but does not include all annual disclosures required by accounting principles generally accepted in the United States of America.
In the opinion of management, the interim financial statements reflect all normal recurring adjustments necessary for a fair statement of the Company's financial condition and operating results as of and for the periods presented. Revenue, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the interim results and trends in the interim financial statements may not be representative of those for the full year or any future period.
Use of estimates
Preparation of financial statements that follow U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
Recently adopted accounting pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). The amendments in this update simplifies accounting for certain convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. As a result, convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer be available for convertible debt instruments. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company early adopted the new standard effective January 1, 2021 using the modified retrospective method. There was no impact on the Company's financial statements as of the adoption date. As further discussed in Note 6, "Debt," the Company issued $402.5 million principal amount of convertible senior notes on May 28, 2021, which have been accounted for in accordance with the provisions of ASU 2020-06.
In July 2021, the FASB issued ASU 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. ASU 2021-05 requires accounting for leases by lessors with variable lease payments that do not depend on a reference index or a rate as operating leases if any other lease classification would require the lessor to recognize a day-one loss. The provisions of ASU 2021-05 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company early adopted the new standard effective September 30, 2021 using retrospective method of adoption with an immaterial adoption impact to the Company's current year financial statements and no impact to the Company's financial statement for comparative prior year periods.
8
NOTE 2. ACQUISITIONS
During the nine months ended September 30, 2021 and fiscal year 2020 the Company acquired 100 % of voting equity of two businesses, and the assets and liabilities of another business. A summary of the acquisitions made during the periods is as follows:
| Date | Type | Company/Product Line | Location (Near) | Segment | ||||||||||||||||||||||
| July 2, 2021 | Stock | CMS Technology, Inc ("Prevenio") | Bridgewater, New Jersey | JBT FoodTech | ||||||||||||||||||||||
| A provider of innovative food safety solutions primarily for the poultry industry as well as produce applications. Prevenio provides a pathogen protection solution through its anti-microbial delivery equipment that enhances food safety and integrity, and creates a safer work environment for its customers and their employees. This acquisition enhances the Company’s recurring revenue portfolio and furthers its investment in solutions that support its customers’ daily operations. | ||||||||||||||||||||||||||
| February 28, 2021 | Stock | AutoCoding Systems Ltd. ("ACS") | Cheshire, U.K. | JBT FoodTech | ||||||||||||||||||||||
| A provider of a central command solution for the integration of packaging process devices. The ACS acquisition extends the Company's capabilities in packaging line equipment and associated devices, including coding and label inspection and verification. | ||||||||||||||||||||||||||
| May 29, 2020 | Asset | MARS Food Processing Solutions, LLC ("MARS") | Denver, North Carolina | JBT FoodTech | ||||||||||||||||||||||
| A provider of solutions for monitoring and managing the efficiency of poultry processing plants. The MARS acquisition allows the Company to offer its Protein customers proprietary solutions for monitoring and managing the efficiency of poultry processing plants. | ||||||||||||||||||||||||||
9
Prevenio(1) | ACS(2) | Total | |||||||||
| (In millions) | |||||||||||
| Financial assets | $ | $ | $ | ||||||||
| Inventories | |||||||||||
| Property, plant and equipment | |||||||||||
Customer relationship (3) | |||||||||||
Patents and acquired technology (3) | |||||||||||
Trademarks (3) | |||||||||||
| Deferred taxes | ( | ( | ( | ||||||||
| Financial liabilities | ( | ( | ( | ||||||||
| Total identifiable net assets | $ | $ | $ | ||||||||
| Cash consideration paid | $ | $ | $ | ||||||||
| Cash acquired | |||||||||||
| Net consideration | $ | $ | $ | ||||||||
Goodwill (4) | $ | $ | $ | ||||||||
(1)The purchase accounting for Prevenio is provisional. The valuation of certain working capital balances, property, plant and equipment, intangibles, income tax balances and residual goodwill is not complete. These amounts are subject to adjustment as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date).
(2)The purchase accounting for ACS is provisional. The valuation of intangibles, income tax balances and residual goodwill is not complete. These amounts are subject to adjustment as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date). During the quarter ended June 30, 2021, the Company refined its estimates for other intangibles by ($2.0 ) million and deferred taxes by $0.5 million. During the quarter ended September 30, 2021, the Company made no significant measurement period adjustments for ACS. The impact of these adjustments was reflected as a net increase in goodwill of $1.3 million. These adjustments resulted in an immaterial impact to the consolidated statement of income.
(3)The acquired intangible assets are amortized on a straight-line basis over their estimated useful lives, which range from to nineteen years . The intangible assets acquired in 2021 have weighted average useful lives of 15 years for customer relationship, 8 years for patents and acquired technology, and 12 years for trademarks.
During the second quarter of 2020, the Company acquired certain assets and liabilities of MARS Food Processing Solutions, LLC ("MARS") for a purchase price of $5 million. The Company expects goodwill of $3.1 million from this acquisition to be deductible for income tax purposes.
10
NOTE 3. GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying amount of goodwill by business segment were as follows:
| (In millions) | JBT FoodTech | JBT AeroTech | Total | ||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | ||||||||||||||
| Acquisitions | |||||||||||||||||
| Currency translation | ( | ( | ( | ||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | ||||||||||||||
Intangible assets consisted of the following:
| September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||
| (In millions) | Gross carrying amount | Accumulated amortization | Gross carrying amount | Accumulated amortization | |||||||||||||||||||
| Customer relationship | $ | $ | $ | $ | |||||||||||||||||||
| Patents and acquired technology | |||||||||||||||||||||||
| Trademarks | |||||||||||||||||||||||
| Non-amortizing intangible assets | — | — | |||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total intangible assets | $ | $ | $ | $ | |||||||||||||||||||
NOTE 4. INVENTORIES
Inventories consisted of the following:
| (In millions) | September 30, 2021 | December 31, 2020 | |||||||||
| Raw materials | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished goods | |||||||||||
| Gross inventories before LIFO reserves and valuation adjustments | |||||||||||
| LIFO reserves | ( | ( | |||||||||
| Valuation adjustments | ( | ( | |||||||||
| Net inventories | $ | $ | |||||||||
NOTE 5. PENSION
Components of net periodic benefit cost were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of net actuarial losses | |||||||||||||||||||||||
| Net periodic cost | $ | $ | $ | $ | |||||||||||||||||||
11
NOTE 6. DEBT
On June 19, 2018, the Company entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent, and the other lenders party thereto. The Credit Agreement provides for a $1 billion revolving credit facility that matures in June 2023. On May 25, 2021, the Company entered into the first amendment to the Credit Agreement with Wells Fargo Bank, National Association, as administrative agent, and the other lenders party thereto (the “Credit Agreement Amendment”). The purpose of the Credit Agreement Amendment was to permit the issuance of the Convertible Senior Notes described below.
Convertible Senior Notes
On May 28, 2021, the Company closed a private offering of $402.5 million aggregate principal amount of the Company's 0.25 % Convertible Senior Notes due 2026 (the "Notes") to qualified institutional buyers, resulting in net proceeds of approximately $392.2 million after deducting initial purchasers’ discounts of the Notes. Interest on the Notes will accrue from May 28, 2021 and is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021, at a rate of 0.25 % per year. The Notes will mature on May 15, 2026 unless earlier converted, redeemed or repurchased. No sinking fund is provided for the Notes.
The initial conversion rate of the Notes is 5.8958 shares of the Company's common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $169.61 per share. The conversion rate of the Notes is subject to adjustment upon the occurrence of certain specified events. In addition, upon the occurrence of a make-whole fundamental change (as defined in the indenture governing the Notes (the "Indenture")) or upon a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder that elects to convert its Notes in connection with such make-whole fundamental change or notice of redemption, as the case may be.
On or after March 20, 2024, the Company has the option to redeem for cash all or part of the Notes, if the last reported sales price of the Company's common stock (the "common stock") has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides redemption notice, during any 30 consecutive trading days ending on, and including, the last trading day immediately before the date the Company sends the related redemption notice. The redemption price of each Note to be redeemed will be the principal amount of such note, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company redeems less than all the outstanding Notes, at least $100 million aggregate principal amount of Notes must be outstanding and not subject to redemption as of the relevant redemption notice date.
Prior to the close of business on the business day immediately preceding February 15, 2026, the Notes are convertible at the option of the holders only under the following circumstances:
•during any calendar quarter commencing after the calendar quarter ending on September 30, 2021 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;
•during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the common stock and the conversion rate on each such trading day;
•if the Company calls such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called (or deemed called) for redemption; or
•upon the occurrence of certain corporate events, as specified in the Indenture governing the Notes.
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At any time on or after February 15, 2026, holders may convert their Notes at their option, and in multiples of $1,000 principle amount, without regard to the foregoing circumstances. Upon conversion, the Company will pay cash up to the aggregate principal amount of the Notes and for the remainder of our conversion obligation in excess of the aggregate principal amount will pay or deliver cash, shares of common stock, or a combination of cash and shares of common stock at the Company’s election.
The Notes were not convertible during the quarter ended September 30, 2021 and none have been converted to date. Also given the average market price of the common stock has not exceeded the exercise price since inception, there is no impact to the diluted earnings per share.
Upon the occurrence of a fundamental change (as defined in the Indenture), subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their Notes in multiples of $1,000 principal amounts, at its repurchase price, plus accrued and unpaid interest to, but excluding, the repurchase date.
The Notes are senior unsecured obligations and rank equally in right of payment with all of the Company's existing unsubordinated debt and senior in right of payment to any future debt that is expressly subordinated in right of payment to the Notes. The Notes will be effectively subordinated to any of the Company's existing and future secured debt to the extent of the assets securing such indebtedness.
The Indenture includes customary terms and covenants, including certain events of default after which the Notes may become due and payable immediately.
Convertible Note Hedge Transactions
The Company paid an aggregate amount of $65.6 million for the Convertible Note Hedge Transactions (the "Hedge Transactions"). The Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those in the Notes, approximately 2.4 million shares of the Company's common stock. These are the same number of shares initially underlying the Notes, at a strike price of $169.61 , subject to customary adjustments. The Hedge Transactions will expire upon the maturity of the Notes, subject to earlier exercise or termination.
The Hedge Transactions are expected generally to reduce the potential dilutive effect of the conversion of the Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted Notes, in the event that the market price per share of the Company's common stock, as measured under the terms of the Hedge Transactions, is greater than the Hedge Transactions strike price of $169.61 . The Hedge Transactions meet the criteria in ASC 815-40 to be classified within Stockholders' Equity, and therefore these transactions are not revalued after their issuance.
The Company made a tax election to integrate the Notes and the Hedge Transactions. The accounting impact of this tax election makes the Hedge Transactions deductible as original issue discount interest for tax purposes over the term of the note, and results in a $17.1 million deferred tax asset recorded as an adjustment to Additional paid-in capital on our Balance Sheet as of September 30, 2021.
Warrant Transactions
In addition, concurrently with entering into the Hedge Transactions, the Company separately entered into privately-negotiated Warrant Transactions (the "Warrant Transactions"), whereby the Company sold to the counterparties warrants to acquire, collectively, subject to anti-dilution adjustments, 2.4 million shares of its common stock at an initial strike price of $240.02 per share. The Company received aggregate proceeds of $29.5 million from the Warrant Transactions with the counterparties, with such proceeds partially offsetting the costs of entering into the Hedge Transactions. The warrants expire in August 2026. If the market value per share of the common stock, exceeds the strike price of the warrants, the warrants will have a dilutive effect on our earnings per share, unless the Company elects, subject to certain conditions, to settle the warrants in cash. The warrants meet the criteria in ASC 815-40 to be classified within Stockholders' Equity, and therefore the warrants are not revalued after issuance.
13
The components of the Company's borrowings were as follows:
| (In millions) | Maturity Date | September 30, 2021 | December 31, 2020 | ||||||||||||||
Revolving credit facility (1) | $ | $ | |||||||||||||||
| Less: unamortized debt issuance costs | $ | ( | $ | ( | |||||||||||||
| Revolving credit facility, net | $ | $ | |||||||||||||||
Convertible senior notes (2) | $ | $ | |||||||||||||||
| Less: unamortized debt issuance costs | $ | ( | $ | ||||||||||||||
| Convertible senior notes, net | $ | $ | |||||||||||||||
| Long-term debt, net | $ | $ | |||||||||||||||
(1) Weighted-average interest rate at September 30, 2021 was 1.31 %
(2) Effective interest rate for the Notes for the quarter ended September 30, 2021 was 0.82 %
Interest expense of $0.8 million recognized for the Notes included contractual interest expense of $0.3 million and the amortization of debt issuance cost of $0.5 million for the three months ended September 30, 2021.
NOTE 7. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income or loss (“AOCI”) represents the cumulative balance of other comprehensive income, net of tax, as of the Balance Sheet date. For the Company, AOCI is composed of adjustments related to pension and other postretirement benefit plans, derivatives designated as hedges, and foreign currency translation adjustments. Changes in the AOCI balances for the three months ended September 30, 2021 and 2020 by component are shown in the following tables:
Pension and Other Postretirement Benefits (1) | Derivatives Designated as Hedges (1) | Foreign Currency Translation (1) | Total (1) | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Beginning balance, June 30, 2021 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive loss before reclassification | ( | ( | ( | ||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | ( | ||||||||||||||||||||||
| Ending balance, September 30, 2021 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(1) All amounts are net of income taxes.
Reclassification adjustments from AOCI into earnings for pension and other postretirement benefit plans for the three months ended September 30, 2021 were $2.3 million of charges to pension expense, other than service cost, net of $0.6 million income tax benefit. Reclassification adjustments for derivatives designated as hedges for the same period were $0.5 million of interest expense, net of $0.2 million income tax benefit. Reclassification adjustments for foreign currency translation related to net investment hedges for the three months ended September 30, 2021 were $0.8 million of benefit in interest expense, net of $0.2 million income tax provision.
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Pension and Other Postretirement Benefits (1) | Derivatives Designated as Hedges (1) | Foreign Currency Translation(1) | Total (1) | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Beginning balance, June 30, 2020 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss) before reclassification | ( | ||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | ( | ||||||||||||||||||||||
| Ending balance, September 30, 2020 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Reclassification adjustments from AOCI into earnings for pension and other postretirement benefit plans for the three months ended September 30, 2020 were $2.4 million of charges to pension expense, other than service cost, net of $0.6 million income tax benefit. Reclassification adjustments for derivatives designated as hedges for the same period were $0.6 million of interest expense, net of $0.2 million income tax benefit. Reclassification adjustments for foreign currency translation related to net investment hedges for the three months ended September 30, 2020 were $0.8 million of benefit in interest expense, net of $0.3 million income tax provision.
Pension and Other Postretirement Benefits (1) | Derivatives Designated as Hedges (1) | Foreign Currency Translation (1) | Total (1) | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Beginning balance, December 31, 2020 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income before reclassification | |||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | ( | ||||||||||||||||||||||
| Ending balance, September 30, 2021 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(1) All amounts are net of income taxes.
Reclassification adjustments from AOCI into earnings for pension and other postretirement benefit plans for the nine months ended September 30, 2021 were $6.9 million of charges to pension expense, other than service cost, net of $1.8 million income tax benefit. Reclassification adjustments for derivatives designated as hedges for the same period were $1.4 million of interest expense, net of $0.4 million income tax benefit. Reclassification adjustments for foreign currency translation related to net investment hedges for the nine months ended September 30, 2021 were $2.2 million of benefit in interest expense, net of $0.6 million income tax provision.
Pension and Other Postretirement Benefits (1) | Derivatives Designated as Hedges (1) | Foreign Currency Translation(1) | Total (1) | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Beginning balance, December 31, 2019 | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Other comprehensive loss before reclassification | ( | ( | ( | ||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | ( | ||||||||||||||||||||||
| Ending balance, September 30, 2020 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(1) All amounts are net of income taxes.
Reclassification adjustments from AOCI into earnings for pension and other postretirement benefit plans for the nine months ended September 30, 2020 were $6.1 million of charges to pension expense, other than service cost, net of $1.5 million in income tax benefit. Reclassification adjustments for derivatives designated as hedges for the same period were $1.0 million of interest expense, net of $0.3 million income tax benefit. Reclassification adjustments for foreign currency translation related to net investment hedges for the nine months ended September 30, 2020 were $2.2 million of benefit in interest expense, net of $0.6 million income tax provision.
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NOTE 8. REVENUE RECOGNITION
Transaction price allocated to remaining performance obligations
The Company has estimated that $914.0 million in revenue is expected to be recognized in the future periods related to remaining performance obligations from the Company's contracts with customers outstanding as of September 30, 2021. The Company expects to complete these obligations and recognize 45 % as revenue in 2021, 47 % in 2022, and 8 % in 2023.
Disaggregation of Revenue
In the following table, revenue is disaggregated by type of good or service, primary geographical market, and timing of recognition for each reportable segment. The table also includes a reconciliation of the disaggregated revenue to total revenue of each reportable segment.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2021 | September 30, 2021 | ||||||||||||||||||||||
| (In millions) | JBT FoodTech | JBT AeroTech | JBT FoodTech | JBT AeroTech | |||||||||||||||||||
| Type of Good or Service | |||||||||||||||||||||||
Recurring (1) | $ | $ | $ | $ | |||||||||||||||||||
Non-recurring (1) | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
Geographical Region (2) | |||||||||||||||||||||||
| North America | |||||||||||||||||||||||
| Europe, Middle East and Africa | |||||||||||||||||||||||
| Asia Pacific | |||||||||||||||||||||||
| Latin America | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
| Timing of Recognition | |||||||||||||||||||||||
| Point in Time | |||||||||||||||||||||||
| Over Time | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
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| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2020 | September 30, 2020 | ||||||||||||||||||||||
| (In millions) | JBT FoodTech | JBT AeroTech | JBT FoodTech | JBT AeroTech | |||||||||||||||||||
| Type of Good or Service | |||||||||||||||||||||||
Recurring (1) | $ | $ | $ | $ | |||||||||||||||||||
Non-recurring (1) | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
Geographical Region (2) | |||||||||||||||||||||||
| North America | |||||||||||||||||||||||
| Europe, Middle East and Africa | |||||||||||||||||||||||
| Asia Pacific | |||||||||||||||||||||||
| Latin America | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
| Timing of Recognition | |||||||||||||||||||||||
| Point in Time | |||||||||||||||||||||||
| Over Time | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
(1) Aftermarket parts and services and revenue from lease and long-term service contracts are considered recurring revenue. Non-recurring revenue includes new equipment and installation.
(2) Geographical region represents the region in which the end customer resides.
Contract balances
The timing of revenue recognition, billings and cash collections results in trade receivables, contract assets, and advance and progress payments (contract liabilities). Contract assets exist when revenue recognition occurs prior to billings. Contract assets are transferred to trade receivables when the right to payment becomes unconditional (i.e., when receipt of the amount is dependent only on the passage of time). Conversely, the Company often receives payments from its customers before revenue is recognized, resulting in contract liabilities. These assets and liabilities are reported on the Balance Sheet as Contract assets and within Advance and progress payments, respectively, on a contract-by-contract net basis at the end of each reporting period.
Contract asset and liability balances for the period were as follows:
| Balances as of | |||||||||||
| (In millions) | September 30, 2021 | December 31, 2020 | |||||||||
| Contract Assets | $ | $ | |||||||||
| Contract Liabilities | |||||||||||
| Balances as of | |||||||||||
| September 30, 2020 | December 31, 2019 | ||||||||||
| Contract Assets | |||||||||||
| Contract Liabilities | |||||||||||
17
NOTE 9. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share from continuing operations for the respective periods and basic and diluted shares outstanding:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In millions, except per share data) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Basic earnings per share: | |||||||||||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average number of shares outstanding | |||||||||||||||||||||||
| Basic earnings per share from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings per share: | |||||||||||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average number of shares outstanding | |||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Restricted stock | |||||||||||||||||||||||
| Total shares and dilutive securities | |||||||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:
•Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities that the Company can assess at the measurement date.
•Level 2: Observable inputs other than those included in Level 1 that are observable for the asset or liability, either directly or indirectly. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
•Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.
Financial assets and financial liabilities measured at fair value on a recurring basis are as follows:
| As of September 30, 2021 | As of December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||||||||||||||
| Investments | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Derivatives | |||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Contingent consideration | |||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Investments represent securities held in a trust for the non-qualified deferred compensation plan. Investments are classified as trading securities and are valued based on quoted prices in active markets for identical assets that the Company has the ability to access. Investments are reported separately in other assets on the Balance Sheet, and include an unrealized gain of $0.6 million and $1.1 million as of September 30, 2021 and December 31, 2020, respectively.
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The Company uses the income approach to measure the fair value of derivative instruments on a recurring basis. This approach calculates the present value of the future cash flow by measuring the change between the derivative contract rate and the published market indicative currency rate, multiplied by the contract notional values, and applying an appropriate discount rate as well as a factor of credit risk.
The Notes are not registered securities nor listed on any securities exchange but may be traded by qualified institutional buyers. The fair value of the Notes estimated using Level 2 inputs was $426.7 million as of September 30, 2021.
The purchase agreement for the Company's acquisition of Proseal, in the second quarter of 2019, included contingent consideration due to the sellers of Proseal upon achievement of certain earnings targets. The contingent consideration obligation included in the Balance Sheet as other current liabilities as of December 31, 2020 was paid during the quarter ended June 30, 2021.
The following table provides a summary of changes in fair value of contingent consideration during the nine months ended September 30, 2021 and 2020:
| Nine months ended | |||||||||||
| (In millions) | September 30, 2021 | September 30, 2020 | |||||||||
| Beginning balance | $ | $ | |||||||||
| Measurement adjustments recorded to earnings | |||||||||||
| Cash payment | ( | ||||||||||
| Foreign currency translation adjustment | ( | ||||||||||
| Ending balance | $ | $ | |||||||||
The carrying amounts of cash and cash equivalents, trade receivables and payables, as well as financial instruments included in other current assets and other current liabilities, approximate fair values because of their short-term maturities.
The carrying values of the Company's revolving credit facility recorded in long-term debt on the Balance Sheet approximate their fair values due to their variable interest rates.
NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Derivative Financial Instruments
All derivatives are recorded as assets or liabilities in the Balance Sheet at their respective fair values. For derivatives designated as cash flow hedges, the unrealized gain or loss related to the derivatives is recorded in Other comprehensive income (loss) until the hedged transaction affects earnings. The Company assesses at inception of the hedge, whether the derivative in the hedging transaction will be highly effective in offsetting changes in cash flows of the hedged item. Changes in the fair value of derivatives that do not meet the criteria for designation as a hedge are recognized in earnings.
Foreign Exchange: The Company manufactures and sells products in a number of countries throughout the world and, as a result, the Company is exposed to movements in foreign currency exchange rates. Major foreign currency exposures involve the markets in Western Europe, South America and Asia. Some of the Company's sales and purchase contracts contain embedded derivatives due to the nature of doing business in certain jurisdictions, which are taken into consideration as part of the Company's risk management policy. The purpose of the Company's foreign currency hedging activities is to manage the economic impact of exchange rate volatility associated with anticipated foreign currency purchases and sales made in the normal course of business. The Company primarily utilizes forward foreign exchange contracts with maturities of less than 2 years in managing this foreign exchange rate risk. The Company has not designated these forward foreign exchange contracts, which had a notional value at September 30, 2021 of $843.3 million, as hedges and therefore does not apply hedge accounting.
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The fair values of our foreign currency derivative assets are recorded within other current assets and other assets, and the fair values of foreign currency derivative liabilities are recorded within other current liabilities and other liabilities. The following table presents the fair value of foreign currency derivatives and embedded derivatives included within the Balance Sheet:
| As of September 30, 2021 | As of December 31, 2020 | ||||||||||||||||||||||
| (In millions) | Derivative Assets | Derivative Liabilities | Derivative Assets | Derivative Liabilities | |||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
A master netting arrangement allows counterparties to net settle amounts owed to each other as a result of separate offsetting derivative transactions. The Company enters into master netting arrangements with its counterparties when possible to mitigate credit risk in derivative transactions by permitting the Company to net settle for transactions with the same counterparty. However, it does not net settle with such counterparties. As a result, derivatives are presented at their gross fair values in the Balance Sheet.
As of September 30, 2021 and December 31, 2020, information related to these offsetting arrangements was as follows:
| (In millions) | As of September 30, 2021 | ||||||||||||||||||||||||||||
| Offsetting of Assets | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Consolidated Balance Sheet | Net Presented in the Consolidated Balance Sheet | Amount Subject to Master Netting Agreement | Net Amount | ||||||||||||||||||||||||
| Derivatives | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
| (In millions) | As of September 30, 2021 | ||||||||||||||||||||||||||||
| Offsetting of Liabilities | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Consolidated Balance Sheet | Net Presented in the Consolidated Balance Sheet | Amount Subject to Master Netting Agreement | Net Amount | ||||||||||||||||||||||||
| Derivatives | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
| (In millions) | As of December 31, 2020 | ||||||||||||||||||||||||||||
| Offsetting of Assets | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Consolidated Balance Sheet | Net Presented in the Consolidated Balance Sheet | Amount Subject to Master Netting Agreement | Net Amount | ||||||||||||||||||||||||
| Derivatives | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
| (In millions) | As of December 31, 2020 | ||||||||||||||||||||||||||||
| Offsetting of Liabilities | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Consolidated Balance Sheet | Net Presented in the Consolidated Balance Sheet | Amount Subject to Master Netting Agreement | Net Amount | ||||||||||||||||||||||||
| Derivatives | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
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The following table presents the location and amount of the gain (loss) on foreign currency derivatives and on the remeasurement of assets and liabilities denominated in foreign currencies, as well as the net impact recognized in the Income Statement:
| Derivatives Not Designated as Hedging Instruments | Location of Gain (Loss) Recognized in Income on Derivatives | Amount of Gain (Loss) Recognized in Income | ||||||||||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
| (In millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||
| Foreign exchange contracts | Revenue | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||
| Foreign exchange contracts | Cost of sales | ( | ( | ( | ||||||||||||||||||||||||||||
| Foreign exchange contracts | Selling, general and administrative expense | |||||||||||||||||||||||||||||||
| Total | ( | |||||||||||||||||||||||||||||||
| Remeasurement of assets and liabilities in foreign currencies | ( | ( | ||||||||||||||||||||||||||||||
| Net gain (loss) on foreign currency transactions | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||
Interest Rates: The Company has entered into four interest rate swaps executed in March 2020 with a combined notional amount of $200 million expiring in April 2025, and one interest rate swap executed in May 2020 with a notional amount of $50 million expiring in May 2025. These interest rate swaps fix the interest rate applicable to certain of the Company's variable-rate debt. The agreements swap one-month LIBOR for fixed rates. The Company has designated these swaps as cash flow hedges and all changes in fair value of the swaps are recognized in accumulated other comprehensive income (loss).
At September 30, 2021, the fair value of these derivatives designated as cash flow hedges were recorded in the Balance Sheet as other liabilities of $1.0 million and as accumulated other comprehensive income, net of tax, of $0.7 million.
Net Investment: The Company has entered into a cross currency swap agreement that synthetically swaps $116.4 million of fixed rate debt to Euro denominated fixed rate debt. The agreement is designated as a net investment hedge for accounting purposes. Accordingly, the gain or loss on this derivative instrument is included in the foreign currency translation component of other comprehensive income until the net investment is sold, diluted, or liquidated. Coupons received for the cross currency swap are excluded from the net investment hedge effectiveness assessment and are recorded in interest expense, net on the condensed consolidated statements of income. Coupon interest from cross currency swap agreement recorded in interest expense, net was approximately $0.7 2.2
At September 30, 2021, the fair value of these derivatives designated as net investment hedges were recorded in the Balance Sheet as other assets of $4.2 million and as accumulated other comprehensive income, net of tax, of $3.1 million.
Refer to Note 10. Fair Value Of Financial Instruments for a description of how the values of the above financial instruments are determined.
Credit Risk
By their nature, financial instruments involve risk including credit risk for non-performance by counterparties. Financial instruments that potentially subject the Company to credit risk primarily consist of trade receivables and derivative contracts. The Company manages the credit risk on financial instruments by transacting only with financially secure counterparties, requiring credit approvals and establishing credit limits, and monitoring counterparties’ financial condition. Maximum exposure to credit loss in the event of non-performance by the counterparty, for all receivables and derivative contracts as of September 30, 2021, is limited to the amount drawn and outstanding on the financial instrument. Refer to Note 1. Description of Business and Basis of Presentation in Item 8. Financial Statements and Supplementary Data of the Company's most recent Annual Report on Form 10-K, for a description of how allowance for credit loss is determined on financial assets measured at amortized cost, which includes Trade receivables, Contract assets, and non-current receivables.
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NOTE 12. LEASES
The following table provides the required information regarding operating and sales-type leases for which the Company is lessor.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Fixed payment revenue | $ | $ | $ | $ | |||||||||||||||||||
| Variable payment revenue | |||||||||||||||||||||||
| Operating lease revenue | $ | $ | $ | $ | |||||||||||||||||||
| Sales-type lease revenue | $ | $ | $ | $ | |||||||||||||||||||
Refer to Note 17. Related Party Transactions for details of operating lease agreements with related parties.
NOTE 13. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is at times subject to pending and threatened legal actions, some for which the relief or damages sought may be substantial. Although the Company is not able to predict the outcome of such actions, after reviewing all pending and threatened actions with counsel and based on information currently available, management believes that the outcome of such actions, individually or in the aggregate, will not have a material adverse effect on the Company's results of operations or financial position. However, it is possible that the ultimate resolution of such matters, if unfavorable, may be material to its results of operations in a particular future period as the time and amount of any resolution of such actions and its relationship to the future results of operations are not currently known.
Liabilities are established for pending legal claims only when losses associated with the claims are judged to be probable, and the loss can be reasonably estimated. In many lawsuits and arbitrations, it is not considered probable that a liability has been incurred or not possible to estimate the ultimate or minimum amount of that liability until the case is close to resolution, in which case no liability would be recognized until that time.
Guarantees and Product Warranties
In the ordinary course of business with customers, vendors and others, the Company issues standby letters of credit, performance bonds, surety bonds and other guarantees. These financial instruments, which totaled $150.0 million at September 30, 2021, represent guarantees of future performance. The Company has also provided $6.3 million of bank guarantees and letters of credit to secure a portion of its existing financial obligations. The majority of these financial instruments expire within one year and are expected to be replaced through the issuance of new or the extension of existing letters of credit and surety bonds.
In some instances, the Company guarantees its customers’ financing arrangements. The Company is responsible for payment of any unpaid amounts, but will receive indemnification from third parties for ninety-five percent of the contract values. In addition, the Company generally retains recourse to the equipment sold. As of September 30, 2021, the gross value of such arrangements was $0.8 million, of which its net exposure under such guarantees was $0.04 million.
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The Company provides warranties to certain of its customers based on standard terms and conditions and negotiated agreements. The Company provides for the estimated cost of warranties at the time revenue is recognized. Cost of warranties includes an estimate for products where reliable, historical experience of failure rates, as well as the related costs in correcting a product failure warranty claims and cost exist. The Company also provides a warranty liability when additional specific warranty costs are identified. The warranty obligation reflected in other current liabilities in the consolidated Balance Sheet is based on historical experience by product and considers failure rates and the related costs in correcting a product failure. Warranty cost and accrual information were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Expense for new warranties | |||||||||||||||||||||||
| Adjustments to existing accruals | ( | ( | ( | ||||||||||||||||||||
| Claims paid | ( | ( | ( | ( | |||||||||||||||||||
| Translation | ( | ( | |||||||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | |||||||||||||||||||
NOTE 14. BUSINESS SEGMENT INFORMATION
Operating segments for the Company are determined based on information used by the chief operating decision maker (CODM) in deciding how to evaluate performance and allocate resources to each of the segments. JBT’s CODM is the Chief Executive Officer (CEO). While there are many measures the CEO reviews in this capacity, the key segment measures reviewed include operating profit, operating profit margin, EBITDA, adjusted when applicable, and EBITDA margins.
Reportable segments are:
•JBT FoodTech—provides comprehensive solutions throughout the food production value chain extending from primary processing through packaging systems for a large variety of food and beverage groups, including poultry, beef, pork, seafood, ready-to-eat meals, fruits, vegetables, dairy, bakery, pet foods, soups, sauces, and juices.
•JBT AeroTech— supplies customized solutions and services used for applications in the air transportation industry, including airport authorities, airlines, airfreight, ground handling companies, militaries and defense contractors.
Segment operating profit is defined as total segment revenue less segment operating expenses. The following items have been excluded in computing segment operating profit: corporate expense, restructuring costs, pension expense, other than service cost, interest income and expense, and income taxes. See the table below for further details on corporate expense.
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Business segment information was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| JBT FoodTech | $ | $ | $ | $ | |||||||||||||||||||
| JBT AeroTech | |||||||||||||||||||||||
| Total revenue | |||||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Segment operating profit: | |||||||||||||||||||||||
| JBT FoodTech | |||||||||||||||||||||||
| JBT AeroTech | |||||||||||||||||||||||
| Total segment operating profit | |||||||||||||||||||||||
| Corporate items: | |||||||||||||||||||||||
Corporate expense (1) | |||||||||||||||||||||||
Restructuring expense (2) | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Pension expense, other than service cost | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
| Income from continuing operations before income taxes | $ | $ | $ | $ | |||||||||||||||||||
(1)Corporate expense generally includes corporate staff-related expense, stock-based compensation, LIFO adjustments, certain foreign currency-related gains and losses, and the impact of unusual or strategic events not representative of segment operations.
(2)Refer to Note 15. Restructuring for further information on restructuring charges.
NOTE 15. RESTRUCTURING
Restructuring charges primarily consist of employee separation benefits under existing severance programs, foreign statutory termination benefits, certain one-time termination benefits, contract termination costs, asset impairment charges and other costs that are associated with restructuring actions. Certain restructuring charges are accrued prior to payments made in accordance with applicable guidance. For such charges, the amounts are determined based on estimates prepared at the time the restructuring actions were approved by management. Inventory write offs due to restructuring are reported in Cost of products and are included in each segment's operating profit given the nature of the item. All other restructuring charges that are reported as Restructuring expenses are excluded from the calculation of each segment's operating profit.
In the first quarter of 2018, the Company implemented a restructuring plan ("2018 restructuring plan") to address its global processes to flatten the organization, improve efficiency and better leverage general and administrative resources primarily within the JBT FoodTech segment. The Company recognized cumulative restructuring charges of $62.2 million, net of cumulative releases of the related liability of $11.9 million. The Company completed this plan in the third quarter of 2020 and transferred the remaining liability into the 2020 restructuring plan in the fourth quarter of 2020.
In the first quarter of 2020, the Company implemented an immaterial restructuring plan primarily within the JBT AeroTech segment. The Company recognized cumulative restructuring charges of $2.4 million related to severance, net of a cumulative release of related liability of $0.2 million. The Company completed this plan in the third quarter of 2020 and transferred the remaining liability into the 2020 restructuring plan in the fourth quarter of 2020.
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In the third quarter of 2020, the Company implemented a restructuring plan ("2020 restructuring plan") for manufacturing capacity rationalization affecting both the JBT FoodTech and JBT AeroTech segments. During the current quarter, the Company has revised its total estimated costs in connection with this plan, with the original estimate of $9 million to $10 million for FoodTech to be recognized by end of 2021, to a range of $10 million to $11 million to be completed by second quarter of the year 2022. These changes are due to a delay in transfer of the manufacturing process under this plan. The total estimated cost for AeroTech in connection with this plan is approximately $6 million. The Company recognized restructuring charges of $14.2 million, net of a cumulative release of the related liability of $1.2 million, through September 30, 2021.
The following table details the cumulative restructuring charges reported in operating income for the 2020 restructuring plan since the implementation of this plan:
| Cumulative Amount | For The Three Months Ended | Cumulative Amount | |||||||||||||||||||||||||||
| (In millions) | Balance as of December 31, 2020 | March 31, 2021 | June 30, 2021 | September 30, 2021 | Balance as of September 30, 2021 | ||||||||||||||||||||||||
| 2020 restructuring plan | |||||||||||||||||||||||||||||
| Severance and related expense | |||||||||||||||||||||||||||||
| Inventory write-off | |||||||||||||||||||||||||||||
| Employee overlap costs | |||||||||||||||||||||||||||||
| Retention bonus | |||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||
| Total Restructuring charges | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Restructuring charges, net of related release of liability, is reported within the following financial statement line items of the accompanying Consolidated Statements of Income:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Cost of products (1) | |||||||||||||||||||||||
| Restructuring expense | |||||||||||||||||||||||
| Total restructuring charge | $ | $ | $ | $ | |||||||||||||||||||
(1) Restructuring charge reported in Cost of products is related to inventory write-off resulting from the 2020 restructuring plan.
Liability balances for restructuring activities are included in other current liabilities in the accompanying Balance Sheet. The table below details the activities in 2021:
| Impact to Earnings | |||||||||||||||||||||||||||||
| (In millions) | Balance as of December 31, 2020 | Charged to Earnings | Releases | Cash Payments | Balance as of September 30, 2021 | ||||||||||||||||||||||||
| 2020 restructuring plan | |||||||||||||||||||||||||||||
| Severance and related expense | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||
| Employee overlap costs | ( | ||||||||||||||||||||||||||||
| Retention bonus | ( | ||||||||||||||||||||||||||||
| Other | ( | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||
The Company released $0.9 million of liability during the nine months ended September 30, 2021 which it no longer expects to pay in connection with the 2020 restructuring plan due to actual severance payments differing from the original estimates and natural attrition of employees.
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NOTE 16. MANAGEMENT SUCCESSION COSTS
On September 24, 2020, the Company initiated a management succession plan after Tom Giacomini, the Company's former CEO, resigned from the Company. In connection with this succession plan, the Company entered into a separation agreement with Mr. Giacomini that provided for a lump sum separation payment of $6.4 million. This separation cost of $6.4 million was recognized as Selling, general, and administrative expense in the condensed consolidated statement of income in the three months ended September 30, 2020 and was subsequently paid during the year 2020.
Termination of Mr. Giacomini's employment resulted in the forfeiture of 96,427 nonvested shares under the Company’s stock-based compensation plans. Accordingly, the Company recorded a benefit of $2.9 million associated with the reversal of previously accrued amounts for these unvested shares as stock based compensation expense within selling, general, and administrative expense in the three months ended September 30, 2020.
NOTE 17. RELATED PARTY TRANSACTIONS
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, our Annual Report on Form 10-K and other materials filed or to be filed by us with the Securities and Exchange Commission, as well as information in oral statements or other written statements made or to be made by us, contain statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are forward-looking statements. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “foresees” or the negative version of those words or other comparable words and phrases. Any forward-looking statements contained in this Form 10-Q are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. These forward-looking statements include, among others, statements relating to the expected impact of the COVID-19 pandemic on our business and our results of operations, our plans to mitigate the impact of the pandemic, our strategic plans, our restructuring plans and expected cost savings from those plans, our liquidity and our covenant compliance. The factors that could cause our actual results to differ materially from expectations include but are not limited to the following factors:
•the duration of the COVID-19 pandemic and the effects of the pandemic on our ability to operate our business and facilities, on our customers, on our supply chains due to extended delivery times and unavailability of required components and freight, on our cost of labor due to higher labor turnover and shortage of skilled labor and on the economy generally;
•fluctuations in our financial results;
•unanticipated delays or acceleration in our sales cycles;
•deterioration of economic conditions;
•disruptions in the political, regulatory, economic and social conditions of the countries in which we conduct business;
•changes to trade regulation, quotas, duties or tariffs;
•risks associated with acquisitions;
•effects of the U.K.’s exit from the E.U.;
•fluctuations in currency exchange rates;
•difficulty in implementing our business strategies;
•increases in energy or raw material prices, freight costs, and lack of availability of raw materials driven by supply chain delays, the unavailability of required components, and inflationary pressures;
•changes in food consumption patterns;
•impacts of pandemic illnesses, food borne illnesses and diseases to various agricultural products;
•weather conditions and natural disasters;
•impact of climate change and environmental protection initiatives;
•our ability to comply with the laws and regulations governing our U.S. government contracts;
•acts of terrorism or war;
•termination or loss of major customer contracts and risks associated with fixed-price contracts, particularly during periods of high inflation;
•customer sourcing initiatives;
•competition and innovation in our industries;
•our ability to develop and introduce new or enhanced products and services and keep pace with technological developments;
•difficulty in developing, preserving and protecting our intellectual property or defending claims of infringement;
•catastrophic loss at any of our facilities and business continuity of our information systems;
•cyber-security risks such as network intrusion or ransomware schemes;
•loss of key management and other personnel;
•potential liability arising out of the installation or use of our systems;
•our ability to comply with U.S. and international laws governing our operations and industries;
•increases in tax liabilities;
•work stoppages;
•fluctuations in interest rates and returns on pension assets;
•availability of and access to financial and other resources; and
•the factors described under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q.
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In addition, many of our Risk Factors and uncertainties are currently amplified by and will continue to be amplified by the COVID-19 pandemic. Given the highly fluid nature of the COVID-19 pandemic, it is not possible to predict all such risks and uncertainties. Refer to the section below titled “Impact of COVID-19 on our Business” in this Form 10-Q for additional information. If one or more of those or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Consequently, actual events and results may vary significantly from those included in or contemplated or implied by our forward-looking statements. The forward-looking statements included in this Form 10-Q are made only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement made by us or on our behalf, whether as a result of new information, future developments, subsequent events or changes in circumstances or otherwise.
Executive Overview
We are a leading global technology solutions provider to high-value segments of the food and beverage industry with focus on proteins, diversified food and health and automated guided vehicle systems. We design, produce, and service sophisticated products and systems for multi-national and regional customers through our FoodTech segment. We also sell critical equipment and services to domestic and international air transportation customers through our AeroTech segment.
Our strategic plan, Elevate, was designed to capitalize on the leadership position of our businesses and favorable macroeconomic trends. The Elevate plan is based on a four-pronged approach to deliver continued growth and margin expansion.
•Accelerate New Product & Service Development. We are accelerating the development of innovative products and services to provide customers with solutions that enhance yield and productivity and reduce lifetime cost of ownership.
•Grow Recurring Revenue. We are capitalizing on our extensive installed base to expand recurring revenue from aftermarket parts and services, equipment leases, consumables and our Airport Services offerings.
•Execute Impact Initiatives. We are enhancing organic growth through initiatives that enable us to sell the entire FoodTech portfolio globally, including enhancing our international sales and support infrastructure, localizing targeted products for emerging markets, and strategic cross selling of products. In AeroTech, we plan to continue to develop advanced defense products and customer support capability to service global defense customers. Additionally, our impact initiatives are designed to support the reduction in operating costs including strategic sourcing, relentless continuous improvement (lean) efforts, and the optimization of organizational structure.
•Maintain a Disciplined Acquisition Program. We are also continuing our strategic acquisition program focused on companies that add complementary products, which enable us to offer more comprehensive solutions to customers, and meet our strict economic criteria for returns and synergies.
We operate under the JBT Operating System which provides a level of process rigor across the company, and is designed to standardize and streamline reporting and problem resolution processes for increased visibility, efficiency, effectiveness and productivity in all business units.
Our approach to Environmental, Social and Corporate Governance (ESG) builds on our culture and long tradition of concern for our employees’ health, safety, and well-being; partnering with our customers to find ways to make better use of the earth’s precious resources; and giving back to the communities where we live and work. Our FoodTech equipment and technologies continue to deliver quality performance while striving to minimize food waste, extend food product life, and maximize efficiency in order to create shared value for our food and beverage customers. Our AeroTech equipment business offers a variety of power options, including electrically powered ground support equipment, that help customers meet their environmental objectives. We recognize the responsibility we have to make a positive impact on our shareholders, the environment and our communities in a manner that is consistent with our fiduciary duties. We have engaged in structured education for enhancing inclusive leadership skills in our organization designed to ensure more diversity in our leadership and hiring practices. We have completed a comprehensive evaluation to determine which ESG topics are most pressing for our business resulting in a materiality matrix informing our development of an ESG strategy, balanced to ensure we invest responsibly in initiatives that can address the risks and opportunities presented by ESG.
We evaluate our operating results considering key performance indicators including segment operating profit, segment operating profit margin, segment EBITDA (adjusted when appropriate) and segment EBITDA margins.
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Impact of COVID-19 on our Business
The COVID-19 pandemic has resulted and is expected to continue to result in significant economic disruption, and we have seen adverse affects as a result on our business. While we continue to see positive signs of recovery, the following uncertainties still exist and may contribute to additional negative impacts on our overall financial results to the extent there is a significant resurgence of COVID-19 infections in locations where we or our customers operate:
•our ability to obtain raw material and required components from domestic and international suppliers required to manufacture our products and execution of services;
•our ability to secure inbound and outbound logistics to and from our facilities, with additional delays linked to international border crossings and the associated approvals and documentation;
•our ability to access customer locations in order to execute installations, new product deliveries, maintenance and repair services;
•our ability to efficiently operate our facilities and meet customer obligations due to modified employee work patterns resulting from social distancing guidelines, absence due to illness and cautionary quarantines and/or government ordered closures, or labor shortages;
•limitations on the ability of our customers to conduct their business, and resulting impacts to our customers' purchasing patterns, from food and travel disruption, social distancing guidelines, absence due to illness or government ordered closures; and
•limitations on the ability of our customers to meet their financial obligations to JBT.
As a result of the global COVID-19 restrictions and social distancing requirements that have continued from the prior year, the food industry continues to experience a notable rise in retail demand which has persisted in 2021. In addition, with these global health restrictions lifting in certain parts of the world as a result of increased vaccination rates, decreasing infection rates and political pressures, foodservice continues to revitalize as restaurants reopen and travel increases. These increases in demand, however promising, are dependent on the continued trend towards reopening which could be slowed if COVID-19 infections and hospitalizations increase.
As FoodTech customers are present in both the retail and foodservice channels, this shifting in demand can create volatility and uncertainty in our customer's purchasing patterns. However, in the third quarter of 2021, our inbound FoodTech orders increased by 23% compared to the same period in 2020 as we continued to see positive recovery specifically for food processors in the quick service restaurant drive through businesses, those servicing the sustained "eat-at-home" trend and ready meals, as well as capital investments continuing to ramp back up for our foodservice and pet food customers. Our customers appear to be investing more to support these trends, addressing immediate capacity needs and creating strong interest in FoodTech's broad product offerings. Expected to offset some of these improvements in orders are continued supply chain challenges as well as labor shortages that we see across many of our markets, driving delays and inefficiencies in our production process. Although the pandemic continues to have negative impacts on our results of operations in FoodTech, we believe it presents an opportunity to accelerate initiatives that were previously underway to bring automation solutions as well as satisfying food safety and hygiene requirements and responding to changes in consumer preferences. Recurring revenue for the FoodTech segment for the quarter has remained strong, and has seen improvement when compared to the same period last year with a 12% increase year over year. These third quarter improvements are driven largely by the continued increase in demand across the foodservice industry as areas remain or continue to reopen, as well as sustained operations within the food processing companies requiring critical maintenance and parts.
For AeroTech, a large portion of our revenue depends on the passenger airline industry. Passenger air travel continues to increase from 2020 levels as vaccines are rolled out globally and travel routes are re-opened. We saw activity at US airports continue to increase during third quarter compared to the prior year, driving improving demand for our equipment and services. However, global passenger traffic continues to be well below pre-pandemic levels which continues to directly impact our mobile equipment business. We expect this impact of the pandemic to continue at least into 2023. Airport infrastructure spending, which is subject to long lead time contracts, remained healthy in the third quarter as we continued to see solid inbound for fixed equipment. Although our projections have more uncertainty than in pre-pandemic periods, we expect demand and inbound orders for these products to continue into 2022. During the quarter we began to see larger impacts of the supply chain disruptions and labor shortages which resulted in operational inefficiencies, drove higher material, labor and freight costs and reduced AeroTech's profitability. However, with ongoing benefits of cost controls including restructuring, as well as the diversity of revenue streams within the business, we expect AeroTech to remain profitable despite these impacts and uncertainties.
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Specifically for aftermarket revenue streams within the AeroTech segment, we have begun to see recovery in demand as equipment utilization increases for our customers in line with air traffic demand. While still below pre-pandemic levels, we have seen a 24% increase in aftermarket revenue in the third quarter of 2021 compared to the same period in 2020, and a 2% sequential increase from the second quarter 2021. We note, however, that these improvements may not continue if a broader resurgence in COVID-19 cases causes restrictions to be reinstated.
Furthermore, an outbreak of COVID-19 in any of our production manufacturing facilities may lead to a temporary shut-down that may negatively impact our results, there are no significant concentrations of our operations across our manufacturing facilities such that a short-term single plant closure would be expected to have a material impact to our consolidated results.
Although we cannot reasonably estimate the duration and severity, or potential for resurgence, of these COVID-19 related events or the impact this will have on the global economy or our business, we believe that our positive order trends, improving revenues and a strong balance sheet and cash flows will allow us to emerge from these events well-positioned for long-term growth. For a discussion of the risks and uncertainties associated with the COVID-19 pandemic, see “The COVID-19 pandemic could have a material adverse impact on our business operations, results of operations, cash flows and financial position” in Item 1A. Risk Factors of our most recent Annual Report on Form 10-K.
Our Strategy to Mitigate Impacts of COVID-19
As we manage through these uncertainties, our focus is on obtaining orders, maintaining disciplined working capital management, identifying ways to mitigate the supply chain disruptions and resulting inefficiencies, continuing to execute as a critical supplier to the essential food and air transportation industries, and investing in key growth strategies. In addition, we have availed ourselves of tax benefits available under the CARES Act. As of the date of this filing, all of our factories and warehouses are operational.
We continue to maintain protocols under the guidance of our Crisis Response Team to protect the health and safety of our workers in our facilities, including daily symptoms screening for clearance to work, social distancing requirements in our workplaces, face covering requirements where social distancing is not possible (with some relief available to employees who are vaccinated), facilitation of work from home arrangements for our employees who can perform work functions remotely, and global travel restrictions consistent with CDC and local government guidelines. Our Crisis Response Team issues frequent guidance to our managers and employees to reinforce these protocols and policies designed to keep our employees safe, maintain our business operations, and allow us to effectively and efficiently manage through positive COVID cases and potential shut downs in our facilities. Furthermore, we are providing enhanced remote support options and extended hours to our customers to support them through the disruption caused by the pandemic.
We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees and our other stakeholders.
Non-GAAP Financial Measures
We present non-GAAP financial measures in this quarterly report on Form 10-Q. These non-GAAP financial measures exclude certain amounts that are included in a measure calculated under U.S. GAAP, or include certain amounts that are excluded from a measure calculated under U.S. GAAP. By excluding or including these items, we believe we provide greater transparency into our operating results and trends, and a more meaningful comparison of our ongoing operating results, consistent with how management evaluates performance. Management uses these non-GAAP financial measures in financial and operational evaluation, planning and forecasting. The adjustments generally fall within the following categories: restructuring costs, M&A related costs, pension-related costs, management succession costs, constant currency adjustments and other major items affecting comparability of our ongoing operating results.
The non-GAAP financial measures presented in this report may differ from similarly-titled measures used by other companies. The non-GAAP financial measures are not intended to be used as a substitute for, nor should they be considered in isolation of, financial measures prepared in accordance with U.S. GAAP.
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Additional details for each Non-GAAP financial measure follow:
•Free cash flow: We define free cash flow as cash provided by continuing operating activities, less capital expenditures, plus proceeds from sale of fixed assets and pension contributions. For free cash flow purposes we consider contributions to pension plans to be more comparable to payment of debt, and therefore exclude these contributions from the calculation of free cash flow.
•Adjusted income from continuing operations and Adjusted diluted earnings per share from continuing operations: We adjust earnings for restructuring expense, M&A related costs, which include integration costs and the amortization of inventory step-up from business combinations, advisory and transaction costs for both potential and completed M&A transactions and strategy (“M&A related costs”), management succession costs, and impact on tax provision from remeasurement of deferred taxes for material tax rate changes.
•EBITDA and Adjusted EBITDA: We define EBITDA as earnings before income taxes, interest expense and depreciation and amortization. We define Adjusted EBITDA as EBITDA before restructuring, pension expense other than service cost, M&A related costs, and management succession costs.
•Segment Adjusted Operating Profit and Segment Adjusted EBITDA: We report segment operating profit, which is the measure of segment profit or loss required to be disclosed in accordance with GAAP. We adjust segment operating profit for restructuring, and M&A related costs. We calculate segment Adjusted EBITDA by subtracting depreciation and amortization from segment adjusted operating profit.
•Constant currency measures: We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency percentages by converting our financial results in local currency for a period using the average exchange rate for the prior period to which we are comparing.
The tables included below reconcile each non-GAAP financial measure to the most comparable GAAP financial measure.
The table below provides a reconciliation of cash provided by continuing operating activities to free cash flow:
| Nine Months Ended September 30, | |||||||||||
| (In millions) | 2021 | 2020 | |||||||||
| Cash provided by continuing operating activities | $ | 163.3 | $ | 161.1 | |||||||
| Less: capital expenditures | 33.9 | 22.7 | |||||||||
| Plus: proceeds from sale of fixed assets | 2.0 | 1.2 | |||||||||
| Plus: pension contributions | 12.3 | 0.6 | |||||||||
| Free cash flow (FCF) | $ | 143.7 | $ | 140.2 | |||||||
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The table below provides a reconciliation of income from continuing operations as reported to adjusted income from continuing operations and adjusted diluted earnings per share from continuing operations.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In millions, except per share data) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Income from continuing operations as reported | $ | 29.3 | $ | 17.2 | $ | 86.8 | $ | 78.7 | |||||||||||||||
| Non-GAAP adjustments | |||||||||||||||||||||||
| Restructuring related costs | |||||||||||||||||||||||
| Restructuring expense | 1.1 | 7.1 | 3.1 | 11.2 | |||||||||||||||||||
| Inventory impairment due to restructuring | — | 1.9 | — | 1.9 | |||||||||||||||||||
| M&A related cost | 3.6 | 0.9 | 8.5 | 4.4 | |||||||||||||||||||
| Management succession costs | — | 3.5 | — | 3.5 | |||||||||||||||||||
Impact on tax provision from Non-GAAP adjustments(1) | (1.1) | (4.0) | (2.8) | (5.9) | |||||||||||||||||||
| Impact on tax provision from remeasurement of deferred taxes from material tax rate changes | — | — | 4.4 | — | |||||||||||||||||||
| Adjusted income from continuing operations | $ | 32.9 | 26.6 | $ | 100.0 | 93.8 | |||||||||||||||||
| Income from continuing operations as reported | 29.3 | 17.2 | 86.8 | 78.7 | |||||||||||||||||||
| Total shares and dilutive securities | 32.1 | 32.1 | 32.1 | 32.1 | |||||||||||||||||||
| Diluted earnings per share from continuing operations | 0.91 | 0.54 | 2.71 | 2.45 | |||||||||||||||||||
| Adjusted income from continuing operations | 32.9 | 26.6 | 100.0 | 93.8 | |||||||||||||||||||
| Total shares and dilutive securities | 32.1 | 32.1 | 32.1 | 32.1 | |||||||||||||||||||
| Adjusted diluted earnings per share from continuing operations | 1.02 | 0.83 | 3.12 | 2.92 | |||||||||||||||||||
(1) Impact on income tax provision was calculated using our annual effective tax rate of 24.2% and 24.7% for the quarters ended September 30, 2021 and 2020, respectively.
32
The tables below provide a reconciliation of net income to EBITDA and Adjusted EBITDA:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net income | $ | 29.3 | $ | 17.2 | $ | 86.8 | $ | 78.7 | |||||||||||||||
| Income from continuing operations as reported | 29.3 | 17.2 | 86.8 | 78.7 | |||||||||||||||||||
| Income tax provision | 9.0 | 7.1 | 32.4 | 26.6 | |||||||||||||||||||
| Interest expense, net | 2.1 | 2.9 | 6.3 | 11.2 | |||||||||||||||||||
| Depreciation and amortization | 20.0 | 18.0 | 56.6 | 53.2 | |||||||||||||||||||
| EBITDA | 60.4 | 45.2 | 182.1 | 169.7 | |||||||||||||||||||
| Restructuring related costs | |||||||||||||||||||||||
| Restructuring expense | 1.1 | 7.1 | 3.1 | 11.2 | |||||||||||||||||||
| Inventory impairment due to restructuring | — | 1.9 | — | 1.9 | |||||||||||||||||||
| Pension expense, other than service cost | 0.1 | 1.1 | 0.1 | 3.1 | |||||||||||||||||||
| M&A related cost | 3.6 | 0.9 | 8.5 | 4.4 | |||||||||||||||||||
| Management succession costs | — | 3.5 | — | 3.5 | |||||||||||||||||||
| Adjusted EBITDA | $ | 65.2 | $ | 59.7 | $ | 193.8 | $ | 193.8 | |||||||||||||||
The tables below provide a reconciliation of segment operating profit to segment adjusted operating profit and segment Adjusted EBITDA:
| Three Months Ended September 30, 2021 | |||||||||||||||||||||||
| (In millions) | JBT FoodTech | JBT AeroTech | Corporate (Unallocated) | Consolidated | |||||||||||||||||||
| Operating profit | $ | 48.9 | $ | 7.0 | $ | (15.4) | $ | 40.5 | |||||||||||||||
| Restructuring expense | — | — | 1.1 | 1.1 | |||||||||||||||||||
| M&A related cost | 0.3 | — | 3.3 | 3.6 | |||||||||||||||||||
| Adjusted operating profit | 49.2 | 7.0 | (11.0) | 45.2 | |||||||||||||||||||
| Depreciation and amortization | 17.9 | 1.2 | 0.9 | 20.0 | |||||||||||||||||||
| Adjusted EBITDA | $ | 67.1 | $ | 8.2 | $ | (10.1) | $ | 65.2 | |||||||||||||||
| Revenue | $ | 359.1 | $ | 118.3 | $ | — | $ | 477.4 | |||||||||||||||
| Operating profit % | 13.6 | % | 5.9 | % | 8.5 | % | |||||||||||||||||
| Adjusted operating profit % | 13.7 | % | 5.9 | % | 9.5 | % | |||||||||||||||||
| Adjusted EBITDA % | 18.7 | % | 6.9 | % | 13.7 | % | |||||||||||||||||
33
| Nine Months Ended September 30, 2021 | |||||||||||||||||||||||
| (In millions) | JBT FoodTech | JBT AeroTech | Corporate (Unallocated) | Consolidated | |||||||||||||||||||
| Operating profit | $ | 141.9 | $ | 29.0 | $ | (45.3) | $ | 125.6 | |||||||||||||||
| Restructuring expense | — | — | 3.1 | 3.1 | |||||||||||||||||||
| M&A related cost | 1.1 | — | 7.4 | 8.5 | |||||||||||||||||||
| Adjusted operating profit | 143.0 | 29.0 | (34.8) | 137.2 | |||||||||||||||||||
| Depreciation and amortization | 51.1 | 3.2 | 2.3 | 56.6 | |||||||||||||||||||
| Adjusted EBITDA | $ | 194.1 | $ | 32.2 | $ | (32.5) | $ | 193.8 | |||||||||||||||
| Revenue | $ | 1,031.6 | $ | 339.1 | $ | — | $ | 1,370.7 | |||||||||||||||
| Operating profit % | 13.8 | % | 8.6 | % | 9.2 | % | |||||||||||||||||
| Adjusted operating profit % | 13.9 | % | 8.6 | % | 10.0 | % | |||||||||||||||||
| Adjusted EBITDA % | 18.8 | % | 9.5 | % | 14.1 | % | |||||||||||||||||
| Three Months Ended September 30, 2020 | |||||||||||||||||||||||
| (In millions) | JBT FoodTech | JBT AeroTech | Corporate (Unallocated) | Consolidated | |||||||||||||||||||
| Operating profit | $ | 37.9 | $ | 11.4 | $ | (21.0) | $ | 28.3 | |||||||||||||||
| Restructuring related costs | |||||||||||||||||||||||
| Restructuring expense | — | — | 7.1 | 7.1 | |||||||||||||||||||
| Inventory impairment due to restructuring | — | 1.9 | — | 1.9 | |||||||||||||||||||
| M&A related cost | 0.7 | — | 0.2 | 0.9 | |||||||||||||||||||
| Management succession costs | — | — | 3.5 | 3.5 | |||||||||||||||||||
| Adjusted operating profit | 38.6 | 13.3 | (10.2) | 41.7 | |||||||||||||||||||
| Depreciation and amortization | 16.0 | 1.3 | 0.7 | 18.0 | |||||||||||||||||||
| Adjusted EBITDA | $ | 54.6 | $ | 14.6 | $ | (9.5) | $ | 59.7 | |||||||||||||||
| Revenue | $ | 301.0 | $ | 118.2 | $ | — | $ | 419.2 | |||||||||||||||
| Operating profit % | 12.6 | % | 9.6 | % | 6.8 | % | |||||||||||||||||
| Adjusted operating profit % | 12.8 | % | 11.3 | % | 9.9 | % | |||||||||||||||||
| Adjusted EBITDA % | 18.1 | % | 12.4 | % | 14.2 | % | |||||||||||||||||
34
| Nine Months Ended September 30, 2020 | |||||||||||||||||||||||
| (In millions) | JBT FoodTech | JBT AeroTech | Corporate (Unallocated) | Consolidated | |||||||||||||||||||
| Operating profit | $ | 127.6 | $ | 40.2 | $ | (48.2) | $ | 119.6 | |||||||||||||||
| Restructuring related costs | |||||||||||||||||||||||
| Restructuring expense | — | — | 11.2 | 11.2 | |||||||||||||||||||
| Inventory impairment due to restructuring | — | 1.9 | — | 1.9 | |||||||||||||||||||
| M&A related cost | 1.0 | — | 3.4 | 4.4 | |||||||||||||||||||
| Management succession costs | — | — | 3.5 | 3.5 | |||||||||||||||||||
| Adjusted operating profit | 128.6 | 42.1 | (30.1) | 140.6 | |||||||||||||||||||
| Depreciation and amortization | 47.2 | 4.0 | 2.0 | 53.2 | |||||||||||||||||||
| Adjusted EBITDA | $ | 175.8 | $ | 46.1 | $ | (28.1) | $ | 193.8 | |||||||||||||||
| Revenue | $ | 913.5 | $ | 374.9 | $ | — | $ | 1,288.4 | |||||||||||||||
| Operating profit % | 14.0 | % | 10.7 | % | 9.3 | % | |||||||||||||||||
| Adjusted operating profit % | 14.1 | % | 11.2 | % | 10.9 | % | |||||||||||||||||
| Adjusted EBITDA % | 19.2 | % | 12.3 | % | 15.0 | % | |||||||||||||||||
35
CONSOLIDATED RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
| Three Months Ended September 30, | Favorable/(Unfavorable) | ||||||||||||||||||||||
| (In millions, except %) | 2021 | 2020 | Change | % | |||||||||||||||||||
| Total revenue | $ | 477.4 | $ | 419.2 | $ | 58.2 | 13.9 | % | |||||||||||||||
| Cost of sales | 334.9 | 292.0 | (42.9) | (14.7) | % | ||||||||||||||||||
| Gross profit | 142.5 | 127.2 | 15.3 | 12.0 | % | ||||||||||||||||||
| Gross profit % | 29.8 | % | 30.3 | % | -50 bps | ||||||||||||||||||
| Selling, general and administrative expense | 100.9 | 91.8 | (9.1) | (9.9) | % | ||||||||||||||||||
| Restructuring expense | 1.1 | 7.1 | 6.0 | 84.5 | % | ||||||||||||||||||
| Operating income | 40.5 | 28.3 | 12.2 | 43.1 | % | ||||||||||||||||||
| Operating income % | 8.5 | % | 6.8 | % | 170 bps | ||||||||||||||||||
| Pension expense, other than service cost | 0.1 | 1.1 | 1.0 | 90.9 | % | ||||||||||||||||||
| Interest expense, net | 2.1 | 2.9 | 0.8 | 27.6 | % | ||||||||||||||||||
| Income from continuing operations before income taxes | 38.3 | 24.3 | 14.0 | 57.6 | % | ||||||||||||||||||
| Income tax provision | 9.0 | 7.1 | (1.9) | (26.8) | % | ||||||||||||||||||
| Income from continuing operations | 29.3 | 17.2 | 12.1 | 70.3 | % | ||||||||||||||||||
| Net income | $ | 29.3 | $ | 17.2 | $ | 12.1 | 70.3 | % | |||||||||||||||
Total revenue for the three months ended September 30, 2021 increased $58.2 million compared to the same period in 2020. This was a 14% increase, with a 10% growth from organic revenue, a 3% gain from acquisitions and a 1% gain from foreign currency translation. Growth from organic revenue was primarily caused by higher equipment and recurring revenue, partially offset by delays in services and shipments caused by supply chain issues and labor shortages.
Operating income margin was 8.5% for the three months ended September 30, 2021 compared to 6.8% in the same period in 2020, an increase of 170 bps, as a result of the following drivers:
•Gross profit margin decreased 50 bps to 29.8% compared to 30.3% in the same period last year. Gross profit margins were negatively impacted by the supply chain disruptions and labor shortages that resulted in operations inefficiencies driving higher material, labor and logistics costs.
•Selling, general and administrative expense increased $9.1 million from prior year, however improved as a percentage of total revenue by 80 bps to 21.1% in the third quarter 2021 down from 21.9% in the prior year driven by leveraging of fixed costs as volumes increased year-over-year, partially offset by higher M&A related costs and the return of variable costs that were reduced in the prior year as a result of the impact of COVID-19.
•Restructuring expense decreased $6.0 million. As a percent of revenue, these expenses have decreased 150 bps to 0.2% compared to 1.7% in the same period last year.
•Currency translation had an immaterial impact on operating income.
Pension expense, other than service cost decreased from $1.1 million in 2020 to $0.1 million for the three months ended September 30, 2021, resulting from a lower interest cost on pension obligation and a higher expected return on pension assets, partially offset by the amortization of higher actuarial losses.
Interest expense, net decreased $0.8 million resulting from lower interest rates in the period.
Income tax expense for the three months ended September 30, 2021 reflected an effective income tax rate of 24.2% compared to 24.7% in the same period in 2020.
36
OPERATING RESULTS OF BUSINESS SEGMENTS
THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
| Three Months Ended September 30, | Favorable/(Unfavorable) | ||||||||||||||||||||||
| (In millions, except %) | 2021 | 2020 | Change | % | |||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| JBT FoodTech | $ | 359.1 | $ | 301.0 | $ | 58.1 | 19.3 | % | |||||||||||||||
| JBT AeroTech | 118.3 | 118.2 | 0.1 | 0.1 | % | ||||||||||||||||||
| Total revenue | $ | 477.4 | $ | 419.2 | $ | 58.2 | 13.9 | % | |||||||||||||||
| Operating income before income taxes | |||||||||||||||||||||||
Segment operating profit(1)(2): | |||||||||||||||||||||||
| JBT FoodTech | $ | 48.9 | $ | 37.9 | $ | 11.0 | 29.0 | % | |||||||||||||||
| JBT FoodTech segment operating profit % | 13.6 | % | 12.6 | % | 100 bps | ||||||||||||||||||
| JBT AeroTech | 7.0 | 11.4 | (4.4) | (38.6) | % | ||||||||||||||||||
| JBT AeroTech segment operating profit % | 5.9 | % | 9.6 | % | -370 bps | ||||||||||||||||||
| Total segment operating profit | 55.9 | 49.3 | 6.6 | 13.4 | % | ||||||||||||||||||
| Total segment operating profit % | 11.7 | % | 11.8 | % | -10 bps | ||||||||||||||||||
| Corporate items: | |||||||||||||||||||||||
| Corporate expense | 14.3 | 13.9 | (0.4) | (2.9) | % | ||||||||||||||||||
| Restructuring expense | 1.1 | 7.1 | 6.0 | 84.5 | % | ||||||||||||||||||
| Operating income | $ | 40.5 | $ | 28.3 | $ | 12.2 | 43.1 | % | |||||||||||||||
| Operating income % | 8.5 | % | 6.8 | % | 170 bps | ||||||||||||||||||
| Inbound orders: | |||||||||||||||||||||||
| JBT FoodTech | $ | 382.0 | $ | 310.4 | |||||||||||||||||||
| JBT AeroTech | 138.7 | 110.8 | |||||||||||||||||||||
| Total inbound orders | $ | 520.7 | $ | 421.2 | |||||||||||||||||||
(1)Refer to Note 14. Business Segment Information of the Notes to Condensed Consolidated Financial Statements.
(2)Segment operating profit is defined as total segment revenue less segment operating expense. Corporate expense, restructuring expense, interest income and expense and income taxes are not allocated to the segments. Corporate expense generally includes corporate staff-related expense, stock-based compensation, LIFO adjustments, certain foreign currency-related gains and losses, and the impact of unusual or strategic events not representative of segment operations.
37
JBT FoodTech
FoodTech revenue increased by $58.1 million or 19% for the third quarter ended September 30, 2021 compared to the same period in 2020. Organic revenue grew $43.7 million in the period compared to the prior year and acquisitions provided additional revenue of $11.1 million during the quarter. Favorable foreign currency translation provided an additional $3.3 million in revenue year over year. Equipment revenue represented 75% of the total organic revenue growth on a constant currency basis, with $32.6 million of additional revenue in the third quarter 2021 compared to the same period in 2020. Recurring revenue also increased by $11.1 million.
FoodTech operating profit increased $11.0 million, or 29%, for the quarter ended September 30, 2021 compared to the same period in 2020. Operating profit margin was 13.6% in 2021 compared to 12.6% in the prior year. Gross profit margins declined 90 bps in the quarter compared to the same period in 2020 as they were negatively impacted by the supply chain disruptions and resulting inefficiencies driving increases in material costs, as well as additional labor costs resulting from the ongoing labor shortage and increased market competition. This decline in margin was more than offset by selling, general and administrative expenses which increased $6.6 million, but improved as a percentage of total revenues to 18.7% in the third quarter 2021 down from 20.1% in the prior year. This improvement was driven by better leverage on fixed costs as volumes increased year-over-year. Currency translation did not have a material impact in the quarter.
JBT AeroTech
JBT AeroTech's revenue in the third quarter of 2021 was flat with the same period in 2020. Our mobile equipment business contributed a 2% increase and our service business contributed a 4% increase which were offset by a 6% decline in our fixed equipment business. The mobile equipment increase was primarily due to higher aftermarket sales partly offset by supply chain issues which caused delays in shipping equipment. The increase in service revenue was a result of an increase in service hours on our maintenance contracts as activity at US airports began to increase as a result of the elimination of customer imposed service hour reductions relating to COVID-19 compared to the prior year. The decline in our fixed equipment business was driven by lower passenger boarding bridge revenue and related products and services primarily due to labor shortages and customer related delays partially offset by an increase in aftermarket sales. Currency translation had an immaterial impact.
AeroTech operating profit declined $4.4 million or 38.6% in the third quarter of 2021 compared to 2020. JBT AeroTech's operating profit margin was 5.9% compared to 9.6% in the prior year, reflecting a decline of 370 bps. Gross profit margins decreased 210 bps mainly driven by higher material, labor and freight costs partially offset by a favorable mix of aftermarket revenues. Selling, general and administrative expenses in 2021 were $2.1 million above 2020 which is an increase of 19%. The increase in 2021 was primarily due to the return of variable costs that were reduced in the prior year as a result of the impact of COVID-19. Currency translation did not have a significant impact on our operating profit comparative results for AeroTech.
Corporate Expense
Corporate expense increased $0.4 million during the three months ended September 30, 2021, compared to the same period in 2020. The increase was driven primarily by higher M&A related costs and incentive compensation expense, both of which were reduced in the prior year as a result of the impact of COVID-19. The increase was partially offset by lower costs relating to restructuring expense and management succession costs. Corporate expense decreased as a percentage of sales from 3.3% in the prior year to 3.0% for the three months ended September 30, 2021.
38
CONSOLIDATED RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
| Nine Months Ended September 30, | Favorable/(Unfavorable) | ||||||||||||||||||||||
| (In millions, except %) | 2021 | 2020 | Change | % | |||||||||||||||||||
| Total revenue | $ | 1,370.7 | $ | 1,288.4 | $ | 82.3 | 6.4 | % | |||||||||||||||
| Cost of sales | 945.1 | 888.0 | (57.1) | (6.4) | % | ||||||||||||||||||
| Gross profit | 425.6 | 400.4 | 25.2 | 6.3 | % | ||||||||||||||||||
| Gross profit % | 31.0 | % | 31.1 | % | -10 bps | ||||||||||||||||||
| Selling, general and administrative expense | 296.9 | 269.6 | (27.3) | (10.1) | % | ||||||||||||||||||
| Restructuring expense | 3.1 | 11.2 | 8.1 | 72.3 | % | ||||||||||||||||||
| Operating income | 125.6 | 119.6 | 6.0 | 5.0 | % | ||||||||||||||||||
| Operating income % | 9.2 | % | 9.3 | % | -10 bps | ||||||||||||||||||
| Pension expense, other than service cost | 0.1 | 3.1 | 3.0 | 96.8 | % | ||||||||||||||||||
| Interest expense, net | 6.3 | 11.2 | 4.9 | 43.8 | % | ||||||||||||||||||
| Income from continuing operations before income taxes | 119.2 | 105.3 | 13.9 | 13.2 | % | ||||||||||||||||||
| Income tax provision | 32.4 | 26.6 | (5.8) | (21.8) | % | ||||||||||||||||||
| Income from continuing operations | 86.8 | 78.7 | 8.1 | 10.3 | % | ||||||||||||||||||
| Net income | $ | 86.8 | $ | 78.7 | $ | 8.1 | 10.3 | % | |||||||||||||||
Total revenue for the nine months ended September 30, 2021 increased $82.3 million compared to the same period in 2020. This was a 6% increase with a 3% growth from organic revenue, a 2% gain from foreign currency translation, and a 1% gain from acquisitions. Growth from organic revenue was primarily caused by a higher equipment and recurring revenue, partially offset by delays in services and shipments caused by supply chain issues and labor shortages.
Operating income margin was 9.2% for the nine months ended September 30, 2021 compared to 9.3% in the same period in 2020, a decrease of 10 bps, as a result of the following drivers:
•Gross profit margin decreased 10 bps to 31.0% compared to 31.1% in the same period last year. This decrease was the result of the supply chain disruptions and resulting inefficiencies driving increases in material costs, logistics costs, and additional labor costs resulting from the ongoing labor shortages.
•Selling, general and administrative expense increased $27.3 million from prior year, and as a percent of revenue increased 80 bps to 21.7% compared to 20.9% in the same period last year. This was due to an increase in M&A related costs, incentive compensation expense and the return of variable costs that were reduced in the prior year as a result of the impact of COVID-19, partially offset by leveraging of fixed costs as volumes increased year-over-year.
•Restructuring expense decreased $8.1 million. As a percent of revenue, these expenses have decreased 70 bps to 0.2% compared to 0.9% in the same period last year.
•Currency translation increased operating income by $2.8 million.
Pension expense, other than service cost, decreased from $3.1 million in 2020 to $0.1 million for the nine months ended September 30, 2021, resulting from a lower interest cost on pension obligation and a higher expected return on pension assets, partially offset by the amortization of higher actuarial losses.
Interest expense, net decreased $4.9 million resulting from lower average debt levels and lower interest rates.
Income tax expense for the nine months ended September 30, 2021 reflected an effective income tax rate of 24.2% compared to 24.7% in the same period in 2020. In addition, discrete tax expense of $4.4 million related to the remeasurement of UK deferred taxes to reflect the UK income tax rate increase was recognized in the second quarter of 2021.
39
OPERATING RESULTS OF BUSINESS SEGMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
| Nine Months Ended September 30, | Favorable/(Unfavorable) | ||||||||||||||||||||||
| (In millions, except %) | 2021 | 2020 | Change | % | |||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| JBT FoodTech | $ | 1,031.6 | $ | 913.5 | $ | 118.1 | 12.9 | % | |||||||||||||||
| JBT AeroTech | 339.1 | 374.9 | (35.8) | (9.5) | % | ||||||||||||||||||
| Total revenue | $ | 1,370.7 | $ | 1,288.4 | $ | 82.3 | 6.4 | % | |||||||||||||||
| Operating income before income taxes | |||||||||||||||||||||||
Segment operating profit(1)(2): | |||||||||||||||||||||||
| JBT FoodTech | $ | 141.9 | $ | 127.6 | $ | 14.3 | 11.2 | % | |||||||||||||||
| JBT FoodTech segment operating profit % | 13.8 | % | 14.0 | % | -20 bps | ||||||||||||||||||
| JBT AeroTech | 29.0 | 40.2 | (11.2) | (27.9) | % | ||||||||||||||||||
| JBT AeroTech segment operating profit % | 8.6 | % | 10.7 | % | -210 bps | ||||||||||||||||||
| Total segment operating profit | 170.9 | 167.8 | 3.1 | 1.8 | % | ||||||||||||||||||
| Total segment operating profit % | 12.5 | % | 13.0 | % | -50 bps | ||||||||||||||||||
| Corporate items: | |||||||||||||||||||||||
| Corporate expense | 42.2 | 37.0 | (5.2) | (14.1) | % | ||||||||||||||||||
| Restructuring expense | 3.1 | 11.2 | 8.1 | 72.3 | % | ||||||||||||||||||
| Operating income | $ | 125.6 | $ | 119.6 | $ | 6.0 | 5.0 | % | |||||||||||||||
| Operating income % | 9.2 | % | 9.3 | % | -10 bps | ||||||||||||||||||
| Inbound orders: | |||||||||||||||||||||||
| JBT FoodTech | $ | 1,165.3 | $ | 888.6 | |||||||||||||||||||
| JBT AeroTech | 421.6 | 347.3 | |||||||||||||||||||||
| Total inbound orders | $ | 1,586.9 | $ | 1,235.9 | |||||||||||||||||||
(1)Refer to Note 14. Business Segment Information of the Notes to Condensed Consolidated Financial Statements.
(2)Segment operating profit is defined as total segment revenue less segment operating expense. Corporate expense, restructuring expense, interest income and expense and income taxes are not allocated to the segments. Corporate expense generally includes corporate staff-related expense, stock-based compensation, LIFO adjustments, certain foreign currency-related gains and losses, and the impact of unusual or strategic events not representative of segment operations.
40
JBT FoodTech
FoodTech revenue increased by $118.1 million or 12.9% in the nine months ended September 30, 2021 compared to the same period in 2020. Organic revenue grew $76.1 million in the period compared to the prior year, and favorable foreign currency translation provided an additional $28.6 million in revenue year over year. Revenue from the acquisitions was $13.4 million. Equipment revenue represented 77% of the organic revenue growth year-to-date on a constant currency basis, with $58.7 million of additional revenue in the nine months ended 2021 compared to the same period in 2020. Recurring revenue drove the remaining increase of $17.4 million.
FoodTech operating profit increased $14.3 million, or 11.2%, in the nine months ended September 30, 2021 compared to the same period in 2020. Operating profit margin was 13.8% in 2021 compared to 14.0% in the prior year. This decrease was driven by gross profit margins which declined 90 bps in the nine months ended September 30, 2021 compared to the same period in 2020. These margins reflected a higher mix of revenue from the faster growing equipment revenue stream as compared to the higher margin recurring revenue streams, with recurring revenue dropping from 49% to 48% of total year-to-date revenue year over year. In addition, margins were negatively impacted by the supply chain disruptions and resulting inefficiencies driving increases in material and labor costs. Selling, general and administrative expense increased $17 million from prior year, but as a percent of revenue decreased to 19.2% compared to 19.8% in the same period last year. The increase in expense was primarily due to the return of variable costs that were reduced in the prior year as a result of the impact of COVID-19. Currency translation increased operating income by $3.7 million in the nine months ended September 20, 2021.
JBT AeroTech
JBT AeroTech's revenue declined $35.8 million or 9.5% for the nine months ended September 30, 2021 compared to the same period in 2020. This is a 10% decrease with an 8% decline from our fixed equipment business and a 3% decline from our mobile equipment business which were partly offset by a 1% increase in our service business. The decline in our fixed equipment business was primarily due to labor shortages and customer related delays partially offset by an increase in aftermarket sales. The mobile equipment decline was due to lower equipment sales driven by supply chain issues which caused delays in shipping equipment and lower customer demand as a result of COVID-19 partly offset by higher aftermarket sales. The increase in service revenue was a result of an increase in service hours on our maintenance contracts as activity at US airports began to increase as a result of the elimination of customer imposed service hour reductions relating to COVID-19 compared to the prior year. Currency translation had an immaterial impact.
AeroTech operating profit declined $11.2 million or 27.9% for the nine months ended September 30, 2021 compared to the same period in 2020. JBT AeroTech's operating profit margin was 8.6% compared to 10.7% in the prior year, reflecting a decline of 210 bps. Gross profit margins decreased 40 bps driven by higher material, labor and freight costs and lost leverage of fixed manufacturing costs as a result of lower revenue partially offset by a favorable mix of aftermarket revenues. Selling, general and administrative expenses in 2021 were $2.8 million above 2020 which is an increase of 8%. The increase in 2021 was due to the return of variable costs that were reduced in the prior year as a result of the impact of COVID-19. Currency translation did not have a significant impact on our operating profit comparative results for AeroTech.
Corporate Expense
Corporate expense increased $5.2 million during the nine months ended September 30, 2021, compared to the same period in 2020. The increase was driven primarily by higher M&A related costs and incentive compensation expense, both of which were reduced in the prior year as a result of the impact of COVID-19. The increase was partially offset by lower costs relating to restructuring expense and management succession costs. Corporate expense increased as a percentage of sales from 2.9% in the prior year to 3.1% for the nine months ended September 30, 2021.
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Restructuring
In the third quarter of 2020, the Company implemented a restructuring plan ("2020 restructuring plan") for manufacturing capacity rationalization affecting both the JBT FoodTech and JBT AeroTech segments. During the current quarter, we have revised our total estimated costs in connection with this plan, with the original estimate of $9 million to $10 million for FoodTech to be recognized by end of the year 2021, to a range of $10 million to $11 million to be completed by second quarter of the year 2022. These changes are due to a delay in transfer of the manufacturing process under this plan. The total estimated cost for AeroTech in connection with this plan is approximately $6 million. We recognized restructuring charges of $14.2 million, net of a cumulative release of the related liability of $1.2 million, through September 30, 2021.
The following table details the cumulative amount of annualized savings and incremental savings for the 2020 restructuring plan:
| Cumulative Amount | Incremental Amount | Cumulative Amount | |||||||||||||||||||||||||||
| (In millions) | As of December 31, 2020 | During the quarter ended March 31, 2021 | During the quarter ended June 30, 2021 | During the quarter ended September 30, 2021 | As of September 30, 2021 | ||||||||||||||||||||||||
| Cost of sales | $ | 0.5 | $ | 0.8 | $ | 1.3 | $ | 1.3 | $ | 3.9 | |||||||||||||||||||
| Selling, general and administrative | 0.2 | 0.2 | 0.4 | 0.5 | 1.3 | ||||||||||||||||||||||||
| Total restructuring savings | $ | 0.7 | $ | 1.0 | $ | 1.7 | $ | 1.8 | $ | 5.2 | |||||||||||||||||||
Changes to the estimated costs and timing of completion of the 2020 restructuring plan, as described above, did not materially impact the amount or timing of its anticipated incremental savings that we expect to realize during the remaining three months in 2021 and in the year 2022 as follows:
| (In millions) | Remainder of 2021 (est.) | 2022 (est.) | |||||||||
| Cost of sales | $ | 1.1 | $ | 1.4 | |||||||
| Selling, general and administrative | 0.5 | 1.2 | |||||||||
| Total expected incremental cost savings | $ | 1.6 | $ | 2.6 | |||||||
For additional financial information about restructuring, refer to Note 15. Restructuring of the Notes to Condensed Consolidated Financial Statements.
Liquidity and Capital Resources
Our primary sources of liquidity are cash flows provided by operating activities from our U.S. and foreign operations, borrowings from our revolving credit facility, and proceeds from the issuance of the convertible notes on May 28, 2021. We used a portion of the net proceeds from the convertible notes to pay the net cost of the convertible note hedge and the warrant transactions, and to partially pay down our borrowings under our revolving credit facility. We expect to use the remaining net proceeds from the convertible notes for general corporate purposes, which may include potential acquisitions.
Our liquidity as of September 30, 2021, or cash plus borrowing capacity under our revolving credit facilities was $388.3 million. The cash flows generated by our operations and the revolving credit facility are expected to be sufficient to satisfy our working capital needs, new product development, restructuring expense, capital expenditures, dividend payments, pension contributions and other financing requirements over the next twelve months.
For the nine months ended September 30, 2021, we had total operating cash flow of $163.3 million and $143.7 million in free cash flow. For full year 2021, we expect to generate positive cash flows. In addition, we anticipate capital expenditures of approximately $50 million for 2021 compared to $34.3 million in prior year. Our level of capital expenditures varies from time to time as a result of actual and anticipated business conditions. Increase in our capital expenditure year over year is due to our limited capital spending in prior year as part of our strategy to mitigate the impact of COVID-19 on our liquidity, and a higher current and anticipated capital spending driven, in part, by continued strategic investments in our digital capabilities. We believe JBT's strong balance sheet, operating cash flows, and access to capital at September 30, 2021 positions us to navigate through the challenging economic conditions associated with the COVID-19 pandemic and continue to invest in growth strategies including our acquisition program and new product development.
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As of September 30, 2021, we had $58.2 million of cash and cash equivalents, $46.5 million of which was held by our foreign subsidiaries. Although these funds are considered permanently invested in our foreign subsidiaries, we are not presently aware of any restriction on the repatriation of these funds. We maintain significant operations outside of the U.S., and many of our uses of cash for working capital, capital expenditures and business acquisitions arise in these foreign jurisdictions. If these funds were needed to fund our operations or satisfy obligations in the U.S., they could be repatriated and their repatriation into the U.S. could cause us to incur additional U.S. income taxes and foreign withholding taxes. At this time it is not practicable to determine the unrecognized deferred tax liability related to foreign cash permanently reinvested in foreign subsidiaries.
As noted above, funds held outside of the U.S. are considered permanently invested in our non-U.S. subsidiaries. At times, these foreign subsidiaries have cash balances that exceed their immediate working capital or other cash needs. In these circumstances, the foreign subsidiaries may loan funds to the U.S. parent company on a temporary basis; the U.S. parent company has in the past and may in the future use the proceeds of these temporary intercompany loans to reduce outstanding borrowings under our committed revolving credit facilities. By using available non-U.S. cash to repay our debt on a short-term basis, we can optimize our leverage ratio, which has the effect of lowering our interest expense.
Under Internal Revenue Service (IRS) guidance, no incremental tax liability is incurred on the proceeds of these loans as long as each individual loan has a term of 30 days or less and all such loans from each subsidiary are outstanding for a total of less than 60 days during the year. During the nine months ended September 30, 2021, any such loan was outstanding for less than 30 days, and all such loans were outstanding for less than 60 days in the aggregate. We use the proceeds of these intercompany loans to reduce outstanding borrowings under our revolving credit facility. We may choose to access such funds again in the future to the extent they are available and can be transferred without significant cost, and use them on a temporary basis to repay outstanding borrowings or for other corporate purposes, but intend to do so only as allowed under this IRS guidance. There is no amount outstanding subject to this IRS guidance as of September 30, 2021.
Cash Flows
Cash flows for the nine months ended September 30, 2021 and 2020 were as follows:
| Nine Months Ended September 30, | |||||||||||
| (In millions) | 2021 | 2020 | |||||||||
| Cash provided by continuing operating activities | $ | 163.3 | $ | 161.1 | |||||||
| Cash required by investing activities | (217.2) | (26.0) | |||||||||
| Cash provided (required) by financing activities | 66.9 | (121.3) | |||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (2.3) | (2.7) | |||||||||
| Increase in cash and cash equivalents | $ | 10.7 | $ | 11.1 | |||||||
Cash provided by continuing operating activities during the nine months ended September 30, 2021 was $163.3 million, representing a $2.2 million increase compared to the same period in 2020. This increase was driven primarily by lower payments for accounts payable and higher customer collection of advance payments partially offset by lower
customer collections for trade receivable, higher investment in inventory and higher pension contributions.
Cash required by investing activities during the nine months ended September 30, 2021 was $217.2 million, an increase of $191.2 million compared to the same period in 2020, primarily due to an increase in acquisition and capital expenditure spending year over year.
Cash provided by financing activities of $66.9 million during the nine months ended September 30, 2021 was primarily due to net proceeds from the issuance of the convertible notes, bond hedge and warrant transactions, partially offset by paying down borrowings under our revolving credit facility and payment of acquisition date earn-out liability. Cash required by financing activities of $121.3 million during the nine months ended September 30, 2020 was primarily due to paying down our borrowings from domestic credit facility in 2020.
Financing Arrangements
As of September 30, 2021 we had $261.2 million drawn on and $731.1 million of availability under the revolving credit facility. Our ability to use this revolving credit facility is limited by the leverage ratio covenant described below.
Our credit agreement includes restrictive covenants that, if not met, could lead to a renegotiation of our credit lines, a requirement to repay our borrowings and/or a significant increase in our cost of financing. Restrictive covenants include a
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minimum interest coverage ratio, a maximum leverage ratio, as well as certain events of default. As of September 30, 2021, we were in compliance with all covenants in our credit agreement. We expect to remain in compliance with all covenants in the foreseeable future. However, there can be no assurance that continued or increased volatility in global economic conditions will not impair our ability to meet our covenants, or that we will continue to be able to access the capital and credit markets on terms acceptable to us or at all.
On May 28, 2021, we closed a private offering of $402.5 million aggregate principal amount of the Company's 0.25% Convertible Senior Notes due 2026 to qualified institutional buyers, resulting in net proceeds to us of approximately $392.2 million after deducting initial purchasers’ discounts. The convertible notes will mature on May 15, 2026 unless earlier converted, redeemed or repurchased. Concurrently with the issuance of the convertible notes, we entered into the convertible note hedge transactions that reduce potential dilution upon conversion of the Notes and into the warrant transactions to raise additional capital to partially offset the costs of entering into the convertible note hedge transactions.
For additional information about our credit agreement, convertible secured notes, convertible note hedge and warrant transactions, refer to Note 6. Debt of the Notes to Condensed Consolidated Financial Statements.
As of September 30, 2021, we have entered into four interest rate swaps executed in March 2020 with a combined notional amount of $200 million expiring in April 2025, and one interest rate swap executed in May 2020 with a notional amount of $50 million expiring in May 2025. We have designated these swaps as cash flow hedges and all changes in fair value of the swaps are recognized in Accumulated other comprehensive income (loss). As a result, as of September 30, 2021 all of our variable rate debt was effectively fixed rate debt subject to an average fixed rate of 0.81%.
CRITICAL ACCOUNTING ESTIMATES
There were no material changes in our judgments and assumptions associated with the development of our critical accounting estimates during the period ended September 30, 2021. Refer to our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of our critical accounting estimates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in reported market risks from the information reported in our Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 4. CONTROLS AND PROCEDURES
Under the direction of our principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of September 30, 2021. We have concluded that, as of September 30, 2021, our disclosure controls and procedures were:
i)effective in ensuring that information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and
ii)effective in ensuring that information required to be disclosed is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
In the ordinary course of business, we review our system of internal control over financial reporting and make changes to our systems and processes to improve such controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, automating manual processes and updating existing systems.
There were no changes in controls identified in the evaluation for the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material legal proceedings identified or material developments in existing material legal proceedings during the three months ended September 30, 2021.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the following risk factors and the factors discussed in Item 1A. "Risk Factors" in JBT's Annual Report on Form 10-K for the year ended December 31, 2020.
RISKS RELATED TO OWNERSHIP OF OUR SECURITIES
The convertible note hedge and warrant transactions may negatively affect the value of the Notes and our common stock.
In connection with the pricing of the Notes, we have entered into convertible note hedge transactions (the "Hedge Transactions") with the option counterparties. We have also entered into warrant transactions with the option counterparties. The Hedge Transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be. However, the warrant transactions could separately have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the strike price of the warrants.
The option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the Notes and prior to the maturity of the Notes (and are likely to do in connection with any conversion of the notes or redemption or repurchase of the Notes). This activity could also cause or avoid an increase or a decrease in the market price of our common stock or the Notes, which could affect the note holders' ability to convert the Notes and, to the extent the activity occurs during any observation period related to a conversion of the Notes, it could affect the number of shares and value of the consideration that note holders will receive upon conversion of the Notes.
We are subject to counterparty risk with respect to the convertible note hedge transactions.
The option counterparties are financial institutions, and we will be subject to the risk that any or all of them might default under the Hedge Transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral.
If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the Hedge Transactions with such option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the option counterparties.
Conversion of the Notes or exercise of the warrants evidenced by the warrant transactions may dilute the ownership interest of existing stockholders.
At our election, we may settle Notes tendered for conversion entirely or partly in shares of our common stock. Furthermore, the warrants evidenced by the warrant transactions are expected to be settled on a net-share basis. As a result, the conversion of some or all of the Notes or the exercise of some or all of such warrants may dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion of the Notes or such exercise of the warrants could adversely affect prevailing market prices of our common stock and, in turn, the price of the Notes. In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could depress the price of our common stock.
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BUSINESS AND OPERATIONAL RISKS
Our results of operations can be adversely affected by labor shortages, turnover and labor cost increases.
We have from time-to-time experienced labor shortages and other labor-related issues. These labor shortages have become more pronounced as a result of the COVID-19 pandemic and a sharp increase in industrial goods as global economy recovers from the effects of the pandemic. A number of factors may adversely affect the labor force available to us in one or more of our markets, including high employment levels, federal unemployment subsidies, and other government regulations, which include laws and regulations related to workers’ health and safety, wage and hour practices and immigration. These factors can also impact the cost of labor. Increased turnover rates within our employee base can lead to decreased efficiency and increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees. An overall labor shortage or lack of skilled labor, increased turnover or labor inflation could have a material adverse effect on our results of operations.
GENERAL RISKS
Our indebtedness and liabilities could limit the cash flow available for our operations and we may not be able to generate sufficient cash to service all of our indebtedness. We may be forced to take certain actions to satisfy our obligations under our indebtedness or we may experience a financial failure.
Our ability to make scheduled payments on or to refinance our debt obligations, including our $402.5 million of 0.25% Convertible senior notes due 2026 (“Notes”), will depend on our financial and operating performance. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness, including the Notes. We may not be able to take any of these actions, these actions may not be successful and permit us to meet our scheduled debt service obligations and these actions may not be permitted under the terms of our future debt agreements. In the absence of sufficient operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions or obtain sufficient proceeds from those dispositions to meet our debt service and other obligations then due.
•Our current and future indebtedness could have negative consequences for our business, results of operations and financial condition by, among other things:
•increasing our vulnerability to adverse economic and industry conditions;
•limiting our ability to obtain additional financing;
•requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes;
•limiting our flexibility to plan for, or react to, changes in our business;
•diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the Convertible Senior Notes; and
•placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
In addition, our credit facility contains, and any future indebtedness that we may incur may contain, restrictive covenants that limit our ability to operate our business, raise capital or make payments under our other indebtedness. If we fail to comply with these covenants or to make payments under our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in full.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table includes information about the Company’s stock repurchases during the three months ended September 30, 2021:
| (Dollars in millions, except per share amounts) | |||||||||||||||||||||||
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as part of Publicly Announced Program | Approximate Dollar Value of Shares that may yet be Purchased under the Program (1) | |||||||||||||||||||
| July 1, 2021 through July 31, 2021 | — | $ | — | — | $ | 30.0 | |||||||||||||||||
| August 1, 2021 through August 31, 2021 | — | — | — | 30.0 | |||||||||||||||||||
| September 1, 2021 through September 30, 2021 | — | — | — | 30.0 | |||||||||||||||||||
| — | $ | — | — | $ | 30.0 | ||||||||||||||||||
(1)Shares that may be repurchased under a share repurchase program for up to $30 million of common stock that was authorized by the Board of Directors in 2018 and is set to expire on December 31, 2021. Refer to the Annual Report on Form 10-K for the year ended December 31, 2020, Note 11. Stockholders' Equity for share repurchase program details.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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EXHIBIT INDEX
| Number in Exhibit Table | Description | |||||||
| 10.1* | ||||||||
| 10.2* | ||||||||
| 10.3* | ||||||||
| 31.1* | ||||||||
| 31.2* | ||||||||
| 32.1* | ||||||||
| 32.2* | ||||||||
| 101.INS* | XBRL Instance Document | |||||||
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104* | Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document). | |||||||
| * | Filed herewith. | |||||||
48
SIGNATURE
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.
| John Bean Technologies Corporation | |||||
| (Registrant) | |||||
| /s/ Jessi L. Corcoran | |||||
| Jessi L. Corcoran | |||||
| Vice President, Corporate Controller and duly authorized officer | |||||
| (Principal Accounting Officer) | |||||
Date: October 29, 2021
49
 | John Bean Technologies Corporation 70 West Madison, Suite 4400 Chicago, IL 60602 (312) 861-5900 | ||||
Exhibit 10.1
July 23, 2021
Ms. Shelley Bridarolli
[Address Omitted]
Dear Shelley,
I am very pleased to confirm our offer of employment with JBT Corporation, as Executive Vice-President, Human Resources, reporting to me, with an expected start date of September 1, 2021 (the Effective Date). The elements of your compensation are itemized below, with more detailed descriptions following the summary:
| Annual Salary | $400,000 | ||||
| Target Cash Bonus | 50% | ||||
| Target Total Cash | $600,000 | ||||
| Annual Long Term Incentive (equity) | $400,000 (estimated, subject normal annual Compensation Committee approval) | ||||
| Sign on Equity | $200,000 (3-year time-based cliff vest) | ||||
| Change in Control Agreement and Executive Severance Plan | Attached | ||||
| Group Insurance - medical, dental, life, disability, vision | Attached | ||||
| 401(k) | up to 6.5% company match | ||||
| Deferred Compensation Election | Attached | ||||
| Vacation | Four weeks’ vacation, earned monthly | ||||
| Financial Planning | Up to $20,000 annually | ||||
| Executive Physical | $5,000 annually | ||||
| Relocation | JBT Tier J relocation program (subject to modifications) | ||||
| Parking | On-site parking reimbursement | ||||
| Start Date | September 1, 2021 | ||||
Your annual base salary will be $400,000, paid on a biweekly basis. You will be eligible for a pro rata increase on JBT’s April 2022 merit increase date.
Annual Cash Bonus
You will be eligible to participate in the JBT Management Incentive Plan (MIP). Your target payout will be 50% of your base salary. This cash incentive bonus is based on both business performance incentives (BPI) and Personal Performance Indicators (PPI). The BPI measures the Company’s
actual financial performance on performance objectives established annually by the Compensation Committee of the Board and is weighted (75%). Payouts on BPI can range from 0.0 to 2.5 times target. The PPI measures your individual performance to personal objectives and is weighted (25%). Payouts on PPI can range from 0.0 to 2.0 times target. Payments under the MIP are made no later than March 15th of the calendar year following the calendar year for which the bonus is earned. For 2021 MIP payable in March 2022, your payout you will pro-rated as if you joined JBT July 1, 2021 (i.e., 6 months of service) with a PPI and BPI of not less than 1.0x (i.e., payout of no less than $100,000).
Long-Term Incentive Plan
You will also be eligible to participate in the John Bean Technologies Corporation Long Term Incentive Plan (LTIP) which provides for periodic equity awards at the discretion of the Board of Directors. Equity awards are determined annually by the Compensation Committee of the Board of Directors. Your annual award in 2022 will have an expected grant date value of $400,000. In 2021 these awards were 40% time based and 60% performance based Restricted Stock Units (RSU’s). The time-based portion has a three plus year vesting period. The performance-based portion has a three-year performance period. Both time based and performance shares vest in March following completion of the performance period. Performance payouts can range from 0 to 200%. Financial performance objectives for the LTIP are also established annually by the Compensation Committee.
Sign-On Equity Award
You will also receive an equity award upon hire. This award will be granted on the first trading date of the month following your hire date, with a grant date value of $200,000 in time-based RSUs. This award will vest on the first trading date 36 months after the grant date.
All equity awards are forfeited if you are not an employee at the time of vesting other than as a result of death or disability, at which point all outstanding and unvested RSU’s will vest in full.
Relocation Package
You are also eligible for JBT’s executive relocation package “Tier J” per the attached Exhibit A. As set forth in the policy, JBT provides relocation cost assistance for the following:
–Lump sum allowance for new home exploratory costs
–Real estate sale transaction expenses
–Certain new home purchase closing or rental search costs
–Household goods moving and storage costs
The lump sum allowance for home exploratory costs will be $25,000.
Pursuant to our discussions, we have agreed to certain modifications to the standard benefits of this program. We understand that you wish to forego the “Home Marketing Assistance” and the “Buyer Value Option Program” and instead will pursue the benefits associated with the “Independent Sale Option”. In connection therewith, JBT will agree to reimburse real estate agent’s commissions for your existing home sale not to exceed 5% of the purchase price up to $2,225,000, as well as customary non-recurring closing costs that are required to be paid by the seller. Additionally, we understand that you have valuable artwork that requires special care. While JBT’s policy does not cover the shipment of these items, JBT is willing to offer a $10,000 lump sum so that you may
appropriately arrange for the proper transport of such items independently. Reimbursement for real estate commissions, customary closing costs and art moving allowance are not eligible for gross up tax benefits.
Severance Agreements
As an executive officer you will be eligible to enter into an Executive Severance Agreement (the “Change in Control Agreement”) that extends benefits in the event JBT undergoes a qualified change in control action. The form of the Change of Control Agreement you will execute upon starting with JBT is attached as Exhibit B.
You will also be eligible to participate in JBT’s Executive Severance Pay Plan (the “Severance Plan”) which includes 15 months’ base salary, target bonus and compensation for costs associated with continuation of medical and dental benefits under COBRA, vacation pay, outplacement assistance, and other benefits in connection with an involuntary termination. The plan agreement is attached as Exhibit C.
Other Benefits
You are also eligible to participate in JBT Corporation’s comprehensive benefits package that includes medical, dental, life, disability and vision (Exhibit D). JBT also offers a 401(k) plan, including up to a 6.5% company match, and a deferred compensation plan (Exhibit E). You will be eligible for four weeks of vacation annually upon joining JBT. The vacation is earned at the rate of 1.67 days per month and unused vacation cannot be carried over from one year to the next.
JBT will provide you up to $20,000 annually (beginning in 2022) to be used for financial planning and/or tax assistance. In addition, parking reimbursement is available if you choose to drive to work at our Chicago corporate office.
JBT also offers executive officers an annual executive physical benefit, covered up to $5,000 annually.
This offer of employment is contingent upon successfully passing a background check and drug screening test, your ability to provide proof of your right to work in the United States, and receipt of a signed JBT Corporation Non-Competition Non-Solicitation Confidential Information and Inventions Agreement in the form attached as Exhibit F. Nothing in this letter limits or alters the employment at-will relationship. This letter reflects the current version of various JBT plans and policies but as you know these may be modified or amended based upon future business needs and the descriptions herein are summaries, subject to the full terms of each of the plan documents.
In light of the COVID-19 pandemic, we are also providing you with a copy of our Chicago corporate office return to office plan intended to go into effect on September 1st, attached as Exhibit G.
JBT Corporation offers a challenging environment with many opportunities for growth and development. I believe that this opportunity will enable you to meet your career goals, as well as significantly contribute to JBT’s strategy and objectives. If you have any questions concerning this offer, please call me at [phone number omitted] or Jim Marvin at [phone number omitted].
Shelley, I look forward to having you join the JBT executive leadership team.
Sincerely,
Brian A. Deck
President and Chief Executive Officer
I Accept This Offer on the Terms Indicated
/s/ Shelley Bridarolli 7/23/21
______________________________________
Signature Date
 | John Bean Technologies Corporation 70 West Madison, Suite 4400 Chicago, IL 60602 (312) 861-5900 | ||||
Exhibit 10.2
September 23, 2021
Mr. Bob Petrie
[Address Omitted]
Dear Bob,
I am very pleased to confirm our offer of employment with JBT Corporation, as Executive Vice President & President, Protein, reporting to me, with an expected start date of October 7, 2021 (the Effective Date). The elements of your compensation are itemized below, with more detailed descriptions following the summary:
| Annual Salary (SEK) | 3,600,000 SEK | ||||
| Target Cash Bonus | 60% | ||||
| Target Total Cash (SEK) | 5,760,000 SEK | ||||
| Annual Long Term Incentive (equity) | $425,000 USD (estimated, subject normal annual Compensation Committee approval) | ||||
| Change in Control Agreement and Executive Severance Plan | Attached | ||||
| Health benefits | No change | ||||
| Deferred Compensation Election | Attached | ||||
| Vacation | Four weeks’ vacation, earned monthly | ||||
| Financial Planning | Up to $20,000 USD equivalent annually | ||||
| Start Date | October 7, 2021 | ||||
Annual Cash Bonus
You will be eligible to participate in the JBT Management Incentive Plan (MIP). Your target payout will be 60% of your base salary. This cash incentive bonus is based on both business performance incentives (BPI) and Personal Performance Indicators (PPI). The BPI measures the Company’s actual financial performance on performance objectives established annually by the Compensation Committee of the Board and is weighted (75%). Payouts on BPI can range from 0.0 to 2.5 times target. The PPI measures your individual performance to personal objectives and is weighted (25%). Payouts on PPI can range from 0.0 to 2.0 times target. Payments under the MIP are made no later than March 15th of the calendar year following the calendar year for which the bonus is earned. For 2021 MIP payable in March 2022, your payout you will pro-rated by time in position.
Long-Term Incentive Plan
You will also be eligible to participate in the John Bean Technologies Corporation Long Term Incentive Plan (LTIP) which provides for periodic equity awards at the discretion of the Board of Directors. Equity awards are determined annually by the Compensation Committee of the Board of Directors. Your annual award in 2022 will have an expected grant date value of $425,000 USD. In 2021 these awards were 40% time based and 60% performance based Restricted Stock Units (RSU’s). The time-based portion has a three plus year vesting period. The performance-based portion has a three-year performance period. Both time based and performance shares vest in March following completion of the performance period. Performance payouts can range from 0 to 200%. Financial performance objectives for the LTIP are also established annually by the Compensation Committee.
Severance Agreements
As an executive officer you will be eligible to enter into an Executive Severance Agreement (the “Change in Control Agreement”) that extends benefits in the event JBT undergoes a qualified change in control action. The Change of Control Agreement will be forwarded to execute upon starting your new position.
You will also be eligible to participate in JBT’s Executive Severance Pay Plan (the “Severance Plan”) which includes 15 months’ base salary, target bonus and compensation for costs associated with vacation pay, outplacement assistance, and other benefits in connection with an involuntary termination.
Other Benefits
Your health and welfare benefits, as well as vacation time remain unchanged.
JBT will provide you up to $20,000 (or USD equivalent) annually (beginning in 2022) to be used for financial planning and/or tax assistance.
This letter reflects the current version of various JBT plans and policies but as you know these may be modified or amended based upon future business needs and the descriptions herein are summaries, subject to the full terms of each of the plan documents.
Bob, as a public company, we are required to disclose the compensation paid to our five most highly compensated executive officers in our annual proxy statement and other documents filed with the U.S. Securities and Exchange Commission (SEC). To the extent you become one of the top five highly compensated executive officers of JBT Corporation, we will publicly disclose your compensation to comply with our legal obligations. [Your compensation and other personal data will be processed in accordance with our privacy policy and the applicable data protection laws]. I look forward to your continued success with JBT and believe that this opportunity will enable you to meet your career goals, as well as significantly contribute to our strategy and objectives. If you have any questions concerning this offer, please call me at [phone number omitted].
Bob, I look forward to having you join the JBT executive leadership team.
Sincerely,
Brian A. Deck
President and Chief Executive Officer
I Accept This Offer on the Terms Indicated
/s/ Bob Petrie 23/9/21
______________________________________
Signature Date
Exhibit 10.3
THIRTIETH AMENDMENT
OF
JOHN BEAN TECHNOLOGIES CORPORATION
SAVINGS AND INVESTMENT PLAN
(As amended and restated, Effective as of January 1, 2012)
OF
JOHN BEAN TECHNOLOGIES CORPORATION
SAVINGS AND INVESTMENT PLAN
(As amended and restated, Effective as of January 1, 2012)
WHEREAS, John Bean Technologies Corporation (the “Company”) maintains the John Bean Technologies Corporation Savings and Investment Plan (the “Plan”); and
WHEREAS, the Company now deems it necessary and desirable to amend the Plan in certain respects; and
WHEREAS, this Thirtieth Amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions of the amendment.
NOW, THEREFORE, by virtue of the authority reserved to the Company by Section 12.1 of the Plan, the Plan is hereby amended as follows, effective as of August 1, 2021:
1.A new Section 2.15 is hereby added to the Plan to read as follows:
“2.15 Service Crediting for CMS Technology, Inc. Notwithstanding any provision herein to the contrary, effective as of August 1, 2021, if an individual (a) was actively employed by CMS Technology, Inc. on July 2, 2021, and (b) remains an active employee of CMS Technology, Inc. as of August 1, 2021, such individual’s period of employment with CMS Technology, Inc. shall be counted under the Plan for purposes of (i) eligibility to participate in the Plan, and (ii) determining the individual’s Hours of Service under the Plan.”
IN WITNESS WHEREOF, the Company has caused this amendment to be executed by a duly authorized representative this 26th day of July, 2021.
JOHN BEAN TECHNOLOGIES
CORPORATION
By: James L. Marvin
Its: EVP, General Counsel and Secretary
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Brian A. Deck, certify that:
1.I have reviewed this quarterly report on Form 10-Q of John Bean Technologies Corporation (the “registrant”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting, to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 29, 2021
| /s/ Brian A. Deck | |||||
| Brian A. Deck | |||||
| President and Chief Executive Officer | |||||
| (Principal executive officer) | |||||
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Matthew J. Meister, certify that:
1.I have reviewed this quarterly report on Form 10-Q of John Bean Technologies Corporation (the “registrant”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting, to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 29, 2021
| /s/ Matthew J. Meister | |||||
| Matthew J. Meister | |||||
| Executive Vice President and Chief Financial Officer | |||||
| (Principal financial officer) | |||||
Exhibit 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
I, Brian A. Deck, President and Chief Executive Officer of John Bean Technologies Corporation (the “Company”), do hereby certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(a) the Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended September 30, 2021, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 29, 2021
| /s/ Brian A. Deck | |||||
| Brian A. Deck | |||||
| President and Chief Executive Officer | |||||
| (Principal executive officer) | |||||
Exhibit 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
I, Matthew J. Meister, Executive Vice President and Chief Financial Officer of John Bean Technologies Corporation (the “Company”), do hereby certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(a) the Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended September 30, 2021, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 29, 2021
| /s/ Matthew J. Meister | |||||
| Matthew J. Meister | |||||
| Executive Vice President and Chief Financial Officer | |||||
| (Principal financial officer) | |||||