JBT MAREL Corp 10-K for FY2023
JBT MAREL Corp (JBTM)
10-K
2024-02-23
For: 2023-12-31
View Original
Added on
April 07, 2026
About this 10-K
JBT MAREL Corp filed this 10-K on February 23, 2024, covering the fiscal year ended December 31, 2023 (FY2023).
Headline figures
Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.66B
- up 4.7% from $1.59B a year earlier
- Net income
- $582.6M
- up 324.0% from net income of $137.4M a year earlier
- Diluted EPS
- $18.13
- up 323.6% from $4.28 a year earlier
| UNITED STATES | ||
| SECURITIES AND EXCHANGE COMMISSION | ||
| Washington, D.C. 20549 | ||
| FORM | |||||
| (Mark One) | |||||
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended December 31 , 2023
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
Commission file number: 1-34036
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||
(Address of principal executive offices)
(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 Exchange on Which Registered | ||||||||||||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 definitions of “large accelerated filer,” “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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of common stock held by non-affiliates of the registrant on the last business day of the registrant’s most recently completed second fiscal quarter was: $3,801,346,464 .
At February 16, 2024, there were 31,791,262 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for the 2024 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein.
TABLE OF CONTENTS
| Page | |||||
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | |||||
Item 6. [Reserved] | |||||
| Item 16. Form 10-K Summary | |||||
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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This 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 Annual Report on Form 10-K 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 related to our business and our results of operations, a potential transaction with Marel, our strategic plans, our restructuring plans and expected cost savings from those plans and our liquidity. The factors that could cause our actual results to differ materially from expectations include but are not limited to the following factors:
•the completion of confirmatory due diligence by us prior to launching the offer for Marel shares (the offer);
•the occurrence of any event, change or other circumstances that could give rise to the termination or abandonment of the offer;
•the expected timing and likelihood of completion of the proposed transaction with Marel, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the offer that could reduce anticipated benefits or cause the parties to abandon the transaction;
•the ability to successfully integrate the businesses of JBT and Marel;
•the possibility that our stockholders may not approve the issuance of new shares of common stock in the offer;
•the risk that Marel and/or JBT may not be able to satisfy the conditions to the proposed offer in a timely manner or at all;
•the risk that the proposed offer and its announcement could have an adverse effect on the ability of JBT and Marel to retain customers and retain and hire key personnel and maintain relationships with their suppliers and customers and on their operating results and businesses generally;
•the risk that problems may arise in successfully integrating the businesses of Marel and JBT, which may result in the combined company not operating as effectively and efficiently as expected;
•the risk that the combined company may be unable to achieve cost-cutting synergies or it may take longer than expected to achieve those synergies;
•fluctuations in our financial results;
•unanticipated delays or acceleration in our sales cycles;
•deterioration of economic conditions, including impacts from supply chain delays and reduced material or component availability;
•inflationary pressures, including increases in energy, raw material, freight, and labor costs;
•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;
•fluctuations in currency exchange rates;
•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;
•acts of terrorism or war, including the ongoing conflicts in Ukraine and the Middle East;
•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;
•difficulty in implementing our pure play food and beverage strategy, including our ability to execute on strategic investments, merger or acquisition opportunities;
•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;
•a systemic failure of the banking system in the United States or globally impacting our customers' financial condition and their demand for our goods and services;
•availability of and access to financial and other resources; and
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•the factors described under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.
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 Annual Report on Form 10-K 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.
PART I
Unless otherwise specified or indicated by the context, JBT Corporation, JBT, we, us, our and the Company refer to John Bean Technologies Corporation and its subsidiaries.
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ITEM 1. BUSINESS
GENERAL
We are a leading global technology solutions and service provider to high-value segments of the food and beverage industry. We design, produce, and service sophisticated products and systems for multi-national and regional customers. Our mission is to make better use of the world’s precious resources by providing solutions that substantially enhance our customers’ success, and in doing so design, produce and service sophisticated and critical products and systems for food and beverage companies that improve yields and boost efficiency.
We were originally incorporated as Frigoscandia, Inc. in Delaware in May 1994. Our principal executive offices are located at 70 West Madison, Suite 4400, Chicago, Illinois 60602.
Operating results and additional financial data and commentary are provided in the Results of Continuing Operations section in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K.
DESCRIPTION OF BUSINESS
We provide 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, plant-based meat alternatives, dairy, bakery, pet foods, soups, sauces, and juices. Our solutions also support nutraceutical and powder applications. We also provide stand-alone and fully integrated automated guided vehicle systems for repetitive material handling requirements for use in manufacturing, warehouse, and other facilities.
The product offering of our businesses includes:
•Food and Beverage Solutions. Our equipment offerings include primary, secondary and further value-added processing, including chilling, mixing/grinding, injecting, blending, marinating, tumbling, flattening, forming, portioning, coating, cooking, frying, freezing, extracting, pasteurizing, sterilizing, concentrating, high pressure processing, weighing, inspecting, filling, closing, sealing, end of line material handling, and packaging solutions, which support a large and growing portfolio of food, beverage, and health end markets.
•Automated Guided Vehicle Systems. Our Automated Guided Vehicle Systems offerings include stand-alone, fully integrated, and dual-mode robotic systems for material movement requirements with a wide variety of applications including automotive manufacturing, warehousing, and medical facilities.
On August 1, 2023, we completed the sale of the AeroTech business segment ("AeroTech"). This sale was completed pursuant to the Stock and Asset Purchase Agreement, dated May 26, 2023, to sell AeroTech to Oshkosh Corporation. This divestiture supported the Company's strategy to become a pure-play food and beverage solutions provider. For additional information, refer to Note 2. Discontinued Operations of the Notes to the Consolidated Financial Statements.
Our historically strong position in the markets we serve has provided us with a large installed base of systems and equipment that is a source of recurring revenue from our aftermarket parts and service offerings and re-build services for customer-owned equipment. As part of our aftermarket program, we also provide a digital solution called OmniBlu™, a subscription-based offering including integrated best-in-class service, parts availability, and machine optimization capabilities - all supported by a powerful digital infrastructure leveraging AI, machine learning, and predictive analytics. We also provide continuous, proactive service to our customers including the fulfillment of preventative maintenance agreements, such as PRoCARE® and consulting services. We offer full service operating leases on certain high-capacity industrial extractors, which include routine parts and maintenance support. Recurring revenue accounted for 51% of total revenue in 2023.
We believe our success is derived from continued innovation, applying differentiated and proprietary technologies to meet customers’ food and beverage processing needs. We continually strive to improve existing products and develop new solutions by working closely with our customers to meet their evolving needs. The installed base also provides us with strong, long-term customer relationships from which we derive information for new product development to meet the evolving needs of our food processing customers.
We have operations strategically positioned around the world to serve our existing equipment installed base located in more than 100 countries. Our principal production facilities are located in the United States (Arkansas, California, Florida, New York, North
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Carolina, Ohio, Pennsylvania, Virginia and Wisconsin), Brazil, Belgium, Germany, Italy, Spain, Sweden, the Netherlands, the United Kingdom, and South Africa. In addition to sales and services offices based in more than 25 countries, we also support our customers in their development of new food products and processes as well as the refinement and testing of their current applications through 10 technical centers located in the United States (California, Florida, and Ohio), Mexico, Brazil, Belgium, Italy, Spain, Sweden, and the Netherlands. Our global presence allows us to provide direct customized support to customers virtually anywhere they process food.
Solutions, Products and Services
We offer a broad portfolio of systems, equipment and services to our customers which are often sold as part of a fully integrated processing line solution. Our systems are typically customized to meet a large variety of customer application needs within food and beverage groups, including poultry, beef, pork, seafood, ready-to-eat meals, fruits, vegetables, plant-based meat alternatives, dairy, bakery, pet foods, soups, sauces, and juices. Thus, actual production capacity ranges vary and are dependent on the food and product packaging type being processed. Our fully integrated processing lines often span from the initial point of entry of raw products through further processing and end of line packaging.
The initial step in the food processing cycle is primary processing, where the readily edible food is extracted from the inedible raw commodity or preserved in its raw form to increase shelf life. Our primary processing offerings increase food yield, lower energy and water usage, reduce food waste, and enhance food safety. In the primary processing space, we offer solutions for meat and poultry applications, and fruit and vegetable processing equipment. Products in the primary processing space include:
•poultry overhead and conveyance systems;
•offal and feather processing;
•meat and poultry processing applications, including scalding, picking, evisceration, maceration, water re-use, paw processing, cut-up and deboning, wing segmentation, and skinning equipment;
•pathogen protection for poultry and meat applications;
•freezing, chilling, refrigeration, and proofing systems;
•industrial citrus, tropical and temperate fruit and vegetable processing equipment, including cleaning, grading, storing, feeding, finishers, pulp systems, evaporators, ingredient recovery systems, slicing, washing, drying, transporting, and mixing;
•specially formulated fruit and vegetable cleaners, post-harvest sanitizers, fungicides, and coatings;
•skid-mounted products, including solutions for aseptic sterilization, bulk filling, and labelling, as well as ingredient and by-product recovery and clean-up systems; and
•high-capacity industrial juice extractors; and
•point of use produce juicers for retail markets.
The next step in the food processing cycle is secondary processing where the ingredients prepared through primary processing are transformed into consumable food or are further preserved for consumption. Our secondary processing offerings add further value by transforming food into a more marketable and edible product while reducing labor through automation, increasing yields, improving product quality, reducing energy and water usage, lowering food waste, and enhancing food safety. In the secondary processing space, we supply a broad portfolio of processing solutions for customers producing protein products, such as meat, poultry, and seafood, and liquid food and beverage products, including products used standalone or as ingredients in dairy products, bakery products, and fruit-based beverages. Products in the secondary processing space include:
•meat and poultry processing functions, including tenderization, portioners and waterjet portioners, slicers and cordon-bleu slicers, attribute scanners/sorters, injectors, scales and weighing systems, brine preparation, injection, marination, mixers, grinders, flatteners, formers, and tenderizers;
•x-ray detection systems created for the unique needs of poultry and fish;
•aseptic systems, including sterilizers, fillers, blow molders and controls that can be used for bulk or retail production of diverse products such as not-from concentrate orange juice, milk, alt-dairy, purees, soups, sauces, and concentrates;
•flavor vats, batching systems, melting systems, and storage tanks;
•fully integrated industrial preservation systems that enable production of extended shelf life and shelf-stable foods in a wide variety of flexible, rigid, and semi-rigid packages;
•rotary and linear filling and closing technologies for metal cans, glass jars, glass and plastic bottles, and pouches; and
•integrated solutions for the processing of extended shelf life and shelf-stable food and liquid products including a line of continuous hydrostatic sterilizers, continuous rotary sterilizers, batch retorts, heat exchangers, and thermal process controls.
The final step in the food processing cycle is further processing where the food product is further refined through a variety of different value added techniques for broader or more convenient consumption. Our further processing offerings enhance the quality of the final food product while reducing labor through automation, improving product quality, reducing energy and water usage, lowering food waste, and enhancing food safety. In the further processing space, we supply a comprehensive portfolio of high-
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volume industrial cooking and freezing solutions, in addition to capabilities in filling, carbonated beverages, high pressure processing, fresh-cut produce, infant food, pet food, and pharma/nutraceuticals. Products in the further processing space include:
•cookers, fryers, spiral and linear ovens and cooking systems, coating and seasoning applicators, pasteurizers, and proofers;
•design, assembly, testing, and installation of self-stacking spiral ovens, freezers, chillers, individual quick freezing (IQF) systems, linear/impingement freezing systems, and flat product and contact freezers;
•equipment to clean, mix, grade, sort, and blanch produce, fresh-cut salads, fruits, and vegetables;
•powder and linear fillers, and vacuum fillers, a leading filler for high-value powdered food;
•solutions for blending, filling, container handling and seaming on high-capacity beverage lines packaged in cans or bottles;
•high-pressure processing equipment, supporting clean-label products and non-thermal preservation solutions for a broad array of market segments;
•full line solutions for wet pet food producers; and
•modularized tanks, skids, and bioreactors as well as installation of sanitary/high purity piping that plays a vital role in producing vaccines and medicines.
In the packaging space, we supply packaging systems, tray seal packaging equipment, and case packers providing automatic in-line solutions for the food segment. Our tray sealing solutions help extend the self life of packaged food and can reduce plastic consumption versus traditional packaging methods, offering solutions in a wide range of industries including, food, pharmaceutical, and retail markets.
We are a recognized U.S. Department of Agriculture ("USDA") and Food and Drug Administration ("FDA") Food Process Authority and offer consulting services to help design food production processes in accordance with the USDA's and FDA's stringent requirements. Our solutions also include specialized material handling systems to automate the handling and tracking of processed and unprocessed containers as well as software and controls provided by AutoCoding Systems that help our customers optimize and track their processes to allow real time modifications in the case of process deviations.
Across our equipment and technologies, we create shared value for our food and beverage customers by offering high-quality, technologically advanced, and reliable solutions that deliver quality performance while also striving to support customer sustainability objectives. As a result, many of our solutions seek to minimize food and packaging waste, extend food product life, optimize and reduce water and energy usage, increase yield and maximize efficiency.
Automated Systems. We are a leading global supplier of robotic automated guided vehicle systems for material movement in
the automotive, food and beverage, building materials, warehousing and healthcare industries. We provide engineering services and simulations to evaluate material handling requirements, standard and custom automated guided vehicle hardware and software, and stand-alone (JayBoT®) and fully integrated system hardware and software for a scalable solution that can be applied individually or across the entire customer enterprise.
Aftermarket Products, Consumables, Parts, and Services. We provide aftermarket products, parts, and services for all of our integrated food processing systems and equipment. We provide retrofits and refurbishments to accommodate changing operational requirements, and we supply our own brand of food grade lubricants and cleaners designed specifically for our equipment. We supply packaging material components for our clip packaging customers in the form of metal clips and hanging loops. We also provide continuous, proactive service to our customers including through the fulfillment of preventative maintenance agreements and consulting services such as water treatment, corrosion monitoring control, food safety and process auditing, and the expertise of on-site technical personnel. In addition to helping our customers reduce their operating costs and improve efficiencies, our customer service focus also helps us maintain strong commercial relationships and provides us with ongoing access to information about our customers’ requirements and strategies to foster continuing product development. Our aftermarket products, parts, and services, coupled with our large installed base of food processing systems and equipment, provide us with a strong base for growing recurring revenue. Sales of aftermarket products, parts and services are consolidated within the total revenue of the related business. As part of our aftermarket program, we also provide a digital solution called OmniBlu™, a subscription-based offering including best-in-class service, parts availability, and machine optimization capabilities - all supported by a powerful digital infrastructure leveraging AI, machine learning, and predictive analytics. We also provide continuous, proactive service to our customers including the fulfillment of preventative maintenance agreements, such as PRoCARE® and consulting services.
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Order Backlog
For information regarding our order backlog, refer to the section entitled “Inbound Orders and Order Backlog” in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K.
Sales and Marketing
We sell and market our products and services predominantly through a direct sales force, supplemented with independent distributors, sales representatives, and technical service teams. Our experienced global sales force is comprised of individuals with strong technical expertise in our products and services and the industries in which they are sold.
We support our sales force with marketing and training programs that are designed to increase awareness of our product offerings and highlight our differentiation while providing a set of sales tools to aid in the sales of our technology solutions. We actively employ a broad range of marketing programs to inform and educate customers, the media, industry analysts, and academia through targeted newsletters, our website, blogs, social media platforms, seminars, trade shows, user groups, and conferences. We regularly introduce new internal digital resources designed to accelerate the quote-to-order process, identify cross-selling opportunities between our separate businesses. In addition, we utilize marketing automation processes and technology to drive lead generation.
Competition
We conduct business worldwide and compete with large multinational companies as well as a variety of local and regional companies, which typically are focused on a specific application, technology or geographical area.
JBT’s major competitors include, but are not limited to, Advanced Equipment Inc.; Alit SRL; Allpax Products, Inc.; Atlas Pacific Engineering Company, Inc.; Barry-Wehmiller Companies, Inc.; Brown International Corp.; CFT S.p.A.; Egemin Automation Inc.; Elettric 80 S.p.a. Italia; Ferrum; Food Processing Equipment Company; FPS Process Foods Solutions; GEA Group AG; Krones; Marel hf.; METALQUIMIA, S.A.; Mettler-Toledo International, Inc.; Morris & Associates, Inc.; MYCOM; Middleby Corporation; Nantong Freezing Equipment Company, Ltd.; Poly-clip system GmbH & Co. KG; Provisur Technologies, Inc.; Shibuya Corporation; Starfrost; Statco Engineering; Steriflow SAS.; Tetra Laval; Tecnopool S.p.A; Heinen Freezing GmbH & Co. KG; Square Technology Group Co., Ltd; DSI Dantech A/S; Duravant LLC; Bettcher Industries, Inc; and ProMach Inc.
We compete by leveraging our industry expertise to provide differentiated and proprietary technology, integrated systems, high product quality and reliability, and comprehensive aftermarket services for installed base of our equipment. Furthermore, this installed base also provides us with strong, long-term customer relationships from which we derive information for new product development to meet the evolving needs of our customers. We strive to provide our customers with equipment that delivers a lower total cost of ownership, distinguishing ourselves by providing reliable uptime, labor reduction through automation, increased yields, and improved product quality, while helping customers achieve ambitious environmental goals of lowering energy and water usage, reducing food waste, and enhancing food safety. Our ability to provide comprehensive sales and service in all major regions of the world, by maintaining local personnel in region, differentiates us from regional competition.
Geographic Information
We have operations strategically positioned around the world to serve our existing equipment base located in more than 100 countries. See Item 1A. Risk Factors for a discussion of risks associated with our global operations.
Customers
No single customer accounted for more than 10% of our total revenue in any of the last three fiscal years.
Patents, Trademarks and Other Intellectual Property
We own a number of United States and foreign patents, trademarks, and licenses that are cumulatively important to our business. We own approximately 659 United States and foreign issued patents and have approximately 307 patent applications pending in the United States and abroad. Further, we license certain intellectual property rights to or from third parties. We also own numerous United States and foreign trademarks and trade names and have approximately 703 registrations and pending applications in the United States and abroad. Developing and maintaining a strong intellectual property portfolio is an important component of our strategy to extend our technology leadership. However, we do not believe that the loss of any one or group of related patents, trademarks, or licenses would have a material adverse effect on our overall business.
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Sources and Availability of Raw Materials
We purchase carbon steel, stainless steel, aluminum, and/or steel castings and forgings both domestically and internationally. We do not use single source suppliers for the majority of our raw material purchases and believe the available supplies of raw materials are adequate to meet our needs. We have taken steps to minimize impacts on the business caused by disruptions to the global economy, including supply chain disruptions, which began in 2020 and continued through 2023. By working closely with our supply base, primarily through supply chain and strategic sourcing initiatives that include supply base consolidation, make versus buy decisions, value engineering and component standardization, and best cost country sourcing, we have improved lead times and stabilized raw material costs. We expect that these supply chain initiatives will continue to help us successfully mitigate the impact of these events.
Working Capital Practices
In order to provide, and install, custom designed equipment, companies in the food machinery industry generally generate customer deposits, or advance payments, before construction begins. For this reason, our business can be less working capital intensive than many other industrial capital goods industries.
Human Capital Management
We have employees geographically dispersed throughout the world. As of fiscal year end 2023, we have approximately 5,100 employees worldwide, with approximately 46% located in the United States. None of our employees in the United States are represented by collective bargaining agreements. Outside the United States, we enter into employment contracts and agreements in those countries in which such relationships are mandatory or customary. The provisions of these agreements correspond in each case with the required or customary terms in the subject jurisdiction. Approximately 49% of our international employees are covered by global employee representation bodies. We have historically maintained good employee relations and have successfully concluded all of our recent negotiations without a work stoppage. However, we cannot predict the outcome of future contract negotiations.
Our strong employee base, along with their commitment to our uncompromising values of integrity, accountability, continuous improvement, teamwork, and customer focus, provide the foundation of our company’s success. Employee safety, and managing the risks associated with our workplace, is of paramount importance to JBT. We give employees the training and tools to manage risk. We also empower employees to stop work if they encounter an unsafe situation. JBT's Health and Safety program operates under management's belief that all injuries can be prevented, with a company objective of "Zero Incidents, Worldwide, Every Day.” Specifically, we have deployed a global Near Miss and Behavior-Based Safety Observations reporting program, under which potential unsafe conditions or behaviors are proactively reported and corrected before they cause an injury. JBT's foundational commitment to safety is demonstrated by our world-class recordable and loss-time rates below. This safety information is provided in the CEO report to the Board of Directors at every Board meeting.
At JBT, we are deeply committed to fostering diversity, equity, inclusion, and belonging (DEIB) across all aspects of our operations. Our belief is firm, that an inclusive and diverse workforce is the cornerstone of innovation, bringing unique perspectives that enrich our corporate culture and drive our success. To this end, we have instituted a comprehensive DEIB strategy that not only acknowledges our strengths but also challenges us to stretch further in our pursuit of equitable outcomes for our workforce, supply chain, community, and stakeholders.
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In October 2023, our biennial employee engagement survey featured a newly implemented company values and belonging index, that provided crucial insights into the levels of engagement and feelings of inclusion among our staff at JBT. By leveraging this belonging index, we're able to pinpoint specific areas for improvement and devise targeted strategies to enhance our inclusive culture. This approach helps us identify and address any disparities in the sense of belonging, allowing for the implementation of initiatives like targeted mentorship, tailored DEIB training, and inclusive team activities. The data from the belonging index not only guides our DEIB strategy, but also tracks our progress, ensuring our actions effectively foster a more welcoming and inclusive environment for all JBT employees. Through this focused and data-driven strategy, we are committed to strengthening our culture of belonging, making JBT an even better place to work.
Central to our DEIB strategy is our Global DEIB Council, a dedicated body tasked with developing and implementing programs, processes, and communications to advance our DEIB objectives. This council plays a pivotal role in guiding our efforts and ensuring that our commitment to inclusion is reflected in every facet of our operations.
A key component of our DEIB strategy is the formation of Employee Network Communities (ENCs). These ENCs provide a supportive space for underrepresented groups to share experiences, foster professional development, and contribute to our inclusive culture. Our network includes the Women's Inclusion Network (WIN), an ENC for Black employees (BEST), and a newly established ENC for global military veterans, among others. These communities are vital in promoting a sense of belonging and engagement within our workforce.
In 2023, JBT undertook significant initiatives to bolster our commitment to diversity, equity, inclusion, and belonging (DEIB), including a global education program. Courses such as the Unconscious Bias training marked a pivotal step in our efforts to cultivate an inclusive workplace. This initiative was aimed at raising awareness and educating our employees on DEIB topics, fostering an environment where every team member can contribute to a culture of mutual respect and understanding.
Complementing this educational push, our Corporate Giving Program was strategically aligned with the UN Sustainable Development goals, and our DEIB goals to make a tangible impact on broader societal issues. This program focused on addressing critical challenges such as food insecurity and supporting underserved communities, demonstrating our dedication to social responsibility. Through the JBT U.S. Corporation Matching Gift Plan, we not only encouraged our employees to engage in philanthropy but also matched their contributions to eligible organizations, amplifying our collective impact and reinforcing our commitment to giving back to the communities where we operate. Together, these initiatives reflect our holistic approach to embedding DEIB principles into every aspect of our corporate ethos in 2023.
Recognizing that our people are our greatest asset, we have put in place robust recruitment and development processes to retain, develop, and attract top talent. Our equitable recruitment strategies include partnerships with national organizations such as the Society of Women Engineers (SWE), the Society of Hispanic Professional Engineers (SHPE), and the National Society of Black Engineers (NSBE).
Our talent development efforts are equally robust, featuring the Executive Performance Management Program and the Global Talent Development Review process. These initiatives ensure that our leadership and workforce are equipped with the necessary skills and competencies to lead JBT towards achieving its strategic goals. Furthermore, our Leadership Framework outlines the essential competencies for successful leadership at JBT, providing a structured and equitable approach to developing these traits across our organization.
At JBT, our leadership, spearheaded by our CEO and supported by a team with deep industry experience, is key to our strategic success and our commitment to diversity, equity, inclusion, and belonging (DEIB). Our CEO has also signed the CEO Action for Diversity and Inclusion pledge formalizing our commitment to create a more diverse, inclusive, and equitable workforce. This experienced management team is crucial for maintaining our global leadership and for advancing DEIB throughout our operations. We're focused on building an inclusive culture where every employee can flourish, which is essential for our continued success as a global market leader. For details on risks related to management retention and attraction, see “Part 1. Item 1A. Risk Factors.” Our leadership's dedication ensures JBT's ongoing growth and reinforces our inclusive competitive edge.
Governmental Regulation and Environmental Matters
Our operations are subject to various federal, state, local, and foreign laws and regulations governing the prevention of pollution and the protection of environmental quality. If we fail to comply with these environmental laws and regulations, administrative, civil, and criminal penalties may be imposed, and we may become subject to regulatory enforcement actions in the form of injunctions and cease and desist orders. We may also be subject to civil claims arising out of an accident or other event causing environmental pollution. These laws and regulations may expose us to liability for the conduct of or conditions caused by others or for our own acts even though these actions were in compliance with all applicable laws at the time they were performed.
Under the Comprehensive Environmental Response, Compensation and Liability Act, referred to as CERCLA, and related state laws and regulations, joint and several liability can be imposed without regard to fault or the legality of the original conduct on
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certain classes of persons that contributed to the release of a hazardous substance into the environment. These persons include the owner and operator of a contaminated site where a hazardous substance release occurred and any company that transported, disposed of, or arranged for the transport or disposal of hazardous substances that have been released into the environment, including hazardous substances generated by any closed operations or facilities. In addition, neighboring landowners or other third parties may file claims for personal injury, property damage, and recovery of response cost. We may also be subject to the corrective action provisions of the Resource, Conservation and Recovery Act, or RCRA, and analogous state laws that require owners and operators of facilities that treat, store, or dispose of hazardous waste to clean up releases of hazardous waste constituents into the environment associated with their operations
Many of our facilities and operations are also governed by laws and regulations relating to worker health and workplace safety, including the Federal Occupational Safety and Health Act, or OSHA. We believe that appropriate precautions are taken to protect our employees and others from harmful exposure to potentially hazardous work environments, and that we operate in substantial compliance with all OSHA or similar regulations.
We are also subject to laws and regulations related to conflict minerals, forced labor, export compliance, anti-corruption, and immigration and we have adopted policies, procedures and employee training programs that are designed to facilitate compliance with those laws and regulations.
Available Information
All periodic and current reports, registration statements, and other filings that we are required to make with the Securities and Exchange Commission (the "SEC"), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, proxy statements and other information are available free of charge through our website as soon as reasonably practicable after we file them with, or furnish them to, the SEC. You may access and read our SEC filings free of charge through our website at www.jbtc.com, under “Investor Relations – SEC Filings,” or the SEC’s website at www.sec.gov.
The information contained on or connected to our website, www.jbtc.com, is not incorporated by reference into this Annual Report on Form 10-K or any other report we file with the SEC.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The executive officers of JBT Corporation, together with the offices currently held by them, their business experience and their ages as of February 16, 2024, are as follows:
| Name | Age | Office | ||||||||||||
| Brian A. Deck | 55 | President and Chief Executive Officer | ||||||||||||
| Matthew J. Meister | 45 | Executive Vice President and Chief Financial Officer | ||||||||||||
| Shelley Bridarolli | 53 | Executive Vice President, Chief Human Resources Officer | ||||||||||||
| James L. Marvin | 63 | Executive Vice President, General Counsel and Assistant Secretary | ||||||||||||
| Kristina Paschall | 49 | Executive Vice President, Chief Information and Digital Officer | ||||||||||||
| Jack Martin | 60 | Executive Vice President, Supply Chain | ||||||||||||
| Luiz "Augusto" Rizzolo | 46 | Executive Vice President and President, Diversified Food and Health | ||||||||||||
| Robert Petrie | 54 | Executive Vice President and President, Protein | ||||||||||||
| Jessi L. Corcoran | 41 | Vice President, Corporate Controller and Chief Accounting Officer | ||||||||||||
BRIAN A. DECK became our President and Chief Executive Officer in December 2020 after serving as the interim Chief Executive Officer from June 2020 to December 2020. Mr. Deck served as our Vice President and Chief Financial Officer from February 2014 until December 2020. Prior to joining JBT, he served as Chief Financial Officer (since May 2011) of National Material L.P., a private diversified industrial holding company. Mr. Deck served as Vice President of Finance and Treasury (November 2007 to May 2011) and as Director, Corporate Financial Planning and Analysis (August 2005 to November 2007) of Ryerson Inc., a metals distributor and processor. Prior to his service with Ryerson, Mr. Deck held various positions with General Electric Capital, Bank One (now JPMorgan Chase & Co.), and Cole Taylor Bank.
MATTHEW J. MEISTER became our Chief Financial Officer in December 2020 after serving as the interim Chief Financial Officer since October 2020. Mr. Meister joined JBT in May 2019 as Vice President and CFO for JBT Protein, with responsibility for all accounting and finance activity for the Protein Division within the FoodTech segment. He joined the Company with extensive experience in global manufacturing across various industries including automotive, medical devices, and general
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industrial applications, including his prior roles at IDEX Corporation, where he held several finance leadership roles within the operations, ending with the Group Vice President, Health and Science Technologies role. Prior to joining IDEX in January 2013, he held various roles of increasing responsibility within the business units and in the corporate office at Navistar International Corporation.
SHELLEY BRIDAROLLI became our as Executive Vice President, Human Resources in September 2021. Prior to that, Ms. Bridarolli was the Senior Vice President Human Resources of Dana Incorporated from November 2018 until April 2020. Before joining Dana Incorporated, she was the Vice President Human Resources for the PowerDrive Systems Division of BorgWarner, Inc. from August 2014 to November 2018, and also served as Borg Warner’s Interim Chief Human Resources Officer from July to November 2018. Prior to that, Ms. Bridarolli held progressive senior HR leadership roles at Eaton Corporation between May 2001 and August 2014. Ms. Bridarolli began her professional career in 1998 with National Fuel Exploration Company in Calgary, Canada.
JAMES L. MARVIN became our Executive Vice President and General Counsel in May 2014, and served as Secretary from July 2008 to August 2018, subsequent to which he has served as Assistant Secretary. From July 2008 until May 2014, Mr. Marvin served as Deputy General Counsel and Secretary, acting as Division Counsel for our former AeroTech Division and managing corporate legal matters. Mr. Marvin joined FMC Technologies, Inc. in April 2003, serving as Assistant General Counsel and Assistant Secretary, acting as Division Counsel for FMC Technologies’ Airport Systems Division and managing corporate legal matters. Before joining FMC Technologies in 2003, Mr. Marvin served in the roles of Chief Corporate Counsel and Division Counsel for Corporate Finance at Heller Financial, Inc., a publicly-traded middle-market financial services business. Mr. Marvin was previously a partner with the Chicago-based law firm Katten Muchin Zavis, with a practice focused in commercial financial transactions. Mr. Marvin was a corporate securities attorney with O’Connor Cavanagh Anderson Westover Killingsworth & Beshears in Phoenix, Arizona.
KRISTINA PASCHALL became our Executive Vice President, Chief Information and Digital Officer in October 2020. She was appointed Vice President and Chief Information Officer of JBT Corporation in September 2017. Prior to joining JBT Corporation, Ms. Paschall was the Chief Information Officer of Ferrara Candy Company (2013 – 2017). Before joining Ferrara, she held progressive senior IT leadership roles at Ingredion and GATX, having spent the previous part of her career in management roles at consulting organizations.
JACK MARTIN became the Executive Vice President, Supply Chain in April 2022. Prior to joining JBT, Mr. Martin was employed by Marmon Holdings as Vice President, Supply Chain from August 2019 to April 2022. Before joining Marmon Holdings, he provided full time supply chain consulting services to Standex International and International Equipment Solutions in 2018 and 2019. Mr. Martin served in several group leadership roles with Dover Corporation from 2008 to 2017 with his last role being Vice President, Global Sourcing. Mr. Martin started and advanced his career in progressive purchasing and supply chain roles for companies like John Crane International, SKF / Chicago Rawhide, and Thermo Fisher Scientific.
LUIZ “AUGUSTO” RIZZOLO became the Executive Vice President and President, Diversified Food and Health in October 2022. Previously, Mr. Rizzolo served as a President, Protein North America (since 2020) and as the Vice President, General Manager of Protein North America Customer Care (2019 – 2020). Prior to joining JBT, Mr. Rizzolo was the Group President, Specialty Retail Business at Marmon Holdings, Inc. (2018 – 2019). Prior to that, he worked at Illinois Tool Works (2014 – 2018) as VP/GM at various times of each of the Global Weight & Wrap Division and the North America Service Division, and at Whirlpool Corporation (2003 – 2014) in positions of increasing responsibility.
ROBERT PETRIE was appointed as our Executive Vice President and President, Protein in September 2021. Mr. Petrie previously led JBT's Protein EMEA (Europe, Middle East, and Africa) business, with additional responsibility for JBT's Protein business in Asia. Mr. Petrie joined the Company in 2009 when Double D Food Engineering Ltd, where he was Managing Director and a shareholder, was acquired by JBT. During his tenure at JBT, Mr. Petrie has progressed through several general management and commercial leadership roles with increasingly complex responsibilities. Before joining Double D, Mr. Petrie held various engineering, quality, and operational positions at NCR Corporation.
JESSI L. CORCORAN became Vice President, Corporate Controller and Chief Accounting Officer in October 2020. Ms. Corcoran came to JBT in 2015 as Senior Manager of External Reporting and Technical Accounting. She was promoted to Assistant Corporate Controller in 2017 and Chief Accounting Officer in 2018. Prior to JBT she worked in the Audit & Assurance practice at Deloitte for nine years, with increasing levels of responsibility through senior manager.
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ITEM 1A. RISK FACTORS
You should carefully consider the risks described below, together with all of the other information included in this Annual Report on Form 10-K, in evaluating our company and our common stock. If any of the risks described below actually occurs, our business, financial condition, results of operations, cash flows and stock price could be materially adversely affected.
RISKS RELATED TO THE PROPOSED MERGER
The Proposed Business Combination (as defined below) with Marel is subject to significant risks and uncertainties and may not be consummated on the expected terms, if at all.
We intend to launch a voluntary tender offer for all of the issued and outstanding shares of Marel hf. (“Marel”) to effectuate a merger with Marel in the second quarter of 2024 (the “Proposed Business Combination"). Launch of the offer is subject to, among other things, confirmatory due diligence, further negotiations, and approval by our Board of Directors. There is no assurance that an offer will be launched. In addition, even if an offer is launched, consummation of the Proposed Business Combination is expected to be subject to the satisfaction or waiver of various conditions, including valid acceptance of the offer from Marel shareholders representing at least 90% of the issued and outstanding share capital and voting rights of Marel, receipt of required regulatory approvals, receipt of required approvals from our shareholders and other customary closing conditions. As a result, there can be no assurance that the Proposed Business Combination will be consummated on the expected terms, on the anticipated schedule, or at all. Any delay in consummation of the Proposed Business Combination will result in increased transaction costs and professional fees. If we fail to consummate the Proposed Business Combination, we may be required to pay Marel a break fee under any agreement that is entered into between the parties.
If consummated, the success of the Proposed Business Combination will depend, in significant part, on the successful integration of the two companies, grow the revenue of the combined company and realize the anticipated strategic benefits and synergies from the combination. Difficulties in integrating our and Marel’s business practices and operations may result in the combined company performing differently than expected, operational challenges or the delay or failure to realize anticipated benefits and synergies, and could have an adverse effect on our business, financial condition, results of operations, and cash flows.
The issuance of shares of our common stock in connection with the Proposed Business Combination will dilute the ownership interests of our existing shareholders. In addition, the combined company's indebtedness is expected to be substantially greater than our current indebtedness.
We currently expect to provide Marel shareholders with a mix of cash and shares of our common stock as consideration for the Proposed Business Combination. Any issuance of shares of our common stock to Marel shareholders will dilute the ownership and voting interests of our existing shareholders. In addition, we expect to incur significant indebtedness, through one or more financing arrangements, to fund the cash portion of the consideration for the Proposed Business Combination, which we may not be able to obtain on favorable terms. We expect the combined company's indebtedness will be substantially greater than our current indebtedness and greater than our and Marel's combined indebtedness prior to the Proposed Business Combination. Our substantially increased indebtedness may have the effect of, among other things, reducing our flexibility to respond to changing business and economic conditions, lowering our credit ratings, increasing our borrowing costs and/or requiring us to reduce or delay investments, strategic acquisitions and capital expenditures, or to seek additional capital to refinance our indebtedness.
BUSINESS AND OPERATIONAL RISKS
Our financial results are subject to fluctuations caused by many factors that could result in our failing to achieve anticipated financial results and cause a drop in our stock price.
Our quarterly and annual financial results have varied in the past and are likely to continue to vary in the future due to a number of factors, many of which are beyond our control. In particular, the contractual terms and the number and size of orders in the capital goods industries in which we compete vary significantly over time. The timing of our sales cycle from receipt of orders to shipment of the products or provision of services can significantly impact our sales and income in any given fiscal period. These and any one or more of the factors listed below, among other things, could cause us not to achieve our revenue or profitability expectations in any given period and the resulting failure to meet such expectations could cause a drop in our stock price:
•volatility in demand for our products and services, including volatility in growth rates in the food processing industry;
•downturns in our customers’ businesses resulting from deteriorating domestic and international economies where our customers conduct substantial business;
•increases in commodity prices resulting in increased manufacturing costs, such as petroleum-based products, metals or other raw materials we use in significant quantities;
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•supply chain delays and interruptions;
•effects of tight labor market on our labor costs resulting from higher labor turnover, shortage of skilled labor, and higher labor absenteeism;
•changes in pricing policies resulting from competitive pressures, including aggressive price discounting by our competitors and other market factors;
•our ability to develop and introduce on a timely basis new or enhanced versions of our products and services;
•unexpected needs for capital expenditures or other unanticipated expenses;
•changes in the mix of revenue attributable to domestic and international sales;
•changes in the mix of products and services that we sell;
•changes in foreign currency rates;
•seasonal fluctuations in buying patterns;
•future acquisitions and divestitures of technologies, products, and businesses;
•changes to trade regulation, quotas, duties or tariffs, caused by the changing U.S. and geopolitical environments; and
•cyber-attacks and other IT threats that could disable our IT infrastructure and create a meaningful inability to operate our business.
The loss of key personnel or any inability to attract and retain additional personnel could affect our ability to successfully grow our business.
Our performance is substantially dependent on the continued services and performance of our senior management and other key personnel. Our performance also depends on our ability to retain and motivate our officers and key employees. The loss of the services of any of our executive officers or other key employees for any reason could harm our business. Transitions in our senior executive management roles could adversely impact our strategic planning, specifically resulting in unexpected changes, or delays in the planning and execution of such plans and can cause a diversion of management time and attention.
The cumulative loss of several significant contracts may negatively affect our business, financial condition, results of operations, and cash flows.
We often enter into large, project-oriented contracts, or long-term equipment leases and service agreements. These agreements may be terminated or breached, or our customers may fail to renew these agreements. If we were to lose several significant agreements and if we were to fail to develop alternative business opportunities, then we could experience a material adverse effect on our business, financial condition, results of operations, and cash flows.
We may lose money or not achieve our expected profitability on fixed-price contracts.
As is customary for several of the business areas in which we operate, we may provide products and services under fixed-price contracts. Under such contracts, we are typically responsible for cost overruns. Our actual costs and any gross profit realized on these fixed-price contracts may vary from our estimates on which the pricing for such contracts was based. There are inherent risks and uncertainties in the estimation process, including those arising from unforeseen technical and logistical challenges or longer than expected lead times for sourcing raw materials and assemblies. A fixed-price contract may significantly limit or prohibit our ability to mitigate the impact of unanticipated increases in raw material prices (including the price of steel and other significant raw materials) by passing on such price increases. Depending on the volume of our work performed under fixed-price contracts at any one time, differences in actual versus estimated performance could have a material adverse impact on our business, financial condition, results of operations, and cash flows.
We attempt to offset these cost increases through increases in pricing and efforts to lower costs through manufacturing efficiencies and cost reductions. However, the impact of such increase costs may not be fully mitigated.
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Infrastructure failures or catastrophic loss at any of our facilities, including damage or disruption to our information systems and information database, could lead to production and service curtailments or shutdowns and negatively affect our business, financial condition, results of operations, and cash flows.
We manufacture our products at facilities in the United States, Belgium, Sweden, Brazil, Italy, Spain, United Kingdom, the Netherlands, Germany, and South Africa. An interruption in production or service capabilities at any of our facilities as a result of equipment failure or any other reasons could result in our inability to manufacture our products. In the event of a stoppage in production at any of our facilities, even if only temporary, or if we experience delays as a result of events that are beyond our control, delivery times to our customers could be severely affected. Any significant delay in deliveries to our customers could lead to cancellations.
Our operations are also dependent on our ability to protect our facilities, computer equipment and the information stored in our databases from damage by, among other things, earthquake, fire, natural disaster, explosions, power loss, telecommunications failures, hurricane, and other catastrophic events. For instance, a part of our operations is based in an area of California that has experienced earthquakes and wildfires and other natural disasters, while another part of our operations is based in an area of Florida that has experienced hurricanes and other natural disasters.
Despite our best efforts at planning for such contingencies, catastrophic events of this nature may still result in delays in deliveries, catastrophic loss, system failures and other interruptions in our operations, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
In addition, it is periodically necessary to replace, upgrade, or modify our internal information systems. For example, we are currently in the process of implementing common Enterprise Resource Planning ("ERP") systems across the majority of our businesses. If we are unable to do this in a timely and cost-effective manner, especially in light of demands on our information technology resources, our ability to capture and process financial transactions and therefore our business, financial condition, results of operations, and cash flows may be materially adversely impacted.
We are subject to cyber-security risks arising out of breaches of security relating to sensitive company, customer, and employee information and to the technology that manages our operations and other business processes.
Our business operations rely upon secure information technology systems for data capture, processing, storage, and reporting. Notwithstanding careful security and controls design, our information technology systems, and those of our third-party providers could become subject to cyber-attacks. Network, system, application, and data breaches could result in operational disruptions or information misappropriation, including, but not limited to, inability to utilize our systems, and denial of access to and misuse of applications required by our clients to conduct business with us. Phishing and other forms of electronic fraud may also subject us to risks associated with improper access to financial assets, customer information and diversion of payments. Theft of intellectual property or trade secrets and inappropriate disclosure of confidential information could stem from such incidents. Any such operational disruption and/or misappropriation of information could result in lost sales, negative publicity or business delays and could have a material adverse effect on our business. In addition, requirements under the privacy laws of the jurisdictions in which we operate, such as the EU General Data Protection Regulation ("GDPR") and California Consumer Privacy Act, impose significant costs that are likely to increase over time.
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. 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, higher rates of absenteeism or labor inflation could have a material adverse effect on our results of operations.
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INDUSTRY RISKS
Deterioration of economic conditions could adversely impact our business.
Our business may be adversely affected by changes in current or future national or global economic conditions, including lower growth rates or recession, high unemployment, rising interest rates, limited availability of capital, decreases in consumer spending rates, the availability and cost of energy, tightening of government monetary policies to contain inflation and the effect of government deficit reduction, sequestration, and other austerity measures impacting the markets we serve. Any such changes could adversely affect the demand for our products or the cost and availability of our required raw materials, which can have a material adverse effect on our financial results. Adverse national and global economic conditions could, among other things:
•make it more difficult or costly for us to obtain necessary financing for our operations, our investments and our acquisitions, or to refinance our debt;
•cause our lenders or other financial instrument counterparties to be unable to honor their commitments or otherwise default under our financing arrangements;
•impair the financial condition of some of our customers, thereby hindering our customers’ ability to obtain financing to purchase our products and/or increasing customer bad debts;
•cause customers to forgo or postpone new purchases in favor of repairing existing equipment and machinery, and delay or reduce preventative maintenance, thereby reducing our revenue and/or profits;
•negatively impact our customers’ ability to raise pricing to counteract increased fuel, labor, and other costs, making it less likely that they will expend the same capital and other resources on our equipment as they have in the past;
•impair the financial condition of some of our suppliers thereby potentially increasing both the likelihood of our having to renegotiate supply terms on terms that may not be as favorable to us and the risk of non-performance by suppliers;
•negatively impact global demand for technologically sophisticated food production equipment, which could result in a reduction of sales, operating income, and cash flows;
•negatively affect the rates of expansion, consolidation, renovation, and equipment replacement within the food processing industry, which may adversely affect the results of operations of our business; and
•impair the financial viability of our insurers.
Variability in the length of our sales cycles makes accurate estimation of our revenue in any single period difficult and can result in significant fluctuation in quarterly operating results.
The length of our sales cycle varies depending on a number of factors over which we may have little or no control, including the size and complexity of a potential transaction, the level of competition that we encounter during our selling process, and our current and potential customers’ internal budgeting and approval processes. Many of our sales are subject to an extended sales cycle. As a result, we may expend significant effort and resources over long periods of time in an attempt to obtain an order, but ultimately not obtain the order, or obtain an order that is smaller than we anticipated. Revenue generated by any one of our customers may vary from quarter to quarter, and a customer who places a large order in one quarter may generate significantly lower revenue in subsequent quarters. Due to the length and uncertainty of our sales cycle, and the variability of orders from period to period, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be an accurate indicator of our future performance.
Our inability to secure raw material supply, component parts, sub-assemblies, finished good assemblies, installation labor, and/or logistics capacity in a timely and cost-effective manner from suppliers would adversely affect our ability to manufacture, install and/or distribute products to customers.
We purchase raw materials, component parts, sub-assemblies, and/or finished good assemblies for use in manufacturing, installation, service and/or distribution of our products to customers. Logistics availability and other external factors impacting our inbound and outbound transportation, raw material supply, component parts, sub-assemblies, and/or finished goods we procure could result in manufacturing, installation and/or outbound transportation delays, inefficiencies, or our inability to distribute products if we cannot timely and efficiently manufacture them. In addition, our gross margins could be adversely impacted if raw materials, component parts, sub-assemblies, finished goods, installation services and/or logistics provider's higher costs cannot be offset with timely pricing increases to customers.
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The disruptions to the global economy as a result of the war in Ukraine and other subsequent geopolitical events continue to impede global supply chains, resulting in longer lead times and increased raw material costs. We have taken steps to minimize the impact of these increased costs by working closely with our suppliers and customers. Despite the actions we have taken to minimize the impacts of supply chain disruptions, there can be no assurances that unforeseen future events in the global supply chain and inflationary pressures will not have a material adverse effect on our business, financial condition and results of operations.
An increase in energy or raw material prices may reduce the profitability of our customers, which ultimately could negatively affect our business, financial condition, results of operations, and cash flows.
Energy prices are volatile globally, but are especially high in Europe, as a result of the war in the Ukraine. High energy prices have a negative trickledown effect on our customers’ business operations by reducing their profitability because of increased operating costs. Our customers require large amounts of energy to run their businesses and higher energy prices also increase food processors’ operating costs through increased energy and utility costs to run their plants, higher priced chemical and petroleum based raw materials used in food processing, and higher fuel costs to run their logistics and service fleet vehicles.
Food processors are also affected by the cost and availability of raw materials such as feed grains, livestock, produce, and dairy products. Increases in the cost and limitations in the availability of such raw materials can negatively affect the profitability of food processors’ operations.
Any reduction in our customers’ profitability due to higher energy or raw material costs or otherwise may reduce their future expenditures for the food processing equipment that we provide. This reduction may have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Changes in food consumption patterns due to dietary trends or economic conditions may adversely affect our business, financial condition, results of operations, and cash flows.
Dietary trends can create demand for protein food products but negatively impact demand for high-carbohydrate foods, or create demand for easy to prepare, transportable meals but negatively impact traditional canned food products. Because different food types and food packaging can quickly go in and out of style as a function of dietary, health, convenience, or sustainability trends, food processors can be challenged in accurately forecasting their needed manufacturing capacity and the related investment in equipment and services. Rising food and other input costs, and recessionary fears may negatively impact our customer's ability to forecast consumer demand for protein products or processed food products and as a result negatively impact our customer's demand for our goods and services. A demand shift away from protein products or processed foods could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Freezes, hurricanes, droughts, other natural disasters, adverse weather conditions, outbreak of animal borne diseases (H5N1, BSE, or other virus strains affecting poultry or livestock), citrus tree diseases, or food borne illnesses or other food safety, or quality concerns may negatively affect our business, financial condition, results of operations, and cash flows.
An outbreak or pandemic stemming from H5N1 (avian flu), BSE (mad cow disease), African swine fever (pork) or any other animal related disease strains could reduce the availability of poultry or beef that is processed for the restaurant, food service, wholesale or retail consumer. Any limitation on the availability of such raw materials could discourage food producers from making additional capital investments in processing equipment, aftermarket products, parts, and services that we provide. Such a decrease in demand for our products could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
The success of our business that serves the citrus food processing industry is directly related to the viability and health of citrus crops. The citrus industries in Florida, Brazil, and other countries are facing increased pressure on their harvest productivity and citrus bearing acreage due to citrus canker and greening diseases. These citrus tree diseases are often incurable once a tree has been infested and the end result can be the destruction of the tree. Reduced amounts of available fruit for the processed or fresh food markets could materially adversely affect our business, financial condition, results of operations, and cash flows.
In the event an E. coli or other food borne illness causes a recall of meat or produce, the companies supplying those fresh, further processed or packaged forms of those products could be severely adversely affected. Any negative impact on the financial viability of our fresh or processed food provider customers could adversely affect our immediate and recurring revenue base. We also face the risk of direct exposure to liabilities associated with product recalls to the extent that our products are determined to have caused an issue leading to a recall.
In the event a natural disaster negatively affects growers or farm production, the food processing industry may not have the fresh food raw materials necessary to meet consumer demand. Crops or entire groves or fields can be severely damaged by a drought, flood,
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freeze, or hurricane, wildfires or adverse weather conditions, including the effects of climate change. An extended drought or freeze or a high category hurricane could permanently damage or destroy a tree crop area. If orchards have to be replanted, trees may not produce viable product for several years. Since our recurring revenue is dependent on growers’ and farmers’ ability to provide high quality crops to certain of our customers, our business, financial condition, results of operations, and cash flows could be materially adversely impacted in the event of a freeze, hurricane, drought, or other natural disaster.
Customer sourcing initiatives may adversely affect our new equipment and aftermarket businesses.
Many multi-national companies, including our customers and prospective customers, have undertaken supply chain integration initiatives to provide a sustainable competitive advantage against their competitors. Under continued price pressure from consumers, wholesalers and retailers, our manufacturer customers are focused on controlling and reducing cost, enhancing their sourcing processes, and improving their profitability.
A key value proposition of our equipment and services is low total cost of ownership. If our customers implement sourcing initiatives that focus solely on immediate cost savings and not on total cost of ownership, our new equipment and aftermarket sales could be adversely affected.
Our business could suffer in the event of a work stoppage by our unionized or non-union labor force.
Outside the United States, we enter into employment contracts and agreements in certain countries in which national employee work councils are mandatory or customary, such as in Belgium, Sweden, Spain, Italy, the Netherlands, Germany and China.
Any future strikes, employee slowdowns, or similar actions by one or more work councils, in connection with labor contract negotiations or otherwise, could have a material adverse effect on our ability to operate our business.
LEGAL AND REGULATORY RISKS
Disruptions in the political, regulatory, economic and social conditions of the countries in which we conduct business could negatively affect our business, financial condition, and results of operations.
We operate manufacturing facilities in many countries other than the United States, the largest of which are located in Belgium, Sweden, Brazil, Italy, Spain, United Kingdom, the Netherlands, Germany and South Africa. Our international sales accounted for 43% of our 2023 revenue. Multiple factors relating to our international operations and to those particular countries in which we operate or seek to expand our operations could have an adverse effect on our financial condition or results of operations. These factors include, among others:
•economic downturns, inflationary and recessionary markets, including in capital and equity markets;
•civil unrest, political instability, terrorist attacks, and wars;
•nationalization, expropriation, or seizure of assets;
•potentially unfavorable tax law changes;
•inability to repatriate income or capital;
•foreign ownership restrictions;
•export regulations that could erode profit margins or restrict exports, including import or export licensing regulations;
•trade restrictions, tariffs, and other trade protection measures, or price controls;
•restrictions on operations, trade practices, trade partners, and investment decisions resulting from domestic and foreign laws and regulations;
•compliance with the U.S. Foreign Corrupt Practices Act and other similar laws;
•burden and cost of complying with different national and local laws, treaties, and technical standards and changes in those regulations;
•transportation delays and interruptions; and
•reductions in the availability of qualified personnel.
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Changes to trade regulation, quotas, duties or tariffs, caused by the changing U.S. and geopolitical environments or otherwise, may increase our costs or limit the amount of raw materials and products that we can import, or may otherwise adversely impact our business.
The U.S. government imposes the import duties or other restrictions on products or raw materials sourced from countries that it perceives as engaging in unfair trade practices. For instance, since 2018, the U.S. government has imposed tariffs on steel and aluminum imports and on specified imports from China. In response to these tariffs, several major U.S. trading partners have imposed, or announced their intention to impose, tariffs on U.S. goods. We import raw materials from China and other such countries subject to these tariffs. Any such duties or restrictions could have a material adverse effect on our business, results of operations or financial condition.
Moreover, these tariffs, or other changes in U.S. trade policy, could trigger retaliatory actions by affected countries. A “trade war” of this nature or other governmental action related to tariffs or international trade agreements or policies has the potential to adversely impact demand for our products, our costs, customers, suppliers and/or the U.S. economy or certain sectors thereof and, thus, to adversely impact our businesses.
Climate change and climate change legislation or regulations may adversely affect our business, financial condition, results of operations, and cash flows.
Increasing attention to climate change, increasing societal expectations on companies to address climate change and changes in consumer preferences may result in increased costs, reduced demand for our products and the products of our customers, reduced profits, risks associated with new regulatory requirements, risks to our reputation and the potential for increased litigation and governmental investigations. Foreign, federal, state and local regulatory and legislative bodies have proposed various legislative and regulatory measures relating to increased transparency and standardization of reporting related to factors that may be contributing to climate change, regulating GHG emissions, and energy policies. If such legislation or regulations are enacted, we could incur increased energy, environmental and other costs and we may need to make capital expenditures to comply with these legislative and regulatory requirements. Failure to comply with these regulations could result in monetary penalties and could adversely affect our business, financial condition, results of operations and cash flows. We could also face increased costs related to defending and resolving legal claims related to climate change and the alleged impact of our operations on climate change.
Further, customer, investor, and employee expectations relating to environmental, social and governance (ESG) have been rapidly evolving. Enhanced stakeholder focus on ESG issues related to our industry requires continuous monitoring of various and evolving standards and expectations and the associated reporting requirements. A failure to adequately meet stakeholder expectations may result in the loss of business, diluted market valuation, and an inability to attract and retain customers and employees.
From time to time, in alignment with our sustainability priorities, we may establish and publicly announce climate-related goals. If we fail to achieve or improperly report on our progress toward achieving our sustainability goals and commitments, the resulting negative publicity could adversely affect our reputation and our access to capital.
Environmental protection initiatives may negatively impact the profitability of our business.
Future environmental regulatory developments in the United States and abroad concerning environmental issues, such as climate change, could adversely affect our operations and increase operating costs and, through their impact on our customers, reduce demand for our products and services. Actions may be taken in the future by the U.S. government, state governments within the United States, foreign governments, or by signatory countries through a new global climate change treaty to regulate the emission of greenhouse gases. Pressures to reduce the footprint of carbon emissions may significantly impact the manufacturing sector. Manufacturing plants are seeking means to reduce their heat-trapping emissions and minimize their energy and water usage. The precise nature of any such future environmental regulatory requirements and their applicability to us and our customers are difficult to predict, but the impact to us and the industries that we serve would likely be adverse and could be significant, including the potential for increased fuel costs, carbon taxes or fees, a requirement to purchase carbon credits, and increased cost related to emission controls, energy use reduction, and to develop alternative technologies with lower emissions.
Our operations and industries are subject to a variety of U.S. and international laws, which can change. We therefore face uncertainties with regard to lawsuits, regulations, and other related matters.
In the normal course of business, we are subject to proceedings, lawsuits, claims, and other matters, including those that relate to the environment, health and safety, employee benefits, import and export compliance, intellectual property, product liability, tax matters, securities regulation, and regulatory compliance. For example, we are subject to changes in foreign laws and regulations that may encourage or require us to hire local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular non-U.S. jurisdiction. In addition, environmental laws and regulations affect the systems and services we design, market and
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sell, as well as the facilities where we manufacture our systems. We are required to invest financial and managerial resources to comply with environmental laws and regulations and anticipate that we will continue to be required to do so in the future.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws.
The U.S. Foreign Corrupt Practices Act ("FCPA"), the U.K. Bribery Act of 2010 (the "U.K. Bribery Act"), and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery laws. We operate in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. Despite our training and compliance programs, there is no assurance that our internal control policies and procedures will protect us from acts committed by our employees or agents. If we are found to be liable for FCPA, the U.K. Bribery Act or other similar violations (either due to our own acts, or due to the acts of others), we could suffer from civil and criminal penalties or other sanctions, which could have a material adverse impact on our business, financial condition, and results of operations.
Unfavorable tax law changes and tax authority rulings may adversely affect results.
We are subject to income taxes in the United States and various foreign jurisdictions. Domestic and international tax liabilities are subject to the allocation of income among various tax jurisdictions. Our effective tax rate could be adversely affected by changes in the geographic mix of earnings. Additionally, changes in tax laws where we have significant operations, including rate changes or corporate tax provisions that disallow or tax perceived base erosion or profit shifting payments or subject us to new types of tax, could materially affect our effective tax rate and our deferred tax assets and liabilities.
Although we believe our tax estimates are reasonable, we are subject to audit by tax authorities and the final determination of audits could be materially different from our historical tax provisions and accruals.
BUSINESS STRATEGY RISKS
We face risks associated with current and future acquisitions.
To achieve our strategic objectives, we have pursued and expect to continue to pursue expansion opportunities such as acquiring other businesses or assets. Expanding through acquisitions involves risks such as:
•the incurrence of additional debt to finance the acquisition or expansion;
•additional liabilities (whether known or unknown), including, among others, product, environmental or pension liabilities of the acquired business or assets;
•risks and costs associated with integrating the acquired business or new operating facility into our operations;
•a failure to retain and assimilate key employees of the acquired business or assets;
•unanticipated demands on our management, operational resources and financial and internal control systems;
•unanticipated regulatory risks;
•the risk of being denied the necessary licenses, permits and approvals from state, local and foreign governments, and the costs and time associated with obtaining such licenses, permits and approvals;
•risks that we do not achieve anticipated operating efficiencies, synergies and economies of scale;
•risks in retaining the existing customers and contracts of the acquired business or assets; and.
•risk that unforeseen issues with an acquisition may adversely affect the anticipated results of the business or value of the intangible assets and trigger an evaluation of the recoverability of the recorded goodwill and intangible assets for such business.
If we are unable to effectively integrate acquired businesses or newly formed operations, or if such acquired businesses underperform relative to our expectations, this may have a material adverse effect on our business, financial position, and results of operations.
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We have invested substantial resources in certain markets and strategic initiatives where we expect growth, and our business may suffer if we are unable to achieve the growth we expect.
As part of our strategy to grow, we are expanding our operations in certain emerging or developing markets, and accordingly have made and expect to continue to make investments to support anticipated growth in those regions. We have also made substantial investments in our digital solution, OmniBluTM, to support potential growth in parts and service revenue as well as the new revenue source of digital software subscriptions. We may fail to realize expected rates of return on our existing investments or incur losses on such investments, and we may be unable to redeploy capital to take advantage of other markets, business lines or other potential areas of growth. Our results will also suffer if these developing markets, business lines or capabilities do not grow as quickly as we anticipate.
Our restructuring initiatives may not achieve the expected cost reductions or other anticipated benefits.
We regularly evaluate our existing operations, service capacity, and business efficiencies to determine if a realignment or restructuring could improve our results of operations or achieve some other business goal. Our realignment and restructuring initiatives are designed to result in more efficient and increasingly profitable operations. Our ability to achieve the anticipated cost savings and other benefits from these initiatives within the expected time frame is subject to many estimates and assumptions. These estimates and assumptions are subject to significant economic, competitive, and other uncertainties, some of which are beyond our control. Failure to achieve the expected cost reductions related to these restructuring initiatives could have a material adverse effect on our business and results of operations.
The industries in which we operate expose us to potential liabilities arising out of the installation or use of our systems that could negatively affect our business, financial condition, results of operations, and cash flows.
Our equipment, systems and services create potential exposure for us for personal injury, wrongful death, product liability, commercial claims, product recalls, business interruption, production loss, property damage, pollution, and other environmental damages. In the event that a customer who purchases our equipment becomes subject to claims relating to food borne illnesses or other food safety or quality issues relating to food processed through the use of our equipment, we could be exposed to significant claims from our customers. Although we have obtained business and related risk insurance, we cannot assure you that our insurance will be adequate to cover all potential liabilities. Further, we cannot assure you that insurance will generally be available in the future or, if available, that premiums to obtain such insurance will be commercially reasonable. If we incur substantial liability and damages arising from such liability are not covered by insurance or are in excess of policy limits, or if we were to incur liability at a time when we are not able to obtain liability insurance, our business, financial condition, results of operations, and cash flows could be materially adversely affected.
TECHNOLOGY RISKS
To remain competitive, we need to rapidly and successfully develop and introduce complex new solutions in a global, competitive, demanding, and changing environment.
If we lose our significant technology advantage in our products and services, our market share and growth could be materially adversely affected. In addition, if we are unable to deliver products, features, and functionality as projected, we may be unable to meet our commitments to customers, which could have a material adverse effect on our reputation and business. Significant investments in research and development efforts that do not lead to successful products, features, and functionality, could also materially adversely affect our business, financial condition, and results of operations.
In 2022, we launched a new subscription-based digital solution called OmniBlu™, which is a complex, evolving, and long-term initiative that involves collaboration with our food-processing customers. There is some uncertainty in the pace and depth of market acceptance of digital solutions in this industry. Our efforts in development and deployment of OmniBlu™ may also divert resources and management attention from other areas of our business. We expect to continue making significant investments to support these efforts, and our ability to support these efforts is dependent on generating sufficient profits from other areas of our business.
Our business, financial condition, results of operations, and cash flows could be materially adversely affected by competing technology. Some of our competitors are large multinational companies that may have greater financial resources than us, and they may be able to devote greater resources to research and development of new systems, services, and technologies than we are able to do. Moreover, some of our competitors operate in narrow business areas, allowing them to concentrate their research and development efforts more directly on products and services for those areas than we may be able to.
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Our future growth is dependent on our ability to keep pace with the adoption of generative artificial intelligence and other machine learning technologies to remain competitive.
Our industry is marked by rapid technological developments and innovations, such as the use of artificial intelligence and machine learning, to conform to evolving industry standards. We may be required to make significant investments in artificial intelligence to maintain our competitive position in the market. If we are unable to provide enhancements and new features and integrations for our existing product portfolio, develop new products that achieve market acceptance, or innovate quickly enough to keep pace with these rapid technological developments, our business could be harmed. Furthermore, the technical challenges associated with developing this technology may be significant, leading to risk of equipment failures, customer disruptions, or vulnerabilities that could compromise the integrity, security, or privacy of certain customer information. These failures could result in reputational damage, legal liabilities, or loss in customer confidence.
High-capacity products or products with new technology may be more likely to experience reliability, quality, or operability problems.
Even with rigorous testing prior to release and investment in product quality processes, problems may be found in newly developed or enhanced products after such products are launched and shipped to customers. Resolution of such issues may cause project delays, additional development costs, and deferred or lost revenue.
New products and enhancements of our existing products may also reduce demand for our existing products or could delay purchases by customers who instead decide to wait for our new or enhanced products. Difficulties that arise in our managing the transition from our older products to our new or enhanced products could result in additional costs and deferred or lost revenue.
We may need to make significant capital and operating expenditures to keep pace with technological developments in our industry.
The industries in which we participate are constantly undergoing development and change, and it is likely that new products, equipment, and service methods will be introduced in the future. We may need to make significant expenditures to purchase new equipment, develop digital solutions, and to train our employees to keep pace with any new technological developments and market. These expenditures could adversely affect our results of operations and financial condition.
If we are unable to develop, preserve, and protect our intellectual property assets, our business, financial condition, results of operations, and cash flows may be negatively affected.
We strive to protect and enhance our proprietary intellectual property rights through patent, copyright, trademark, and trade secret laws, as well as through technological safeguards and operating policies and procedures. It may be costly and time consuming to protect our intellectual property, and the steps we have taken to do so in the U.S. and foreign countries may not be adequate. To the extent we are not successful, our business, financial condition, results of operations, and cash flows could be materially adversely impacted. We may be unable to prevent third parties from using our technology without our authorization, or from independently developing technology that is similar to ours, particularly in those countries where the laws do not protect our proprietary rights as fully as in others. With respect to our pending patent applications, we may not be successful in securing patents for these claims, and our competitors may already have applied for patents that, once issued, will prevail over our patent rights or otherwise limit our ability to sell our products.
Claims by others that we infringe their intellectual property rights could harm our business, financial condition, results of operations, and cash flows.
We have seen a trend towards aggressive enforcement of intellectual property rights as product functionality in our industry increasingly overlaps and the number of issued patents continues to grow. As a result, there is a risk that we could be subject to infringement claims which, regardless of their validity, could:
•be expensive, time consuming, and divert management attention away from normal business operations;
•require us to pay monetary damages or enter into non-standard royalty and licensing agreements;
•require us to modify our product sales and development plans; or
•require us to satisfy indemnification obligations to our customers.
These claims can be burdensome and costly to defend or settle and can harm our business and reputation.
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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 our Convertible Senior Notes due 2026 (the "Notes"), we entered into convertible note hedge transactions (the "Hedge Transactions") with the option counterparties. We 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 are 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 is not 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 the 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.
GENERAL RISKS
Fluctuations in currency exchange rates could negatively affect our business, financial condition, and results of operations.
A significant portion of our revenue and expenses are realized in foreign currencies. As a result, changes in exchange rates will result in increases or decreases in our costs and earnings and may adversely affect our Consolidated Financial Statements, which are stated in U.S. dollars. Although we may seek to minimize currency exchange risk by engaging in hedging transactions where we deem appropriate, we cannot be assured that our efforts will be successful. Currency fluctuations may also result in our systems and services becoming more expensive and less competitive than those of other suppliers in the foreign countries in which we sell our systems and services.
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Terrorist attacks and threats, escalation of military activity in response to such attacks, acts of war, or outbreak of pandemic diseases may negatively affect our business, financial condition, results of operations, and cash flows.
Any future terrorist attacks against U.S. targets, rumors or threats of war, actual conflicts involving the United States or its allies, or military or trade disruptions affecting our customers or the economy as a whole may materially adversely affect our operations or those of our customers. Strategic targets such as those relating to transportation and food processing may be at greater risk of future terrorist attacks than other targets in the United States. Furthermore, outbreaks of pandemic diseases, such as COVID-19, or the fear of such events, could provoke responses, including government-imposed travel restrictions and extended shutdown of certain businesses, customers, and/or supply chain disruptions in affected regions. As a result, there could be delays or losses in transportation and deliveries to our customers, decreased sales of our products, and delays in payments by our customers. A decline in these customers’ businesses could have a negative impact on their demand for our products. It is possible that any of these occurrences, or a combination of them, could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Our existing financing agreements include restrictive and financial covenants.
Certain of our loan agreements require us to comply with various restrictive covenants and some contain financial covenants that require us to comply with specified financial ratios and tests. Our failure to meet these covenants could result in default under these loan agreements and would result in a cross-default under other loan agreements. In the event of a default and our inability to obtain a waiver of the default, all amounts outstanding under loan agreements could be declared immediately due and payable. Our failure to comply with these covenants could adversely affect our results of operations and financial condition.
Fluctuations in interest rates could adversely affect our results of operations and financial position.
Our profitability may be adversely affected during any periods of unexpected or rapid increases in interest rates on our variable rate debt. A significant increase in interest rates may significantly increase our cost of borrowings and reduce the availability and increase the cost of obtaining new debt and refinancing existing indebtedness. For additional detail related to this risk, see Part II, Item 7A, "Quantitative and Qualitative Disclosure About Market Risk."
Significant changes in actual investment return on pension assets, discount rates, and other factors could affect our results of operations, equity, and pension contributions in future periods.
Our results of operations may be positively or negatively affected by the amount of income or expense we record for our defined benefit pension plans. U.S. generally accepted accounting principles ("GAAP") require that we calculate income or expense for the plans using actuarial valuations. These valuations reflect assumptions about financial market and other economic conditions, which may change based on changes in key economic indicators. The most significant year-end assumptions we use to estimate pension income or expense are the discount rate and the expected long-term rate of return on plans assets. In addition, we are required to make an annual measurement of plan assets and liabilities, which may result in a significant change to equity through a reduction or increase to accumulated other comprehensive income. For a discussion regarding how our financial statements can be affected by pension plan accounting policies, see Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -Critical Accounting Estimates – Defined Benefit Pension and Other Post-retirement Plans and Note 10. Pension and Post-Retirement and Other Benefit Plans of the Notes to Consolidated Financial Statements in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K. Although GAAP expense and pension funding contributions are not directly related, key economic factors that affect GAAP expense would also likely affect the amount of cash we would contribute to pension plans as required under the Employee Retirement Income Security Act.
As a result of our acquisition activity, our goodwill and intangible assets have increased significantly in recent years, and we may in the future incur impairments to goodwill or intangible assets.
When we acquire a business, a substantial portion of the purchase price of the acquisition is allocated to goodwill and other identifiable intangible assets. The amount of the purchase price which is allocated to goodwill is determined by the excess of the purchase price over the net identifiable assets acquired. Our balance sheet includes a significant amount of goodwill and other intangible assets, which represents approximately 43% of our total assets as of December 31, 2023. In accordance with Accounting Standards Codification 350 Intangibles-Goodwill and Other, our goodwill and other intangibles are reviewed for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and to rely heavily on projections of future operating performance. Because we operate in highly competitive environments, projections of our future operating results and cash flows may vary significantly from our actual results. If our estimates or the underlying assumptions change in the future, we may be required to record impairment charges. Any such charge could have a material adverse effect on our reported net income.
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As a publicly traded company, we incur regulatory costs that reduce profitability.
As a publicly traded corporation, we incur certain costs to comply with regulatory requirements of the NYSE and of the federal securities laws. If regulatory requirements were to become more stringent or if accounting or other controls thought to be effective later fail, we may be forced to make additional expenditures, the amounts of which could be material. Many of our competitors are privately owned, so our accounting and control costs can be a competitive disadvantage.
Our share repurchase program could increase the volatility of the price of our common stock.
On December 1, 2021, the Board authorized a share repurchase program for up to $30 million of common stock beginning on January 1, 2022, and continuing through December 31, 2024. We intend to fund repurchases through cash flows generated by our operations. The amount and timing of share repurchases are based on a variety of factors. Important factors that could cause us to limit, suspend or delay our stock repurchases include unfavorable market conditions, the trading price of our common stock, the nature of other investment opportunities presented to us from time to time, the ability to obtain financing at attractive rates, the availability of U.S. cash and restrictions imposed by U.S. securities regulations. Repurchases of our shares will reduce the number of outstanding shares of our common stock and might incrementally increase the potential for volatility in our common stock by reducing the potential volumes at which our common stock may trade in the public market.
Our actual operating results may differ significantly from our guidance.
We regularly release guidance regarding our future performance that represents management’s estimates as of the date of release. This guidance, which consists of forward-looking statements, is qualified by, and subject to, the assumptions and the other information contained or referred to in the release or report in which guidance is given. Our guidance is not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither our independent registered public accounting firm nor any other independent expert or outside party compiles or examines the guidance and, accordingly, no such person expresses any opinion or any other form of assurance with respect thereto.
Guidance is based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. We generally state possible outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to represent that actual results could not fall outside of the suggested ranges. The principal reason that we release this data is to provide a basis for management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any such persons.
Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results may vary from the guidance and the variations may be material. Investors should also recognize that the reliability of any forecasted financial data diminishes the farther in the future that the data are forecast. In light of the foregoing, investors are urged to put the guidance in context and not to place undue reliance on it.
Our corporate governance documents and Delaware law may delay or discourage takeovers and business combinations that our stockholders might consider in their best interests.
Provisions in our certificate of incorporation and by-laws may make it difficult and expensive for a third-party to pursue a tender offer, change-in-control, or takeover attempt that is opposed by our management and Board of Directors. These provisions include, among others:
•A Board of Directors that is divided into three classes with staggered terms (although this three-class board structure is being eliminated over the next two years as a result of an approved proposal at our 2023 Annual Meeting of Stockholders);
•Limitations on the right of stockholders to remove directors;
•The right of our Board of Directors to issue preferred stock without stockholder approval;
•The inability of our stockholders to act by written consent; and
•Rules and procedures regarding how stockholders may present proposals or nominate directors at stockholders' meetings.
Public stockholders who might desire to participate in this type of transaction may not have an opportunity to do so. These anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change-in-control or a change in our management or Board of Directors and, as a result, may adversely affect the marketability and market price of our common stock.
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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 the 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 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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
We maintain a comprehensive technology and cybersecurity program to ensure our systems are effective and prepared for information security risks, including regular oversight of our programs for security monitoring for internal and external threats to ensure the confidentiality, integrity, and availability of our information assets. We regularly perform evaluations and testing of our security program, information technology infrastructure, information security management systems, and third-party service providers we use in our operations.
Our cybersecurity program is led by our Chief Information Security Officer (the "CISO"), a Certified Information Systems Security Manager with over 10 years of related experience, including oversight over any third-party service providers used in connection with our cybersecurity program. Our cybersecurity program includes the implementation of controls aligned with best practices in cybersecurity and applicable statutes and regulations to identify threats, detect attacks, and protect our information assets. We use preventative and detective tools and utilities that provide alerts of vulnerabilities and missing patches for our systems. We have implemented security monitoring capabilities designed to alert us to suspicious activity and have developed an incident response program that includes periodic testing and is designed to restore business operations as quickly and as orderly as possible in the event of a breach. In addition, our employees participate in an ongoing program of mandatory annual training and receive frequent communications regarding the cybersecurity environment to increase awareness throughout the company. We have also implemented an annual training program for specific specialized employee populations, including secure coding training. Notwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us.
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We have established a Cybersecurity Steering Committee comprised of key leaders across the Company whose responsibilities include oversight of technology, security, and reporting functions. The objective of the Cyber Security Steering Committee is to set policies and procedures for the Company in relation to cyber events, including the Company's response protocols and disclosure requirements upon occurrence of any cyber event that is considered material to the Company.
The Audit Committee reviews cybersecurity information technology risks in connection with its oversight of our enterprise risk management system, and reports to the Board on enterprise risk management matters on a quarterly basis. If a cybersecurity event is identified by the CISO, management and the Cyber Security Steering Committee report any material security instances to the Audit Committee and the Board as they occur. Additionally, our CISO meets regularly with our senior management team and the Board of Directors or the Audit Committee to brief them on technology and information security matters, including cybersecurity risk related matters.
We carry insurance that provides protection that may reduce the potential losses arising from a cybersecurity incident. Past cybersecurity incidents have not materially affected the Company, including our business strategy, results of operations or financial condition.
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ITEM 2. PROPERTIES
We lease commercial office space for our corporate headquarters totaling approximately 24,000 square feet in Chicago, Illinois. We believe that our properties and facilities meet our current operating requirements and are in good operating condition. We believe that each of our significant manufacturing facilities is operating at a level consistent with the industries in which we operate. The following are significant production facilities for our operations:
| LOCATION | SQUARE FEET (approximate) | LEASED OR OWNED | ||||||||||||
| United States: | ||||||||||||||
| Madera, California | 271,000 | Owned | ||||||||||||
| Lakeland, Florida | 200,000 | Owned | ||||||||||||
| Sandusky, Ohio | 140,000 | Owned | ||||||||||||
| Apex, North Carolina | 134,200 | Owned/Leased | ||||||||||||
| Columbus, Ohio | 115,000 | Leased | ||||||||||||
| Eastlake, Ohio | 106,000 | Leased | ||||||||||||
| Kingston, New York | 98,000 | Owned | ||||||||||||
Stratford, Wisconsin | 80,800 | Owned | ||||||||||||
| Middletown, Ohio | 73,000 | Leased | ||||||||||||
| Chalfont, Pennsylvania | 67,000 | Leased | ||||||||||||
Alpharetta, Georgia | 65,000 | Leased | ||||||||||||
| Russellville, Arkansas | 65,000 | Owned | ||||||||||||
| Riverside, California | 50,000 | Leased | ||||||||||||
| International: | ||||||||||||||
| Sint Niklaas, Belgium | 289,000 | Owned | ||||||||||||
| Helsingborg, Sweden | 228,000 | Owned/Leased | ||||||||||||
| Werther, Germany | 164,000 | Owned | ||||||||||||
| Araraquara, Brazil | 128,000 | Owned | ||||||||||||
| Adlington, England | 97,000 | Owned | ||||||||||||
| Amsterdam, The Netherlands | 96,000 | Leased | ||||||||||||
| Livingston, Scotland | 87,000 | Owned | ||||||||||||
| Parma, Italy | 62,000 | Owned | ||||||||||||
| Navarra, Spain | 58,500 | Owned | ||||||||||||
| Glinde, Germany | 55,000 | Leased | ||||||||||||
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ITEM 3. LEGAL PROCEEDINGS
We are involved in legal proceedings arising in the ordinary course of business. Although the results of litigation cannot be predicted with certainty, we do not believe that the resolution of the proceedings that we are involved in, either individually or taken as a whole, will have a material adverse effect on our business, results of operations, cash flows or financial condition.
In the normal course of our business, we are at times subject to pending and threatened legal actions, some for which the relief or damages sought may be substantial. Although we are 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 results of operations or financial position of our Company. However, it is possible that the ultimate resolution of such matters, if unfavorable, may be material to the 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.
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ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company's common stock is listed on the New York Stock Exchange under the symbol JBT. As of February 16, 2024, there were 1,159 holders of record of our common stock.
The following graph shows the cumulative total return of an investment of $100 (and reinvestment of any dividends thereafter) on December 31, 2018 in: (i) the Company's common stock, (ii) the S&P Smallcap 600 Stock Index and (iii) the S&P 1500 Industrial Machinery index. These indices are included for comparative purposes only and do not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of the stock involved, and are not intended to forecast or be indicative of possible future performance of the common stock.
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Issuer Purchases of Equity Securities
The following table includes information about the Company’s stock repurchases during the three months ended December 31, 2023 based on the settlement dates of each share repurchase:
| (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(1) | Approximate Dollar Value of Shares that may yet be Purchased under the Program | ||||||||||||||||||||||
| October 1, 2023 through October 31, 2023 | 19,757 | $ | 102.82 | 19,757 | $ | 20.3 | ||||||||||||||||||||
| November 1, 2023 through November 30, 2023 | 30,235 | 102.35 | 30,235 | 17.2 | ||||||||||||||||||||||
| December 1, 2023 through December 31, 2023 | — | — | — | 17.2 | ||||||||||||||||||||||
| 49,992 | $ | 102.54 | 49,992 | $ | 17.2 | |||||||||||||||||||||
(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 on December 1, 2021 and is set to expire on December 31, 2024. Shares may be purchased from time to time in open market transactions, subject to market conditions. Repurchased shares become treasury shares, which are accounted for using the cost method and are intended to be used for future awards under the Incentive Compensation Plan.
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ITEM 6. [RESERVED]
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Executive Overview
We are a leading global technology solutions provider to high-value segments of the food and beverage industry. We design, produce, and service sophisticated products and systems for multi-national and regional customers.
In early 2022, we announced our Elevate 2.0 strategy that capitalizes on favorable trends, as well as our leadership position, in the food and beverage processing industry. This strategy is based on a four-pronged approach to deliver continued growth and margin expansion.
•Organic Growth. Our broad application knowledge, engineering expertise, and global sales and service allow us to work alongside our customers to develop critical products and solutions across a diverse set of food & beverage end markets. JBT is benefiting from strong commercial and market trends, which create meaningful opportunities for continued new product innovation and R&D in support of our customers' needs. Additionally, our cross-selling abilities, investment opportunities in developing geographies, and aftermarket capabilities provide meaningful growth opportunities for us globally.
•Digital Transformation. We continue to invest in our digital solution, OmniBlu™, a customer-centric platform that delivers improved access to inventory and service, advanced functionality, and measurable results for customers, while also expanding JBT's recurring revenue from aftermarket parts and services.
•Margin Enhancement. We see opportunities to improve our operating margins by 200 basis points or more in the medium-term, primarily through supply chain and strategic sourcing initiatives. Key areas of focus include supply base consolidation, make versus buy decisions, value engineering and component standardization, and best cost country sourcing.
•Acquisitions. We are also continuing our strategic acquisition program focused on companies that add complementary products and technology solutions, which enable us to offer more comprehensive solutions to customers and meet our economic criteria for returns and synergies.
On August 1, 2023, we completed the sale of the AeroTech business segment ("AeroTech"). This sale was completed pursuant to the Stock and Asset Purchase Agreement, dated May 26, 2023, to sell AeroTech to Oshkosh Corporation. This divestiture supports the Company's strategy to become a pure-play food and beverage solutions provider. For additional information, refer to Note 2. Discontinued Operations of the Notes to the Consolidated Financial Statements.
We operate under the JBT Business 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 equipment and technologies continue to deliver quality performance while striving to minimize food waste, extend food product life, support customer sustainability objectives, and maximize efficiency in order to create shared value for our food and beverage customers. While the majority of our impact lies within the solutions offered to our customers, our commitment to environmental responsibility extends to our own operations. We strive for our own facilities to operate efficiently and safely, much like the solutions we provide to our customers. 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.
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Business Conditions and Outlook
Our operational performance was strong in 2023 despite a mixed commercial environment. We experienced healthy equipment demand across diverse end markets, including beverages, warehouse automation, and pharmaceuticals and nutraceuticals. Meanwhile, this was offset by the impact of higher interest rates and market dynamics in the poultry industry which affected customers' investment. Our aftermarket parts and service model remained resilient with year-over-year growth in recurring revenue.
Our operating margins improved meaningfully compared to 2022, driven by improved price-cost realizations, restructuring program savings, and strategic sourcing initiatives.
Looking ahead, we expect the demand environment to improve in 2024 as interest rates decline, poultry market dynamics continue to improve as well as benefit from our organic growth initiatives. Additionally, we expect our margins to continue to increase as we realize benefits from our continuous improvement efforts, restructuring program savings, and strategic sourcing initiatives.
Components of Results of Operations
Revenue
We derive our revenue from sales or operating leases of equipment as well as sales of related aftermarket goods and services and software. Revenue from equipment and software licenses is considered as non-recurring, whereas revenue from aftermarket goods and services, re-build service for customer-owned equipment, operating lease of equipment, and subscription-based software applications is considered as recurring.
Cost of Sales
Cost of sales are costs that are directly related to the procurement and manufacturing of equipment and parts sold, services provided, and other direct costs incurred to fulfill contracts with customers. Costs include direct costs, such as labor and raw materials and indirect costs such as manufacturing overhead and amortization of capitalized software to be sold, and patents and acquired technology intangible assets.
Selling, General and Administrative
Selling expense primarily consists of employee-related expenses for sales, marketing and public relations employees. Selling expense also includes trade show, market research, advertising and other related external marketing expense as well as office and software related costs to support sales.
General and administrative expense consists of employee-related expenses, stock based compensation and other expenses that support finance, human resource, legal, and internal-use information technology functions at our business units and our corporate offices. General and administrative expense incurred at our corporate offices, including the impact of unusual or strategic events not representative of operations, as well as stock based compensation for all employees are considered as our corporate expenses.
Restructuring expense
Restructuring expense consists of costs from our 2022/2023 Restructuring Plan. For additional financial information about restructuring, refer to Note 20. Restructuring of the Notes to the Consolidated Financial Statements.
Pension expense, other than service costs
Pension expense, other than service costs are related to our domestic and foreign defined benefit pension and other post-employment benefit plans.
Interest income
Interest income consists of interest earned on our cash equivalents and short-term marketable securities.
Interest expense
Interest expense consists of interest expense on our outstanding debt obligations including amortization of debt discounts and offering costs.
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Results of Continuing Operations
A discussion of our results of operations for 2023 compared to 2022 is set forth below.
CONSOLIDATED RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2023 AND 2022
| Year Ended December 31, | Favorable / (Unfavorable) | |||||||||||||||||||||||||||||||
| (In millions) | 2023 | 2022 | Change | Change % | ||||||||||||||||||||||||||||
| Revenue | $ | 1,664.4 | $ | 1,590.3 | $ | 74.1 | 4.7% | |||||||||||||||||||||||||
| Cost of sales | 1,078.7 | 1,060.9 | (17.8) | (1.7)% | ||||||||||||||||||||||||||||
| Gross profit | 585.7 | 529.4 | 56.3 | 10.6% | ||||||||||||||||||||||||||||
| Gross Profit % | 35.2% | 33.3% | 190 bps | |||||||||||||||||||||||||||||
| Selling, general and administrative expense | 409.6 | 389.7 | (19.9) | (5.1)% | ||||||||||||||||||||||||||||
| Restructuring expense | 11.4 | 7.1 | (4.3) | (60.6)% | ||||||||||||||||||||||||||||
| Operating income | 164.7 | 132.6 | 32.1 | 24.2% | ||||||||||||||||||||||||||||
| Pension expense (income), other than service cost | 0.7 | — | (0.7) | (100.0)% | ||||||||||||||||||||||||||||
| Interest income | 13.4 | 3.7 | 9.7 | 262.2% | ||||||||||||||||||||||||||||
| Interest expense | 24.3 | 16.3 | (8.0) | (49.1)% | ||||||||||||||||||||||||||||
| Net income before income taxes | 153.1 | 120.0 | 33.1 | 27.6% | ||||||||||||||||||||||||||||
| Income tax provision | 23.5 | 16.2 | (7.3) | (45.1)% | ||||||||||||||||||||||||||||
| Equity in net earnings of unconsolidated affiliate | (0.3) | — | (0.3) | (100.0)% | ||||||||||||||||||||||||||||
| Income from continuing operations | 129.3 | 103.8 | 25.5 | 24.6% | ||||||||||||||||||||||||||||
| Income from discontinued operations, net of taxes | 453.3 | 33.6 | 419.7 | 1,249.1% | ||||||||||||||||||||||||||||
| Net income | $ | 582.6 | $ | 137.4 | $ | 445.2 | 324.0% | |||||||||||||||||||||||||
Adjusted EBITDA from continuing operations(1) | $ | 273.1 | $ | 227.7 | $ | 45.4 | 19.9% | |||||||||||||||||||||||||
Adjusted EBITDA % from continuing operations(1) | 16.4 | % | 14.3 | % | 210 bps | |||||||||||||||||||||||||||
(1)The key measures reviewed by the CODM to evaluate our performance are most notably Adjusted EBITDA from continuing operations and Adjusted EBITDA % from continuing operations. For additional information, refer to the 'Reconciliation of Non-GAAP Measures' section below.
2023 Compared With 2022
Revenue
Total revenue in 2023 increased $74.1 million or 4.7% compared to 2022. Acquisitions provided additional revenue of $76.8 million, organic revenue grew by $4.7 million, and foreign currency translation was unfavorable by $7.4 million compared to the prior year. Growth in organic revenue was the result of higher pricing as well as an increase in volume for recurring revenue, partially offset by a decrease in volume for non-recurring revenue.
Gross Profit and Gross Profit Margin
Gross profit margin increased 190 bps to 35.2% compared to 33.3% in 2022. The increase was driven primarily by higher pricing, savings from our restructuring plan, and favorable mix of higher recurring revenue, partially offset by the lost leverage of fixed costs from lower equipment volume year over year.
Selling, general and administrative expense
Selling, general and administrative expense increased $19.9 million from prior year, and as a percent of revenue increased by 10 bps to 24.6% compared to 24.5% in 2022. The increase in Selling, general and administrative expense is the result of higher incentive compensation expense accruals and higher relative expenses from recently acquired companies, including higher amortization costs of acquired intangible assets, as well as higher costs related to the implementation of the OmniBluTM platform. The increase was partially offset by a decrease in M&A related costs.
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Interest income
Interest income increased $9.7 million compared to 2022. This increase is due to higher interest income on cash on hand from the sale proceeds of AeroTech.
Interest expense
Interest expense increased $8.0 million compared to 2022. This increase was primarily due to higher interest rates as well as a higher average debt balance to fund the acquisitions we made in the third quarter of 2022.
Income tax provision
The Company's tax rate from continuing operations was 15.3% for the year ended December 31, 2023 compared to 13.5% in 2022. The tax rate for the year ended December 31, 2023 was favorably impacted by discrete items totaling $9.5 million, primarily driven by a benefit related to the disposition of a subsidiary which generated a capital loss that was partially allocated to continuing operations. The tax rate for the year ended December 31, 2022 was favorably impacted by discrete items totaling $8.9 million, primarily driven by benefits from stock based compensation, the UK patent box regime, and Brazilian tax litigation.
Income from continuing operations and Adjusted EBITDA
Income from continuing operations for the year ended December 31, 2023 increased to $129.3 million compared to $103.8 million in 2022, representing an increase of $25.5 million. Adjusted EBITDA was $273.1 million for the year ended December 31, 2023 compared to $227.7 million in 2022, representing an increase of $45.4 million. The increase in Adjusted EBITDA was primarily driven by a higher gross profit partially offset by a higher selling, general and administrative expense, excluding the impacts of our depreciation, amortization, and acquisition, and integration costs.
Income from discontinued operations
For the years ended December 31, 2023 and 2022, we recognized income from discontinued operations, net of income taxes, of $453.3 million and $33.6 million, respectively. Discontinued operations consists of the results of operations of the AeroTech business, as well as the gain on the sale of AeroTech of $443.7 million, net of tax, that was completed during the third quarter of 2023.
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A discussion of our results of operations for 2022 compared to 2021 is set forth below.
CONSOLIDATED RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2022 AND 2021
| Year Ended December 31, | Favorable / (Unfavorable) | |||||||||||||||||||||||||||||||
| (In millions) | 2022 | 2021 | Change | Change % | ||||||||||||||||||||||||||||
| Revenue | $ | 1,590.3 | $ | 1,400.8 | $ | 189.5 | 13.5% | |||||||||||||||||||||||||
| Cost of sales | 1,060.9 | 918.7 | (142.2) | (15.5)% | ||||||||||||||||||||||||||||
| Gross profit | 529.4 | 482.1 | 47.3 | 9.8% | ||||||||||||||||||||||||||||
| Gross Profit % | 33.3% | 34.4% | -110 bps | |||||||||||||||||||||||||||||
| Selling, general and administrative expense | 389.7 | 351.4 | (38.3) | (10.9)% | ||||||||||||||||||||||||||||
| Restructuring expense | 7.1 | 5.1 | (2.0) | (39.2)% | ||||||||||||||||||||||||||||
| Operating income | 132.6 | 125.6 | 7.0 | 5.6% | ||||||||||||||||||||||||||||
| Pension expense (income), other than service cost | — | (1.3) | (1.3) | (100.0)% | ||||||||||||||||||||||||||||
| Interest income | 3.7 | 3.8 | (0.1) | (2.6)% | ||||||||||||||||||||||||||||
| Interest expense | 16.3 | 11.2 | (5.1) | (45.5)% | ||||||||||||||||||||||||||||
| Net income before income taxes | 120.0 | 119.5 | 0.5 | 0.4% | ||||||||||||||||||||||||||||
| Income tax provision | 16.2 | 27.0 | 10.8 | 40.0% | ||||||||||||||||||||||||||||
| Income from continuing operations | 103.8 | 92.5 | 11.3 | 12.2% | ||||||||||||||||||||||||||||
| Income from discontinued operations, net of taxes | 33.6 | 26.6 | 7.0 | 26.3% | ||||||||||||||||||||||||||||
| Net income | $ | 137.4 | $ | 119.1 | $ | 18.3 | 15.4% | |||||||||||||||||||||||||
Adjusted EBITDA from continuing operations(1) | $ | 227.7 | $ | 212.2 | $ | 15.5 | 7.3% | |||||||||||||||||||||||||
Adjusted EBITDA % from continuing operations(1) | 14.3% | 15.1% | -80 bps | |||||||||||||||||||||||||||||
(1)The key measures reviewed by the CODM to evaluate our performance are most notably Adjusted EBITDA from continuing operations and Adjusted EBITDA % from continuing operations. For additional information, refer to the 'Reconciliation of Non-GAAP Measures' section below.
2022 Compared With 2021
Revenue
Total revenue in 2022 increased $189.5 million or 13.5% compared to 2021. Organic revenue grew $171.8 million in the period and acquisitions provided additional revenue of $93.5 million, partially offset by unfavorable currency translation of $75.8 million compared to the prior year. The growth from organic revenue was the result of increases in sales volume for both recurring and non-recurring revenues.
Gross Profit and Gross Profit Margin
Gross profit margin decreased 110 bps to 33.3% in 2022 compared to 34.4% for the year ended December 31, 2021. The decrease was primarily due to supply chain disruptions and pressures resulting in inefficiencies that drove increases in material, freight, and labor costs as well as due to a higher mix of organic revenue growth from lower-margin non-recurring revenue compared to recurring revenue.
Selling, general and administrative expense
Selling, general and administrative expense increased $38.3 million from prior year, and as a percent of revenue increased by 60 bps to 24.5% compared to 25.1% in 2021. The increase in Selling, general and administrative expense was the result of higher relative expenses from recently acquired companies, including higher amortization costs of acquired intangible assets, as well as the costs related to the implementation of the OmniBluTM platform.
Interest expense
Interest expense increased $5.1 million compared to 2021. The increase was primarily due to higher interest rates as well as a higher average debt balance used to fund the acquisitions in the third quarter of 2022.
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Income tax provision
The Company's tax rate from continuing operations was 13.5% for the year ended December 31, 2022 compared to 22.6% for 2021. The tax rate for the year ended December 31, 2022 was favorably impacted by discrete items totaling $8.9 million, primarily driven by benefits from stock based compensation, the UK patent box regime, and Brazilian tax litigation.
Income from continuing operations and Adjusted EBITDA
Income from continuing operations for the year ended December 31, 2022 increased to $103.8 million compared to $92.5 million in 2021, representing an increase of $11.3 million. Adjusted EBITDA was $227.7 million for the year ended December 31, 2022 compared to $212.2 million in 2021, representing an increase of $15.5 million. The increase in Adjusted EBITDA was primarily driven by a higher gross profit partially offset by a higher selling, general and administrative expense, excluding the impacts of our depreciation, amortization, and acquisition, and integration costs.
Income from discontinued operations
For the years ended December 31, 2022 and 2021, we recognized income from discontinued operations, net of income taxes, of $33.6 million and $26.6 million, respectively.
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Reconciliation of Non-GAAP Measures
The key measures reviewed by the CODM for allocating resources and evaluating financial performance of our ongoing operations are most notably Adjusted EBITDA from continuing operations and Adjusted EBITDA margin from continuing operations. These non-GAAP financial measures adjust for certain amounts that are otherwise included or excluded from a measure calculated under US GAAP. By adjusting for 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. We also believe that these non-GAAP measures are useful to investors as a way to evaluate and compare our operating performance against peers in the Company's industry. The adjustments generally fall within the following categories: restructuring related costs, M&A related costs, pension-related costs, constant currency adjustments and other major items affecting comparability of our ongoing operating results. The definition of Adjusted EBITDA used here may differ from that used by other companies.
The following table presents a reconciliation of the Company's reported Income from continuing operations to Adjusted EBITDA.
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2023 | 2022 | 2021 | ||||||||||||||
| Income from continuing operations | $ | 129.3 | $ | 103.8 | $ | 92.5 | |||||||||||
| Income tax provision | 23.5 | 16.2 | 27.0 | ||||||||||||||
| Interest expense, net | 10.9 | 12.6 | 7.4 | ||||||||||||||
| Depreciation and amortization | 91.3 | 76.2 | 72.1 | ||||||||||||||
| EBITDA from continuing operations | 255.0 | 208.8 | 199.0 | ||||||||||||||
Restructuring related costs (1) | 11.4 | 7.3 | 5.3 | ||||||||||||||
Pension expense (income), other than service cost (2) | 0.7 | — | (1.3) | ||||||||||||||
M&A related costs (3) | 6.0 | 11.6 | 9.2 | ||||||||||||||
| Adjusted EBITDA from continuing operations | $ | 273.1 | $ | 227.7 | $ | 212.2 | |||||||||||
(1) Costs incurred as a direct result of the restructuring program are excluded because they are not part of the ongoing operations of our underlying business.
(2) Pension expense (income), other than service cost is excluded as it represents all non service-related pension expense, which consists of non-cash interest cost, expected return on plan assets and amortization of actuarial gains and losses.
(3) M&A related costs include integration costs, 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 are excluded as they are not part of the ongoing operations of our underlying business.
We also present certain financial information on a constant currency basis to 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. 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.
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Restructuring
In the third quarter of 2020, the Company implemented a restructuring plan ("2020 restructuring plan") for manufacturing capacity rationalization across the Company. The Company completed the 2020 restructuring plan as of June 30, 2022 and total cost in connection with the 2020 restructuring plan was $11.0 million.
In the third quarter of 2022, the Company implemented a restructuring plan (the "2022/2023 restructuring plan") to optimize our overall cost structure on a global basis. The initiatives under this plan include streamlining operations and our general and administrative infrastructure. As of December 31, 2023, the Company recognized restructuring charges of $16.8 million, net of a cumulative release of the related liability of $6.5 million. The total estimated cost, net of releases was revised in the second quarter from $8.0 million to $10.0 million to a range of $16.0 million to $18.0 million, which was originally expected to be recognized by the end of 2023. During the quarter we have refined our range to $17.0 million to $18.0 million and now expect the full amount to be recognized by the first quarter of 2024. These changes are due to additional actions being taken, as well as delays in certain actions that support our streamlining operations under this plan.
The following table details the cumulative amount of annualized savings and incremental savings for the 2022/2023 restructuring plan:
| Cumulative Amount | Incremental Amount | Cumulative Amount | |||||||||||||||
| (In millions) | As of December 31, 2022 | During the year ended December 31, 2023 | As of December 31, 2023 | ||||||||||||||
| Cost of sales | $ | 0.1 | $ | 4.8 | $ | 4.9 | |||||||||||
| Selling, general and administrative | 0.1 | 6.1 | 6.2 | ||||||||||||||
| Total restructuring savings | $ | 0.2 | $ | 10.9 | $ | 11.1 | |||||||||||
Cumulative savings for the 2022/2023 restructuring plan were revised in the second quarter from the range of $9.0 million to $12.0 million to a range of $18.0 million to $20.0 million to reflect the impact of additional actions being taken to streamline operations. Full year 2023 savings were revised in the second quarter from $5.0 million to $6.0 million to a range of $9.0 million to $10.0 million, which was below our actual savings for 2023 due to timing of the expected benefits. The remainder of the savings will be realized in 2024.
For additional financial information about restructuring, refer to Note 20. Restructuring of the Notes to Consolidated Financial Statements.
Inbound Orders and Order Backlog
Inbound orders represent the estimated sales value of confirmed customer orders received during the year. Inbound orders from continuing operations during the years ended December 31, 2023 and 2022 were $1,667.5 million and $1,587.4 million, respectively.
Inbound orders from continuing operations increased $80.1 million for the year ended December 31, 2023 compared to 2022, which includes an unfavorable foreign currency translation impact of $3.7 million in the period resulting in an increase of $83.8 million on a constant currency basis.
Order backlog is calculated as the estimated sales value of unfilled, confirmed customer orders. Order backlog from continuing operations was $678.2 million and $664.4 million as of December 31, 2023 and 2022, respectively.
Order backlog from continuing operations at December 31, 2023 increased by $13.8 million compared to December 31, 2022. We expect to convert 93% of backlog at December 31, 2023 into revenue during 2024.
Seasonality
We experience seasonality in our operating results. Our revenue and operating income are generally lower in the first quarter and highest in the fourth quarter, primarily as a result of our customers' purchasing trends.
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Liquidity and Capital Resources
Overview of Sources and Uses of Cash
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. In addition, we completed the sale of the AeroTech business on August 1, 2023 and received proceeds of $808.2 million. During the second half of 2023, we used the proceeds to repay $305.4 million of our debt as well as to make payments of $15.4 million for transaction costs related to the sale of AeroTech, $133.2 million for tax on the gain from the sale of AeroTech, and $9.0 million for contribution to our U.S. qualified pension plan. We expect to use the remaining net proceeds from the transaction for potential acquisitions as well as our other stated capital allocation priorities.
As of December 31, 2023, we had $483.3 million of cash and cash equivalents, $35.5 million of which was held by our foreign subsidiaries. Although certain 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 tax and foreign withholding taxes. The foreign withholding taxes on these repatriations to the U.S. would potentially be partially offset by U.S. foreign tax credits.
As noted above, certain 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 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 costs.
For the year ended December 31, 2023, we had total operating cash flow of $74.2 million. Our liquidity as of December 31, 2023, or cash plus borrowing ability under our revolving credit facilities, was $1.2 billion.
The cash flows generated by our operations and borrowings are expected to be sufficient to satisfy our principal cash requirements that include our working capital needs, new product development, restructuring expenses, capital expenditures, income taxes, debt repayments, dividends, periodic pension contributions, and other financing arrangements.
Based on our current capital allocation objectives, during 2024 we anticipate capital expenditures to be between $50 million and $60 million. Our level of capital expenditures varies from time to time as a result of actual and anticipated business conditions.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures in the U.S. over five years. As a result, the Company experienced a decrease in cash from operations in 2023 of $16 million and will experience approximately a $10 million decrease in cash from operations in 2024. The impact will continue over the five-year amortization period but decrease each year.
Contractual Obligations and Cash Requirements
The following is a summary of our significant contractual and other obligations at December 31, 2023:
| (In millions) | Total Payments | Current | Long-Term | ||||||||||||||
Long-term debt (a) | $ | 646.4 | $ | — | $ | 646.4 | |||||||||||
Interest payments on long-term debt (b) | 15.9 | 5.6 | 10.3 | ||||||||||||||
Operating leases (c) | 44.1 | 13.8 | 30.3 | ||||||||||||||
Total contractual and other obligations (d) | $ | 706.4 | $ | 19.4 | $ | 687.0 | |||||||||||
(a)A summary of our long-term debt obligations as of December 31, 2023 can be found in Note 8, “Debt”, of the Notes to the Consolidated Financial Statements.
(b)Amounts include contractual interest payments using the interest rates as of December 31, 2023 and include the effect of our interest rate swaps.
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(c)A summary of our operating lease obligations as of December 31, 2023 can be found in Note 19, “Leases”, of the Notes to the Consolidated Financial Statements.
(d)This table does not include obligations under our pension and postretirement benefit plans, which are included in Note 10, Pension and Post-Retirement and Other Benefit Plans, of the Notes to the Consolidated Financial Statements.
We also have outstanding firm purchase orders with certain suppliers for the purchase of raw materials and services, which are not included in the table above. These purchase orders are generally short-term in nature and include a requirement that our supplier provide products or services to our specifications and require us to make a firm purchase commitment to our supplier. The costs associated with these agreements will be reflected in cost of sales on our Consolidated Statements of Income as substantially all of these commitments are associated with purchases made to fulfill our customers’ orders.
The following is a summary of other off-balance sheet arrangements at December 31, 2023:
| (In millions) | Total Amount | Current | Long-Term | ||||||||||||||
| Letters of credit and bank guarantees | $ | 25.1 | $ | 24.4 | $ | 0.7 | |||||||||||
| Surety bonds | 1.0 | 0.9 | 0.1 | ||||||||||||||
| Total other off-balance sheet arrangements | $ | 26.1 | $ | 25.3 | $ | 0.8 | |||||||||||
To provide required security regarding our performance on certain contracts, we provide letters of credit, surety bonds and bank guarantees, for which we are contingently liable. In order to obtain these financial instruments, we pay fees to various financial institutions in amounts competitively determined in the marketplace. Our ability to generate revenue from certain contracts is dependent upon our ability to obtain these off-balance sheet financial instruments.
Our off-balance sheet financial instruments may be renewed, revised or released based on changes in the underlying commitment. Historically, our commercial commitments have not been drawn upon to a material extent; consequently, management believes it is not likely that there will be claims against these commitments that would result in a negative impact on our key financial ratios or our ability to obtain financing.
Cash Flows
Cash flows for each of the years ended December 31, 2023 and 2022 were as follows:
| (In millions) | 2023 | 2022 | 2021 | |||||||||||||||||||||||
| Cash provided by continuing operating activities | $ | 74.2 | $ | 135.2 | $ | 174.9 | ||||||||||||||||||||
| Cash provided (required) by continuing investing activities | 729.3 | (413.2) | (270.5) | |||||||||||||||||||||||
| Cash (required) provided by continuing financing activities | (354.1) | 270.6 | 80.8 | |||||||||||||||||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (1.2) | (2.5) | (2.3) | |||||||||||||||||||||||
| Net increase (decrease) in cash from continuing operations | $ | 448.2 | $ | (9.9) | $ | (17.1) | ||||||||||||||||||||
2023 Compared with 2022
Cash provided by continuing operating activities in 2023 was $74.2 million, representing a $61.0 million decrease compared to 2022. The decrease was primarily due to tax payments of $133.2 million for income taxes on gain from sale of AeroTech. Excluding the impact of this tax payment in 2023, cash provided by continuing operations increased by $72.2 million year over year, primarily due to reduced inventory investment and increased customer collections of trade receivables and advance payments, partially offset by an increased payments for accounts payable and for pension contributions.
Cash provided by continuing investing activities during 2023 was $729.3 million, representing a $1.1 billion increase compared to 2022. The increase is primarily from the proceeds received on the sale of the AeroTech business and lower spending on acquisitions and capital expenditures year over year.
Cash required by continuing financing activities of $354.1 million in 2023 represents an increase in cash outflows of $624.7 million compared to 2022. This increase in cash outflows year over year was primarily due to higher debt repayments of our revolving credit facility using proceeds from the AeroTech sale, compared to higher borrowings from our credit facility to fund acquisitions during 2022.
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2022 Compared with 2021
Cash provided by continuing operating activities in 2022 was $135.2 million, representing a $39.7 million decrease compared to 2021. Decrease was primarily driven by a decrease in customer advance payments and an increase in inventory, partially offset by lower pension contributions and an increase in accounts payable.
Cash required by investing activities during 2022 was $413.2 million, representing a $142.7 million increase compared to 2021, primarily due to increased acquisition and capital expenditure spending year over year.
Cash provided by financing activities of $270.6 million in 2022 represents an increase of $189.8 million compared to 2021. This increase was primarily driven by higher borrowings to fund acquisitions in 2022, partially offset by prior year activity that did not recur in the current year. Specifically the cash provided by financing activities of $80.8 million in 2021 was primarily due to 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.
Financing Arrangements
As of December 31, 2023 we had $250.0 million drawn on and $1,043.8 million of availability under the revolving credit facility. Our ability to use this availability is subject to our compliance with 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 minimum interest coverage ratio, a maximum leverage ratio, as well as certain events of default. As of December 31, 2023, we were in compliance with all covenants in our credit agreement. We expect to remain in compliance with all covenants in the foreseeable future.
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 (the "Notes") to qualified institutional buyers, resulting in net proceeds to us of approximately $392.2 million after deducting initial purchasers’ discounts. The Notes will mature on May 15, 2026 unless earlier converted, redeemed or repurchased. Concurrently with the issuance of the Notes, we entered into the 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 Note hedge transactions.
For additional information about our credit agreement, Notes, convertible note hedge and warrant transactions, refer to Note 8. Debt of the Notes to the Consolidated Financial Statements.
As of December 31, 2023, we have 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 December 31, 2023, all of our total outstanding debt of $652.5 million effectively remains fixed rate debt, with the Convertible Senior Notes subject to a fixed rate of 0.25% and all of the revolving credit facility subject to an average fixed rate of 0.76% in addition to the premium charged for the credit spread on our revolving credit facility.
Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles. As such, we are required to make certain estimates, judgments and assumptions about matters that are inherently uncertain. On an ongoing basis, our management re-evaluates these estimates, judgments and assumptions for reasonableness because of the critical impact that these factors have on the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the periods presented. Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed this disclosure. We believe that the following are the critical accounting estimates used in preparing our financial statements.
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Revenue Recognition
We recognize a large portion of our product revenue over time, using the "cost-to-cost" input method for contracts that provide highly customized equipment and refurbishments of customer-owned equipment for which we have a contractual, enforceable right to collect payment upon customer cancellation for performance completed to date. The input method of “cost-to-cost” to recognize revenue over time requires that we measure progress based on costs incurred to date relative to total estimated cost at completion. These cost estimates are based on assumptions and estimates to project the outcome of future events including estimated labor and material costs required to complete open projects.
Defined Benefit Pension Plans
The measurement of pension plans’ costs requires the use of assumptions for discount rates, investment returns, employee turnover rates, retirement rates, mortality rates and other factors. The actuarial assumptions used in our pension reporting are reviewed annually and compared with external benchmarks to ensure that they appropriately account for our future pension and post-retirement benefit obligations. While we believe that the assumptions used are appropriate, differences between assumed and actual experience may affect our operating results.
Our accrued pension liability reflects the funded status of our worldwide plans, or the projected benefit obligation net of plan assets. Our discount rate assumption is determined by developing a yield curve based on high quality corporate bonds with maturities matching the plan’s expected benefit payment streams. The plans’ expected cash flows are then discounted by the resulting year-by-year spot rates. The projected benefit obligation is sensitive to changes in our estimate of the discount rate. The discount rate used in calculating the projected benefit obligation for the U.S. pension plan, which represents 86% of all pension plan obligations, was 4.99% in 2023, 5.18% in 2022 and 2.90% in 2021. A decrease of 50 basis points in the discount rate used in our calculation would increase our projected benefit obligation by $11.7 million.
Our pension expense is sensitive to changes in our estimate of the expected rate of return on plan assets. The expected return on assets used in calculating the pension expense for the U.S. pension plan, which represents 94% of all pension plan assets, was 6.25% for 2023, 5.50% for 2022 and 5.75% for 2021. For 2024, the rate is expected to be 5.50%. A change of 50 basis points in the expected return on assets assumption would impact pension expense by $1.3 million (pre-tax).
See Note 10. Pension and Post-Retirement and Other Benefit Plans of the notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data for additional discussion of our assumptions and the amounts reported in the Consolidated Financial Statements.
Recent Accounting Pronouncements
For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements see Note 1 of the Notes to Consolidated Financial Statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to financial market risks, including fluctuations in foreign currency exchange rates and interest rates. In order to manage and mitigate our exposure to these risks, we may use derivative financial instruments in accordance with established policies and procedures. We do not use derivative financial instruments where the objective is to generate profits solely from trading activities. At December 31, 2023 and 2022, our derivative holdings consisted of foreign currency forward contracts and foreign currency instruments embedded in purchase and sale contracts and interest rate swap contracts.
These forward-looking disclosures address potential impacts from market risks only as they affect our financial instruments. They do not include other potential effects resulting from changes in foreign currency exchange rates, interest rates, commodity prices or equity prices that could impact our business.
Foreign Currency Exchange Rate Risk
During 2023, our foreign subsidiaries generated 43% of our revenue. Financial statements of our foreign subsidiaries for which the U.S. dollar is not the functional currency are translated into U.S. dollars. As a result, we are exposed to foreign currency translation risk.
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When we sell or purchase products or services, transactions are frequently denominated in currencies other than an operation’s functional currency. As a result, we are exposed to foreign currency transaction risk. When foreign currency exposures exist, we may enter into foreign exchange forward instruments with third parties to economically hedge foreign currency exposures. Our hedging policy reduces, but does not entirely eliminate, the impact of foreign currency exchange rate movements. We do not apply hedge accounting for our foreign currency forward instruments.
We economically hedge our recognized foreign currency assets and liabilities to reduce the risk that our earnings and cash flows will be adversely affected by fluctuations in foreign currency exchange rates. We expect any gains or losses in the hedging portfolio to be substantially offset by a corresponding gain or loss in the underlying exposures being hedged. We also economically hedge firmly committed anticipated transactions in the normal course of business. As these are not offset by an underlying balance sheet position being hedged, our earnings can be significantly impacted on a periodic basis by the change in the unrealized value of these hedges.
We use a sensitivity analysis to measure the impact of an immediate 10% adverse movement in the foreign currency exchange rates. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar and all other variables are held constant. We expect that changes in the fair value of derivative instruments will offset the changes in fair value of the underlying assets and liabilities on the balance sheet. A 10% adverse movement in the foreign currency exchange rates would reduce the value of our derivative instruments by $7.4 million (pre-tax) as of December 31, 2023. This amount would be reflected in our net income but would be significantly offset by the changes in the fair value of the underlying hedged assets and liabilities.
Market Risk and Interest Rate Risk
As of December 31, 2023, we had 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). We use a sensitivity analysis to measure the impact on fair value of the interest rate swaps of an immediate adverse movement in the interest rates of 50 basis points. This analysis was based on a modeling technique that measures the hypothetical market value resulting from a 50 basis point change in interest rates. This adverse change in the applicable interest rates would result in a decrease of $1.4 million in the net fair value of our interest rate swaps for $250 million of notional value expiring in 2025.
In May 2021, we issued $402.5 million aggregate principal amount of Convertible Senior Notes (the “Notes”) due 2026. We do not have economic interest rate exposure as the Notes have a fixed annual rate of 0.25%. The fair value of the Notes is subject to interest rate risk, market risk and other factors due to its conversion feature. The fair value of the Notes is also affected by the price and volatility of our common stock and will generally increase or decrease as the market price of our common stock changes. The interest and market value changes affect the fair value of the Notes but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligation. Additionally, we carry the Notes at face value, less any unamortized issuance costs, on the balance sheet and present the fair value for disclosure purposes only.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of John Bean Technologies Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of John Bean Technologies Corporation and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2023 listed in the index appearing under Item 15(a) (2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the methodology for valuing certain inventories to the first-in, first-out ("FIFO") cost method from the last-in, first-out ("LIFO") cost method in 2023.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition - Product Revenue Estimated Costs at Completion
As described in Note 1 to the consolidated financial statements, the Company recognized $615.2 million of product revenue for the year ended December 31, 2023 for over time projects, using the “cost-to-cost” input method. Revenue is recognized over time for refurbishments of customer-owned equipment and for highly customized equipment for which the Company has a contractual, enforceable right to collect payment upon customer cancellation for performance completed to date. As disclosed by management, the “cost-to-cost" input method requires that management measure progress based on costs incurred to date relative to total estimated cost at completion. Cost estimates are based on assumptions and estimates to project the outcome of future events including estimated labor and material costs required to complete open projects.
The principal considerations for our determination that performing procedures relating to revenue recognition - product revenue estimated costs at completion is a critical audit matter are (i) the significant judgment by management when determining the estimated costs at completion, and (ii) the high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s assumptions related to estimated labor and material costs required to complete open projects.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the product revenue recognition process, including controls over the determination of estimated costs at completion. These procedures also included, among others, evaluating and testing management’s process for determining the estimated costs at completion for a sample of contracts, which included evaluating the reasonableness of assumptions related to the estimated labor and material costs required to complete open projects used by management and considering the factors that can affect the accuracy of those estimates. Evaluating the reasonableness of assumptions used involved assessing management’s ability to reasonably estimate costs at completion by (i) testing the completeness and accuracy of underlying data used in the estimate; (ii) performing a comparison of estimated costs for selected contracts to actual costs incurred on similar completed contracts; (iii) evaluating the timely identification of circumstances that may warrant a modification to estimated costs at completion; and (iv) evaluating responses to inquiries with the Company’s project managers regarding the expected remaining efforts.
/s/ PricewaterhouseCoopers LLP
February 23, 2024
We have served as the Company's auditor since 2021.
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JOHN BEAN TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
| Year Ended December 31, | |||||||||||||||||
| (In millions, except per share data) | 2023 | 2022 | 2021 | ||||||||||||||
| 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 (income), other than service cost | ( | ||||||||||||||||
| Interest income | |||||||||||||||||
| Interest expense | |||||||||||||||||
| Net income before income taxes | |||||||||||||||||
| Income tax provision | |||||||||||||||||
| Equity in net earnings of unconsolidated affiliate | ( | ||||||||||||||||
| Income from continuing operations | |||||||||||||||||
| Income from discontinued operations, net of taxes | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Basic earnings per share: | |||||||||||||||||
| Income from continuing operations | $ | $ | $ | ||||||||||||||
| Income from discontinued operations | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Diluted earnings per share: | |||||||||||||||||
| Income from continuing operations | $ | $ | $ | ||||||||||||||
| Income from discontinued operations | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | |||||||||||||||||
| Diluted | |||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2023 | 2022 | 2021 | ||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Other comprehensive income (loss), net of income taxes | |||||||||||||||||
| Foreign currency translation adjustments | ( | ||||||||||||||||
| Pension and other post-retirement benefits adjustments | ( | ||||||||||||||||
| Derivatives designated as hedges | ( | ||||||||||||||||
| Other comprehensive income (loss) | ( | ||||||||||||||||
| Comprehensive income | $ | $ | $ | ||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
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JOHN BEAN TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
| (In millions, except per share and number of shares) | December 31, 2023 | December 31, 2022 | |||||||||
| Assets | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Trade receivables, net of allowances | |||||||||||
| Contract assets | |||||||||||
| Inventories | |||||||||||
| Other current assets | |||||||||||
| Current assets of discontinued operations | |||||||||||
| Total current assets | |||||||||||
Property, plant and equipment, net of accumulated depreciation of $ | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Non-current assets of discontinued operations | |||||||||||
| 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 | |||||||||||
| Current liabilities of discontinued operations | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Accrued pension and other post-retirement benefits, less current portion | |||||||||||
| Other liabilities | |||||||||||
| Non-current liabilities of discontinued operations | |||||||||||
| Commitments and contingencies (Note 17) | |||||||||||
| Stockholders' Equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Common stock held in treasury, at cost; 2023: | ( | ( | |||||||||
| 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 consolidated financial statements.
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JOHN BEAN TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2023 | 2022 | 2021 | ||||||||||||||
| Cash flows from continuing operating activities: | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Less: Income from discontinued operations, net of taxes | |||||||||||||||||
| Income from continuing operations | |||||||||||||||||
| Adjustments to reconcile income from continuing operations to cash provided by continuing operating activities: | |||||||||||||||||
| Depreciation | |||||||||||||||||
| Amortization | |||||||||||||||||
| Stock-based compensation | |||||||||||||||||
| Pension and other post-retirement benefits expense | |||||||||||||||||
| Deferred income taxes | ( | ( | ( | ||||||||||||||
| 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 post-retirement benefits, net | ( | ( | ( | ||||||||||||||
| Income taxes on gain from sale of AeroTech | ( | ||||||||||||||||
| Other assets and liabilities, net | |||||||||||||||||
| Cash provided by continuing operating activities | |||||||||||||||||
| Cash flows from continuing investing activities: | |||||||||||||||||
| Proceeds from sale of AeroTech, net | |||||||||||||||||
| Acquisitions, net of cash acquired | ( | ( | ( | ||||||||||||||
| Investment in unconsolidated affiliate | ( | ||||||||||||||||
| Capital expenditures | ( | ( | ( | ||||||||||||||
| Proceeds from disposal of assets | |||||||||||||||||
| Purchase of marketable securities | ( | ||||||||||||||||
| Proceeds from sale of marketable securities | |||||||||||||||||
| Cash provided (required) by continuing investing activities | ( | ( | |||||||||||||||
| Cash flows from continuing financing activities: | |||||||||||||||||
| Net proceeds from short-term debt | ( | ( | |||||||||||||||
| Payment in connection with modification of credit facilities | ( | ||||||||||||||||
| Net (payments) proceeds from domestic credit facilities, net of debt issuance costs | ( | ||||||||||||||||
| 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 equity compensation awards | ( | ( | ( | ||||||||||||||
| Proceeds from settlement of cross currency swaps | |||||||||||||||||
| Common stock repurchases | ( | ( | |||||||||||||||
| Dividends | ( | ( | ( | ||||||||||||||
| Acquisition date earnout liability and other deferred acquisition payments | ( | ||||||||||||||||
| Cash (required) provided by continuing financing activities | ( | ||||||||||||||||
| Net increase (decrease) in cash from continuing operations | ( | ( | |||||||||||||||
| Cash flows from discontinued operations: | |||||||||||||||||
| Cash required by operating activities of discontinued operations, net | ( | ||||||||||||||||
| Cash required by investing activities of discontinued operations, net | ( | ( | ( | ||||||||||||||
| Net cash (required) provided by discontinued operations | ( | ||||||||||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | ( | ( | ( | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | $ | ( | $ | |||||||||||||
52
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2023 | 2022 | 2021 | ||||||||||||||
| Cash and cash equivalents from continuing operations, beginning of period | $ | $ | $ | ||||||||||||||
| Add: Cash and cash equivalents from discontinued operations, beginning of period | |||||||||||||||||
| Add: Net increase (decrease) in cash and cash equivalents | ( | ||||||||||||||||
| Less: Cash and cash equivalents from discontinued operations, end of period | ( | ( | |||||||||||||||
| Cash and cash equivalents from continuing operations, end of period | $ | $ | $ | ||||||||||||||
| Supplemental cash flow information for continuing operations: | |||||||||||||||||
| Interest paid | |||||||||||||||||
| Income taxes paid | |||||||||||||||||
| Income taxes paid on gain from sale of AeroTech | |||||||||||||||||
| Non-cash investing in capital expenditures, accrued but not paid | |||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
53
JOHN BEAN TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| (In millions) | Common Stock | Common Stock Held in Treasury | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Equity | |||||||||||||||||||||||||||||||||||
| 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 $( | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Pension and other post-retirement liability adjustments, net of income taxes of $( | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Proceeds from sale of warrants | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Purchase of convertible bond hedge, net of income tax of $ | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Taxes withheld on issuance of stock-based awards | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||
| December 31, 2021 | ( | ||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Issuance of treasury stock | — | ( | — | — | |||||||||||||||||||||||||||||||||||||
| Share repurchases | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||
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 post-retirement liability adjustments, net of income taxes of $( | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Taxes withheld on issuance of stock-based awards | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||
| December 31, 2022 | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Issuance of treasury stock | — | ( | — | — | |||||||||||||||||||||||||||||||||||||
| Share repurchases | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||
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 post-retirement liability adjustments, net of income taxes of $ | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Taxes withheld on issuance of stock-based awards | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||
| December 31, 2023 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
54
JOHN BEAN TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of John Bean Technologies Corporation (JBT, we, or the Company) and all wholly-owned subsidiaries. All intercompany investments, accounts, and transactions have been eliminated.
Discontinued Operations
On August 1, 2023, the Company completed the sale of its former AeroTech business segment ("AeroTech") to Oshkosh Corporation, a Wisconsin corporation (the "Purchaser") in exchange for cash consideration of $808.2 million, (the "Transaction"). As a result, the financial results of AeroTech have been presented as discontinued operations in the Consolidated Statements of Income for all periods presented. The assets and liabilities of AeroTech are reflected as assets and liabilities of discontinued operations on the Consolidated Balance Sheets for prior periods presented. The operating results and cash flows of AeroTech have been reported through July 31, 2023, the date immediately prior to the closing date of the Transaction. Amounts pertaining to results of operations, financial condition and cash flows throughout the document are from the Company's continuing operations unless otherwise noted. Refer to Note 2, Discontinued Operations, for further discussion.
Business Segments
The Company has determined that it operates as a single reportable segment for continuing operations, with the AeroTech reportable segment considered as a discontinued operation as of June 30, 2023. The Company's Chief Executive Officer is the chief operating decision maker (CODM), who reviews the Company's financial information presented on a consolidated basis for purposes of allocating resources and evaluating the Company's financial performance. The key measures reviewed by the CODM for these purposes are most notably Adjusted EBITDA from continuing operations and Adjusted EBITDA margin from continuing operations. Adjusted EBITDA is EBITDA adjusted for items that are not reflective of ongoing operations.
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 revenues and expenses during the reporting period. Actual results could differ from these estimates.
Cash and cash equivalents
Marketable Securities
The Company may invest portions of its excess cash in different marketable securities. Marketable securities with original maturities of three months or more are classified as held-to-maturity debt securities. Interest income is recorded as it is earned within Interest income in the Consolidated Statements of Income.
Allowance for credit losses
55
Inventories
Inventories are stated at the lower of cost or net realizable value, which includes an estimate for excess and obsolete inventories. Inventory costs include those costs directly attributable to products, including all manufacturing overhead but excluding costs to distribute. Cost is determined on the first-in, first-out (“FIFO”) basis.
During the fourth quarter of 2023, the Company changed its methodology for valuing certain inventories to the FIFO cost method from the last-in, first-out ("LIFO") cost method. The change was applicable to inventories that were previously accounted for on a LIFO basis within both continuing operations and historically owned discontinued operations. The Company concluded that the FIFO basis of accounting is preferable as it provides a better matching of costs and revenues, more closely resembles the physical flow of inventory, better reflects the acquisition cost of inventory on the balance sheet, conforms the Company's method of valuation to a single method, and results in improved comparability with industry peers.
The effects of this change in accounting principle have been retrospectively applied to all periods presented and a cumulative effect adjustment was recorded to increase the January 1, 2021 inventory balance by $19.4 28.3 million, and increase retained earnings by $35.3 million, net of tax. The Consolidated Statements of Income for the years ended December 31, 2022 and 2021, Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021, and the Condensed Consolidated Balance Sheet as of December 31, 2022, have been retrospectively adjusted to reflect the change in accounting principle.
The following tables reflect the effect of the change in accounting principle on the consolidated financial statements as of and for the year ended December 31, 2023:
Consolidated Statements of Income | |||||||||||||||||
(in millions) | As Computed under LIFO | Effect of Change | As Reported | ||||||||||||||
Cost of products | $ | $ | ( | $ | |||||||||||||
| Income tax provision | |||||||||||||||||
Income from continuing operations | |||||||||||||||||
Income from discontinued operations, net of taxes | ( | ||||||||||||||||
Net income | ( | ||||||||||||||||
| Basic earnings per share: | |||||||||||||||||
| Income from continuing operations | $ | $ | $ | ||||||||||||||
| Income from discontinued operations | ( | ||||||||||||||||
| Net income | $ | $ | ( | $ | |||||||||||||
| Diluted earnings per share: | |||||||||||||||||
| Income from continuing operations | $ | $ | $ | ||||||||||||||
| Income from discontinued operations | ( | ||||||||||||||||
| Net income | $ | $ | ( | $ | |||||||||||||
| Consolidated Statements of Comprehensive Income | |||||||||||||||||
| (In millions) | As Computed under LIFO | Effect of Change | As Reported | ||||||||||||||
| Comprehensive income | $ | $ | ( | $ | |||||||||||||
Consolidated Balance Sheets | |||||||||||||||||
(in millions) | As Computed under LIFO | Effect of Change | As Reported | ||||||||||||||
Inventories | $ | $ | $ | ||||||||||||||
| Other current liabilities | |||||||||||||||||
| Other liabilities | |||||||||||||||||
| Retained earnings | |||||||||||||||||
56
| Consolidated Statements of Cash Flows | |||||||||||||||||
| (In millions) | As Computed under LIFO | Effect of Change | As Reported | ||||||||||||||
| Cash flows from continuing operating activities: | |||||||||||||||||
| Income from continuing operations | $ | $ | $ | ||||||||||||||
| Adjustments to reconcile income from continuing operations to cash provided by continuing operating activities: | |||||||||||||||||
| LIFO expense | ( | ||||||||||||||||
| Change in operating assets and liabilities from continuing operations: | |||||||||||||||||
Other assets and liabilities, net | |||||||||||||||||
| Cash provided by continuing operating activities | |||||||||||||||||
The following tables reflect the impact to the financial statement line items as a result of the change in accounting principle for the prior periods presented in the accompanying financial statements:
| Consolidated Statements of Income | |||||||||||||||||||||||||||||||||||
Year Ended December 31, 2022 | Year Ended December 31, 2021 | ||||||||||||||||||||||||||||||||||
| (In millions, except per share data) | As Reported (1) | Effect of Change | As Adjusted | As Reported (1) | Effect of Change | As Adjusted | |||||||||||||||||||||||||||||
| Cost of products | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Income tax provision | |||||||||||||||||||||||||||||||||||
| Income from continuing operations | |||||||||||||||||||||||||||||||||||
| Income from discontinued operations, net of taxes | ( | ||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||
| Basic earnings per share: | |||||||||||||||||||||||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Income from discontinued operations | ( | ||||||||||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Diluted earnings per share: | |||||||||||||||||||||||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Income from discontinued operations | ( | ||||||||||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Consolidated Statements of Comprehensive Income | |||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2022 | Year Ended December 31, 2021 | ||||||||||||||||||||||||||||||||||
| (In millions) | As Reported (1) | Effect of Change | As Adjusted | As Reported (1) | Effect of Change | As Adjusted | |||||||||||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
57
| Consolidated Balance Sheet | |||||||||||||||||
| December 31, 2022 | |||||||||||||||||
| (In millions) | As Reported (1) | Effect of Change | As Adjusted | ||||||||||||||
| Inventories | $ | $ | $ | ||||||||||||||
Current assets of discontinued operations | |||||||||||||||||
| Other current liabilities | |||||||||||||||||
| Other liabilities | |||||||||||||||||
| Retained earnings | |||||||||||||||||
| Consolidated Statements of Cash Flows | |||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2022 | Year Ended December 31, 2021 | ||||||||||||||||||||||||||||||||||
| (In millions) | As Reported (1) | Effect of Change | As Adjusted | As Reported (1) | Effect of Change | As Adjusted | |||||||||||||||||||||||||||||
Cash flows from continuing operating activities: | |||||||||||||||||||||||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Adjustments to reconcile income from continuing operations to cash provided by continuing operating activities: | |||||||||||||||||||||||||||||||||||
| LIFO expense | ( | ( | |||||||||||||||||||||||||||||||||
| Change in operating assets and liabilities from continuing operations: | |||||||||||||||||||||||||||||||||||
Other assets and liabilities, net | |||||||||||||||||||||||||||||||||||
| Cash provided by continuing operating activities | |||||||||||||||||||||||||||||||||||
(1) As Reported represents the consolidated financial statement balances that have been recast for discontinued operations presentation.
Property, plant, and equipment
Capitalized software costs
We capitalize costs incurred to purchase software or internal and external costs incurred during the application development stage of software projects. These costs are amortized on a straight-line basis over the estimated useful lives of the assets. For capitalized software, the useful lives range from to ten years .
58
Goodwill
The Company completed its annual goodwill impairment test as of October 31, 2023 using a qualitative assessment approach. As a result of this assessment the Company concluded that it is more likely than not that the fair value of each reporting unit exceeds its carrying value, and therefore it determined that none of its goodwill was impaired. Similar conclusions were reached as of October 31, 2022 and 2021.
Acquired intangible assets
Intangible assets with finite useful lives are subject to amortization on a straight-line basis over the expected period of economic benefit, which range from less than 4 years to 24 years. The Company evaluates whether events or circumstances have occurred that warrant a revision to the remaining useful lives of intangible assets. In cases where a revision is deemed appropriate, the remaining carrying amounts of the intangible assets are amortized over the revised remaining useful life.
The carrying values of intangible assets with indefinite lives are reviewed for recoverability on an annual basis, and whenever events occur or changes in circumstances indicate that impairment may have occurred. The facts and circumstances considered include an assessment of the recoverability of the cost of intangible assets from future cash flows to be derived from the use of the asset. It is not possible to predict the likelihood of any possible future impairments or, if such an impairment were to occur, the magnitude of any impairment. However, any potential impairment would be limited to the carrying value of the indefinite-lived intangible asset.
For intangible assets with indefinite lives, the Company also evaluates whether events or circumstances have occurred that warrant a revision of their useful lives from an indefinite life to finite useful life. In cases where a revision is deemed appropriate, the carrying amounts of such intangible assets are amortized over the revised finite useful life.
Impairment of long-lived assets
Long-lived assets other than goodwill and acquired indefinite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If it is determined that an impairment loss has occurred, the loss is measured as the amount by which the carrying amount of the long-lived asset exceeds its fair value.
We have evaluated the current environment as of December 31, 2023 and the year then ended and have concluded there is no event or circumstance that has caused an impairment of our long-lived assets. We will continue to monitor the environment to determine whether the impacts to the Company represent an event or change in circumstances that may trigger a need to assess for useful life revision or impairment.
59
Equity Method Investment
Revenue recognition
Revenue is measured based on consideration specified in a contract with a customer, and excludes any sales incentives. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a product or service to a customer.
Performance Obligations & Contract Estimates
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation based on its respective stand-alone selling price and recognized as revenue when, or as, the performance obligation is satisfied.
The Company's contracts with customers often include multiple promised goods and/or services. For instance, a contract may include equipment, installation, optional warranties, periodic service calls, etc. The Company frequently has contracts for which the equipment and installation are considered a single performance obligation. In these instances the installation services are not separately identifiable as the installation goes above and beyond the basic assembly, set-up and testing and therefore significantly customizes or modifies the equipment. However, the Company also has contracts where the installation services are deemed to be separately identifiable as the nature of these services are considered basic assembly, set-up and testing, and are therefore deemed to be a separate performance obligation. This generally occurs in contracts where the Company manufactures standard equipment.
When a performance obligation is separately identifiable, as defined in ASC 606, Revenue from Contracts with Customers, the Company allocates a portion of the contract price to the obligation and recognizes it separately from the other performance obligations. Contract price allocation among multiple performance obligations is based on the relative standalone selling price of each distinct good or service in the contract. When not sold separately, an estimate of the standalone selling price is determined using expected cost plus a reasonable margin.
The timing of revenue recognition for each performance obligation is either over time as control transfers or at a point in time. The Company recognizes revenue over time for contracts that provide service over a period of time, for refurbishments of customer-owned equipment, and for highly customized equipment for which the Company has a contractual, enforceable right to collect payment upon customer cancellation for performance completed to date. Revenue generated from standard equipment, highly customized equipment contracts without an enforceable right to payment for performance completed to date, as well as aftermarket parts and a portion of aftermarket services sales, are recognized at a point in time.
The Company utilizes the “cost-to-cost” input method to recognize product revenue over time. The Company measures progress based on costs incurred to date relative to total estimated cost at completion. Incurred cost represents work performed, which corresponds with, and therefore depicts, the transfer of control to the customer. Contract costs include labor, material, and certain allocated overhead expense. Material costs are considered incurred, and therefore included in the cost-to-cost measure of progress, when they are used in manufacturing and therefore customize the asset. Cost estimates are based on assumptions and estimates to project the outcome of future events; including the estimated labor and material costs required to complete open projects. During the year, we recognized $615.2 million in revenue for over time projects using the cost-to-cost method.
Revenue attributable to equipment which qualifies as point in time is recognized when customers take control of the asset. For equipment where installation is separately identifiable, the Company generally determines that control transfers when the customer has obtained legal title and the risks and rewards of ownership, which is dependent upon the shipping terms within the contract. For customized equipment where installation is not separately identifiable, but where the Company does not have an enforceable right to payment for performance completed to-date, it defines control transfer as the point in time in which it is able to objectively verify that the customer has the capability of full use of the asset as intended per the contract. Service revenue is recognized over time either proportionately over the period of the underlying contract or when services are complete, depending on the terms of the arrangement.
Any expected losses for a contract are charged to earnings, in total, in the period such losses are identified.
60
Research and development
Income taxes
The Company’s provision for income taxes includes amounts payable or refundable for the current year, the effects of deferred taxes and impacts from uncertain tax positions, if applicable. We establish deferred tax liabilities or assets for temporary differences between financial and tax reporting basis and subsequently adjust them to reflect changes in tax rates expected to be in effect when the temporary differences reverse. We record a valuation allowance reducing deferred tax assets when it is more likely than not that such assets will not be realized. Valuation allowances are evaluated periodically and may be subject to change in future reporting periods.
We recognize tax benefits in our financial statements from uncertain tax positions only if it is more likely than not that the tax position will be sustained based on the technical merits of the position. The amount we recognize is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon resolution. Future changes related to the expected resolution of uncertain tax positions could affect tax expense in the period when the change occurs. Interest and penalties related to underpayment of income taxes are classified as income tax expense.
We monitor for changes in tax laws and reflect the impacts of tax law changes in the period of enactment. When there is refinement to tax law changes in subsequent periods, we account for the new guidance in the period when it becomes known.
Stock-based employee compensation
The Company measures compensation cost on restricted stock awards based on the market price of common stock at the grant date and the number of shares awarded. The compensation cost for each award is recognized ratably over the lesser of the stated vesting period or the period until the employee becomes retirement eligible, after taking into account forfeitures.
Foreign currency
Financial statements of operations for which the U.S. dollar is not the functional currency are translated to the U.S. dollar prior to consolidation. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date, while income statement accounts are translated at the average exchange rate for each period. For these operations, translation gains and losses are recorded as a component of accumulated other comprehensive loss in stockholders’ equity until the foreign entity is sold or liquidated.
Derivative financial instruments
Derivatives are recognized in the Consolidated Balance Sheets at fair value, with classification as current or non-current based upon the maturity of the derivative instrument. The Company does not offset fair value amounts for derivative instruments held with the same counterparty. Changes in the fair value of derivative instruments are recorded in current earnings or deferred in accumulated other comprehensive loss, depending on the type of hedging transaction and whether a derivative is designated as, and is effective as, a hedge.
In the Consolidated Statements of Income, earnings from foreign currency derivatives related to sales and remeasurement of sales-related assets, liabilities and contracts are recorded in revenue, while earnings from foreign currency derivatives related to purchases and remeasurement of purchase-related assets, liabilities and contracts are recorded in cost of products. Earnings from foreign currency derivatives related to cash management of foreign currencies throughout the world and remeasurement of cash are recorded in selling, general and administrative expenses.
61
When hedge accounting is applied, the Company ensures that the derivative is highly effective at offsetting changes in anticipated cash flows of the hedged item or transaction. Changes in fair value of derivatives that are designated as cash flow hedges are deferred in accumulated other comprehensive income (loss) until the underlying transactions are recognized in earnings. At such time, related deferred hedging gains or losses are also recorded in earnings on the same line as the hedged item. Effectiveness is assessed at the inception of the hedge. The Company documents the risk management strategy and method for assessing hedge effectiveness at the inception of and throughout the term of each hedge.
The Company's cross-currency swap agreements synthetically swap U.S. dollar denominated fixed rate debt for Euro denominated fixed rate debt and are designated as net investment hedges for accounting purposes. The gains or losses on these derivative instruments are included in the foreign currency translation component of other comprehensive income until the net investment is sold, diluted, or liquidated. Interest payments received for the cross currency swaps are excluded from the net investment hedge effectiveness assessment and are recorded in interest income on the Consolidated Statements of Income.
For derivatives with components excluded from the assessment of hedge effectiveness, the accumulated gains or losses recorded in accumulated other comprehensive income (loss) on such excluded components in a qualifying cash flow or net investment hedging relationship are reclassified to earnings on a systematic and rational basis over the hedge term.
Cash flows from derivative contracts are reported in the consolidated statements of cash flows in the same categories as the cash flows from the underlying transactions.
Leases
Lessee accounting
The Company leases office space, manufacturing facilities and various types of manufacturing and data processing equipment. Leases of real estate generally provide that the Company pays for repairs, property taxes and insurance. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on whether the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Leases are classified as operating or finance leases at the commencement date of the lease. Operating leases are included in operating lease right of use ("ROU") assets, other current liabilities, and operating lease liabilities in the Consolidated Balance Sheets, which are reported within , and , respectively. Lease liabilities are classified between current and long-term liabilities based on their payment terms. The ROU asset balance for finance leases is included in property, plant, and equipment, net in the Consolidated Balance Sheets. In accordance with the standard, the Company has elected not to recognize leases with terms of less than one year on the Consolidated Balance Sheets.
ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the implicit rate is generally not readily determinable for most of its leases, the Company uses its incremental borrowing rate at commencement date in determining the present value of lease payments. We determine the incremental borrowing rate for all leases, based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The Company uses an unsecured borrowing rate and risk-adjusts that rate to approximate a collateralized rate. The operating lease ROU asset also includes prepaid rent and reflects the unamortized balance of lease incentives. Lease expense for operating leases is recognized on a straight-line basis over the lease term.
The Company does not separate lease and non-lease components for leases other than leases of vehicles and communication equipment. For the asset categories of real estate, manufacturing, office and IT equipment, the Company accounts for the lease and non-lease components as a single lease component.
The Company's leases may include renewal and termination options, which extend the lease term if the Company concludes that it is reasonably certain that it will exercise the option. The exercise of lease renewal options is at the Company's sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of the ROU assets are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements may contain variable costs such as common area maintenance, insurance, real estate taxes or other costs. Variable lease costs are expensed as incurred on the Consolidated Statements of Income.
The Company's lease agreements do not contain any material residual value guarantees.
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Lessor accounting
The Company leases certain equipment, such as high capacity industrial extractors, to customers.
In most instances, the Company includes maintenance as a component of the lease agreement. Lease accounting requires lessors to separate lease and non-lease components and further defines maintenance as a non-lease component. The Company combines lease and non-lease components where the components meet both of the following criteria:
•The timing and pattern of transfer to the lessee of the lease and non-lease component are the same, and
•The lease component, if accounted for separately, would be classified as an operating lease.
As such, the leased asset and its respective maintenance component are accounted for as a single component.
In certain leases, consumables are included as a non-lease component. For these leases, the components do not qualify for the practical expedient as the timing and pattern of transfer to the lessee are not the same. In these instances, the non-lease component will be accounted for in accordance with ASC 606.
The Company monitors the risk associated with residual value of its leased assets. It reviews on an annual basis or more often as deemed necessary, and adjusted residual values and useful lives of equipment leased to outside parties, as appropriate. Adjustments to residual values result in an adjustment to depreciation expense. The Company's annual review is based on a long-term view considering historical market price changes, market price trends, and expected life of the equipment.
Lease agreements with the Company's customers do not contain any material residual value guarantees. Certain lease agreements include terms and conditions resulting in variable lease payments. These payments typically rely upon the usage of the underlying asset.
Recently Adopted Accounting Standards
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform—Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides that an entity can elect not to apply certain required modification accounting in U.S. GAAP to contracts where all changes to the critical terms relate to reference rate reform (e.g., the expected discontinuance of LIBOR and the transition to an alternative reference interest rate, etc.). In addition, the rule provides optional expedients and exceptions that enable entities to continue to apply hedge accounting for hedging relationships where one or more of the critical terms change due to reference rate reform. The rule became effective for all entities as of March 12, 2020 and is set to expire after December 31, 2024 as per ASU 2022-06, issued in December 2022. During 2023, the Company adopted the practical expedient provided under ASU 2020-04 related to its debt and interest rate swap arrangements and as such, any amendments are treated as a continuation of the existing agreements and no gain or loss on the modification is recorded.
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Recently Issued Accounting Standards Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures. The amendments in ASU 2023-07 improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment profit and loss measures, and provide new segment disclosure requirements for entities with a single reportable segment. The amendments in ASU 2023-07 will be applied retrospectively to all prior periods presented in the financial statements and are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the effect of adopting ASU 2023-07 on its disclosures.
NOTE 2. DISCONTINUED OPERATIONS
As disclosed in Note 1, on August 1, 2023, the Company completed the sale of AeroTech to the Purchaser in exchange for cash consideration of $808.2 million. The Transaction was completed pursuant to the Stock and Asset Purchase Agreement ("Purchase Agreement"), dated May 26, 2023, by and between the Company and Purchaser to sell AeroTech and is subject to post-closing purchase price adjustments under the Purchase Agreement. The Company recognized a gain on the Transaction of $443.7 million, net of $131.4 million of income taxes on the transaction, which is recognized in within the Consolidated Statements of Income for the year ended December 31, 2023. Income taxes on the transaction were reduced by $17.9 million, driven by a tax benefit allocated to discontinued operations from the sale of a subsidiary in the period ending December 31, 2023. The sale of AeroTech supports the Company's strategy to become a pure-play food and beverage solutions provider.
In connection with the Transaction, the Company and the Purchaser entered into a Transition Services Agreement (the "TSA") for the provision of information technology related services for 12 months and of other services for up to 6 months to support the transition of the AeroTech business, subject to the terms and conditions set forth therein. In addition, the TSA provides the Purchaser options to extend the term for information technology related services for up to another 6 months. TSA income is recognized as services are performed, and the income earned is recorded in Selling, general and administrative expense within the Condensed Consolidated Statements of Income to offset the costs incurred to support the TSA. During the year ended December 31, 2023, the Company's cash inflow from the Purchaser related to the TSA was $1.4 million.
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Summarized Discontinued Operations Financial Information
The following table summarizes the results of operations classified as discontinued operations, net of taxes, in the Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021.
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2023 | 2022 | 2021 | ||||||||||||||
| Revenue | $ | $ | $ | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Cost of sales | |||||||||||||||||
| Selling, general and administrative expense | |||||||||||||||||
| Operating income | |||||||||||||||||
| Interest expense | |||||||||||||||||
| Gain on sale of AeroTech | |||||||||||||||||
| Income from discontinued operations before income taxes | |||||||||||||||||
| Income tax provision | |||||||||||||||||
| Income from discontinued operations, net of taxes | $ | $ | $ | ||||||||||||||
In accordance with ASC 205-20, Allocation of Interest to Discontinued Operations, the Company elected to allocate interest expense to discontinued operations for the Company's debt that is not directly attributed to the AeroTech business. Interest expense was allocated based on a ratio of net assets of discontinued operations to the sum of consolidated net assets and consolidated debt.
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The following table provides a reconciliation of the carrying amounts of the major classes of assets and liabilities which are included in assets and liabilities of discontinued operations in the accompanying Consolidated Balance Sheets as of December 31, 2022:
| (In millions) | December 31, 2022 | ||||
| Assets: | |||||
| Cash and cash equivalents | $ | ||||
| Trade receivables, net of allowances | |||||
| Contract assets | |||||
| Inventories | |||||
| Other current assets | |||||
| Total current assets of discontinued operations | $ | ||||
Property, plant and equipment, net of accumulated depreciation of $ | $ | ||||
| Goodwill | |||||
| Intangible assets, net | |||||
| Other assets | |||||
| Total non-current assets of discontinued operations | $ | ||||
| Liabilities: | |||||
| Accounts payable | $ | ||||
| Advance and progress payments | |||||
| Other current liabilities | |||||
| Total current liabilities of discontinued operations | $ | ||||
| Total non-current liabilities of discontinued operations | $ | ||||
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NOTE 3. ACQUISITIONS
During 2022, the Company acquired 100 % of the voting equity of two businesses. The Company did not make any acquisitions during 2023. A summary of the acquisitions made during 2022 is as follows:
| Date | Type | Company/Product Line | Location | |||||||||||||||||
| September 1, 2022 | Stock | Bevcorp, LLC ("Bevcorp") | Eastlake, Ohio | |||||||||||||||||
| A provider of beverage processing and packaging solutions in blending, handling, filling, and closing technologies. The Bevcorp acquisition expands the Company's presence in the ready-to-drink carbonated beverage production market and provides significant cross-selling opportunity in filling and seaming food and beverage applications. | ||||||||||||||||||||
| July 1, 2022 | Stock | Alco-food-machines GmbH & Co. KG ("Alco") | Bad Iburg, Germany | |||||||||||||||||
| A provider of further food processing equipment and production lines for a broad range of food applications. The Alco acquisition extends the Company's capabilities in further processing offerings and strengthens existing full line offerings. | ||||||||||||||||||||
Each acquisition has been accounted for as a business combination. Tangible and identifiable intangible assets acquired and liabilities assumed were recorded at their respective estimated fair values. The excess of the consideration transferred over the estimated fair value of the net assets received has been recorded as goodwill. The factors that contributed to the recognition of goodwill primarily relate to acquisition-driven anticipated cost savings and revenue enhancement synergies coupled with the assembled workforce acquired.
| (In millions) | Bevcorp(1) | Alco(2) | Total | ||||||||||||||
| Financial assets | $ | $ | $ | ||||||||||||||
| Inventories | |||||||||||||||||
| Property, plant and equipment | |||||||||||||||||
Customer relationship (3) | |||||||||||||||||
Patents and acquired technology (3) | |||||||||||||||||
Trademarks (3) | |||||||||||||||||
| Financial liabilities | ( | ( | ( | ||||||||||||||
| Total identifiable net assets | $ | $ | $ | ||||||||||||||
| Cash consideration paid | $ | $ | $ | ||||||||||||||
| Cash acquired | |||||||||||||||||
| Net consideration | $ | $ | $ | ||||||||||||||
Goodwill (4) | $ | $ | $ | ||||||||||||||
(1)The purchase accounting for Bevcorp was final as of March 31, 2023. During the quarter ended March 31, 2023, the Company recorded an increase in cash consideration paid of $1.1 million due to finalization of the working capital adjustments, and refined estimates for financial liabilities by ($1.0 ) million, resulting in a corresponding net increase in residual goodwill of $0.1 million for Bevcorp.
(2)The purchase accounting for Alco was final as of June 30, 2023. During the quarter ended March 31, 2023, the Company made no significant measurement period adjustments for this acquisition. During the quarter ended June 30, 2023, the Company recorded a decrease in cash consideration paid by $1.1
(3)The acquired intangible assets are amortized on a straight-line basis over their estimated useful lives, which range from to twenty-four years . The intangible assets acquired in 2022 have weighted average useful lives of twenty-three years for trademarks, twenty years for customer relationship, and seven years for patents and acquired technology.
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NOTE 4. INVENTORIES
Inventories as of December 31, consisted of the following:
| (In millions) | 2023 | 2022 | |||||||||
| Raw materials | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished goods | |||||||||||
| Gross inventories before valuation adjustments | |||||||||||
| Valuation adjustments | ( | ( | |||||||||
| Net inventories | $ | $ | |||||||||
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, consisted of the following:
| (In millions) | 2023 | 2022 | |||||||||
| Land and land improvements | $ | $ | |||||||||
| Buildings | |||||||||||
| Machinery and equipment | |||||||||||
| Construction in process | |||||||||||
| Accumulated depreciation | ( | ( | |||||||||
| Property, plant and equipment, net | $ | $ | |||||||||
NOTE 6. OTHER ASSETS
Other assets as of December 31, consisted of the following:
| 2023 | 2022 | ||||||||||||||||||||||
| (In millions) | Carrying Amount | Accumulated Amortization | Carrying Amount | Accumulated Amortization | |||||||||||||||||||
| Capitalized software | $ | $ | $ | $ | |||||||||||||||||||
| Cloud computing arrangement implementation costs | |||||||||||||||||||||||
| Other | — | — | |||||||||||||||||||||
| Total other assets | $ | $ | $ | $ | |||||||||||||||||||
Capitalized software amortization expense was $14.4 million, $4.5 million, and $3.7 million for 2023, 2022, and 2021, respectively. Amortization expense related to cloud computing arrangement implementation costs was $2.2 million, $1.3 million, and $1.3 million for 2023, 2022, and 2021, respectively.
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NOTE 7. GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying amount of goodwill were as follows:
| (In millions) | |||||
| Balance as of January 1, 2022 | $ | ||||
| Acquisitions | |||||
| Currency translation | ( | ||||
| Balance as of December 31, 2022 | |||||
| Acquisitions | ( | ||||
| Currency translation | |||||
| Balance as of December 31, 2023 | $ | ||||
Intangible assets consisted of the following:
| 2023 | 2022 | ||||||||||||||||||||||
| (In millions) | Carrying Amount | Accumulated Amortization | Carrying Amount | Accumulated Amortization | |||||||||||||||||||
| Customer relationships | $ | $ | $ | $ | |||||||||||||||||||
| Patents and acquired technology | |||||||||||||||||||||||
| Trademarks | |||||||||||||||||||||||
| Indefinite lived intangibles assets | — | — | |||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total intangible assets | $ | $ | $ | $ | |||||||||||||||||||
Intangible asset amortization expense was $46.1 million, $41.1 million, and $36.7 million for 2023, 2022 and 2021, respectively. Annual amortization expense for intangible assets is estimated to be $44.2 million in 2024, $43.2 million in 2025, $41.5 million in 2026, $38.1 million in 2027, and $34.1 million in 2028.
NOTE 8. DEBT
The components of the Company's borrowings as of December 31, were as follows:
| (In millions) | Maturity Date | 2023 | 2022 | ||||||||||||||
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 December 31, 2023 was 6.75 %
(2) Effective interest rate for the Notes (as defined below) for the quarter ended December 31, 2023 was 0.82 %
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Components of interest expense recognized for the 0.25 % Convertible Senior Notes due 2026 (the "Notes") were as follows for the years ended December 31:
| (In millions) | 2023 | 2022 | 2021 | ||||||||||||||
| Contractual interest expense | $ | $ | $ | ||||||||||||||
| Interest cost related to amortization of issuance costs | |||||||||||||||||
| Total interest expense | $ | $ | $ | ||||||||||||||
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 provided for a $1 billion revolving credit facility that matures in June 2023. The borrowings under the Credit Agreement were used to repay in full all outstanding indebtedness under the previous credit agreement. On May 25, 2021, the Company entered into the first amendment to the
Credit Agreement to permit the issuance of the Convertible Senior Notes described below. On December 14, 2021, the Company entered into the second amendment to increase its borrowing limit from $1 billion to $1.3 billion, extend the maturity of the Credit Agreement from June 2023 to December 2026, and modified the leverage calculation to differentiate between secured debt and total debt. Revolving loans under the credit facility bear interest, at the Company's option, at 1) SOFR (subject to a floor rate of zero ) plus 10 basis points, or 2) an alternative base rate (which is the greater of Wells Fargo’s Prime Rate, the Federal Funds Rate plus 50 basis points, or SOFR (subject to a floor rate of zero ) plus 1.1 % , plus, in each case, a margin dependent on the leverage ratio.
The Company is required to make periodic interest payments on borrowed amounts and to pay an annual commitment fee of 15.0 to 30.0 basis points, depending on its leverage ratio. As of December 31, 2023, the Company had $250.0 million drawn on and $1,043.8 million of availability under the revolving credit facility. The ability to use this availability is limited by the leverage ratio covenant described below.
The obligations under the Credit Agreement are guaranteed by the Company’s domestic and certain foreign subsidiaries and subsequently formed or acquired subsidiaries (the “Guarantors”). The obligations under the Credit Agreement are secured by a first-priority security interest in substantially all of the Guarantor’s tangible and intangible personal property and a pledge of the capital stock of permitted borrowers and certain Guarantors.
The Company's credit facility includes restrictive covenants that, if not met, could lead to renegotiation of its credit facility, a requirement to repay its borrowings, and/or a significant increase in its cost of financing. Restrictive covenants include a minimum interest coverage ratio, a maximum leverage ratio, as well as certain events of default.
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 has accrued 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.
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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.
At any time on or after February 15, 2026, holders may convert their Notes at their option, and in multiples of $1,000 principal 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 year ended December 31, 2023 and none have been converted to date. Also given the daily 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
In conjunction with the Notes, 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.
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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 resulted in a $17.1
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.
NOTE 9. INCOME TAXES
Domestic and foreign components of income from continuing operations before income taxes and non-controlling interests for the years ended on December 31, are shown below:
| (In millions) | 2023 | 2022 | 2021 | ||||||||||||||
| Domestic | $ | $ | $ | ||||||||||||||
| Foreign | |||||||||||||||||
| Income before income taxes | $ | $ | $ | ||||||||||||||
The provision for income taxes related to income from continuing operations for the years ended on December 31, consisted of:
| (In millions) | 2023 | 2022 | 2021 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | $ | $ | ||||||||||||||
| State | |||||||||||||||||
| Foreign | |||||||||||||||||
| Total current | $ | $ | $ | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | $ | ( | $ | ( | $ | ( | |||||||||||
| State | ( | ( | |||||||||||||||
| Foreign | ( | ( | |||||||||||||||
| Total deferred | $ | ( | $ | ( | $ | ( | |||||||||||
| Provision for income taxes | $ | $ | $ | ||||||||||||||
The Company included in the tax provision for the year ended December 31, 2021 an immaterial correction of the rate applied since 2017 to a deferred tax liability associated with an investment in a subsidiary.
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Significant components of deferred tax assets and liabilities at December 31, were as follows:
| (In millions) | 2023 | 2022 | |||||||||
| Deferred tax assets attributable to: | |||||||||||
| Accrued pension and other postretirement benefits | $ | $ | |||||||||
| Accrued expenses and accounts receivable allowances | |||||||||||
| Loss carryforwards | |||||||||||
| Inventories | |||||||||||
| Stock-based compensation | |||||||||||
| Operating lease liabilities | |||||||||||
| Convertible bond | |||||||||||
| Research and development costs | |||||||||||
| Credit carryforwards | |||||||||||
| Other | |||||||||||
| Total deferred tax assets | $ | $ | |||||||||
| Valuation allowance | ( | ( | |||||||||
| Deferred tax assets, net of valuation allowance | $ | $ | |||||||||
| Deferred tax liabilities attributable to: | |||||||||||
| Investment in subsidiary | $ | $ | |||||||||
| Property, plant and equipment | |||||||||||
| Goodwill and intangibles | |||||||||||
| Right to use lease assets | |||||||||||
| Net investment hedges | |||||||||||
| Total deferred tax liabilities | $ | $ | |||||||||
| Net deferred tax liabilities | $ | ( | $ | ( | |||||||
Included in deferred tax assets are tax benefits related to net operating loss carryforwards attributable to foreign and domestic operations. The net tax effect of state and foreign loss carryforwards at year-end 2023 totaled $7.6 million. Of this amount, $7.1 million are available to offset future taxable income in several jurisdictions indefinitely, and $0.5 million are available to offset future taxable income through 2042. Of the tax effected losses, approximately $2.0 million in Belgium and the Netherlands are subject to a full valuation allowance, as management has concluded that, based on the available evidence, it is more likely than not that the deferred tax assets will not be fully utilized.
Included in deferred tax assets at December 31, 2023 are $2.9 million of research and development credit carryforwards, of which $2.6 million are U.S. state credits that will expire beginning in 2030, if unused. Of the $2.6 million, approximately $0.6 million are subject to a full valuation allowance, as management has concluded that, based on the available evidence, it is more likely than not that the deferred tax assets will not be fully utilized.
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The effective income tax rate was different from the statutory U.S. federal income tax rate due to the following:
| 2023 | 2022 | 2021 | |||||||||||||||
| Statutory U.S. federal tax rate | |||||||||||||||||
| Net difference resulting from: | |||||||||||||||||
| Research and development tax incentives | ( | ( | ( | ||||||||||||||
| Foreign earnings subject to different tax rates | |||||||||||||||||
| State income taxes | |||||||||||||||||
| Foreign tax credits | ( | ( | ( | ||||||||||||||
| Effect of UK law change | |||||||||||||||||
| Global intangible low-taxed income (GILTI) | |||||||||||||||||
| Stock based compensation - excess tax benefit | ( | ||||||||||||||||
| Remeasurement of deferred tax liability | ( | ||||||||||||||||
| Valuation allowance | |||||||||||||||||
| Disposition of subsidiary | ( | ||||||||||||||||
| Other | ( | ( | |||||||||||||||
| Total difference | ( | ( | |||||||||||||||
| Effective income tax rate | |||||||||||||||||
The Company considers the unremitted earnings of certain foreign subsidiaries indefinitely reinvested. With respect to these subsidiaries, the Company has not provided deferred taxes on unremitted earnings of approximately $108 million. The amount of unrecognized deferred tax liabilities associated with these earnings is approximately $3.3 million.
As of December 31, 2023, the Company has recorded estimated deferred taxes of $9.4 million for income and withholding taxes related to the Company's foreign subsidiaries that are not permanently reinvested.
As of December 31, 2023 the Company had approximately $0.3 million of unrecognized tax benefits that, if recognized, would impact the Company's effective tax rate.
The Organization for Economic Co-operation and Development (OECD) has established a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar Two), with certain aspects of Pillar Two effective January 1, 2024 and other aspects effective January 1, 2025, depending on the jurisdictions in which the Company operates. While it is uncertain whether the U.S. will enact legislation to adopt Pillar Two, certain countries in which the Company operates have enacted legislation, and other countries are in the process of introducing legislation, to implement Pillar Two. The Company does not expect Pillar Two to have a material impact on the effective tax rate, consolidated results of operation, financial position, or cash flows.
In our major jurisdictions, including the United States, Belgium, Brazil, the Netherlands, Sweden, and the United Kingdom, tax years are typically subject to examination for three to five years.
NOTE 10. PENSION AND POST-RETIREMENT AND OTHER BENEFIT PLANS
The Company sponsors qualified and nonqualified defined benefit pension plans that together cover many of its U.S. employees. The plans provide defined benefits based on years of service and final average salary. The Company also sponsors a noncontributory plan that provides post-retirement life insurance benefits ("OPEB") to some of its U.S. employees. Non-U.S. based employees are eligible to participate in either Company-sponsored or government-sponsored benefit plans to which the Company contributes. The Company also sponsors separate defined contribution plans that cover substantially all of its U.S. employees and some non-U.S. employees.
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The funded status of is pension plans, together with the associated balances recognized in its consolidated financial statements as of December 31, 2023 and 2022, were as follows:
| (In millions) | 2023 | 2022 | |||||||||
| Projected benefit obligation at January 1 | $ | $ | |||||||||
| Service cost | |||||||||||
| Interest cost | |||||||||||
| Actuarial (gain) loss | ( | ||||||||||
| Plan participants' contributions | |||||||||||
| Benefits paid | ( | ( | |||||||||
| Currency translation adjustments | ( | ||||||||||
| Projected benefit obligation at December 31 | $ | $ | |||||||||
| Fair value of plan assets at January 1 | $ | $ | |||||||||
| Company contributions | |||||||||||
| Actual return on plan assets | ( | ||||||||||
| Plan participants' contributions | |||||||||||
| Benefits paid | ( | ( | |||||||||
| Currency translation adjustments | ( | ||||||||||
| Fair value of plan assets at December 31 | $ | $ | |||||||||
| Funded status of the plans (liability) at December 31 | $ | ( | $ | ( | |||||||
| Amounts recognized in the Consolidated Balance Sheets at December 31 | |||||||||||
| Other current liabilities | ( | ( | |||||||||
| Accrued pension and other post-retirement benefits, less current portion | ( | ( | |||||||||
| Net amount recognized | $ | ( | $ | ( | |||||||
The liability associated with the OPEB plan included in the consolidated financial statements was $2.2 million and $2.3 million as of December 31, 2023 and 2022, respectively.
Amounts recognized in accumulated other comprehensive loss at December 31, 2023 and 2022 were $179.2 million and $177.3 million, respectively for pensions, and $(0.3 ) million and $(0.4 ) million for the OPEB plan, respectively. These amounts were primarily unrecognized actuarial gains and losses.
The accumulated benefit obligation for all pension plans was $268.8 million and $265.0 million at December 31, 2023 and 2022, respectively. All pension plans had accumulated benefit obligations in excess of plan assets as of December 31, 2023. For the year ended December 31, 2023, accumulated benefit obligation for the pension plans increased primarily due to actuarial losses incurred from the decrease in discount rates driven by a decrease in bond yields.
Pension costs (income) for the years ended December 31, were as follows:
| (In millions) | 2023 | 2022 | 2021 | ||||||||||||||
| Service cost | $ | $ | $ | ||||||||||||||
| Interest cost | |||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ||||||||||||||
| Amortization of net actuarial loss | |||||||||||||||||
| Settlement loss recognized | |||||||||||||||||
| Total costs | $ | $ | $ | ||||||||||||||
OPEB plan costs were not material for the years ended December 31, 2023, 2022, and 2021.
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Pre-tax changes in projected benefit obligations and plan assets recognized in other comprehensive loss during 2023 for the OPEB plan were not material and for the pension plans were as follows:
| (In millions) | Pensions | ||||
| Actuarial gain | $ | ||||
| Amortization of net actuarial loss | ( | ||||
| Net income recognized in other comprehensive income | $ | ||||
| Total recognized in net periodic benefit cost and other comprehensive income | $ | ||||
The Company uses a corridor approach to recognize actuarial gains and losses that result from changes in actuarial assumptions. The corridor approach defers all actuarial gains and losses resulting from changes in assumptions in other accumulated other comprehensive income (loss), such as those related to changes in the discount rate and differences between actual and expected returns on plan assets. These unrecognized gains and losses are amortized when the net gains and losses exceed 10% of the higher of the market-related value of the assets or the projected benefit obligation for each respective plan. The amortization is on a straight-line basis over the life expectancy of the plan’s participants for the frozen plans and the expected remaining service periods for the other plans.
Beginning in 2010, the U.S. defined benefit plans were frozen to new entrants and future benefit accruals for non-union participants were discontinued.
The following weighted-average assumptions were used to determine the benefit obligations for the pension plans:
| 2023 | 2022 | 2021 | |||||||||||||||
| Discount rate | |||||||||||||||||
| Rate of compensation increase | |||||||||||||||||
The following weighted-average assumptions were used to determine net periodic benefit cost for the pension plans:
| 2023 | 2022 | 2021 | |||||||||||||||
| Discount rate | |||||||||||||||||
| Rate of compensation increase | |||||||||||||||||
| Expected rate of return on plan assets | |||||||||||||||||
The estimate of the expected rate of return on plan assets is based primarily on the historical performance of plan assets, asset allocation, current market conditions and long-term growth expectations.
Plan assets
The Company's pension investment strategy balances the requirements to generate returns using higher-returning assets, such as equity securities, with the need to control risk in the pension plan with less volatile assets, such as fixed-income securities. Risks include, among others, the likelihood of the pension plans being underfunded, thereby increasing their dependence on Company contributions. The assets are managed by professional investment firms and performance is evaluated against specific benchmarks.
Target asset allocations and actual allocations as of December 31, 2023 and 2022 were as follows:
| Target | 2023 | 2022 | |||||||||||||||
| Equity | |||||||||||||||||
| Fixed income | |||||||||||||||||
| Real estate and other | |||||||||||||||||
| Cash | |||||||||||||||||
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Actual pension plans’ asset holdings by category and level within the fair value hierarchy are presented in the following table:
| As of December 31, 2023 | As of December 31, 2022 | ||||||||||||||||||||||||||||||||||
| (In millions) | Total | Level 1 | Level 2 | Total | Level 1 | Level 2 | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Equity securities: | |||||||||||||||||||||||||||||||||||
All caps(1) | |||||||||||||||||||||||||||||||||||
International(2) | |||||||||||||||||||||||||||||||||||
Infrastructure(3) | |||||||||||||||||||||||||||||||||||
| Fixed income securities: | |||||||||||||||||||||||||||||||||||
Government securities(4) | |||||||||||||||||||||||||||||||||||
Corporate bonds(5) | |||||||||||||||||||||||||||||||||||
Other investments(6) | |||||||||||||||||||||||||||||||||||
| Total assets at fair value | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Investments valued using NAV as a practical expedient(7) | |||||||||||||||||||||||||||||||||||
| Total assets | $ | $ | |||||||||||||||||||||||||||||||||
(1)Includes funds that invest in large, medium and small cap equity securities.
(2)Includes funds that invest primarily in international equity securities.
(3)Includes funds that invest primarily in infrastructure equity securities.
(4)Includes U.S. government securities and funds that invest primarily in U.S. government bonds, including treasury inflation protected securities.
(5)Includes funds that invest in investment grade bonds, high yield bonds and mortgage-backed fixed income securities.
(6)Includes funds that invest primarily in commodities and investments in insurance contracts held by the Company's foreign pension plans.
(7)The Company elected the practical expedient to characterize certain new investments which are measured at net asset values ("NAV") that have not been classified in the fair value hierarchy.
The fair value of assets classified as Level 1 is based on unadjusted quoted prices in active markets for identical assets. The fair value of assets classified as Level 2 is based on quoted prices for similar assets or based on valuations made using inputs that are either directly or indirectly observable as of the reporting date. Such inputs include net asset values reported at a minimum on a monthly basis by investment funds or contract values provided by the issuing insurance company. The Company is able to sell any of its investment funds with notice of no more than 30 days. For more information on the fair value hierarchy, see Note 17. Fair Value of Financial Instruments.
Contributions
The Company expects to contribute $3.5 million to its pension and other post-retirement benefit plans in 2024. The pension contributions will be primarily for the non-U.S. pension plans. All of the contributions are expected to be in the form of cash.
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Estimated future benefit payments
The following table summarizes expected benefit payments from various pension benefit plans through 2032. Actual benefit payments may differ from expected benefit payments.
| (In millions) | Pensions | ||||
| 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029-2033 | |||||
Savings Plans
U.S. and some international employees participate in defined contribution savings plans that the Company sponsors. These plans generally provide company matching contributions on participants’ voluntary contributions and/or company non-elective contributions. Additionally, certain highly compensated employees participate in a non-qualified deferred compensation plan, which also allows for company matching contributions and company non-elective contributions on compensation in excess of the Internal Revenue Code Section 401(a) (17) limit. The expense for matching contributions was $13.6 million, $11.9 million, and $10.4 million in 2023, 2022 and 2021, respectively.
NOTE 11. 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 post-retirement benefits plans, derivatives designated as hedges, and foreign currency translation adjustments. Changes in the AOCI balances for the years ended December 31, 2023 and 2022 by component are shown in the following table:
| (In millions) | Pension and Other Post-retirement Benefits(1) | Derivatives Designated as Hedges(1) | Foreign Currency Translation(1) | Total(1) | |||||||||||||||||||
| Balance as of January 1, 2022 | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Other comprehensive income (loss) before reclassification | ( | ( | |||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | ( | ||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Other comprehensive income (loss) before reclassification | ( | ||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | ( | ( | ( | ||||||||||||||||||||
| Balance as of December 31, 2023 | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
(1) All amounts are net of income taxes.
Reclassification adjustments from AOCI into earnings for pension and other post-retirement benefits plans for the year ended December 31, 2023 were $5.0 million of charges to pension expense (income), other than service cost, net of $1.3 million income tax benefit. Reclassification adjustments for derivatives designated as hedges for the year ended December 31, 2023 were $10.8 million of interest income, net of $2.8 million income tax provision. Reclassification adjustments for foreign currency translation related to net investment hedges for the year ended December 31, 2023 were $1.5 0.4 million income tax provision.
Reclassification adjustments from AOCI into earnings for pension and other post-retirement benefits plans for the year ended December 31, 2022 were $8.2 million of charges to pension expense (income), other than service cost, net of $2.1 million income tax benefit. Reclassification adjustments for derivatives designated as hedges for the year ended December 31, 2022 were $2.4 million of benefit in interest expense, net of $0.7 million income tax provision. Reclassification adjustments for foreign currency translation related to net investment hedges for the year ended December 31, 2022 were $2.9 million of benefit in interest expense, net of $0.7 million in provision for income taxes.
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NOTE 12. STOCK-BASED COMPENSATION
The Company recorded stock-based compensation expense and related income tax effects for the years ended December 31, as follows:
| (In millions) | 2023 | 2022 | 2021 | ||||||||||||||
| Stock-based compensation expense | $ | $ | $ | ||||||||||||||
| Tax benefit recorded in consolidated statements of income | $ | $ | $ | ||||||||||||||
As of December 31, 2023, there was $16.0 million of unrecognized stock-based compensation expense for outstanding awards expected to be recognized over a weighted average period of 1.8 years.
Incentive Compensation Plan
The Company sponsors a stock-based compensation plan (the “Incentive Compensation Plan”) that provides certain incentives and awards to its officers, employees, directors and consultants. The Incentive Compensation Plan allows the Compensation Committee (the “Committee”) of the Board of Directors to make various types of awards to eligible individuals. Awards that may be issued include common stock, stock options, stock appreciation rights, restricted stock and stock units.
Restricted stock unit awards specify any applicable performance goals, the time and rate of vesting and such other provisions as determined by the Committee. Restricted stock units generally vest after 3 years of service, but may also vest upon a change of control as defined in the Incentive Compensation Plan. The 2017 Incentive Compensation Plan was approved by stockholders in May 2017. The 2017 Incentive Compensation Plan replaced the prior incentive compensation plan (the “2008 Incentive Compensation Plan”). The aggregate number of shares of common stock that are authorized for issuance under the 2017 Incentive Compensation Plan is (i) 1,000,000 shares, plus (ii) the number of shares of common stock that remained available for issuance under the 2008 Incentive Compensation Plan on the effective date of the 2017 Incentive Compensation Plan, plus (iii) the number of shares of common stock that were subject to outstanding awards under the 2008 Incentive Compensation Plan on the effective date of the 2017 Incentive Compensation Plan that are canceled, forfeited, returned or withheld without the issuance of shares thereunder.
Impact of Retirement on Outstanding Awards
In the event of an executive officer’s retirement from the Company upon or after attaining age 62 and a specified number of years of service, any nonvested awards remain outstanding after retirement and vest on the originally scheduled vesting date. This permits flexibility in retirement planning, permits the Company to provide an incentive for the vesting period and does not penalize employees who receive awards as incentive compensation when they retire.
Restricted Stock Units
A summary of the nonvested restricted stock units as of December 31, 2023 and changes during the year is presented below:
| Shares | Weighted-Average Grant-Date Fair Value | ||||||||||
| Nonvested at December 31, 2022 | $ | ||||||||||
| Granted | $ | ||||||||||
| Vested | ( | $ | |||||||||
| Forfeited | ( | $ | |||||||||
| Nonvested at December 31, 2023 | $ | ||||||||||
The Company grants time-based and performance-based restricted stock units with a vesting period of to three years
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The number of shares to be issued for performance-based restricted stock units awards made in 2023, 2022, and 2021, is dependent upon performance over the three year period ending December 31st of the respective term, with respect to cumulative diluted earnings per share from continuing operations and average operating return on invested capital (ROIC). The payout for 2023 grants of performance-based units is also dependent and may increase or decrease by 20% if the Company’s three year total shareholder return is within the top quartile or bottom quartile, respectively, of the comparator group of the Standard & Poor’s 1500 Industrial Machinery index. ROIC is defined as net income plus after tax net interest expense divided by average invested capital, which is an average of total shareholders equity plus debt plus future pension expenses held in AOCI less cash and cash equivalents. Based on results achieved in 2023, 2022, and 2021, and the forecasted amounts over the remainder of the performance period, the Company expects to issue a total of 80,839 , 68,608 , and 19,702 , shares at the vesting dates in February 2026, February 2025, and March 2024, respectively. Compensation cost has been measured in 2023 based on these expectations.
The following summarizes values for restricted stock activity in each of the years in the three year period ended December 31:
| 2023 | 2022 | 2021 | |||||||||||||||
| Weighted-average grant-date fair value of restricted stock units granted | $ | $ | $ | ||||||||||||||
| Fair value of restricted stock vested (in millions) | $ | $ | $ | ||||||||||||||
NOTE 13. STOCKHOLDERS’ EQUITY
The following is a summary of capital stock activity (in shares) for the year ended December 31, 2023:
| Common Stock Outstanding | Common Stock Held in Treasury | ||||||||||
| December 31, 2022 | |||||||||||
| Stock awards issued | ( | ||||||||||
| Treasury stock purchases | ( | ||||||||||
| December 31, 2023 | |||||||||||
NOTE 14. REVENUE RECOGNITION
Transaction price allocated to the remaining performance obligations
The Company has estimated that $678.2 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 December 31, 2023. The Company expects to complete these obligations and recognize 93 % as revenue in 2024 and the remainder in 2025.
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Disaggregation of Revenue
In the following table, revenue is disaggregated by type of good or service, primary geographical market, and timing of recognition. The table also includes a reconciliation of the disaggregated revenue to total revenue.
| December 31, | |||||||||||||||||
| (In millions) | 2023 | 2022 | 2021 | ||||||||||||||
| 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) Recurring revenue includes revenue from aftermarket parts and services, re-build services on customer owned equipment, operating leases of equipment, and subscription-based software applications. Non-recurring revenue includes new equipment and installation and the sale of software licenses.
(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) | December 31, 2023 | December 31, 2022 | December 31, 2021 | ||||||||||||||||||||
| Contract Assets | $ | $ | $ | ||||||||||||||||||||
| Contract Liabilities | |||||||||||||||||||||||
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NOTE 15. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share ("EPS") from net income for the respective periods and basic and diluted shares outstanding:
| (In millions, except per share data) | 2023 | 2022 | 2021 | ||||||||||||||
| Basic earnings per share: | |||||||||||||||||
| Income from continuing operations | $ | $ | $ | ||||||||||||||
| Income from discontinued operations, net of tax | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Weighted average number of shares outstanding | |||||||||||||||||
| Basic earnings per share from: | |||||||||||||||||
| Continuing operations | $ | $ | $ | ||||||||||||||
| Discontinued operations | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Diluted earnings per share: | |||||||||||||||||
| Income from continuing operations | $ | $ | $ | ||||||||||||||
| Income from discontinued operations, net of tax | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Weighted average number of shares outstanding | |||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||
| Restricted stock | |||||||||||||||||
| Total shares and dilutive securities | |||||||||||||||||
| Diluted earnings per share from: | |||||||||||||||||
| Continuing operations | $ | $ | $ | ||||||||||||||
| Discontinued operations | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
NOTE 16. DERIVATIVE FINANCIAL INSTRUMENTS AND CREDIT RISK
Derivative financial instruments
All derivatives are recorded as assets or liabilities in the Consolidated Balance Sheets 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. The Company's major foreign currency exposures involve the markets in Western Europe, South America and Asia. Some sales and purchase contracts contain embedded derivatives due to the nature of doing business in certain jurisdictions, which the Company takes into consideration as part of its risk management policy. The purpose of 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 one year in managing this foreign exchange rate risk. The Company has not designated these forward foreign exchange contracts, which had a notional value at December 31, 2023 of $520.9 million, as hedges and therefore does not apply hedge accounting.
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The fair values of our foreign currency and commodity derivative assets are recorded within other current assets and other assets, and the fair values of foreign currency and commodity 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 December 31, 2023 | As of December 31, 2022 | ||||||||||||||||||||||
| (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 it to net settle for transactions with the same counterparty. However, the Company does not net settle with such counterparties. As a result, the Company presents derivatives at their gross fair values in the Consolidated Balance Sheets.
As of December 31, 2023 and 2022, information related to these offsetting arrangements was as follows:
| (In millions) | As of December 31, 2023 | ||||||||||||||||||||||||||||
| Offsetting of Assets | |||||||||||||||||||||||||||||
| Gross Amounts of Recognized Assets | Gross Amounts Offset in the Consolidated Balance Sheets | Amount Presented in the Consolidated Balance Sheets | Amount Subject to Master Netting Agreement | Net Amount | |||||||||||||||||||||||||
| Derivatives | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
| Offsetting of Liabilities | As of December 31, 2023 | ||||||||||||||||||||||||||||
| Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Consolidated Balance Sheets | Amount Presented in the Consolidated Balance Sheets | Amount Subject to Master Netting Agreement | Net Amount | |||||||||||||||||||||||||
| Derivatives | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
| (In millions) | As of December 31, 2022 | ||||||||||||||||||||||||||||
| Offsetting of Assets | |||||||||||||||||||||||||||||
| Gross Amounts of Recognized Assets | Gross Amounts Offset in the Consolidated Balance Sheets | Amount Presented in the Consolidated Balance Sheets | Amount Subject to Master Netting Agreement | Net Amount | |||||||||||||||||||||||||
| $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| Offsetting of Liabilities | As of December 31, 2022 | ||||||||||||||||||||||||||||
| Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Consolidated Balance Sheets | Amount Presented in the Consolidated Balance Sheets | Amount Subject to Master Netting Agreement | Net Amount | |||||||||||||||||||||||||
| $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
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The following table presents the location and amount of the 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 Consolidated Statements of Income:
| Derivatives Not Designated as Hedging Instruments | Location of Gain (Loss) Recognized in Income | Amount of Gain (Loss) Recognized in Income | ||||||||||||||||||||||||
| (In millions) | 2023 | 2022 | 2021 | |||||||||||||||||||||||
| Foreign exchange contracts | Revenue | $ | $ | ( | $ | ( | ||||||||||||||||||||
| Foreign exchange contracts | Cost of sales | ( | ( | ( | ||||||||||||||||||||||
| Foreign exchange contracts | Selling, general and administrative expense | |||||||||||||||||||||||||
| Commodity contracts | Income from discontinued operations | ( | ||||||||||||||||||||||||
| Total | $ | $ | ( | $ | ( | |||||||||||||||||||||
| Remeasurement of assets and liabilities in foreign currencies | ( | ( | ||||||||||||||||||||||||
| Net gain (loss) | $ | $ | ( | $ | ( | |||||||||||||||||||||
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 SOFR 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 December 31, 2023, the fair value of these derivatives designated as cash flow hedges is recorded in the Consolidated Balance Sheet as other assets of $12.3 million and as accumulated other comprehensive income, net of tax, of $9.2 million. At December 31, 2022, the fair value of these derivatives designated as cash flow hedges is recorded in the Consolidated Balance Sheet as other assets of $19.9 million and as accumulated other comprehensive income, net of tax, of $14.8 million.
Net Investment: In July 2018, the Company entered into cross currency swap agreements that synthetically swap $116.4 million of fixed rate debt to Euro denominated fixed rate debt. The agreements were designated as net investment hedges for accounting purposes. Accordingly, the gains or losses on these derivative instruments were included in the foreign currency translation component of other comprehensive income. The agreements matured in July 2023 resulting in cash proceeds and a gain of $5.8 1.5 million, $2.9 million, and $2.9 million for the years ended December 31, 2023, 2022, and 2021, respectively.
At December 31, 2022, the fair value of these derivatives designated as net investment hedges is recorded in the Consolidated Balance Sheet as other current assets of $9.9 million and as accumulated other comprehensive income, net of tax, of $7.3 million.
Refer to Note 17. 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. The Company's maximum exposure to credit loss in the event of non-performance by the counterparty, for all receivables and derivative contracts as of December 31, 2023, is limited to the amount outstanding on the financial instrument. Allowances for losses are established based on collectability assessments. Refer to Note 1. Summary of Significant Accounting Policies 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 17. 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 December 31, 2023 | As of December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||||||||||||||
| Investments | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Derivatives | |||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| 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. As of December 31, 2023, $0.3 million of investments are recorded in other current assets in the Consolidated Balance Sheet related to investments that are expected to be redeemed within the next twelve months. The remaining investments are reported separately in other assets on the Consolidated Balance Sheets. Investments include an unrealized gain of $1.7 million as of December 31, 2023 and unrealized loss of $3.9 million as of December 31, 2022.
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 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 and the estimated fair values of debt financial instruments as of December 31 were as follows:
| 2023 | 2022 | ||||||||||||||||||||||
| (In millions) | Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | |||||||||||||||||||
| Convertible senior notes | $ | $ | $ | $ | |||||||||||||||||||
| Revolving credit facility, expires December 14, 2026 | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
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. The fair value of the Convertible senior notes is estimated using Level 2 inputs as they are not registered securities nor listed on any securities exchange but may be traded by qualified institutional buyers.
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NOTE 18. 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 results of operations or financial position. However, it is possible that the ultimate resolution of such matters, if unfavorable, may be material to 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 arbitration, 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 approximately $20.0 million at December 31, 2023, represent guarantees of future performance. The Company also has provided approximately $6.1 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 ; the Company expects to replace them 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 eighty-five percent of the contract values. In addition, the Company generally retains recourse to the equipment sold. As of December 31, 2023, the gross value of such arrangements was $2.1 million, of which the Company's net exposure under such guarantees was $0.4 million.
The Company provides warranties of various lengths and terms to certain 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 for products where reliable, historical experience of warranty claims and costs exists. The Company also provides a warranty liability when additional specific obligations are identified. The warranty obligation reflected in other current liabilities in the Consolidated Balance Sheets 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:
| (In millions) | 2023 | 2022 | |||||||||
| Balance at beginning of the year | $ | $ | |||||||||
| Expenses for new warranties | |||||||||||
| Adjustments to existing accruals | ( | ( | |||||||||
| Claims paid | ( | ( | |||||||||
| Added through acquisition | |||||||||||
| Translation | ( | ||||||||||
| Balance at end of year | $ | $ | |||||||||
NOTE 19. LEASES
Lessee Accounting
The components of the Company's lease costs for the years ended December 31, were as follows:
| (In millions) | 2023 | 2022 | 2021 | ||||||||||||||
| Fixed lease cost | $ | $ | $ | ||||||||||||||
| Variable lease cost | |||||||||||||||||
| Total operating lease cost | $ | $ | $ | ||||||||||||||
86
Included within operating lease costs are short-term lease costs, which were $1.4 million, $1.3 million, and $0.9 million for the years ended December 31, 2023, 2022, and 2021, respectively, and sublease income which was immaterial for the years ended December 31, 2023, 2022, and 2021. The Company's finance lease cost was immaterial for the years ended December 31, 2023, 2022, and 2021.
Supplemental cash flow information related to the Company's leases for the years ended December 31, was as follows:
| (In millions) | 2023 | 2022 | 2021 | ||||||||||||||
| Operating cash flows from operating leases | $ | $ | $ | ||||||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | $ | $ | ||||||||||||||
Financing cash flows from finance leases were immaterial for the years ended December 31, 2023, 2022, and 2021. Right-of-use assets obtained in exchange for new finance lease liabilities were $1.2 million for the year ended December 31, 2023 and immaterial for the years ended December 31, 2022, and 2021.
Supplemental balance sheet information related to the Company's leases as of December 31, was as follows:
| (In millions) | Balance Sheet Classification | 2023 | 2022 | ||||||||||||||
| Lease ROU assets: | |||||||||||||||||
| Operating | Other assets | $ | $ | ||||||||||||||
Finance (a) | Net property, plant and equipment | ||||||||||||||||
| Total lease ROU assets | $ | $ | |||||||||||||||
| Lease liabilities: | |||||||||||||||||
| Current: | |||||||||||||||||
| Operating | Other current liabilities | $ | $ | ||||||||||||||
Finance (a) | |||||||||||||||||
| Long-term: | |||||||||||||||||
| Operating | Other liabilities | ||||||||||||||||
Finance (a) | |||||||||||||||||
| Total lease liabilities | $ | $ | |||||||||||||||
(a) Finance leases include real estate leases for which the Company is a lessee for an indefinite lease term. However, these finance leases have no lease liability outstanding as of December 31, 2023 as no amounts are due under the lease.
The following table presents the weighted-average remaining lease term and discount rates for the leases for which the Company is the lessee:
| (In millions) | 2023 | 2022 | |||||||||
| Weighted-average remaining lease term (years) | |||||||||||
| Operating leases | |||||||||||
Finance leases(a) | |||||||||||
| Weighted-average discount rate | |||||||||||
| Operating leases | |||||||||||
Finance leases(a) | |||||||||||
(a) Excludes real estate finance leases for which the Company is a lessee for an indefinite lease term and has no lease liability outstanding as of December 31, 2023.
87
The majority of ROU assets and lease liabilities, approximately 83 %, relate to real estate leases, with the remaining amount primarily comprised of vehicle leases.
Maturity of operating and finance lease liabilities as of December 31, 2023, in millions:
| Operating Leases | Finance Leases | ||||||||||
Year 1(a) | $ | $ | |||||||||
| Year 2 | |||||||||||
| Year 3 | |||||||||||
| Year 4 | |||||||||||
| Year 5 | |||||||||||
| After Year 5 | |||||||||||
| Total lease payments | $ | $ | |||||||||
| Less: Interest on lease payments | ( | ( | |||||||||
| Present value of lease liabilities | $ | $ | |||||||||
Refer to Note 21. Related Party Transactions for details of operating lease agreements with related parties.
Lessor Accounting
Operating Leases:
The following tables provide the required information regarding operating leases for which the Company is the lessor.
Operating Lease Revenue:
| (In millions) | December 31, 2023 | December 31, 2022 | December 31, 2021 | ||||||||||||||
| Fixed payment revenue | $ | $ | $ | ||||||||||||||
| Variable payment revenue | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
Operating Lessor Maturity Analysis as of December 31, 2023, in millions:
Year 1(a) | $ | ||||
| Year 2 | |||||
| Year 3 | |||||
| Year 4 | |||||
| Year 5 | |||||
| After Year 5 | |||||
| Total lease receivables | $ | ||||
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Sales-Type Leases:
Sales-Type Lessor Maturity Analysis as of December 31, 2023, in millions:
Year 1(a) | $ | ||||
| Year 2 | |||||
| Year 3 | |||||
| After Year 3 | |||||
| Total lease receivables | $ | ||||
Sales-type lease revenue was $5.2 million, $4.9 million, and $11.6 million for the years ended December 31, 2023, 2022, and 2021 respectively.
Our net investment in sales-type leases were classified in the Consolidated Balance Sheets as of December 31, as follows:
| (In millions) | 2023 | 2022 | |||||||||
| Trade receivables, net of allowances | $ | $ | |||||||||
| Other assets | |||||||||||
| Total | $ | $ | |||||||||
NOTE 20. 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 all other restructuring charges are reported as Restructuring expenses in the Statements of Income.
In the third quarter of 2020, the Company implemented a restructuring plan ("2020 restructuring plan") for manufacturing capacity rationalization across the Company. The Company completed the 2020 restructuring plan as of June 30, 2022 and total cost in connection with the 2020 restructuring plan was $11.0 million.
In the third quarter of 2022, the Company implemented a restructuring plan (the "2022/2023 restructuring plan") to optimize the overall cost structure for the Company on a global basis. The initiatives under this plan include streamlining operations and enhancing our general and administrative infrastructure. As of December 31, 2023, the Company recognized restructuring charges of $16.8 million, net of a cumulative release of the related liability of $6.5 million. The total estimated cost, net of releases was revised in the second quarter from $8.0 million to $10.0 million to a range of $16.0 million to $18.0 million, which was originally expected to be recognized by the end of 2023. During the quarter we have refined our range to $17.0 million to $18.0 million and now expect the full amount to be recognized by the first quarter of 2024. These changes are due to additional actions being taken, as well as delays in certain actions that support our streamlining operations under this plan.
The following table details the cumulative restructuring charges reported in operating income for the 2022/2023 restructuring plan since the implementation of this plan:
| Cumulative Amount | As of the Quarter Ended | Cumulative Amount | |||||||||||||||||||||||||||||||||
| (In millions) | Balance as of December 31, 2022 | March 31, 2023 | June 30, 2023 | September 30, 2023 | December 31, 2023 | Balance as of December 31, 2023 | |||||||||||||||||||||||||||||
| 2022/2023 restructuring plan | |||||||||||||||||||||||||||||||||||
| Severance and related expense | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Total Restructuring charges | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
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Restructuring charges, net of release of related liability, are reported in restructuring expense within the Consolidated Statements of Income. Liability balances for restructuring activities are included in Accounts payable, trade and other and Other current liabilities in the accompanying Consolidated Balance Sheets. The table below details the restructuring activities for the year ended December 31, 2023:
| Impacts to earnings | |||||||||||||||||||||||||||||
| (In millions) | Balance as of December 31, 2022 | Charged to Earnings | Releases | Cash Payments | Balance as of December 31, 2023 | ||||||||||||||||||||||||
| 2022/2023 restructuring plan | |||||||||||||||||||||||||||||
| Severance and related expense | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||
| Other | ( | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||
The Company released $6.2 million of the liability during the year ended December 31, 2023 which it no longer expects to pay in connection with the restructuring plans due to actual severance payments differing from the original estimates and natural attrition of employees.
NOTE 21. RELATED PARTY TRANSACTIONS
The Company is a party to agreements to lease manufacturing facilities from entities owned by certain of the Company's employees who were former owners or employees of acquired businesses. As of December 31, 2023, the operating lease right-of-use asset and the lease liability related to these agreements is $3.5 million and $3.7 million, respectively.
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NOTE 22. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following selected quarterly information for the years ended December 31, 2023 and 2022 has been updated to reflect the change in accounting principle as described in Note 1. Summary of Significant Accounting Policies and the sale of the AeroTech business as described in Note 2. Discontinued Operations:
| Consolidated Statements of Income | Three Months Ended | ||||||||||||||||||||||
| (In millions, except per share data) | March 31, 2023 | June 30, 2023 | September 30, 2023 | December 31, 2023 | |||||||||||||||||||
Total revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
Income from continuing operations | |||||||||||||||||||||||
Income from discontinued operations, net of taxes | |||||||||||||||||||||||
Net income | |||||||||||||||||||||||
Basic earnings per share: (1) | |||||||||||||||||||||||
Continuing operations | $ | $ | $ | $ | |||||||||||||||||||
Discontinued operations | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Diluted earnings per share: (1) | |||||||||||||||||||||||
| Continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Discontinued operations | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||
| (In millions, except per share data) | March 31, 2022 | June 30, 2022 | September 30, 2022 | December 31, 2022 | |||||||||||||||||||
Total revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
Income from continuing operations | |||||||||||||||||||||||
Income from discontinued operations, net of taxes | |||||||||||||||||||||||
Net income | |||||||||||||||||||||||
Basic earnings per share: (1) | |||||||||||||||||||||||
Continuing operations | $ | $ | $ | $ | |||||||||||||||||||
Discontinued operations | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Diluted earnings per share: (1) | |||||||||||||||||||||||
| Continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Discontinued operations | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
(1) Quarterly basic and diluted earnings per share amounts may not add up to the full fiscal year total presented due to rounding. Basic and diluted earnings per share are calculated by dividing net earnings by basic and diluted shares outstanding, respectively.
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Schedule II—Valuation and Qualifying Accounts
| (In thousands) | Additions | ||||||||||||||||||||||||||||
| Description | Balance at Beginning of Period | Charged to Costs and Expenses | Deductions and Other(a) | Balance at End of Period | |||||||||||||||||||||||||
| Year ended December 31, 2021: | |||||||||||||||||||||||||||||
| Allowance for doubtful accounts | $ | $ | $ | $ | |||||||||||||||||||||||||
| Valuation allowance for deferred tax assets | $ | $ | $ | $ | |||||||||||||||||||||||||
| Year ended December 31, 2022: | |||||||||||||||||||||||||||||
| Allowance for credit losses | $ | $ | $ | $ | |||||||||||||||||||||||||
| Valuation allowance for deferred tax assets | $ | $ | $ | $ | |||||||||||||||||||||||||
| Year ended December 31, 2023: | |||||||||||||||||||||||||||||
| Allowance for credit losses | $ | $ | $ | $ | |||||||||||||||||||||||||
| Valuation allowance for deferred tax assets | $ | $ | $ | $ | |||||||||||||||||||||||||
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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ITEM 9A. CONTROLS AND PROCEDURES
(a)Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, management of the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of December 31, 2023 to ensure that information required to be disclosed in reports the Company files or submits under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and (2) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
(b)Management’s Annual Report on Internal Control over Financial Reporting
Internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934) is a process designed 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 (GAAP) and includes those policies and procedures that:
(i)pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the Company;
(ii)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
(iii)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on that evaluation, management concluded that the Company’s internal control over financial reporting is effective as of December 31, 2023, based on the criteria in Internal Control Integrated Framework issued by the COSO.
Attestation Report of the Registered Public Accounting Firm
PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, as stated in their report which is included on page 47.
(c)Changes in Internal Control over Financial Reporting
In the ordinary course of business, the Company reviews its internal control over financial reporting and makes changes to its systems and processes to improve such controls and increase efficiency, while ensuring that the Company maintains effective internal control over financial reporting. Changes may include such activities as implementing new, more efficient systems, automating manual processes and updating existing systems.
There were no changes in our internal control over financial reporting identified in the evaluation for the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.
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ITEM 9B. OTHER INFORMATION
Rule 10b5-1 Trading Plans
(b)
During the three months ended December 31, 2023, no director or officer of the Company adopted terminated
95
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Company has a code of ethics entitled the “Code of Business Conduct and Ethics” that applies to employees, including principal executive and financial officers (including the principal executive officer, principal financial officer and principal accounting officer) as well as directors. A copy of the Code of Business Conduct and Ethics may be found on the Company's website at www.jbtc.com under About Us / Corporate Governance and is available in print to stockholders without charge by submitting a request to the General Counsel and Assistant Secretary of JBT Corporation, 70 West Madison Street, Suite 4400, Chicago, Illinois 60602.
The Company also elects to disclose the information required by Form 8-K, Item 5.05, “Amendments to the registrant’s code of ethics, or waiver of a provision of the code of ethics,” through the Company's website at www.jbtc.com, and such information will remain available on the website for at least a twelve-month period.
Information regarding the Company's executive officers is presented in the section entitled “Information about our Executive Officers” in Part I of this Annual Report on Form 10-K.
Other information required by this Item can be found in the Proxy Statement for the Company's 2024 Annual Meeting of Stockholders and is incorporated herein by reference.
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ITEM 11. EXECUTIVE COMPENSATION
Information required by this item can be found in the sections entitled “Director Compensation,” “Compensation Committee Interlocks and Insider Participation in Compensation Decisions,” “Executive Compensation” and "Compensation Tables and Explanatory Information" of the Proxy Statement for the Company's 2024 Annual Meeting of Stockholders and is incorporated herein by reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information required by this item can be found in the sections entitled “Security Ownership of John Bean Technologies Corporation” and "Compensation Tables and Explanatory Information - Securities Authorized for Issuance Under Equity Compensation Plans Table" of the Proxy Statement for the Company's 2024 Annual Meeting of Stockholders and is incorporated herein by reference.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by this item can be found in the sections entitled “Transactions with Related Persons” and “Director Independence” of the Proxy Statement for the Company's 2024 Annual Meeting of Stockholders and is incorporated herein by reference.
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by this item can be found in the section entitled “Ratification of Appointment of Independent Registered Public Accounting Firm” of the Proxy Statement for the Company's 2024 Annual Meeting of Stockholders and is incorporated herein by reference.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)The following documents are filed as part of this Report:
1.Financial Statements: The consolidated financial statements required to be filed in this Annual Report on Form 10-K are listed below and appear on pages 49 through 92 herein:
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID | |||||
Consolidated Statements of Income for the Years Ended December 31, 2023, 2022 and 2021 | |||||
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023, 2022 and 2021 | |||||
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021 | |||||
2.Financial Statement Schedule: Schedule II—Valuation and Qualifying Accounts is included in this Annual Report on Form 10-K on page 92. All other schedules are omitted because of the absence of conditions under which they are required or because information called for is shown in the consolidated financial statements and notes thereto in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
3.Exhibits:
See Index of Exhibits below for a list of the exhibits being filed or furnished with or incorporated by reference to this Annual Report on Form 10-K.
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INDEX OF EXHIBITS
| Exhibit Number | Exhibit Description | |||||||
| 2.1 | ||||||||
| 2.1A | ||||||||
| 2.2 | ||||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 4.1 | ||||||||
| 4.2 | ||||||||
| 4.3 | ||||||||
| 4.4 | ||||||||
| 4.5 | ||||||||
| 10.1 | ||||||||
10.1A | ||||||||
| 10.2 | ||||||||
| 10.3 | ||||||||
| 10.4 | ||||||||
103
| 10.5 | ||||||||
| 10.6 | ||||||||
10.6A* | ||||||||
| 10.7 | ||||||||
| 10.7A | ||||||||
| 10.7B | ||||||||
10.8* | ||||||||
10.9* | ||||||||
| 10.10 | ||||||||
| 10.10A | ||||||||
| 10.10B | ||||||||
| 10.10C | ||||||||
10.10D* | ||||||||
10.10E* | ||||||||
10.11 | ||||||||
10.11A* | ||||||||
10.12* | ||||||||
104
10.13 | ||||||||
10.13A | ||||||||
10.13B | ||||||||
10.13C | ||||||||
10.13D | ||||||||
10.13E | ||||||||
10.14 | ||||||||
10.15 | ||||||||
10.15A | ||||||||
10.15B | ||||||||
| 10.16 | ||||||||
10.16A | ||||||||
10.16B | ||||||||
10.16C | ||||||||
| 10.17 | ||||||||
10.17A | ||||||||
105
10.17B | ||||||||
10.17C | ||||||||
18.1* | ||||||||
| 21.1* | ||||||||
| 23.1* | ||||||||
| 31.1* | ||||||||
| 31.2* | ||||||||
| 32.1* | ||||||||
| 32.2* | ||||||||
97.1* | ||||||||
| 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 (formatted as Inline XBRL and contained in Exhibit 101). | |||||||
| 1 | The schedules and exhibits to the Amended and Restated Credit Agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish to the Securities and Exchange Commission, upon request, a copy of any omitted schedule or exhibit; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any schedule or exhibit so furnished. | |||||||
| 2 | A management contract or compensatory plan required to be filed with this report. | |||||||
| * | Filed herewith | |||||||
106
ITEM 16. FORM 10-K SUMMARY
None.
107
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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) | ||||||||
| By: | /s/ Brian A. Deck | |||||||
| Brian A. Deck | ||||||||
| President and Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
Date: February 23, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
108
| Signature | Title | Date | ||||||||||||
| /s/ BRIAN A. DECK | President, Director and | February 23, 2024 | ||||||||||||
| Chief Executive Officer | ||||||||||||||
| Brian A. Deck | (Principal Executive Officer) | |||||||||||||
| /s/ MATTHEW J. MEISTER | Executive Vice President and | February 23, 2024 | ||||||||||||
| Chief Financial Officer | ||||||||||||||
Matthew J. Meister | (Principal Financial Officer) | |||||||||||||
| /s/ JESSI L. CORCORAN | Vice President, Corporate Controller | February 23, 2024 | ||||||||||||
| (Principal Accounting Officer) | ||||||||||||||
| Jessi L. Corcoran | ||||||||||||||
| /s/ BARBARA BRASIER | Director | February 23, 2024 | ||||||||||||
| Barbara Brasier | ||||||||||||||
| /s/ C. MAURY DEVINE | Director | February 23, 2024 | ||||||||||||
| C. Maury Devine | ||||||||||||||
| /s/ ALAN D. FELDMAN | Director | February 23, 2024 | ||||||||||||
| Alan D. Feldman | ||||||||||||||
| /s/ POLLY B. KAWALEK | Director | February 23, 2024 | ||||||||||||
| Polly B. Kawalek | ||||||||||||||
| /s/ EMMANUEL LAGARRIGUE | Director | February 23, 2024 | ||||||||||||
| Emmanuel Lagarrigue | ||||||||||||||
| /s/ LAWRENCE V. JACKSON | Director | February 23, 2024 | ||||||||||||
| Lawrence V. Jackson | ||||||||||||||
| /s/ CHARLES L. HARRINGTON | Director | February 23, 2024 | ||||||||||||
| Charles L. Harrington | ||||||||||||||
109
Exhibit 10.6A THIRD AMENDMENT OF JOHN BEAN TECHNOLOGIES CORPORATION NON-QUALIFIED SAVINGS AND INVESTMENT PLAN WHEREAS, John Bean Technologies Corporation (the “Company”) maintains the John Bean Technologies Corporation Non-Qualified Savings and Investment Plan (as amended, the “Plan”); WHEREAS, JBT AeroTech Corporation (“AeroTech”) is currently a wholly-owned subsidiary of the Company and participates in the Plan as an adopting Employer; WHEREAS, the Company, AeroTech and Oshkosh Corporation are currently party to a Stock and Asset Purchase Agreement, dated as of May 26, 2023, pursuant to which AeroTech will cease to be a subsidiary of the Company (the “Transaction”); WHEREAS, the Company now deems it necessary and desirable to amend the Plan to reflect the Transaction; and WHEREAS, this Third 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 and in exercise of the powers reserved to the Company to amend the Plan, the Plan is hereby amended as follows, effective July 31, 2023, contingent upon the closing of the Transaction: 1. Section 3.2 of the Plan is hereby amended to replace the last sentence with the following sentence to read as follows: Effective July 31, 2023, JBT AeroTech Corporation shall no longer be an Adopting Affiliate under the Plan and no employees of JBT AeroTech Corporation shall be active Participants in the Plan. As such time, Accounts held by individuals who are then employed by JBT AeroTech Corporation at such time shall be transferred to the JBT AeroTech Corporation Non-Qualified Savings and Investment Plan. Accounts held by former employees of JBT AeroTech Corporation shall remain outstanding under the terms of the Plan. IN WITNESS WHEREOF, the Company has caused this amendment to be executed by a duly authorized representative this 31st day of July, 2023. John Bean Technologies Corporation /s/ Shelley Bridarolli ___________________ By: Shelley Bridarolli Its: Executive Vice President, Human Resources
JBT – Change in Control Agreement – NEO Exhibit 10.8 -1- JOHN BEAN TECHNOLOGIES CORPORATION Change in Control Executive Severance Agreement THIS AGREEMENT is made and entered into as of the ____ day of ________________, 202_, by and between JOHN BEAN TECHNOLOGIES CORPORATION (hereinafter referred to as the "Company") and ___________________________ (hereinafter referred to as the "Executive"). WHEREAS, the Board has approved the Company’s entering into severance agreements with certain key executives of the Company; WHEREAS, the Executive is a key executive of the Company; WHEREAS, should the possibility of a Change in Control of the Company arise, the Board believes it is imperative that the Company and the Board should be able to rely upon the Executive to continue in the Executive’s position, and that the Company should be able to receive and rely upon the Executive's advice, if requested, as to the best interests of the Company and its shareholders without concern that the Executive might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control; WHEREAS, should the possibility of a Change in Control arise, in addition to the Executive’s regular duties, the Executive may be called upon to assist in the assessment of such possible Change in Control, advise management and the Board as to whether such Change in Control would be in the best interests of the Company and its shareholders, and to take such other actions as the Board might determine to be appropriate; and NOW THEREFORE, to assure the Company that it will have the continued dedication of the Executive and the availability of the Executive’s advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control of the Company, and to induce the Executive to remain in the employ of the Company, and for other good and valuable consideration, the Company and the Executive agree as follows: Article 1. Establishment, Term, and Purpose This Agreement will commence on the Effective Date and will continue in effect until six (6) months after the date that the Executive is no longer a “Key Executive” of the Company, as defined in this Agreement. However, in the event a Change in Control occurs during the term of this Agreement, this Agreement will remain in effect for the longer of: (i) twenty-four (24) months beyond the month in which such Change in Control occurred; and (ii) until all obligations of the Company hereunder have been fulfilled, and until all benefits required hereunder have been paid to the Executive. JBT – Change in Control Agreement - NEO -2- Article 2. Definitions Whenever used in this Agreement, the following terms will have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized. 2.1. Base Salary means the salary of record paid to an Executive as annual salary, excluding amounts received under incentive or other bonus plans, whether or not deferred. 2.2. Beneficiary means the persons or entities designated or deemed designated by the Executive pursuant to Section 12.2 herein. 2.3. Board means the Board of Directors of the Company. 2.4. Cause means: (a) Violated a material requirement of any material Company policy, specifically including a violation of the Company’s Code of Business Conduct and Ethics; (b) Disclosed, without proper authorization, any trade secrets or other confidential information of the Company; or willfully engaging in any other conduct which breaches Section 10 of this Agreement; (c) Engaged in acts of willful malfeasance or misconduct which is demonstrably injurious to the Company or its subsidiaries or affiliates; (d) Is convicted of, or has pled guilty or nolo contendere to, a felony under the laws of the United States or applicable state law; (e) Engaged in any act that, in the reasonable opinion of the Company, is contrary to its best interests and would reasonably be expected to result in material damage to the property, business or reputation of the Company or its affiliates; (f) The Executive's willful and continued failure to substantially perform the Executive’s employment duties in any material respect (other than any such failure resulting from physical or mental incapacity or occurring after issuance by the Executive of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive that specifically identifies the manner in which the Company believes the Executive has failed to perform the Executive’s duties, and after the Executive has failed to resume substantial performance of the Executive’s duties on a continuous basis within thirty (30) calendar days of receiving such demand. 2.5. Change in Control means either a “Change in Ownership,” a “Change in Effective Control,” or a “Change in Ownership of a Substantial Portion of Assets,” as defined below: “Change in Ownership”: A Change in Ownership of the Company occurs on the date that any one person, or more than one Person Acting as a Group (as defined below), acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% JBT – Change in Control Agreement - NEO -3- of the total fair market value or total voting power of the stock of the Company. However, if any one person or more than one Person Acting as a Group, is considered to own more than 50% of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Ownership of the Company (or to cause a Change in Effective Control of the Company). An increase in the percentage of stock owned by any one person, or Persons Acting as a Group, as a result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock. This applies only when there is a transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company remains outstanding after the transaction. Persons Acting as a Group: Persons will not be considered to be acting as a group solely because they (i) purchase or own stock of the same corporation at the same time, or as a result of the same public offering, or (ii) purchase assets of the same corporation at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock or assets, or similar business transaction with the Company. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock or assets, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to the ownership in that corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. “Change in Effective Control”: A Change in Effective Control of the Company occurs on the date that either – (i) Any one person, or more than one Person Acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company; or (ii) a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. A Change in Effective Control will have occurred only if the Participant is employed by the Company or an Employer upon the date of the Change in Effective Control or the Company is liable for the payment of the benefits hereunder and no other corporation is a majority shareholder of the Company. Further, in the absence of an event described in paragraph (i) or (ii), a Change in Effective Control of the Company will not have occurred. Acquisition of additional control: If any one person, or more than one Person Acting as a Group, is considered to effectively control the Company, the acquisition of additional control of the Company by the same person or persons is not considered to cause a Change in Effective Control of the Company (or to cause a Change in Ownership of the Company). "Change in Ownership of a Substantial Portion of Assets": A Change in Ownership of a Substantial Portion of Assets occurs on the date that any one person, or more than one Person Acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent JBT – Change in Control Agreement - NEO -4- acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. Transfers to a related person: There is no Change in Control when there is a transfer to an entity that is controlled by the shareholders of the Company immediately after the transfer. A transfer of assets by the Company is not treated as a Change of Ownership of a Substantial Portion of Assets if the assets are transferred to – (i) A shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock; (ii) An entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company; (iii) A person, or more than one Person Acting as a Group, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company; or (iv) An entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in paragraph (iii). A person’s status is determined immediately after the transfer of the assets. For example, a transfer to a corporation in which the Company has no ownership interest before the transaction, but which is a majority-owned subsidiary of the Company after the transaction is not treated as a Change in Ownership of a Substantial Portion of Assets of the Company. 2.6. Code means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. 2.7. Committee means the Compensation Committee of the Board, or any other committee of the Board appointed to perform the functions of the Compensation Committee. 2.8. Company means John Bean Technologies Corporation, a Delaware corporation, or any successor thereto as provided in Article 11 herein. 2.9. Disability means complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which the Executive was employed when such disability commenced. 2.10. Effective Date means the date of this Agreement set forth above. 2.11. Effective Date of Termination means the date on which a Qualifying Termination occurs which triggers the payment of Severance Benefits hereunder.
JBT – Change in Control Agreement - NEO -5- 2.12. Exchange Act means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. 2.13. Good Reason means, without the Executive's express written consent, the occurrence of any one or more of the following: (a) The assignment of the Executive to duties materially inconsistent with the Executive's authorities, duties, responsibilities, and status (including, without limitation, offices, titles and reporting requirements) as an employee of the Company (including, without limitation, any material change in duties or status as a result of the stock of the Company ceasing to be publicly traded or of the Company becoming a subsidiary of another entity, or any material change in the Executive's reporting relationship, such as the chairman or chief executive officer ceasing to report to the Board of Directors of a publicly traded company), or a material reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from the greatest of (i) those in effect on the Effective Date; (ii) those in effect during the fiscal year immediately preceding the year of the Change in Control; and (iii) those in effect immediately preceding the Change in Control; (b) The Company's requiring the Executive to be based at a location which is at least fifty (50) miles further from the Executive’s then current primary residence than is such residence from the office where the Executive is located at the time of the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's business obligations as of the Effective Date or as the same may be changed from time to time prior to a Change in Control; (c) A material reduction by the Company in the Executive’s Base Salary as in effect on the Effective Date or as the same may be increased from time to time; (d) A material reduction in the Executive’s level of participation in any of the Company’s short- and/or long-term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or arrangements in which the Executive participates from the greatest of the levels in place: (i) on the Effective Date; (ii) during the fiscal year immediately preceding the fiscal year of the Change in Control; and (iii) on the date immediately preceding the date of the Change in Control; or (e) The failure of the Company to assume and agree to perform this Agreement in all material respects, as contemplated in Article 11 herein. The existence of Good Reason will not be affected by the Executive's temporary incapacity due to physical or mental illness not constituting a Disability. The Executive's continued employment will not constitute a waiver of the Executive's rights with respect to any circumstance constituting Good Reason. Notwithstanding the above to the contrary, “Good Reason” for Executive’s separation from employment will exist only if (i) the Executive provides written notice to the Company within ninety (90) days of the occurrence of any of the above listed events, (ii) the Company fails to cure the event within thirty (30) days following the Company’s receipt of the JBT – Change in Control Agreement - NEO -6- Executive’s written notice, and (iii) the Executive separates from employment with the Company effective not later than sixty (60) days after the end of the Company’s cure period. 2.14. Key Executive means the Company’s Chief Executive Officer and any other officer of the Company that reports directly to the Company’s Chief Executive Officer and is designated as a member of the Executive Leadership Team (or its equivalent) by the Chief Executive Officer. 2.15. Notice of Termination means a written notice which indicates the specific termination provision in this Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.16. Person has the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as provided in Section 13(d). 2.17. Qualifying Termination means any of the events described in Section 3.2 herein, the occurrence of which triggers the payment of Severance Benefits hereunder. 2.18. Severance Benefits means the payment of severance compensation as provided in Section 3.3 herein. 2.19. Trust means the Company grantor trust to be created pursuant to Article 5 of this Agreement. Article 3. Severance Benefits 3.1. Right to Severance Benefits. The Executive will be entitled to receive from the Company Severance Benefits, as described in Section 3.3 herein, if there has been a Change in Control of the Company and if, within twenty-four (24) calendar months following the Change in Control, a Qualifying Termination of the Executive has occurred. The Executive will not be entitled to receive Severance Benefits if the Executive’s employment is terminated (i) for Cause, (ii) due to a voluntary termination without Good Reason, or (iii) due to death or Disability. 3.2. Qualifying Termination. The occurrence of any one or more of the following events will trigger the payment of Severance Benefits to the Executive under this Agreement: (a) An involuntary termination of the Executive's employment by the Company for reasons other than Cause, Disability or death within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs; (b) A voluntary termination by the Executive for Good Reason within twenty- four (24) calendar months following the month in which a Change in Control of the Company occurs pursuant to a Notice of Termination delivered to the Company by the Executive; or JBT – Change in Control Agreement - NEO -7- (c) The Company or any successor company breaches any of the material provisions of this Agreement. 3.3. Description of Severance Benefits. In the event the Executive becomes entitled to receive Severance Benefits, as provided in Sections 3.1 and 3.2 herein, the Company will pay to the Executive (or in the event of the Executive’s death, the Executive’s Beneficiary) and provide him with the following: (a) An amount equal to two (2) times the highest rate of the Executive's annualized Base Salary in effect at any time up to and including the Effective Date of Termination. (b) An amount equal to two (2) times the Executive's highest annualized target total cash Management Incentive Award granted under the John Bean Technologies Corporation Incentive Compensation and Stock Plan for any plan year up to and including the plan year in which the Executive's Effective Date of Termination occurs. (c) An amount equal to the Executive's unpaid Base Salary, and unused and accrued vacation pay, earned or accrued through the Effective Date of Termination. (d) An amount equal to the target total cash Management Incentive Award established for the plan year in which the Executive's Effective Date of Termination occurred, prorated through the Effective Date of Termination. (e) Subject to applicable law and regulation as of the Effective Date of Termination, a continuation of the Company’s welfare benefits of health care, life and accidental death and dismemberment, and disability insurance coverage for twenty-four (24) months after the Effective Date of Termination. These benefits will be provided to the Executive (and to the Executive's covered spouse and dependents) at the same premium cost, and at the same coverage level, as in effect as of the date of the Change in Control. The continuation of these welfare benefits will be discontinued prior to the end of the twenty-four (24) month period if the Executive has available substantially similar benefits at a comparable cost from a subsequent employer, as determined by the Committee. In addition, the Company will make available for purchase by the Executive continued health care, life and accidental death and dismemberment, and disability insurance coverage at the same coverage level as in effect as of the date of the Change in Control for a period of twenty-four (24) months beginning immediately upon the end of the coverage period provided under the foregoing provisions of this Section 3.3(e). (f) Time-based equity awards granted under the John Bean Technologies Corporation Incentive Compensation and Stock Plan will vest on the Effective Date of Termination and immediately become transferable thereafter. Performance-based equity awards will vest on the Effective Date of Termination. For purposes of determining the amount of the resulting award in such an event, the number of RSUs relating to any then- completed year(s) in the performance period that are deemed earned will be determined JBT – Change in Control Agreement - NEO -8- based on actual performance and, for any year(s) that have not been completed, it will be assumed that the Company achieved “target” performance on each of the performance measures for such year(s), resulting in the payment of 100% of the one-third of the total target RSU award amount of this grant relating to each such year. Any restrictions imposed by Company stock ownership guidelines applicable to the sale of the Company’s Common Stock by executive officers will not apply to any Awards granted to the Executive prior to a Change of Control under the John Bean Technologies Corporation Incentive Compensation and Stock Plan or other incentive arrangements adopted by the Company that vests as a result of the Change of Control in accordance with the terms of this Agreement. The aggregate benefits accrued by the Executive as of the Effective Date of Termination under the John Bean Technologies Corporation Salaried Employees’ Retirement Program, the John Bean Technologies Corporation Savings and Investment Plan, the John Bean Technologies Corporation Salaried Employees’ Equivalent Retirement Plan, the John Bean Technologies Corporation Non- Qualified Savings and Investment Plan and other savings and retirement plans sponsored by the Company will be determined and distributed pursuant to the terms of the applicable plan in effect as of the day immediately prior to the Change in Control, including but not limited to, the Executive’s distribution elections. Solely for vesting purposes under the Company's nonqualified retirement plans, it will be assumed that the Executive's employment continued following the Effective Date of Termination for two (2) full years (i.e., two (2) additional years of age and service credits will be added for vesting only). 3.4. Termination for Disability. If the Executive's employment is terminated due to Disability, the Executive will receive the Executive’s Base Salary through the Effective Date of Termination, and the Executive's benefits will be determined in accordance with the Company's disability, retirement, survivor's benefits, insurance and other applicable plans and programs then in effect and the Executive will not be entitled to the Severance Benefits described in Section 3.3. 3.5. Termination upon Death. If the Executive's employment is terminated due to death, the Executive's benefits will be determined in accordance with the Company's retirement, survivor's benefits, insurance and other applicable programs of the Company then in effect and neither the Executive nor the Executive’s Beneficiary will be entitled to the Severance Benefits described in Section 3.3. 3.6. Termination for Cause, or Other Than for Good Reason. Following a Change in Control of the Company, if the Executive's employment is terminated either: (a) by the Company for Cause; or (b) by the Executive (other than for Good Reason, or under circumstances giving rise to a Qualifying Termination described in Section 3.2(c) herein), the Company will pay the Executive an amount equal to the Executive’s Base Salary and accrued vacation through the Effective Date of Termination, at the rate then in effect, plus all other amounts to which the Executive is entitled under any plans of the Company, at the time such payments are due and the Company will have no further obligations to the Executive under this Agreement. If the Executive’s employment is
JBT – Change in Control Agreement - NEO -9- terminated for Cause or Other Than for Good Reason, the Executive is not entitled to the Severance Benefits described in Section 3.3. 3.7. Notice of Termination. Any termination of employment by the Company or by the Executive for Good Reason will be communicated by a Notice of Termination. Article 4. Form and Timing of Severance Benefits 4.1. Form and Timing of Severance Benefits. Subject to the provisions of Section 10(d), the Severance Benefits described in Sections 3.3 (a), (b), (c) and (d) herein will be paid in cash to the Executive (or the Executive’s Beneficiary, if applicable) in a single lump sum as soon as practicable following the Effective Date of Termination, but in no event beyond thirty (30) days from such date; provided, if any such Severance Benefits constitute deferred compensation under Section 409A of the Code and are payable within a period that spans two calendar years, such Severance Benefits shall be paid in the later calendar year; provided further that, if the Executive is deemed on the Effective Date of Termination to be a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code, any such Severance Benefits that constitute deferred compensation under Section 409A of the Code and would otherwise be payable prior to the earlier of (i) the 6-month anniversary of the Executive’s Qualifying Termination and (ii) the date of the Executive’s death (the “Delay Period”) shall instead be paid in a lump sum immediately upon (and not before) the expiration of the Delay Period. To the extent any in-kind benefits provided to Executive, or any reimbursement by the Company for expenses incurred by Executive to obtain such benefits, under Section 3.3 (e) herein constitute deferred compensation under Section 409A of the Code, (i) all such reimbursements shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Executive, (ii) any right to such reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, (iii) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, and (iv) if Executive is deemed on the Effective Date of Termination to be a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code, the Executive shall pay the cost of all such in-kind benefits during the Delay Period and the Company shall reimburse the Executive for such costs immediately upon expiration of the Delay Period.. 4.2. Withholding of Taxes. The Company will be entitled to withhold from any amounts payable under this Agreement all taxes as may be legally required (including, without limitation, any United States federal taxes and any other state, city, or local taxes). Article 5. Tax Adjustment Payment 5.1. Tax Adjustment Payment. In the event that the Executive (or the Executive’s Beneficiary, if applicable) becomes entitled to Severance Benefits or any other payment or benefit under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, the "Total Payments"), whether or not the Executive has terminated employment with the Company, if all or any part of the Total Payments will be subject to the tax imposed by Section 4999 of the Code (or JBT – Change in Control Agreement - NEO -10- any similar tax that may hereafter be imposed) (the "Excise Tax"), the Total Payments shall be reduced (but not below zero) such that the value of the Total Payments shall be one dollar ($1) less than the maximum amount of payments which the Executive may receive without becoming subject to the tax imposed by Section 4999 of the Code; provided, however, that the foregoing limitation shall not apply in the event that it is determined that the Total Payments on an after-tax basis (i.e., after payment of federal, state, and local income taxes, penalties, interest, and Excise Tax) if such limitation is not applied would exceed the after-tax benefits to the Executive if such limitation is applied. The Executive shall bear the expense of any and all Excise Taxes due on any payments that are deemed to be “excess parachute payments” under Section 280G of the Code. 5.2. Tax Computation. The determination of whether any of the Total Payments will be subject to the Excise Tax and the assumptions to be used in arriving at such determination, shall be made by a nationally recognized certified public accounting firm that does not serve as an accountant or auditor for any individual, entity or group effecting the Change in Control as designated by the Company (the “Accounting Firm”). The Accounting Firm will provide detailed supporting calculations to the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive or the Company requesting a calculation hereunder. All fees and expenses of the Accounting Firm will be paid by the Company. Article 6. Establishment of Trust As soon as practicable following the Effective Date hereof, the Company will create a Trust (which will be a grantor trust within the meaning of Sections 671-678 of the Code) for the benefit of the Executive and Beneficiaries, as appropriate. The Trust will have a Trustee as selected by the Company and will have certain restrictions as to the Company's ability to amend the Trust or cancel benefits provided thereunder. Any assets contained in the Trust will, at all times, be specifically subject to the claims of the Company's general creditors in the event of bankruptcy or insolvency; such terms to be specifically defined within the provisions of the Trust, along with the required procedure for notifying the Trustee of any bankruptcy or insolvency. At any time following the Effective Date hereof, the Company may, but is not obligated to, deposit assets in the Trust in an amount equal to or less than the aggregate Severance Benefits which may become due to the Executive under Sections 3.3 (a), (b), (c) and (d) and 5.1 of this Agreement. As soon as practicable after the Company has knowledge that a Change in Control is imminent, but no later than the day immediately preceding the date of the Change in Control, the Company will deposit assets in such Trust in an amount equal to the estimated aggregate Severance Benefits which may become due to the Executive under Sections 3.3 (a), (b), (c) and (d), 5.1 Articles 8 and 9 of this Agreement. Such deposited amounts will be reviewed and increased, if necessary, every six (6) months following a Change in Control to reflect the Executive's estimated aggregate Severance Benefits at such time. Article 7. The Company's Payment Obligation The Company's obligation to make the payments and the arrangements provided for herein will be absolute and unconditional, and will not be affected by any circumstances, including, without JBT – Change in Control Agreement - NEO -11- limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder will be paid without notice or demand. Each and every payment made hereunder by the Company will be final, and the Company will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. The Executive will not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment will in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 3.3(e) and in Section 10 herein. Notwithstanding anything in this Agreement to the contrary, if Severance Benefits are paid under this Agreement, no severance benefits under any program of the Company, other than benefits described in this Agreement, will be paid to the Executive. Article 8. Fees and Expenses To the extent permitted by law, the Company will pay as incurred within ten (10) days following receipt of an invoice from the Executive, which invoice shall be submitted no later than ninety (90) days following the date Executive incurs liability for the relevant item, all reasonable legal fees, costs of litigation, prejudgment interest, and other expenses incurred in good faith by the Executive as a result of the Company's refusal to provide the Severance Benefits to which the Executive becomes entitled under this Agreement, or as a result of the Company's contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict (including, without limitation, conflicts related to the calculations under Article 5 hereof) between the parties pertaining to this Agreement. The Company’s obligations under this Article 8 shall apply only to reasonable legal fees, costs of litigation, prejudgment interest, and other expenses incurred on or before the date that is ten (10) years after Executive’s death, (b) shall not be subject to liquidation, and (c) may not be exchanged for another benefit. The amount of the legal fees, costs of litigation, prejudgment interest, and other expenses for which Executive is entitled to be reimbursed under this Article 8 in any calendar year shall not affect Executive’s right to reimbursement of any expenses or in-kind benefits to which Executive is entitled under this Agreement or any other agreement to which Executive and the Company are parties. Article 9. Outplacement Assistance and Financial Planning Following a Qualifying Termination (as described in Section 3.2 herein), the Executive will be reimbursed by the Company for the reasonable costs of all outplacement services obtained by the Executive within a twelve (12) month period after the Effective Date of Termination; provided that the maximum amount of outplacement assistance to be reimbursed will not exceed the amount determined by the then current outplacement service standard benefit for Key Executives; and further provided that the invoice for such services are submitted no later than ninety (90) days following the date the Executive incurs such costs. The Company’s obligations under this Article 9 (a) shall apply only to costs for outplacement services obtained by the Executive, (b) shall not be subject to liquidation, and (c) may not be exchanged for another benefit. The amount of the JBT – Change in Control Agreement - NEO -12- costs of the outplacement services for which the Executive is entitled to be reimbursed under this Article 9 in any calendar year shall not affect Executive’s right to reimbursement of any expenses or in-kind benefits to which the Executive is entitled under this Agreement or any other agreement to which the Executive and the Company are parties. The Company shall also pay to the covered Executive a single lump sum payment of $20,000 LESS any amounts that the Company has previously reimbursed the Executive for financial planning/tax preparation assistance expenses in the calendar year in which the Termination occurs. Article 10. Non-Compete, Non-Solicitation, Confidential Information and Release (a) Covenant not to Compete (i) Compliance with the provisions of this Article 10 is an express condition of the Executive's right to receive payments and benefits under this Agreement. The Executive acknowledges and recognizes the confidential information and records provided by the Company and its successors and assigns, the benefits provided hereunder, and the professional training and experience they will receive from the Company, as well as the highly competitive nature of the Company’s business, and in consideration of all of the above, agrees that during the period beginning on the Effective Date of Termination and ending twenty four (24) months thereafter (the "Covered Time"), the Executive will not engage, directly or indirectly, in a similar position or provide services that are the same or similar in character, function, scope, nature or purpose to the services in which the Executive is engaged, or in which the Executive has been engaged, to provide to the Company as part of their employment at any time during the Covered Time or the Look- Back Period to a Covered Business within the Covered Area (“Competitive Activity”). For the purposes of this Agreement, “Look-Back Period” (as hereinafter defined) refers to the last two years of the Executive’s employment. For purposes of this Agreement "Covered Business" shall be defined as a major competitor of the Company listed in an Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission and a company in the food industry that directly competes with the Company at any time during the Covered Time and the Look-Back Period. For the purposes of this Agreement, “Covered Area” (as hereinafter defined) is any state of the United States of America or any nation in which the Company is conducting business as of the Effective Date of Termination (the "Covered Area"). For purposes of this Article 10, the phrase "engage, directly or indirectly" shall mean engaging directly or having an interest, directly or indirectly, as owner, partner, shareholder, agent, representative, employee, officer, director, independent contractor, capital investor, lender, consultant or advisor (other than as the holder of less than 2% of the outstanding stock of a publicly-traded corporation), either alone or in association with others, in the operation of any aspect of any type of business or enterprise engaged in any aspect of the Covered Business. (ii) The Executive agrees that during the term of this Agreement (including any extensions thereof) and for the twenty-four (24) months thereafter, he shall not (i) directly or indirectly solicit or attempt to solicit any of the employees, agents, consultants, or representatives of the Company or affiliates of the Company to leave any of such entities; or (ii) directly or indirectly solicit or attempt to solicit any of the employees, agents, consultants or representatives
JBT – Change in Control Agreement - NEO -13- of the Company or affiliates of the Company to become employees, agents, representatives or consultants of any other person or entity. (iii) The Executive understands that the provisions of Sections 10(a)(i) and (ii) may limit his ability to earn a livelihood in a business similar to the business of the Company but nevertheless agrees and hereby acknowledges that the restrictions and limitations thereof are reasonable in scope, area, and duration, are reasonably necessary to protect the goodwill and business interests of the Company, and that the consideration provided under this Agreement is sufficient to justify the restrictions contained in such provisions. Accordingly, in consideration thereof and in light of the Executive's education, skills and abilities, the Executive agrees that he will not assert that, and it should not be considered that, such provisions are either unreasonable in scope, area, or duration, or will prevent him from earning a living, or otherwise are void, voidable, or unenforceable or should be voided or held unenforceable. (b) Enforcement (i) The parties hereto agree and acknowledge that the covenants and agreements contained herein are reasonable in scope, area, and duration and necessary to protect the reasonable competitive business interests of the Company, including, without limitation, the value of the proprietary information and goodwill of the Company. (ii) The Executive agrees that the covenants and undertakings contained in Article 10 of this Agreement relate to matters which are of a special, unique and extraordinary character and that the Company cannot be reasonably or adequately compensated in damages in an action at law in the event the Executive breaches any of these covenants or undertakings. Therefore, the Executive agrees that the Company shall be entitled, as a matter of course, without the need to prove irreparable injury, to an injunction, restraining order or other equitable relief from any court of competent jurisdiction, restraining any violation or threatened violation of any of such terms by the Executive and such other persons as the court shall order. The Executive agrees to pay costs and legal fees incurred by the Company in obtaining such injunction. (iii) Rights and remedies provided for in this Section 10(b) are cumulative and shall be in addition to rights and remedies otherwise available to the parties under any other agreement or applicable law. (iv) In the event that any provision of this Agreement shall to any extent be held invalid, unreasonable or unenforceable in any circumstances, the parties hereto agree that the remainder of this Agreement and the application of such provision of this Agreement to other circumstances shall be valid and enforceable to the fullest extent permitted by law. If any provision of this Agreement is held to be unenforceable because of the scope or duration of or the area covered by such provision, the parties hereto agree that the court or arbitrator making such determination shall reduce the scope, duration and/or area of such provision (and shall substitute appropriate provisions for any such unenforceable provisions) in order to make such provision enforceable to the fullest extent permitted by law, and/or shall delete specific words and phrases, and such modified provision shall then be enforceable and shall be enforced. The parties hereto recognize that if, in any judicial proceeding, a court shall refuse to enforce any of the separate covenants JBT – Change in Control Agreement - NEO -14- contained in this Agreement; then that unenforceable covenant contained in this Agreement shall be deemed eliminated from these provisions to the extent necessary to permit the remaining separate covenants to be enforced. In the event that any court or arbitrator determines that the time period or the area, or both, are unreasonable and that any of the covenants is to that extent unenforceable, the parties hereto agree that such covenants will remain in full force and effect, first, for the greatest time period, and second, in the greatest geographical area that would not render them unenforceable. (v) In the event of the Executive's breach of this Article 10, in addition to all other rights the Company may have hereunder or in law or in equity, all payments and benefits hereunder shall cease; all options, stock, and other securities granted by the Company or its successor, including stock obtained through prior exercise of options, shall be immediately forfeited (whether or not vested), and the original purchase price, if any, shall be returned to the Executive; and all profits received through exercise of options or sale of stock, and all previous payments and benefits made or provided hereunder shall be promptly returned and repaid to the Company. (c) Confidential Information The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10(c) constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. (d) Release The Executive's execution of a complete and general release of any and all of his potential claims (other than for vested benefits described in this Agreement or any other vested benefits with the Company and/or its affiliates) against the Company, any of its affiliated companies, and their respective successors and any officers, employees, agents, directors, attorneys, insurers, underwriters, and assigns of the Company, its affiliates and/or successors, is an express condition of the Executive's right to receive payments, vesting, and benefits hereunder. The Executive shall be required to execute a Waiver and Release Agreement which documents the release required under this Section 10(d), the form of which shall be provided to the Executive by Company. Article 11. Successors and Assignment 11.1. Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof to expressly assume and JBT – Change in Control Agreement - NEO -15- agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. 11.2. Assignment by the Executive. This Agreement will inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount would still be payable to him hereunder, had he continued to live, all such amounts, unless otherwise provided herein, will be paid in accordance with the terms of this Agreement to the Executive's Beneficiary. If the Executive has not named a Beneficiary, then such amounts will be paid to the Executive's devisee, legatee, or other designee, or if there is no such designee, to the Executive's estate, and such designee, or the Executive’s estate will be treated as the Beneficiary hereunder. Article 12. Miscellaneous 12.1. Employment Status. Except as may be provided under any other agreement between the Executive 1and the Company, the employment of the Executive by the Company is "at will," and may be terminated by either the Executive or the Company at any time, subject to applicable law. 12.2. Beneficiaries. The Executive may designate one or more persons or entities as the primary and/or contingent Beneficiaries of any Severance Benefits including, without limitation, payments under Article 5 hereof, owing to the Executive under this Agreement. Such designation must be in writing, executed by the Executive and in a form acceptable to the Committee. The Executive may make or change such designations at any time. 12.3. Severability. In the event any provision of this Agreement will be held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Agreement, and the Agreement will be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Agreement are not part of the provisions hereof and will have no force and effect. 12.4. Modification. No provision of this Agreement may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by an authorized member of the Committee, or by the respective parties' legal representatives and successors. 12.5. Applicable Law. To the extent not preempted by the laws of the United States, the laws of the state of Delaware will be the controlling law in all matters relating to this Agreement. 12.6. Indemnification. To the full extent permitted by law, the Company will, both during and after the period of the Executive's employment, indemnify the Executive (including by advancing him expenses) for any judgments, fines, amounts paid in settlement and reasonable expenses, including any attorneys' fees, incurred by the Executive in connection with the defense of any lawsuit or other claim to which he is made a party by reason of being (or having been) an officer, director or employee of the Company or any of its subsidiaries. The Executive will be covered by JBT – Change in Control Agreement - NEO -16- director and officer liability insurance to the maximum extent that that insurance covers any officer or director (or former officer or director) of the Company. 12.7. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, negotiations, representations or proposals, whether written or oral. Without limitation of the foregoing, this Agreement supersedes and replaces in its entirety that certain Amended and Restated Executive Severance Agreement between the Company and the Executive dated ________________________, which is terminated and no longer effective as of the Effective Date of this Agreement.
JBT – Change in Control Agreement - NEO -17- IN WITNESS WHEREOF, the parties have executed this Agreement on this ____ day of _____________, 20____. JOHN BEAN TECHNOLOGIES Executive: CORPORATION By: _________________________________ ____________________________________ Name: _________________________________ Its: Compensation Committee Chair By: _________________________________ Name: _________________________________ Its: Executive Vice President, Human Resources
JBT – Change in Control Agreement – CEO Exhibit 10.9 -1- JOHN BEAN TECHNOLOGIES CORPORATION Change in Control Executive Severance Agreement THIS AGREEMENT is made and entered into as of the ____ day of ________________, 202_, by and between JOHN BEAN TECHNOLOGIES CORPORATION (hereinafter referred to as the "Company") and ___________________________ (hereinafter referred to as the "Executive"). WHEREAS, the Board has approved the Company’s entering into severance agreements with certain key executives of the Company; WHEREAS, the Executive is a key executive of the Company; WHEREAS, should the possibility of a Change in Control of the Company arise, the Board believes it is imperative that the Company and the Board should be able to rely upon the Executive to continue in the Executive’s position, and that the Company should be able to receive and rely upon the Executive's advice, if requested, as to the best interests of the Company and its shareholders without concern that the Executive might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control; WHEREAS, should the possibility of a Change in Control arise, in addition to the Executive’s regular duties, the Executive may be called upon to assist in the assessment of such possible Change in Control, advise management and the Board as to whether such Change in Control would be in the best interests of the Company and its shareholders, and to take such other actions as the Board might determine to be appropriate; and NOW THEREFORE, to assure the Company that it will have the continued dedication of the Executive and the availability of the Executive’s advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control of the Company, and to induce the Executive to remain in the employ of the Company, and for other good and valuable consideration, the Company and the Executive agree as follows: Article 1. Establishment, Term, and Purpose This Agreement will commence on the Effective Date and will continue in effect until six (6) months after the date that the Executive is no longer a “Key Executive” of the Company, as defined in this Agreement. However, in the event a Change in Control occurs during the term of this Agreement, this Agreement will remain in effect for the longer of: (i) twenty-four (24) months beyond the month in which such Change in Control occurred; and (ii) until all obligations of the Company hereunder have been fulfilled, and until all benefits required hereunder have been paid to the Executive. JBT – Change in Control Agreement - CEO -2- Article 2. Definitions Whenever used in this Agreement, the following terms will have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized. 2.1. Base Salary means the salary of record paid to an Executive as annual salary, excluding amounts received under incentive or other bonus plans, whether or not deferred. 2.2. Beneficiary means the persons or entities designated or deemed designated by the Executive pursuant to Section 12.2 herein. 2.3. Board means the Board of Directors of the Company. 2.4. Cause means: (a) Violated a material requirement of any material Company policy, specifically including a violation of the Company’s Code of Business Conduct and Ethics; (b) Disclosed, without proper authorization, any trade secrets or other confidential information of the Company; or willfully engaging in any other conduct which breaches Section 10 of this Agreement; (c) Engaged in acts of willful malfeasance or misconduct which is demonstrably injurious to the Company or its subsidiaries or affiliates; (d) Is convicted of, or has pled guilty or nolo contendere to, a felony under the laws of the United States or applicable state law; (e) Engaged in any act that, in the reasonable opinion of the Company, is contrary to its best interests and would reasonably be expected to result in material damage to the property, business or reputation of the Company or its affiliates; (f) The Executive's willful and continued failure to substantially perform the Executive’s employment duties in any material respect (other than any such failure resulting from physical or mental incapacity or occurring after issuance by the Executive of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive that specifically identifies the manner in which the Company believes the Executive has failed to perform the Executive’s duties, and after the Executive has failed to resume substantial performance of the Executive’s duties on a continuous basis within thirty (30) calendar days of receiving such demand. 2.5. Change in Control means either a “Change in Ownership,” a “Change in Effective Control,” or a “Change in Ownership of a Substantial Portion of Assets,” as defined below: “Change in Ownership”: A Change in Ownership of the Company occurs on the date that any one person, or more than one Person Acting as a Group (as defined below), acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% JBT – Change in Control Agreement - CEO -3- of the total fair market value or total voting power of the stock of the Company. However, if any one person or more than one Person Acting as a Group, is considered to own more than 50% of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Ownership of the Company (or to cause a Change in Effective Control of the Company). An increase in the percentage of stock owned by any one person, or Persons Acting as a Group, as a result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock. This applies only when there is a transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company remains outstanding after the transaction. Persons Acting as a Group: Persons will not be considered to be acting as a group solely because they (i) purchase or own stock of the same corporation at the same time, or as a result of the same public offering, or (ii) purchase assets of the same corporation at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock or assets, or similar business transaction with the Company. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock or assets, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to the ownership in that corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. “Change in Effective Control”: A Change in Effective Control of the Company occurs on the date that either – (i) Any one person, or more than one Person Acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company; or (ii) a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. A Change in Effective Control will have occurred only if the Participant is employed by the Company or an Employer upon the date of the Change in Effective Control or the Company is liable for the payment of the benefits hereunder and no other corporation is a majority shareholder of the Company. Further, in the absence of an event described in paragraph (i) or (ii), a Change in Effective Control of the Company will not have occurred. Acquisition of additional control: If any one person, or more than one Person Acting as a Group, is considered to effectively control the Company, the acquisition of additional control of the Company by the same person or persons is not considered to cause a Change in Effective Control of the Company (or to cause a Change in Ownership of the Company). "Change in Ownership of a Substantial Portion of Assets": A Change in Ownership of a Substantial Portion of Assets occurs on the date that any one person, or more than one Person Acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent JBT – Change in Control Agreement - CEO -4- acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. Transfers to a related person: There is no Change in Control when there is a transfer to an entity that is controlled by the shareholders of the Company immediately after the transfer. A transfer of assets by the Company is not treated as a Change of Ownership of a Substantial Portion of Assets if the assets are transferred to – (i) A shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock; (ii) An entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company; (iii) A person, or more than one Person Acting as a Group, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company; or (iv) An entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in paragraph (iii). A person’s status is determined immediately after the transfer of the assets. For example, a transfer to a corporation in which the Company has no ownership interest before the transaction, but which is a majority-owned subsidiary of the Company after the transaction is not treated as a Change in Ownership of a Substantial Portion of Assets of the Company. 2.6. Code means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. 2.7. Committee means the Compensation Committee of the Board, or any other committee of the Board appointed to perform the functions of the Compensation Committee. 2.8. Company means John Bean Technologies Corporation, a Delaware corporation, or any successor thereto as provided in Article 11 herein. 2.9. Disability means complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which the Executive was employed when such disability commenced. 2.10. Effective Date means the date of this Agreement set forth above. 2.11. Effective Date of Termination means the date on which a Qualifying Termination occurs which triggers the payment of Severance Benefits hereunder.
JBT – Change in Control Agreement - CEO -5- 2.12. Exchange Act means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. 2.13. Good Reason means, without the Executive's express written consent, the occurrence of any one or more of the following: (a) The assignment of the Executive to duties materially inconsistent with the Executive's authorities, duties, responsibilities, and status (including, without limitation, offices, titles and reporting requirements) as an employee of the Company (including, without limitation, any material change in duties or status as a result of the stock of the Company ceasing to be publicly traded or of the Company becoming a subsidiary of another entity, or any material change in the Executive's reporting relationship, such as the chairman or chief executive officer ceasing to report to the Board of Directors of a publicly traded company), or a material reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from the greatest of (i) those in effect on the Effective Date; (ii) those in effect during the fiscal year immediately preceding the year of the Change in Control; and (iii) those in effect immediately preceding the Change in Control; (b) The Company's requiring the Executive to be based at a location which is at least fifty (50) miles further from the Executive’s then current primary residence than is such residence from the office where the Executive is located at the time of the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's business obligations as of the Effective Date or as the same may be changed from time to time prior to a Change in Control; (c) A material reduction by the Company in the Executive’s Base Salary as in effect on the Effective Date or as the same may be increased from time to time; (d) A material reduction in the Executive’s level of participation in any of the Company’s short- and/or long-term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or arrangements in which the Executive participates from the greatest of the levels in place: (i) on the Effective Date; (ii) during the fiscal year immediately preceding the fiscal year of the Change in Control; and (iii) on the date immediately preceding the date of the Change in Control; or (e) The failure of the Company to assume and agree to perform this Agreement in all material respects, as contemplated in Article 11 herein. The existence of Good Reason will not be affected by the Executive's temporary incapacity due to physical or mental illness not constituting a Disability. The Executive's continued employment will not constitute a waiver of the Executive's rights with respect to any circumstance constituting Good Reason. Notwithstanding the above to the contrary, “Good Reason” for Executive’s separation from employment will exist only if (i) the Executive provides written notice to the Company within ninety (90) days of the occurrence of any of the above listed events, (ii) the Company fails to cure the event within thirty (30) days following the Company’s receipt of the JBT – Change in Control Agreement - CEO -6- Executive’s written notice, and (iii) the Executive separates from employment with the Company effective not later than sixty (60) days after the end of the Company’s cure period. 2.14. Key Executive means the Company’s Chief Executive Officer and any other officer of the Company that reports directly to the Company’s Chief Executive Officer and is designated as a member of the Executive Leadership Team (or its equivalent) by the Chief Executive Officer. 2.15. Notice of Termination means a written notice which indicates the specific termination provision in this Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.16. Person has the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as provided in Section 13(d). 2.17. Qualifying Termination means any of the events described in Section 3.2 herein, the occurrence of which triggers the payment of Severance Benefits hereunder. 2.18. Severance Benefits means the payment of severance compensation as provided in Section 3.3 herein. 2.19. Trust means the Company grantor trust to be created pursuant to Article 5 of this Agreement. Article 3. Severance Benefits 3.1. Right to Severance Benefits. The Executive will be entitled to receive from the Company Severance Benefits, as described in Section 3.3 herein, if there has been a Change in Control of the Company and if, within twenty-four (24) calendar months following the Change in Control, a Qualifying Termination of the Executive has occurred. The Executive will not be entitled to receive Severance Benefits if the Executive’s employment is terminated (i) for Cause, (ii) due to a voluntary termination without Good Reason, or (iii) due to death or Disability. 3.2. Qualifying Termination. The occurrence of any one or more of the following events will trigger the payment of Severance Benefits to the Executive under this Agreement: (a) An involuntary termination of the Executive's employment by the Company for reasons other than Cause, Disability or death within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs; (b) A voluntary termination by the Executive for Good Reason within twenty- four (24) calendar months following the month in which a Change in Control of the Company occurs pursuant to a Notice of Termination delivered to the Company by the Executive; or JBT – Change in Control Agreement - CEO -7- (c) The Company or any successor company breaches any of the material provisions of this Agreement. 3.3. Description of Severance Benefits. In the event the Executive becomes entitled to receive Severance Benefits, as provided in Sections 3.1 and 3.2 herein, the Company will pay to the Executive (or in the event of the Executive’s death, the Executive’s Beneficiary) and provide him with the following: (a) An amount equal to three (3) times the highest rate of the Executive's annualized Base Salary in effect at any time up to and including the Effective Date of Termination. (b) An amount equal to three (3) times the Executive's highest annualized target total cash Management Incentive Award granted under the John Bean Technologies Corporation Incentive Compensation and Stock Plan for any plan year up to and including the plan year in which the Executive's Effective Date of Termination occurs. (c) An amount equal to the Executive's unpaid Base Salary, and unused and accrued vacation pay, earned or accrued through the Effective Date of Termination. (d) An amount equal to the target total cash Management Incentive Award established for the plan year in which the Executive's Effective Date of Termination occurred, prorated through the Effective Date of Termination. (e) Subject to applicable law and regulation as of the Effective Date of Termination, a continuation of the Company’s welfare benefits of health care, life and accidental death and dismemberment, and disability insurance coverage for twenty-four (24) months after the Effective Date of Termination. These benefits will be provided to the Executive (and to the Executive's covered spouse and dependents) at the same premium cost, and at the same coverage level, as in effect as of the date of the Change in Control. The continuation of these welfare benefits will be discontinued prior to the end of the twenty-four (24) month period if the Executive has available substantially similar benefits at a comparable cost from a subsequent employer, as determined by the Committee. In addition, the Company will make available for purchase by the Executive continued health care, life and accidental death and dismemberment, and disability insurance coverage at the same coverage level as in effect as of the date of the Change in Control for a period of twenty-four (24) months beginning immediately upon the end of the coverage period provided under the foregoing provisions of this Section 3.3(e). (f) Time-based equity awards granted under the John Bean Technologies Corporation Incentive Compensation and Stock Plan will vest on the Effective Date of Termination and immediately become transferable thereafter. Performance-based equity awards will vest on the Effective Date of Termination. For purposes of determining the amount of the resulting award in such an event, the number of RSUs relating to any then- completed year(s) in the performance period that are deemed earned will be determined JBT – Change in Control Agreement - CEO -8- based on actual performance and, for any year(s) that have not been completed, it will be assumed that the Company achieved “target” performance on each of the performance measures for such year(s), resulting in the payment of 100% of the one-third of the total target RSU award amount of this grant relating to each such year. Any restrictions imposed by Company stock ownership guidelines applicable to the sale of the Company’s Common Stock by executive officers will not apply to any Awards granted to the Executive prior to a Change of Control under the John Bean Technologies Corporation Incentive Compensation and Stock Plan or other incentive arrangements adopted by the Company that vests as a result of the Change of Control in accordance with the terms of this Agreement. The aggregate benefits accrued by the Executive as of the Effective Date of Termination under the John Bean Technologies Corporation Salaried Employees’ Retirement Program, the John Bean Technologies Corporation Savings and Investment Plan, the John Bean Technologies Corporation Salaried Employees’ Equivalent Retirement Plan, the John Bean Technologies Corporation Non- Qualified Savings and Investment Plan and other savings and retirement plans sponsored by the Company will be determined and distributed pursuant to the terms of the applicable plan in effect as of the day immediately prior to the Change in Control, including but not limited to, the Executive’s distribution elections. Solely for vesting purposes under the Company's nonqualified retirement plans, it will be assumed that the Executive's employment continued following the Effective Date of Termination for three (3) full years (i.e., three (3) additional years of age and service credits will be added for vesting only). 3.4. Termination for Disability. If the Executive's employment is terminated due to Disability, the Executive will receive the Executive’s Base Salary through the Effective Date of Termination, and the Executive's benefits will be determined in accordance with the Company's disability, retirement, survivor's benefits, insurance and other applicable plans and programs then in effect and the Executive will not be entitled to the Severance Benefits described in Section 3.3. 3.5. Termination upon Death. If the Executive's employment is terminated due to death, the Executive's benefits will be determined in accordance with the Company's retirement, survivor's benefits, insurance and other applicable programs of the Company then in effect and neither the Executive nor the Executive’s Beneficiary will be entitled to the Severance Benefits described in Section 3.3. 3.6. Termination for Cause, or Other Than for Good Reason. Following a Change in Control of the Company, if the Executive's employment is terminated either: (a) by the Company for Cause; or (b) by the Executive (other than for Good Reason, or under circumstances giving rise to a Qualifying Termination described in Section 3.2(c) herein), the Company will pay the Executive an amount equal to the Executive’s Base Salary and accrued vacation through the Effective Date of Termination, at the rate then in effect, plus all other amounts to which the Executive is entitled under any plans of the Company, at the time such payments are due and the Company will have no further obligations to the Executive under this Agreement. If the Executive’s employment is
JBT – Change in Control Agreement - CEO -9- terminated for Cause or Other Than for Good Reason, the Executive is not entitled to the Severance Benefits described in Section 3.3. 3.7. Notice of Termination. Any termination of employment by the Company or by the Executive for Good Reason will be communicated by a Notice of Termination. Article 4. Form and Timing of Severance Benefits 4.1. Form and Timing of Severance Benefits. Subject to the provisions of Section 10(d), the Severance Benefits described in Sections 3.3 (a), (b), (c) and (d) herein will be paid in cash to the Executive (or the Executive’s Beneficiary, if applicable) in a single lump sum as soon as practicable following the Effective Date of Termination, but in no event beyond thirty (30) days from such date; provided, if any such Severance Benefits constitute deferred compensation under Section 409A of the Code and are payable within a period that spans two calendar years, such Severance Benefits shall be paid in the later calendar year; provided further that, if the Executive is deemed on the Effective Date of Termination to be a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code, any such Severance Benefits that constitute deferred compensation under Section 409A of the Code and would otherwise be payable prior to the earlier of (i) the 6-month anniversary of the Executive’s Qualifying Termination and (ii) the date of the Executive’s death (the “Delay Period”) shall instead be paid in a lump sum immediately upon (and not before) the expiration of the Delay Period. To the extent any in-kind benefits provided to Executive, or any reimbursement by the Company for expenses incurred by Executive to obtain such benefits, under Section 3.3 (e) herein constitute deferred compensation under Section 409A of the Code, (i) all such reimbursements shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Executive, (ii) any right to such reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, (iii) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, and (iv) if Executive is deemed on the Effective Date of Termination to be a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code, the Executive shall pay the cost of all such in-kind benefits during the Delay Period and the Company shall reimburse the Executive for such costs immediately upon expiration of the Delay Period. 4.2. Withholding of Taxes. The Company will be entitled to withhold from any amounts payable under this Agreement all taxes as may be legally required (including, without limitation, any United States federal taxes and any other state, city, or local taxes). Article 5. Tax Adjustment Payment 5.1. Tax Adjustment Payment. In the event that the Executive (or the Executive’s Beneficiary, if applicable) becomes entitled to Severance Benefits or any other payment or benefit under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, the "Total Payments"), whether or not the Executive has terminated employment with the Company, if all or any part of the Total Payments will be subject to the tax imposed by Section 4999 of the Code (or JBT – Change in Control Agreement - CEO -10- any similar tax that may hereafter be imposed) (the "Excise Tax"), the Total Payments shall be reduced (but not below zero) such that the value of the Total Payments shall be one dollar ($1) less than the maximum amount of payments which the Executive may receive without becoming subject to the tax imposed by Section 4999 of the Code; provided, however, that the foregoing limitation shall not apply in the event that it is determined that the Total Payments on an after-tax basis (i.e., after payment of federal, state, and local income taxes, penalties, interest, and Excise Tax) if such limitation is not applied would exceed the after-tax benefits to the Executive if such limitation is applied. The Executive shall bear the expense of any and all Excise Taxes due on any payments that are deemed to be “excess parachute payments” under Section 280G of the Code. 5.2. Tax Computation. The determination of whether any of the Total Payments will be subject to the Excise Tax and the assumptions to be used in arriving at such determination, shall be made by a nationally recognized certified public accounting firm that does not serve as an accountant or auditor for any individual, entity or group effecting the Change in Control as designated by the Company (the “Accounting Firm”). The Accounting Firm will provide detailed supporting calculations to the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive or the Company requesting a calculation hereunder. All fees and expenses of the Accounting Firm will be paid by the Company. Article 6. Establishment of Trust As soon as practicable following the Effective Date hereof, the Company will create a Trust (which will be a grantor trust within the meaning of Sections 671-678 of the Code) for the benefit of the Executive and Beneficiaries, as appropriate. The Trust will have a Trustee as selected by the Company and will have certain restrictions as to the Company's ability to amend the Trust or cancel benefits provided thereunder. Any assets contained in the Trust will, at all times, be specifically subject to the claims of the Company's general creditors in the event of bankruptcy or insolvency; such terms to be specifically defined within the provisions of the Trust, along with the required procedure for notifying the Trustee of any bankruptcy or insolvency. At any time following the Effective Date hereof, the Company may, but is not obligated to, deposit assets in the Trust in an amount equal to or less than the aggregate Severance Benefits which may become due to the Executive under Sections 3.3 (a), (b), (c) and (d) and 5.1 of this Agreement. As soon as practicable after the Company has knowledge that a Change in Control is imminent, but no later than the day immediately preceding the date of the Change in Control, the Company will deposit assets in such Trust in an amount equal to the estimated aggregate Severance Benefits which may become due to the Executive under Sections 3.3 (a), (b), (c) and (d), 5.1 Articles 8 and 9 of this Agreement. Such deposited amounts will be reviewed and increased, if necessary, every six (6) months following a Change in Control to reflect the Executive's estimated aggregate Severance Benefits at such time. Article 7. The Company's Payment Obligation The Company's obligation to make the payments and the arrangements provided for herein will be absolute and unconditional, and will not be affected by any circumstances, including, without JBT – Change in Control Agreement - CEO -11- limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder will be paid without notice or demand. Each and every payment made hereunder by the Company will be final, and the Company will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. The Executive will not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment will in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 3.3(e) and in Section 10 herein. Notwithstanding anything in this Agreement to the contrary, if Severance Benefits are paid under this Agreement, no severance benefits under any program of the Company, other than benefits described in this Agreement, will be paid to the Executive. Article 8. Fees and Expenses To the extent permitted by law, the Company will pay as incurred within ten (10) days following receipt of an invoice from the Executive, which invoice shall be submitted no later than ninety (90) days following the date Executive incurs liability for the relevant item, all reasonable legal fees, costs of litigation, prejudgment interest, and other expenses incurred in good faith by the Executive as a result of the Company's refusal to provide the Severance Benefits to which the Executive becomes entitled under this Agreement, or as a result of the Company's contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict (including, without limitation, conflicts related to the calculations under Article 5 hereof) between the parties pertaining to this Agreement. The Company’s obligations under this Article 8 shall apply only to reasonable legal fees, costs of litigation, prejudgment interest, and other expenses incurred on or before the date that is ten (10) years after Executive’s death, (b) shall not be subject to liquidation, and (c) may not be exchanged for another benefit. The amount of the legal fees, costs of litigation, prejudgment interest, and other expenses for which Executive is entitled to be reimbursed under this Article 8 in any calendar year shall not affect Executive’s right to reimbursement of any expenses or in-kind benefits to which Executive is entitled under this Agreement or any other agreement to which Executive and the Company are parties. Article 9. Outplacement Assistance and Financial Planning Following a Qualifying Termination (as described in Section 3.2 herein), the Executive will be reimbursed by the Company for the reasonable costs of all outplacement services obtained by the Executive within a twelve (12) month period after the Effective Date of Termination; provided that the maximum amount of outplacement assistance to be reimbursed will not exceed the amount determined by the then current outplacement service standard benefit for Key Executives; and further provided that the invoice for such services are submitted no later than ninety (90) days following the date the Executive incurs such costs. The Company’s obligations under this Article 9 (a) shall apply only to costs for outplacement services obtained by the Executive, (b) shall not be subject to liquidation, and (c) may not be exchanged for another benefit. The amount of the JBT – Change in Control Agreement - CEO -12- costs of the outplacement services for which the Executive is entitled to be reimbursed under this Article 9 in any calendar year shall not affect Executive’s right to reimbursement of any expenses or in-kind benefits to which the Executive is entitled under this Agreement or any other agreement to which the Executive and the Company are parties. The Company shall also pay to the covered Executive a single lump sum payment of $20,000 LESS any amounts that the Company has previously reimbursed the Executive for financial planning/tax preparation assistance expenses in the calendar year in which the Termination occurs. Article 10. Non-Compete, Non-Solicitation, Confidential Information and Release (a) Covenant not to Compete (i) Compliance with the provisions of this Article 10 is an express condition of the Executive's right to receive payments and benefits under this Agreement. The Executive acknowledges and recognizes the confidential information and records provided by the Company and its successors and assigns, the benefits provided hereunder, and the professional training and experience they will receive from the Company, as well as the highly competitive nature of the Company’s business, and in consideration of all of the above, agrees that during the period beginning on the Effective Date of Termination and ending twenty four (24) months thereafter (the "Covered Time"), the Executive will not engage, directly or indirectly, in a similar position or provide services that are the same or similar in character, function, scope, nature or purpose to the services in which the Executive is engaged, or in which the Executive has been engaged, to provide to the Company as part of their employment at any time during the Covered Time or the Look- Back Period to a Covered Business within the Covered Area (“Competitive Activity”). For the purposes of this Agreement, “Look-Back Period” (as hereinafter defined) refers to the last two years of the Executive’s employment. For purposes of this Agreement "Covered Business" shall be defined as a major competitor of the Company listed in an Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission and a company in the food industry that directly competes with the Company at any time during the Covered Time and the Look-Back Period. For the purposes of this Agreement, “Covered Area” (as hereinafter defined) is any state of the United States of America or any nation in which the Company is conducting business as of the Effective Date of Termination (the "Covered Area"). For purposes of this Article 10, the phrase "engage, directly or indirectly" shall mean engaging directly or having an interest, directly or indirectly, as owner, partner, shareholder, agent, representative, employee, officer, director, independent contractor, capital investor, lender, consultant or advisor (other than as the holder of less than 2% of the outstanding stock of a publicly-traded corporation), either alone or in association with others, in the operation of any aspect of any type of business or enterprise engaged in any aspect of the Covered Business. (ii) The Executive agrees that during the term of this Agreement (including any extensions thereof) and for the twenty-four (24) months thereafter, he shall not (i) directly or indirectly solicit or attempt to solicit any of the employees, agents, consultants, or representatives of the Company or affiliates of the Company to leave any of such entities; or (ii) directly or indirectly solicit or attempt to solicit any of the employees, agents, consultants or representatives
JBT – Change in Control Agreement - CEO -13- of the Company or affiliates of the Company to become employees, agents, representatives or consultants of any other person or entity. (iii) The Executive understands that the provisions of Sections 10(a)(i) and (ii) may limit his ability to earn a livelihood in a business similar to the business of the Company but nevertheless agrees and hereby acknowledges that the restrictions and limitations thereof are reasonable in scope, area, and duration, are reasonably necessary to protect the goodwill and business interests of the Company, and that the consideration provided under this Agreement is sufficient to justify the restrictions contained in such provisions. Accordingly, in consideration thereof and in light of the Executive's education, skills and abilities, the Executive agrees that he will not assert that, and it should not be considered that, such provisions are either unreasonable in scope, area, or duration, or will prevent him from earning a living, or otherwise are void, voidable, or unenforceable or should be voided or held unenforceable. (b) Enforcement (i) The parties hereto agree and acknowledge that the covenants and agreements contained herein are reasonable in scope, area, and duration and necessary to protect the reasonable competitive business interests of the Company, including, without limitation, the value of the proprietary information and goodwill of the Company. (ii) The Executive agrees that the covenants and undertakings contained in Article 10 of this Agreement relate to matters which are of a special, unique and extraordinary character and that the Company cannot be reasonably or adequately compensated in damages in an action at law in the event the Executive breaches any of these covenants or undertakings. Therefore, the Executive agrees that the Company shall be entitled, as a matter of course, without the need to prove irreparable injury, to an injunction, restraining order or other equitable relief from any court of competent jurisdiction, restraining any violation or threatened violation of any of such terms by the Executive and such other persons as the court shall order. The Executive agrees to pay costs and legal fees incurred by the Company in obtaining such injunction. (iii) Rights and remedies provided for in this Section 10(b) are cumulative and shall be in addition to rights and remedies otherwise available to the parties under any other agreement or applicable law. (iv) In the event that any provision of this Agreement shall to any extent be held invalid, unreasonable or unenforceable in any circumstances, the parties hereto agree that the remainder of this Agreement and the application of such provision of this Agreement to other circumstances shall be valid and enforceable to the fullest extent permitted by law. If any provision of this Agreement is held to be unenforceable because of the scope or duration of or the area covered by such provision, the parties hereto agree that the court or arbitrator making such determination shall reduce the scope, duration and/or area of such provision (and shall substitute appropriate provisions for any such unenforceable provisions) in order to make such provision enforceable to the fullest extent permitted by law, and/or shall delete specific words and phrases, and such modified provision shall then be enforceable and shall be enforced. The parties hereto recognize that if, in any judicial proceeding, a court shall refuse to enforce any of the separate covenants JBT – Change in Control Agreement - CEO -14- contained in this Agreement; then that unenforceable covenant contained in this Agreement shall be deemed eliminated from these provisions to the extent necessary to permit the remaining separate covenants to be enforced. In the event that any court or arbitrator determines that the time period or the area, or both, are unreasonable and that any of the covenants is to that extent unenforceable, the parties hereto agree that such covenants will remain in full force and effect, first, for the greatest time period, and second, in the greatest geographical area that would not render them unenforceable. (v) In the event of the Executive's breach of this Article 10, in addition to all other rights the Company may have hereunder or in law or in equity, all payments and benefits hereunder shall cease; all options, stock, and other securities granted by the Company or its successor, including stock obtained through prior exercise of options, shall be immediately forfeited (whether or not vested), and the original purchase price, if any, shall be returned to the Executive; and all profits received through exercise of options or sale of stock, and all previous payments and benefits made or provided hereunder shall be promptly returned and repaid to the Company. (c) Confidential Information The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10(c) constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. (d) Release The Executive's execution of a complete and general release of any and all of his potential claims (other than for vested benefits described in this Agreement or any other vested benefits with the Company and/or its affiliates) against the Company, any of its affiliated companies, and their respective successors and any officers, employees, agents, directors, attorneys, insurers, underwriters, and assigns of the Company, its affiliates and/or successors, is an express condition of the Executive's right to receive payments, vesting, and benefits hereunder. The Executive shall be required to execute a Waiver and Release Agreement which documents the release required under this Section 10(d), the form of which shall be provided to the Executive by Company. Article 11. Successors and Assignment 11.1. Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof to expressly assume and JBT – Change in Control Agreement - CEO -15- agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. 11.2. Assignment by the Executive. This Agreement will inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount would still be payable to him hereunder, had he continued to live, all such amounts, unless otherwise provided herein, will be paid in accordance with the terms of this Agreement to the Executive's Beneficiary. If the Executive has not named a Beneficiary, then such amounts will be paid to the Executive's devisee, legatee, or other designee, or if there is no such designee, to the Executive's estate, and such designee, or the Executive’s estate will be treated as the Beneficiary hereunder. Article 12. Miscellaneous 12.1. Employment Status. Except as may be provided under any other agreement between the Executive 1and the Company, the employment of the Executive by the Company is "at will," and may be terminated by either the Executive or the Company at any time, subject to applicable law. 12.2. Beneficiaries. The Executive may designate one or more persons or entities as the primary and/or contingent Beneficiaries of any Severance Benefits including, without limitation, payments under Article 5 hereof, owing to the Executive under this Agreement. Such designation must be in writing, executed by the Executive and in a form acceptable to the Committee. The Executive may make or change such designations at any time. 12.3. Severability. In the event any provision of this Agreement will be held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Agreement, and the Agreement will be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Agreement are not part of the provisions hereof and will have no force and effect. 12.4. Modification. No provision of this Agreement may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by an authorized member of the Committee, or by the respective parties' legal representatives and successors. 12.5. Applicable Law. To the extent not preempted by the laws of the United States, the laws of the state of Delaware will be the controlling law in all matters relating to this Agreement. 12.6. Indemnification. To the full extent permitted by law, the Company will, both during and after the period of the Executive's employment, indemnify the Executive (including by advancing him expenses) for any judgments, fines, amounts paid in settlement and reasonable expenses, including any attorneys' fees, incurred by the Executive in connection with the defense of any lawsuit or other claim to which he is made a party by reason of being (or having been) an officer, director or employee of the Company or any of its subsidiaries. The Executive will be covered by JBT – Change in Control Agreement - CEO -16- director and officer liability insurance to the maximum extent that that insurance covers any officer or director (or former officer or director) of the Company. 12.7. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, negotiations, representations or proposals, whether written or oral. Without limitation of the foregoing, this Agreement supersedes and replaces in its entirety that certain Amended and Restated Executive Severance Agreement between the Company and the Executive dated ________________________, which is terminated and no longer effective as of the Effective Date of this Agreement.
JBT – Change in Control Agreement - CEO -17- IN WITNESS WHEREOF, the parties have executed this Agreement on this ____ day of _____________, 202 __. JOHN BEAN TECHNOLOGIES Executive: CORPORATION By: _________________________________ ___________________________________ Name: _________________________________ ___________________________________ Its: Non-Executive Chairman of the Board or Compensation Committee Chair By: _________________________________ Name: _________________________________ Its: Executive Vice President, Human Resources
Exhibit 10.10D 1 FOURTH AMENDMENT OF THE JOHN BEAN TECHNOLOGIES CORPORATION EMPLOYEES’ RETIREMENT PROGRAM PART I SALARIED AND NONUNION HOURLY EMPLOYEES’ RETIREMENT PLAN (As Amended and Restated Effective as of January 1, 2012) WHEREAS, John Bean Technologies Corporation (the “Company”) sponsors and maintains the John Bean Technologies Corporation Employees’ Retirement Program Part I Salaried and Nonunion Hourly Employees’ Retirement Plan, as amended and restated effective as of January 1, 2012 (the “Plan”); and WHEREAS, pursuant to Section 10.02 of the Stock and Asset Purchase Agreement among the Company, JBT AeroTech Corporation and OSHKOSH Corporation, dated as of May 26, 2023 (the “Purchase Agreement”), the employees of JBT Aerotech Corporation and its subsidiaries shall cease to participate under the Plan and JBT Aerotech Corporation and its subsidiaries shall be removed as participating employers under the Plan, in each case effective as of August 1, 2023. NOW, THEREFORE, by virtue and in exercise of the powers reserved to JBT under Section 11.1 of the Plan, the Plan is hereby amended in the following particulars, each effective August 1, 2023: 1. By adding the following to the end of the definition of “Participating Employer” in Article I of the Plan: “Effective August 1, 2023, JBT AeroTech Corporation and each of its subsidiaries shall cease to be Participating Employers under the Plan.” 2. By adding the following at the end of Section 1-1 of Supplement 1 to the Plan: “Effective August 1, 2023, each Participant covered under this Supplement 1 shall cease to actively participate under this Plan.” * * * * * 2 IN WITNESS WHEREOF, the Company has caused this amendment to be executed by a duly authorized representative this 31st day of July, 2023. JOHN BEAN TECHNOLOGIES CORPORATION /s/ Shelley Bridarolli By: Shelley Bridarolli Its: Executive Vice President Human Resources
Exhibit 10.10E 1 FIFTH AMENDMENT OF THE JOHN BEAN TECHNOLOGIES CORPORATION EMPLOYEES’ RETIREMENT PROGRAM PART II UNION HOURLY EMPLOYEES’ RETIREMENT PLAN (As Amended and Restated Effective as of January 1, 2012) WHEREAS, John Bean Technologies Corporation (the “Company”) sponsors and maintains the John Bean Technologies Corporation Employees’ Retirement Program Part II Union Hourly Employees’ Retirement Plan, as amended and restated effective as of January 1, 2012 (the “Plan”); WHEREAS, pursuant to Section 10.02 of the Stock and Asset Purchase Agreement among the Company, JBT AeroTech Corporation and OSHKOSH Corporation, dated as of May 26, 2023 (the “Purchase Agreement”), the employees of JBT Aerotech Corporation and its subsidiaries shall cease to participate under the Plan and JBT Aerotech Corporation and its subsidiaries shall be removed as participating employers under the Plan, in each case effective as of August 1, 2023; and WHEREAS, pursuant to Section 10.11 of the Purchase Agreement, the Company is required to recognize that, with respect to each participant who is represented by United Steel Workers Local 6162 who had accrued benefits under the Plan as of the “Closing Date” (as such term is defined under the Purchase Agreement) who had not met all eligibility requirements for early retirement subsidies under the Plan as of the Closing Date (“Designated Union Participants”), each such Designated Union Participant’s service with OSHKOSH Corporation and its controlled group affiliates (within the meaning of Section 414 of the Internal Revenue Code) between the Closing Date and such Designated Union Participant’s “Severance from Service Date” (as such term is defined under the Plan) shall be taken into account for purposes of determining such Designated Union Participant’s eligibility for early retirement subsidies under the Plan. NOW, THEREFORE, by virtue and in exercise of the powers reserved to JBT under Section 11.1 of the Plan, the Plan is hereby amended in the following particulars, each effective August 1, 2023: 1. By adding the following to the end of the definition of “Participating Employer” in Article I of the Plan: “Effective August 1, 2023, JBT AeroTech Corporation and each of its subsidiaries shall cease to be Participating Employers under the Plan.” 2. By adding the following at the end of Section 1-1 of Supplemental 1 to the Plan: “Effective August 1, 2023, each Participant represented by United Steel Workers Local 6162 shall cease to actively participate under this Plan.” 3. By adding the following at the end of Section 1-7 of Supplemental 1 to the Plan: 2 “Each Participant under this Supplemental 1 who was actively participating under the Plan as of August 1, 2023 but who had not met Early Retirement Date eligibility requirements (i.e., was not at least age 55 with 10 or more years of Credited Service) as of August 1, 2023 is referred to herein as a “Designated Union Participant.” Solely for purposes of determining whether such Designated Union Participant becomes eligible for an Early Retirement Benefit by meeting Early Retirement Date eligibility requirements (prior to such Designated Union Participant otherwise commencing payment of his accrued benefit on his Annuity Starting Date), in addition to recognizing such Designated Union Participants Period of Service with the Company and its Affiliates, such Designated Union Participant’s service with OSHKOSH Corporation and its controlled group affiliates (within the meaning of Code Section 414) (collectively, the “Purchaser Group”) between the August 1, 2023 and such Designated Union Participant’s “Severance from Service Date” (as such term is defined under the Plan, but measured by severance from service from the Purchaser Group instead of the Company and its Affiliates) will be taken into account as if such severance from service occurred from the Company and its Affiliates.” * * * * * IN WITNESS WHEREOF, the Company has caused this amendment to be executed by a duly authorized representative this 31st day of July, 2023. JOHN BEAN TECHNOLOGIES CORPORATION /s/ Shelley Bridarolli By: Shelley Bridarolli Its: Executive Vice President Human Resources
Exhibit 10.11A 1 FIRST AMENDMENT OF THE JOHN BEAN TECHNOLOGIES CORPORATION SAVINGS AND INVESTMENT PLAN (As Amended and Restated Effective as of January 1, 2023) WHEREAS, John Bean Technologies Corporation (the “Company”) sponsors and maintains the John Bean Technologies Corporation Savings and Investment Plan, as amended and restated effective as of January 1, 2023 (the “Plan”); and WHEREAS, pursuant to Section 10.02 of the Stock and Asset Purchase Agreement among the Company, JBT AeroTech Corporation and OSHKOSH Corporation, dated as of May 26, 2023 (the “Purchase Agreement”), the employees of JBT Aerotech Corporation and its subsidiaries shall cease to participate under the Plan and JBT Aerotech Corporation and its subsidiaries shall be removed as participating employers under the Plan, in each case effective as of August 1, 2023. NOW, THEREFORE, by virtue and in exercise of the powers reserved to JBT under Section 12.1 of the Plan, the Plan is hereby amended in the following particulars, each effective August 1, 2023: 1. By deleting the last paragraph and the third from last paragraph of the definition of “Eligible Employee” in Article I of the Plan. 2. By substituting the following for the definition of “Matched Participant” in Article I of the Plan: “Matched Participant means a Participant who is eligible to receive Company Safe Harbor Matching Contributions under Section 3.4D, including each (a) salaried Participant, (b) non- union hourly Participant and (c) Participant who is a member of a bargaining unit covered by a collective bargaining agreement that specifically provides for a Company Safe Harbor Matching Contribution under the Plan to the eligible members of the bargaining unit.” 3. By substituting “2.7 [Reserved]” for Section 2.7 of the Plan. 4. By substituting “2.14 [Reserved]” for Section 2.14 of the Plan. 5. By deleting Section 3.3A.2. 6. By substituting “3.4C [Reserved]” for Section 3.4C of the Plan. 7. By adding the following as new Section 13.12.5 of the Plan: “Notwithstanding any other provision in the Plan to the contrary, effective on August 1, 2023, JBT AeroTech Corporation and each of its subsidiaries shall cease being Participating Employers under the Plan. 8. By substituting the following for Appendix A: 2 “ Appendix A Bargaining Units Covered Under the Plan Effective August 1, 2023, the Jetway Systems, Ogden, Utah United Steel Workers Local 6162 shall cease to participate under this plan and on and after such date, no bargaining units are covered under the plan.” 9. By substituting the following for Appendix B: “ Appendix B [RESERVED]” 10. By substituting the following for Appendix C: “ Appendix C Provisions Applicable Only to Section 3.4C of the Plan and Only With Respect to Participants Who Are Members of the Jetway Systems, Ogden, Utah United Steel Workers Local 6162 Bargaining Unit C.1. [Reserved] C.2. [Reserved] C.3. [Reserved] C.4. A Participant becomes vested in his or her Company Nonelective Contribution Account for Company Nonelective Contributions made pursuant to this Section C.4 according to the following schedule: With respect to Participants with less than 3 Years of Service: Years of Service Percent 1 or less 33.33% 2 but fewer than 3 66.67% 3 or more 100% C.5. Notwithstanding anything to the contrary in the Plan, effective August 1, 2023, members of the Jetway Systems, Ogden, Utah - United Steel Workers Local 6162 shall cease to participate under the Plan and, for the avoidance of doubt, shall not be eligible to receive any Company Nonelective Contributions on or after such date.” * * * * * 3 IN WITNESS WHEREOF, the Company has caused this amendment to be executed by a duly authorized representative this 31st day of July, 2023. JOHN BEAN TECHNOLOGIES CORPORATION /s/ Shelley Bridarolli By: Shelley Bridarolli Its: Executive Vice President Human Resources
Exhibit 10.12 JOHN BEAN TECHNOLOGIES CORPORATION EXECUTIVE SEVERANCE PAY PLAN Amended and Restated as of December 5, 2023 1 ARTICLE 1 PURPOSE AND TERM OF PLAN 1.1 Purpose of the Plan. The John Bean Technologies Corporation Executive Severance Pay Plan (the “Plan”), as set forth herein, is sponsored by John Bean Technologies Corporation (“Sponsor”) and is intended to ease financial hardships which may be experienced by the CEO or Employees of Sponsor whose employment is terminated involuntarily other than as a result of a Change in Control or pursuant to Section 2.5 and who are not otherwise entitled to severance pursuant to an agreement by and between Sponsor and the Employee. The Plan is not intended to be an “employee pension benefit plan” or “pension plan” as those terms are defined in Section 3(2) of ERISA. Rather, the Plan is intended to constitute the type of arrangement identified as a “severance pay arrangement” within the meaning of Section 3(2)(B)(i) of ERISA, as further elaborated by regulations promulgated by the Secretary of Labor at Title 29, Code of Federal Regulations, § 2510.3-2(b), which is subject to ERISA. No Employee shall have a vested right to such Benefits. The Benefits paid by the Plan are not intended to constitute deferred compensation and as such, it is intended that the Plan be exempt from Code Section 409A. It is further intended that any benefit paid under the Plan be excluded from the benefit-generating or contribution- generating base of any tax-qualified or nonqualified deferred compensation plan or arrangement sponsored or maintained by Sponsor unless the documents setting forth such plan or arrangement specifically state otherwise. 1.2 Term of the Plan. The Plan shall be effective, as amended and restated, May 15, 2020, and will continue until Sponsor, acting in its sole discretion, elects to amend, modify, or terminate the Plan. ARTICLE 2 DEFINITIONS 2.1 “Base Salary” means the current base salary or wages paid to a Participant, on a monthly basis, as of the Employee’s Employment Termination Date. Base Salary shall not include performance, incentive or other bonuses; commissions; Sponsor contributions to Social Security; benefits payable under, or Sponsor contributions to, any retirement or other plan of deferred compensation; or the value of any fringe benefits provided by Sponsor. Notwithstanding anything in this Plan to the contrary, temporary reductions in base salary or wages shall be disregarded for purposes of calculating an Employee’s Base Salary for purposes of this Plan. 2.2 “Benefit” means the amount that a Participant is entitled to receive pursuant to Section 4.1 of the Plan. 2.3 “Board” means the Board of Directors of John Bean Technologies Corporation. 2.4 “Code” shall mean the Internal Revenue Code of 1986, as amended. 2.5 “Disqualifying Event” means: 2 (a) Violated a material requirement of any material Company policy, specifically including a violation of the Company’s Code of Business Conduct and Ethics; (b) Disclosed, without proper authorization, any trade secrets or other confidential information of the Company; or willfully engaging in any other conduct which breaches Section 10 of this Agreement; (c) Engaged in acts of willful malfeasance or misconduct which is demonstrably injurious to the Company or its subsidiaries or affiliates; (d) Is convicted of, or has pled guilty or nolo contendere to, a felony under the laws of the United States or applicable state law; (e) Engaged in any act that, in the reasonable opinion of the Company, is contrary to its best interests and would reasonably be expected to result in material damage to the property, business or reputation of the Company or its affiliates; (f) The Executive's willful and continued failure to substantially perform the Executive’s employment duties in any material respect (other than any such failure resulting from physical or mental incapacity or occurring after issuance by the Executive of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive that specifically identifies the manner in which the Company believes the Executive has failed to perform the Executive’s duties, and after the Executive has failed to resume substantial performance of the Executive’s duties on a continuous basis within thirty (30) calendar days of receiving such demand. 2.6 “Employee” means an individual eligible to participate in the Plan in accordance with section 3.1. 2.7 “Employment Termination Date” means the date on which the employment relationship between the Employee and Sponsor is involuntarily terminated and the Employee experiences a “separation from service” as such term is defined under Code Section 409A. In no event shall an Employee be considered to have involuntarily terminated his or her employment or to have experienced an Employment Termination Date for the purposes of the Plan if his or her employment with Sponsor is terminated due to (a) Employee’s voluntary cessation of employment (with or without notice); (b) Employee’s death or Disability (as such term is defined under Code Section 409A); or (c) any of the reasons specified in Section 2.5. 2.8 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended. 2.9 “Named Fiduciary” means Sponsor and the Plan Administrator. Each Named Fiduciary shall have only those particular powers, duties, responsibilities and obligations as are specifically given such Named Fiduciary under the Plan. Any Named Fiduciary, if so appointed, may perform in more than one fiduciary capacity. 2.10 “Participant” means any of the individuals described in Section 3.1. 3 2.11 “Plan” means the John Bean Technologies Corporation Executive Severance Pay Plan. 2.12 “Plan Administrator” means the Compensation Committee of the Board, appointed by Sponsor to administer the Plan. 2.13 “Plan Year” means the period commencing each January 1 and ending on the following December 31. 2.14 “Sponsor” means John Bean Technologies Corporation. The term “Sponsor” shall also include any successor to John Bean Technologies Corporation if such successor adopts the Plan. 2.15 “Target Bonus” means the applicable percentage of annual actual base salary earnings for a Participant as determined by the Plan Administrator. 2.16 “Terminated Employee” means a former Employee who has experienced a termination within the meaning of Section 2.7. ARTICLE 3 PARTICIPATION AND ELIGIBILITY FOR BENEFITS 3.1 Plan Participants. Except as otherwise provided in this Section 3.1, the CEO and each Employee of Sponsor who is a direct report of the CEO and who is a party to an Executive Severance Agreement with Sponsor is eligible to participate in the Plan provided he or she meets each requirement under the Plan, as determined by the Plan Administrator. No individual may receive severance pay or benefits under the Plan if he or she is entitled to receive severance pay or benefits as of the individual’s Employment Termination Date pursuant to an agreement by and between Sponsor and such individual, including, but not limited to, pursuant to the Executive Severance Agreement. Notwithstanding anything in this Plan to the contrary, no individual is eligible under this Plan if he or she is party to an employment agreement with Sponsor which provides such individual with severance pay or benefits upon termination of employment with Sponsor. Sponsor reserves the right, in its discretion, to cover any additional positions or individuals under the Plan, under whatever terms and conditions that Sponsor shall elect. 3.2 General Benefits Award Requirement. A Terminated Employee shall be eligible to receive a Benefit under the Plan only upon an involuntary termination employment by Sponsor as provided in Section 2.7, other than as a result of a Change in Control. For purposes herein, a Change in Control shall have such meaning as is set forth in the Executive Severance Agreement executed by and between Employee and Sponsor. 3.3 Execution of a Separation Agreement. In order to be eligible to receive the Benefit under the Plan, the Participant must execute a Separation Agreement in such form and containing such terms as shall be required by the Plan Administrator from time to time, in its sole
4 and absolute discretion, which terms shall include a waiver and release of claims and non- disclosure, non-solicitation and non-competition provisions. ARTICLE 4 CALCULATION OF SEVERANCE BENEFIT 4.1 Amount of Benefit. A Terminated Employee who has satisfied the requirements of Article 3 shall be entitled to receive the following benefits, as determined by the Plan Administrator: (a) Severance Benefit Amount. The Terminated Employee shall receive an amount equal to fifteen (15) months of Base Salary and Target Bonus (with respect to a Terminated Employee who is the CEO and President, twenty-four (24) months of Base Salary and Target Bonus). (b) Target Bonus. The Terminated Employee shall receive a pro-rated payment of the Terminated Employee’s applicable annual Target Bonus (at target level) for the calendar year in which the Employee’s Employment Termination Date occurs. (c) COBRA Benefits. For each Terminated Employee who, upon such Employee’s Employment Termination Date, is enrolled in Sponsor’s Medical and Dental Insurance plans and, as a result is entitled to elect continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), Sponsor will pay to the Terminated Employee an amount equal to the Sponsor’s portion of the monthly premium for medical and dental coverage provided to the Terminated Employee as of his or her Employment Termination Date, multiplied by fifteen (15) (except with respect to a Terminated Employee who is the CEO and President, in which case it is multiplied by twenty-four (24), which the Terminated Employee may, but is not required to, use to pay for any elected COBRA coverage or other health care coverage. (d) Vacation Pay. The Terminated Employee shall receive a lump sum payment of the Terminated Employee’s earned and accrued, but unused vacation. (e) Long-Term Incentive Plan. Unvested time-based equity awards shall be adjusted for appropriate proration as of the termination date and will continue to vest according to the original vesting schedule of such awards. Performance-based equity awards may be prorated at the discretion of the CEO and the Compensation Committee of the Board of Directors, and any such awards that are prorated will continue to vest according to the original vesting schedule of such awards. (f) Outplacement Assistance. Sponsor shall reimburse the Terminated Employee for the reasonable cost of outplacement assistance obtained by the Terminated Employee within the twelve (12) month period immediately following the Employee’s Employment Termination Date; provided the maximum amount of outplacement assistance to be reimbursed will not exceed the amount to which the Terminated Employee is determined to be eligible for under the current outplacement services standard benefit plan; provided further, in order to be eligible to receive reimbursement, the Terminated Employee must submit the invoice 5 for such assistance received within ninety (90) days following the date the Terminated Employee incurs such costs. Sponsor shall make the reimbursement within thirty (30) days following receipt of a timely submitted invoice that is eligible for reimbursement. (g) Financial Planning/Tax Preparation Assistance. Sponsor shall pay to the Terminated Employee a single lump sum payment of $20,000 LESS any amounts that Sponsor has previously reimbursed the Terminated Employee for financial planning/tax preparation assistance expenses in the calendar year in which the termination of employment occurs. The Terminated Employee may use this payment for financial planning/tax preparation assistance. (h) Tax Treatment. Terminated Employees shall pay (and Sponsor shall be permitted to withhold) any and all federal, state and local taxes, if any, that are required by law to be paid with respect to the Benefits received. 4.2 Reductions. The Benefit payable hereunder shall be reduced by any and all payments required to be made by Sponsor under federal, state and local law. 4.3 Effect on At-Will Employment Relationship and on Other Benefits. Neither the Plan, nor any of its provisions, alters the at-will employment relationship between Employee and Sponsor. In addition, there shall not be drawn from the continued provision by Sponsor of any Benefit hereunder any implication of continued employment or of any continued right to accrue vacation days, paid holidays, paid sick days or other similar benefits normally associated with employment for any part of the period during or in respect of which a Benefit is payable under the Plan. 4.4 Benefits as Consideration for Waivers, Covenants and Releases. The Benefit provided hereunder, where applicable, shall constitute consideration for the release that a Terminated Employee is required to provide to Sponsor relating to prior employment by Sponsor. The Benefit provided hereunder, where applicable, shall also constitute consideration for any waiver by the terminated Employee, whether full or partial, and whether absolute or conditional, of any rights, claims, entitlement to relief or damages, or entitlement to seek imposition upon Sponsor of penalties, in connection with any contract, express or implied, or under any statute, regulation, rule, order, or similar promulgation by a governmental or quasi-governmental entity. In addition, the Benefit provided hereunder, where applicable, shall constitute consideration for any covenants or agreements contained in the Separation Agreement executed by the Terminated Employee in connection with this Plan. ARTICLE 5 METHOD AND DURATION OF BENEFIT PAYMENTS 5.1 Method of Payment. Except as otherwise provided in Article 4, a Participant’s Benefits shall be paid in the form of a single lump sum payment as soon as practicable after both (a) the Participant’s Employment Termination Date and (b) the date the Separation Agreement referenced in Section 3.3 becomes effective (as described below), but in no event beyond thirty (30) days from such date; provided, if any such Benefits constitute deferred 6 compensation under Code Section 409A and are payable within a period that spans two calendar years, such Benefits shall be paid in the later calendar year; provided further that, if the Employee is deemed on the Employee’s Employment Termination Date to be a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code, any such Benefits that constitute deferred compensation under Code Section 409A and would otherwise be payable prior to the earlier of (i) the 6-month anniversary of the Employee’s Employment Termination Date and (ii) the date of the Employee’s death (the “Delay Period”) shall instead be paid in a lump sum immediately upon (and not before) the expiration of the Delay Period. For purposes herein, a Participant’s Separation Agreement shall not become effective unless and until the Participant timely executes the Separation Agreement on or before the date set forth in such agreement and does not subsequently timely revoke the Separation Agreement under applicable law. 5.2 Cessation of Benefit Payments. A Participant shall cease to participate in the Plan, and all Benefit payments shall cease, upon the occurrence of the earliest of: (a) Completion of the payment to the Participant of the entitled Benefit under Section 4.1; (b) Termination by the Plan Administrator of the Terminated Employee’s right to be a Participant upon discovery of the occurrence of a Disqualifying Event within the meaning of Section 2.5, whether or not such discovery occurs before the Employment Termination Date; or (c) The violation by the Terminated Employee of any of the provisions of this Plan, of provisions contained in the Separation Agreement executed by the Terminated Employee, including, but not limited to, obligations with respect to trade secrets and confidential information, and covenants not to solicit Sponsor employees, clients and prospective clients and covenants not to perform same for clients and prospective clients. ARTICLE 6 THE PLAN ADMINISTRATOR 6.1 Authority and Duties. It shall be the duty of the Plan Administrator, on the basis of information supplied to it by Sponsor, to determine the eligibility of each Terminated Employee to participate in the Plan, to calculate the Benefit to be paid to each Terminated Employee who has been selected by Sponsor to receive a severance pay award pursuant to Section 3.3, and to determine the manner and time of payment of the Benefit. Sponsor shall make such payments as are certified to it by the Plan Administrator to be due to Participants. The Plan Administrator shall have the full discretionary power and authority to construe, interpret and administer the Plan, to make Benefit eligibility determinations, to correct deficiencies in the Plan, and to supply omissions. All decisions, actions and interpretations of the Plan Administrator shall be final, binding and conclusive upon the parties, subject only to determinations by individuals appointed by the Board to review denied claims for Benefits. 7 6.2 Records, Reporting and Disclosure. The Plan Administrator shall keep all individual and group records relating to Participants and all other records necessary for the proper operation of the Plan. Such records shall be made available to Sponsor and to each Participant for examination during business hours, except that a Participant shall examine only such records as pertain exclusively to the examining Participant and to the Plan. The Plan Administrator shall prepare and shall file as required by law or regulation all reports, forms, documents and other items required by ERISA, the Code, and every other relevant statute, each as amended, and all regulations thereunder (except that Sponsor, as payor of the Benefits, shall prepare and distribute to the proper recipients all forms relating to withholding of income or wage taxes, Social Security contributions, and other amounts which may be similarly reportable). ARTICLE 7 AMENDMENT AND TERMINATION 7.1 Amendment, Modification or Termination. The Board retains the right, at any time and from time to time, to amend, modify or terminate the Plan, including amendment or modification of any Appendices hereto, in whole or in part, for any reason, and without either the consent of or the prior notification to any Participant. Any such amendment may not cause the cessation and discontinuance of payments of a Benefit to any person or persons under the Plan. The Board shall have the right to delegate its authority and power hereunder, or any portion thereof, to any committee of the Board, and the right to rescind any such delegation in whole or in part. ARTICLE 8 DUTIES OF SPONSOR 8.1 Records. Sponsor shall supply to the Plan Administrator all records and information necessary to the performance of the Plan Administrator’s duties. 8.2 Payment. Sponsor shall make payments from its general assets to Participants formerly in its employ in accordance with the terms of the Plan, as directed by the Plan Administrator. ARTICLE 9 CLAIMS PROCEDURES 9.1 Application for Benefits. If a Terminated Employee believes he or she is eligible to receive a Benefit under the Plan, he or she may apply for such Benefit by completing and filing with the Plan Administrator an application for Benefits on a form supplied by the Plan Administrator. Before the date on which Benefit payments commence, each such application must be supported by such information as the Plan Administrator deems relevant and appropriate. 9.2 Appeals of Denied Claims for Benefits. In the event that a claim for a Benefit is denied in whole or in part, the Terminated Employee shall be notified of such denial in writing by the Plan Administrator. The notice advising of the denial shall specify the reason or
8 reasons for denial, make specific reference to pertinent Plan provisions, describe any additional material or information necessary for the Terminated Employee to perfect the claim (explaining why such material or information is needed), and shall advise the Terminated Employee of the procedure for the appeal of such denial. All appeals shall be made by the following procedure: (a) The Terminated Employee shall file with the Plan Administrator a notice appealing the denial. Such notice shall be filed within sixty (60) days of notification by the Plan Administrator of the claim denial, shall be made in writing, and shall set forth all of the facts upon which the appeal is based. Appeals not timely filed shall be barred. (b) A determination of an appealed claim shall be accompanied by a written statement as to the reason or reasons therefor. The determination so rendered shall be final and binding upon all parties. ARTICLE 10 MISCELLANEOUS 10.1 Nonalienation of Benefits. (a) Except as provided in Subsection (b) of this Section 10.1, none of the payments, Benefits or rights of any Participant shall be subject to any claim of any creditor, and, in particular, to the fullest extent permitted by law, all such payments, Benefits and rights shall be free from attachment, garnishment, trustee’s process, or any other legal or equitable process available to any creditor of such Participant. No Participant shall have the right to alienate, anticipate, commute, pledge, encumber or assign any Benefit or any of the payments which he or she may expect to receive, contingently or otherwise, under the Plan. (b) Notwithstanding the provisions of Subsection (a) of this Section, any Benefit hereunder shall be subject to (1) offset by any claims of Sponsor against the Participant; (2) tax liens imposed thereon; and (3) the terms of any valid court order attaching thereto. 10.2 Severability of Provisions. If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included. 10.3 Heirs, Assigns, and Personal Representatives. The Plan shall be binding upon the heirs, executors, administrators, successors and assigns of the parties, including each Participant, present and future (except that no successor to Sponsor shall be considered a Plan Sponsor unless that successor adopts the Plan). 10.4 Headings and Captions. The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. 10.5 Gender and Number. Except where clearly indicated otherwise by context, the masculine form of any word shall include the feminine and the neuter, the feminine 9 form shall include the masculine and the neuter, the singular form shall include the plural, and the plural form shall include the singular. 10.6 Unfunded Plan. The Plan shall not be funded. No Participant shall have any right to, or interest in, any assets of Sponsor which may be applied to the payment of a Benefit hereunder. 10.7 Appendices. From time to time, Sponsor may elect to append provisions of limited duration to the Plan to govern what Sponsor determines to be special circumstances governing a substantial number of Employees. Each such Appendix, during the period stipulated therein, shall be deemed a part of the Plan. Except as otherwise stated in any such Appendix applicable to any Employee or Terminated Employee, the rights of such Employee or Terminated Employee as stated in such Appendix shall supersede the rights provided under the Plan, the Benefit provided under such Appendix shall be in lieu of comparable or stipulated Benefits provided under the Plan, and there shall be no duplication of Benefits. 10.8 Lost Payees. A Benefit shall be deemed forfeited if the Plan Administrator is unable to locate a Participant to whom a Benefit is otherwise due. 10.9 Controlling Law. The Plan shall be construed and enforced according to federal law. In the absence of applicable federal law as to any issue, such issue shall be resolved in accordance with the laws of the State of Illinois. 10.10 409A Compliance. Notwithstanding any Plan provisions herein to the contrary and, to the extent applicable, the Plan shall be interpreted, construed and administered (including with respect to any amendment, modification or termination of the Plan) in such a manner so as to comply with the provisions of Code Section 409A and any related Internal Revenue Service guidance promulgated thereunder (including its exemptive provisions). IN WITNESS WHEREOF, and as evidence of the adoption of the Plan, as amended and restated, effective December 5, 2023, John Bean Technologies Corporation has caused the same to be executed this the 5th day of December 2023. JOHN BEAN TECHNOLOGIES CORPORATION /s/ Shelley Bridarolli By: /Shelley R.K. Bridarolli/ Shelley R.K. Bridarolli Its: Executive Vice President, Human Resources
Exhibit 18.1 PricewaterhouseCoopers LLP, One North Wacker, Chicago, Illinois 60606 T: 312 298 2000; F: 312 298 2001, www.pwc.com/us February 23, 2024 Board of Directors John Bean Technologies Corporation 70 West Madison, Suite 4400 Chicago, Illinois 60602 Dear Directors: We are providing this letter to you for inclusion as an exhibit to John Bean Technologies Corporation’s (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”) pursuant to Item 601 of Regulation S-K. We have audited the consolidated financial statements included in the Form 10-K and issued our report thereon dated February 23, 2024. Note 1 to the consolidated financial statements describes a change in accounting principle from the last-in, first-out (“LIFO”) inventory accounting method to the first-in, first- out (“FIFO”) inventory accounting method. It should be understood that the preferability of one acceptable method of accounting over another for determining the cost of inventory has not been addressed in any authoritative accounting literature, and in expressing our concurrence below we have relied on management’s determination that this change in accounting principle is preferable. Based on our reading of management’s stated reasons and justification for this change in accounting principle in the Form 10-K, and our discussions with management as to their judgment about the relevant business planning factors relating to the change, we concur with management that such change represents, in the Company’s circumstances, a change to a preferable accounting principle in conformity with Accounting Standards Codification 250, Accounting Changes and Error Corrections. Very truly yours, /s/ PricewaterhouseCoopers LLP
| Exhibit 21.1 | ||||||||
| JOHN BEAN TECHNOLOGIES CORPORATION SUBSIDIARY LIST | ||||||||
| Legal Entity Name | Jurisdiction of Organization | |||||||
John Bean Technologies Corporation | Delaware [USA] | |||||||
| John Bean Technologies LLC | Delaware [USA] | |||||||
| JBT Equipment Finance LLC | Delaware [USA] | |||||||
| JBT Holdings LLC | Delaware [USA] | |||||||
| Tipper Tie, Inc. | Delaware [USA] | |||||||
| Avure U.S., Inc. | Delaware [USA] | |||||||
| Avure Technologies Incorporated | Delaware [USA] | |||||||
| Bevcorp, LLC | Delaware [USA] | |||||||
| JBT Contract Services LLC | Delaware [USA] | |||||||
| CMS Technology, Inc. | Delaware [USA] | |||||||
| Prime Equipment Group, LLC | Ohio [USA] | |||||||
| Proseal America, Inc. | Virginia [USA] | |||||||
| A & B Process Systems Corp. | Wisconsin [USA] | |||||||
| AutoCoding Systems Pty Limited | Australia | |||||||
| AutoCoding Systems Limited | United Kingdom | |||||||
| International Packaging Solutions Limited | United Kingdom | |||||||
| JBT Alco-food-machines GmbH | Germany | |||||||
| JBT FTNON B.V. | Netherlands | |||||||
| JBT Food and Dairy Systems B.V. | Netherlands | |||||||
| JBT Food and Dairy Systems Mexico, S.A. de C.V. | Mexico | |||||||
| JBT Food and Dairy Systems SARL | France | |||||||
| JBT International (Thailand) Ltd. | Thailand | |||||||
| JBT Kunshan Holdings Ltd. | Hong Kong | |||||||
| JBT Malaysia Sdn. Bhd. | Malaysia | |||||||
| JBT Ningbo Holdings Ltd. | Hong Kong | |||||||
| JBT Shanghai Holdings Ltd. | Hong Kong | |||||||
| John Bean Technologies Chile Limitada | Chile | |||||||
| John Bean Technologies (Ningbo) Company Ltd. | China | |||||||
| John Bean Technologies (Proprietary) Ltd. | South Africa | |||||||
| John Bean Technologies (Shanghai) Company Ltd. | China | |||||||
| John Bean Technologies (Thailand) Ltd. | Thailand | |||||||
| John Bean Technologies AB | Sweden | |||||||
| John Bean Technologies Argentina S.R.L. | Argentina | |||||||
| John Bean Technologies Australia Ltd. | Australia | |||||||
| John Bean Technologies B.V. | Netherlands | |||||||
| John Bean Technologies Canada Limited | Canada | |||||||
| John Bean Technologies de Mexico S. de R.L. de C.V. | Mexico | |||||||
| John Bean Technologies Europe B.V. | Netherlands | |||||||
| John Bean Technologies Foodtech Spain S.L. | Spain | |||||||
| John Bean Technologies GmbH | Germany | |||||||
| John Bean Technologies Hong Kong Ltd. | Hong Kong | |||||||
| John Bean Technologies India Pvt. Ltd. | India | |||||||
| John Bean Technologies K.K. | Japan | |||||||
| John Bean Technologies Ltd. | United Kingdom | |||||||
| John Bean Technologies Máquinas e Equipamentos Industriais Ltda. | Brazil | |||||||
| John Bean Technologies Middle East FZE | UAE | |||||||
| John Bean Technologies N.V. | Belgium | |||||||
| John Bean Technologies NZ Limited | New Zealand | |||||||
| John Bean Technologies OOO | Russia | |||||||
| John Bean Technologies Philippines Corp. | Philippines | |||||||
| John Bean Technologies S.A.S. | France | |||||||
| John Bean Technologies S.p. Z.o.o. | Poland | |||||||
| John Bean Technologies S.P.A. | Italy | |||||||
| John Bean Technologies S.R.O. | Czech Republic | |||||||
| John Bean Technologies Singapore Pte. Ltd. | Singapore | |||||||
| John Bean Technologies Singapore Holdings Pte. Ltd. | Singapore | |||||||
| Newco 1001 Limited | United Kingdom | |||||||
| PLF International Limited | United Kingdom | |||||||
| Proseal Australia PTY Ltd | Australia | |||||||
| Proseal UK Limited | United Kingdom | |||||||
| PT John Bean Technologies Indonesia | Indonesia | |||||||
| Schröder Maschinenbau GmbH | Germany | |||||||
| Tipper Tie Technopack GmbH | Germany | |||||||
| Urtasun Tecnología Alimentaria S.L. | Spain | |||||||
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-152682 and 333-218253) of John Bean Technologies Corporation of our report dated February 23, 2024 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
February 23, 2024
Exhibit 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Brian A. Deck, certify that:
1.I have reviewed this annual report on Form 10-K 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;
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: | February 23, 2024 | |||||||
| /s/ Brian A. Deck | ||||||||
| Brian A. Deck | ||||||||
| President and Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
Exhibit 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
I, Matthew J. Meister, certify that:
1.I have reviewed this annual report on Form 10-K 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;
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: | February 23, 2024 | |||||||
| /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. 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 Annual Report on Form 10-K of the Company for the year ended December 31, 2023, 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: | February 23, 2024 | |||||||
| /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. 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 Annual Report on Form 10-K of the Company for the year ended December 31, 2023, 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: | February 23, 2024 | |||||||
| /s/ Matthew J. Meister | ||||||||
Matthew J. Meister | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||
| (Principal Financial Officer) | ||||||||
Exhibit 97.1 1 JOHN BEAN TECHNOLOGIES CORPORATION COMPENSATION RECOVERY POLICY 1. Purpose. The purpose of this Compensation Recovery Policy (this “Policy”) is to describe the circumstances under which John Bean Technologies Corporation (the “Company”) is required to recover certain compensation paid to certain employees. Any references in compensation plans, agreements, equity awards or other policies to the Company’s “recoupment,” “clawback” or similarly-named policy shall be deemed to refer to this Policy with respect to Incentive-Based Compensation Received on or after the Effective Date. With respect to Incentive-Based Compensation Received prior to the Effective Date, such references to the Company’s “recoupment”, “clawback” or similarly-named policy in compensation plans, agreements, equity awards or other policies shall be deemed to refer to the Company’s “recoupment,” “clawback” or similarly-named policy, if any, in effect prior to the Effective Date. 2. Mandatory Recovery of Compensation. In the event that the Company is required to prepare an Accounting Restatement, the Company shall recover reasonably promptly the amount of Erroneously Awarded Compensation. 3. Definitions. For purposes of this Policy, the following terms, when capitalized, shall have the meanings set forth below: (a) “Accounting Restatement” shall mean any accounting restatement required due to material noncompliance of the Company with any financial reporting requirement under the securities laws, including to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. (b) “Covered Officer” shall mean the Company’s president; principal financial officer; principal accounting officer (or if there is no such accounting officer, the controller); any vice-president of the Company in charge of a principal business unit, division, or function (such as sales, administration, or finance); any other officer who performs a significant policy-making function; or any other person who performs similar significant policy-making functions for the Company. (c) “Effective Date” shall mean October 2, 2023. (d) “Erroneously Awarded Compensation” shall mean the excess of (i) the amount of Incentive-Based Compensation Received by a person (A) after beginning service as a Covered Officer, (B) who served as a Covered Officer at any time during the performance period for that Incentive-Based Compensation, (C) while the Company has a class of securities listed on a national securities exchange or a national securities association and (D) during the Recovery Period; over (ii) the Recalculated Compensation. For the avoidance of doubt, a person who served as a Covered Officer during the periods set forth in clauses (A) and (B) of the 2 preceding sentence shall continue to be subject to this Policy even after such person’s service as a Covered Officer has ended. (e) “Incentive-Based Compensation” shall mean any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a financial reporting measure. A financial reporting measure is a measure that is determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measures that are derived wholly or in part from such measures, regardless of whether such measure is presented within the financial statements or included in a filing with the Securities and Exchange Commission. Each of stock price and total shareholder return is a financial reporting measure. For the avoidance of doubt, incentive-based compensation subject to this Policy does not include stock options, restricted stock, restricted stock units or similar equity-based awards for which the grant is not contingent upon achieving any financial reporting measure performance goal and vesting is contingent solely upon completion of a specified employment period and/or attaining one or more non-financial reporting measures. (f) “Recalculated Compensation” shall mean the amount of Incentive-Based Compensation that otherwise would have been Received had it been determined based on the restated amounts in the Accounting Restatement, computed without regard to any taxes paid. For Incentive-Based Compensation based on stock price or total shareholder return, where the amount of the Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in an Accounting Restatement, the amount of the Recalculated Compensation must be based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total shareholder return, as the case may be, on the compensation Received. The Company must maintain documentation of the determination of that reasonable estimate and provide such documentation to the national securities exchange or association on which its securities are listed. (g) Incentive-Based Compensation is deemed “Received” in the Company’s fiscal period during which the financial reporting measure specified in the award of such Incentive-Based Compensation is attained, even if the payment or grant of the Incentive-Based Compensation occurs after the end of that period. (h) “Recovery Period” shall mean the three completed fiscal years of the Company immediately preceding the date the Company is required to prepare an Accounting Restatement; provided that the Recovery Period shall not begin before the Effective Date. For purposes of determining the Recovery Period, the Company is considered to be “required to prepare an Accounting Restatement” on the earlier to occur of: (i) the date the Company’s Board of Directors, a committee thereof, or the Company’s authorized officers conclude, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement, or (ii) the date a court, regulator, or other legally authorized body 3 directs the Company to prepare an Accounting Restatement. If the Company changes its fiscal year, then the transition period within or immediately following such three completed fiscal years also shall be included in the Recovery Period, provided that if the transition period between the last day of the Company’s prior fiscal year end and the first day of its new fiscal year comprises a period of nine to 12 months, then such transition period shall instead be deemed one of the three completed fiscal years and shall not extend the length of the Recovery Period. 4. Exceptions. Notwithstanding anything to the contrary in this Policy, recovery of Erroneously Awarded Compensation will not be required to the extent the Company’s committee of independent directors responsible for executive compensation decisions (or a majority of the independent directors on the Company’s board of directors in the absence of such a committee) has made a determination that such recovery would be impracticable and one of the following conditions have been satisfied: (a) The direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered; provided that, before concluding that it would be impracticable to recover any amount of Erroneously Awarded Compensation that was Incentive-Based Compensation based on the expense of enforcement, the Company must make a reasonable attempt to recover such Erroneously Awarded Compensation, document such reasonable attempt(s) to recover, and provide that documentation to the national securities exchange or association on which its securities are listed. (b) Recovery would violate home country law where, with respect to Incentive-Based Compensation, that law was adopted prior to November 28, 2022; provided that, before concluding that it would be impracticable to recover any amount of Erroneously Awarded Compensation that was Incentive-Based Compensation based on violation of home country law, the Company must obtain an opinion of home country counsel, acceptable to the national securities exchange or association on which its securities are listed, that recovery would result in such a violation, and must provide such opinion to the exchange or association. (c) Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder. 5. Manner of Recovery. In addition to any other actions permitted by law or contract, the Company may take any or all of the following actions to recover any Erroneously Awarded Compensation: (a) require the Covered Officer to repay such amount; (b) offset such amount from any other compensation owed by the Company or any of its affiliates to the Covered Officer, regardless of whether the contract or other documentation governing such other compensation specifically permits or specifically prohibits such offsets; and (c) subject to Section 4(c), to the extent the Erroneously Awarded Compensation was deferred into a plan of deferred compensation, whether or not 4 qualified, forfeit such amount (as well as the earnings on such amounts) from the Covered Officer’s balance in such plan, regardless of whether the plan specifically permits or specifically prohibits such forfeiture. If the Erroneously Awarded Compensation consists of shares of the Company’s common stock, and the Covered Officer still owns such shares, then the Company may satisfy its recovery obligations by requiring the Covered Officer to transfer such shares back to the Company. 6. Other. (a) This Policy shall be administered and interpreted, and may be amended from time to time, by the Company’s board of directors or any committee to which the board may delegate its authority in its sole discretion in compliance with the applicable listing standards of the national securities exchange or association on which the Company’s securities are listed, and the determinations of the board or such committee shall be binding on all Covered Officers. (b) The Company shall not indemnify any Covered Officer against the loss of Erroneously Awarded Compensation. (c) The Company shall file all disclosures with respect to this Policy in accordance with the requirements of the Federal securities laws, including disclosure required by the Securities and Exchange Commission filings. (d) Any right to recovery under this Policy shall be in addition to, and not in lieu of, any other rights of recovery that may be available to the Company.