JBT (John Bean Technologies Corporation) — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. The filing is for John Bean Technologies Corporation; it does not identify the registrant as JBT MAREL Corp. Unless noted, operating results below refer to continuing operations and exclude AeroTech, which was classified as discontinued operations.
Business context and results
JBT provides technology, equipment and services to food and beverage markets. Its strategy emphasizes organic growth, digital transformation, margin improvement and complementary acquisitions. On August 1, 2023, after quarter-end, JBT completed the sale of AeroTech to Oshkosh, advancing its plan to focus on food and beverage solutions.
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Continuing-operations revenue | $427.7m | $394.0m | $816.2m | $750.3m |
| Operating income | $43.4m | $32.0m | $70.9m | $55.0m |
| Gross margin | 34.2% | 32.7% | 34.1% | 33.1% |
| Adjusted EBITDA, continuing operations (non-GAAP) | $71.4m | $53.2m | $125.8m | $98.3m |
| Adjusted EBITDA margin (non-GAAP) | 16.7% | 13.5% | 15.4% | 13.1% |
| Income from continuing operations | $27.7m | $25.7m | $44.1m | $45.6m |
| Net income, including discontinued operations | $31.0m | $33.4m | $56.6m | $59.0m |
| Diluted EPS, continuing operations | $0.87 | $0.80 | $1.37 | $1.42 |
| Diluted EPS, total | $0.97 | $1.04 | $1.76 | $1.84 |
Financial position, cash flow and liquidity
- Cash: $42.8m at June 30, 2023, versus $71.7m at December 31, 2022. The filing reports $37.8m held by foreign subsidiaries.
- Debt: $555.4m drawn on the revolving credit facility and $402.5m principal on convertible notes; total gross borrowings were $957.9m. Balance-sheet long-term debt, net of issuance costs, was $949.6m, with $0.9m short-term debt.
- Liquidity: Management reported $597.6m of cash plus borrowing availability. The revolver had $738.2m available, subject to its leverage covenant. JBT said it was in compliance with covenants and expected to remain so in the foreseeable future.
- Six-month continuing cash flow: $62.6m provided by operating activities, down from $75.0m; $34.9m used in investing activities, including $35.3m of capital expenditures; and $40.8m used in financing activities. Continuing-operations cash decreased $13.7m.
- Other balance-sheet items: Total assets were $2,587.8m and stockholders’ equity $921.2m. Assets held for sale were $335.1m and liabilities held for sale $142.1m.
Changes versus prior comparable periods
- Q2 continuing revenue rose 8.6%; management attributed the increase to $31.7m of acquired revenue and $6.8m of organic growth, partly offset by $4.7m of unfavorable foreign-currency translation. Organic growth reflected pricing and recurring-revenue volume gains, partly offset by lower non-recurring volume.
- Q2 gross margin expanded 150 basis points, primarily on pricing and a more favorable aftermarket mix. For the first half, margin expanded 100 basis points; management cited higher LIFO expense and reduced fixed-cost leverage as offsets.
- Q2 continuing income increased to $27.7m, but first-half continuing income declined 3.3% to $44.1m. Net income fell in both periods, in part because AeroTech discontinued-operations income declined year over year.
- Interest expense rose to $7.1m in Q2 and $13.6m for the first half, mainly from higher rates and higher average debt following 2022 acquisitions. First-half operating cash flow also fell, primarily due to higher payments to suppliers and lower customer collections.
Outlook, management commentary and risks
- Management reported solid Q2 orders, including major pharmaceutical, nutraceutical and automated-guided-vehicle orders; it said most large project orders booked in the quarter would convert to revenue in 2024. Demand in core meat and poultry markets remained under pressure amid weak wholesale pricing.
- JBT expected positive cash flow for full-year 2023 and forecast capital expenditures of $50m–$60m, including $12m–$14m for its OmniBlu digital platform. It estimated an approximately $20m 2023 operating-cash-flow impact from required tax amortization of U.S. R&D expenses.
- The 2022/2023 restructuring plan’s estimated total cost increased to $16m–$18m, expected to be recognized by year-end 2023. Estimated cumulative savings increased to $18m–$20m; 2023 savings were projected at $9m–$10m, with the remainder in 2024.
- After the AeroTech sale, management said it expected to use net proceeds in line with capital-allocation priorities, including debt repayment and disciplined acquisitions. It estimated approximately $25m of transaction costs and $134m of cash taxes related to the sale.
- Risks highlighted include economic deterioration, inflation and supply-chain constraints, customer demand and project timing, foreign-exchange and interest-rate movements, customer concentration or contract loss, competition, cybersecurity, geopolitical disruption, and the ability to meet credit covenants or access capital.
- No formal full-year revenue or earnings guidance is provided in the supplied filing text. Management’s forward-looking statements are subject to significant uncertainties.
Important facts for investors to verify
- Reconcile AeroTech sale proceeds: the notes report $817.6m cash consideration, while MD&A says $819.7m of proceeds received; the transaction had a $800m base price and remains subject to purchase-price adjustments.
- Track post-sale cash taxes, transaction costs, debt repayment and any acquisitions funded from the proceeds.
- Assess whether the Q2 order strength converts to revenue as expected in 2024, particularly given pressure in meat and poultry markets.
- Monitor restructuring charges, delivery of the increased savings targets, and margin durability amid inflation, LIFO costs and lower project volume.
- Evaluate cash conversion, foreign-subsidiary cash availability, floating-rate debt exposure and covenant headroom. The filing reports no covenant breach.
- Consider discontinued-operations comparability: AeroTech contributed $164.3m of Q2 2023 revenue and $3.3m of after-tax income; its sale closed after the reporting date.