Business context and reporting period
John Bean Technologies Corporation (JBT; NYSE: JBT) filed this unaudited Form 10-Q for the quarter ended September 30, 2019. The filing describes a global provider of food and beverage processing technology and airport ground-support and gate equipment through JBT FoodTech and JBT AeroTech. The supplied filing identifies the registrant as John Bean Technologies Corporation, not “JBT MAREL Corp.”
Financial performance and position
Amounts are in millions of dollars, except per-share data and percentages.
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $489.4 | $481.9 | $1,400.2 | $1,382.4 |
| Operating income | $48.6 | $36.6 | $125.6 | $84.7 |
| Operating margin | 9.9% | 7.6% | 9.0% | 6.1% |
| Income from continuing operations | $33.5 | $26.4 | $87.2 | $61.5 |
| Diluted EPS from continuing operations | $1.04 | $0.82 | $2.72 | $1.91 |
| Cash provided by continuing operating activities | Not separately reported quarterly | Not separately reported quarterly | $35.1 | $26.6 |
| Free cash flow (company-defined) | Not provided quarterly | Not provided quarterly | $14.4 | $18.2 |
- Q3 gross margin rose to 30.2% from 28.0%; nine-month gross margin rose to 30.7% from 27.4%. Management attributed improvement to restructuring-related efficiencies, product and aftermarket mix, and acquired businesses.
- Q3 SG&A was $97.7 million versus $86.9 million; nine-month SG&A was $293.1 million versus $261.5 million. The increases primarily reflected acquisitions and related costs.
- At September 30, cash was $49.1 million, total current assets $725.1 million, and current liabilities $472.8 million. Long-term debt was $768.7 million and short-term/current debt $1.6 million. The company reported $771.7 million drawn and $215.7 million available under its revolving credit facility.
- Nine-month investing cash outflow was $396.3 million, including $368.4 million of acquisitions, net of cash acquired. Financing provided $368.5 million, mainly from credit-facility borrowing. Cash increased $6.1 million to $49.1 million.
- Segment operating profit for the first nine months increased to $132.5 million in FoodTech from $110.8 million and to $50.2 million in AeroTech from $40.2 million. Q3 segment profit was $42.5 million in FoodTech and $22.2 million in AeroTech.
Material changes versus prior comparable periods
- Q3 revenue increased 2% as reported; management cited acquisition growth offset by a 3% organic decline, foreign-exchange headwinds, and the absence of a prior-year revenue-recognition transition benefit. FoodTech Q3 revenue was nearly flat, while AeroTech revenue increased 3.7%.
- Nine-month revenue increased 1% as reported. Management cited 5% organic growth and 6% growth from acquisitions, partly offset by the prior-year ASC 606 transition benefit and currency translation. FoodTech revenue declined 2.5%; AeroTech revenue grew 11.3%.
- Operating income and margin improved in both comparison periods, with lower restructuring expense a significant contributor. Restructuring expense fell by $10.3 million in Q3 and $21.3 million over nine months.
- Interest expense increased by $2.5 million in Q3 and $2.9 million over nine months, principally because of higher average debt used to fund acquisitions.
- Acquisitions increased goodwill to $516.9 million from $321.4 million at year-end 2018 and intangible assets to $325.9 million from $213.9 million. The company reported five acquisitions across 2018 and 2019 for aggregate net consideration of $442.8 million; 2019 acquisitions included Proseal, Prime Equipment Group, and LEKTRO.
Outlook, management commentary, risks and unusual items
- The filing does not provide a clear full-year revenue or earnings guidance range. Management expected to recognize remaining costs under its 2018 restructuring plan in Q4 2019. It projected approximately $55 million in total annualized savings from that plan, with additional savings of $6.8 million in the remainder of 2019 and $22.0 million in 2020.
- Management said cash flows and revolving-credit capacity were expected to meet working-capital, investment, pension, restructuring, acquisition, and other financing needs. The company was in compliance with debt covenants and expected to remain compliant, while cautioning that economic volatility could affect compliance or access to credit.
- Approximately $546.7 million, or 71%, of debt remained floating-rate at September 30, 2019 despite interest-rate swaps. Higher interest rates could increase expense. Foreign-currency exposure was managed in part with forward contracts; nine-month net foreign-currency transaction loss was $3.1 million.
- Legal matters were not expected by management to have a material adverse effect overall, but an unfavorable resolution could be material in a future period. Performance guarantees and similar instruments totaled $196.2 million; additional bank guarantees and letters of credit securing financial obligations totaled $6.7 million. Net exposure on customer financing guarantees was $0.2 million.
- Proseal and Prime acquisition earnouts were measured at a fair value of $15.8 million; payment depends on performance targets. Proseal purchase accounting remained provisional, as did certain Prime and LEKTRO valuations. The Proseal earnout could reach $17.7 million if its specified target is met.
- Q3 included $8.7 million of M&A-related costs and $1.3 million of restructuring expense. Adjusted diluted EPS was $1.28 in Q3 and $3.47 for nine months, versus GAAP diluted EPS from continuing operations of $1.04 and $2.72, respectively; adjusted measures are non-GAAP.
- The company adopted ASC 842 lease accounting in 2019, recording $33.4 million in operating-lease liabilities at September 30. It reported effective disclosure controls and no material change to reported risk factors.
Important facts for investors to verify
- Confirm the issuer and security: this filing is for John Bean Technologies Corporation (JBT), and the period is Q3 2019.
- Assess whether improved margins and earnings are sustainable after considering acquisition contributions, restructuring savings, M&A costs, and prior-year ASC 606 comparison effects.
- Review debt, floating-rate exposure, covenant headroom, and acquisition-related borrowing against operating cash flow and free cash flow.
- Track FoodTech demand and orders: nine-month FoodTech revenue and total inbound orders declined year over year, despite higher segment profit.
- Monitor delivery of the stated restructuring savings and resolution of provisional acquisition accounting and performance-based earnouts.