Business context and reporting period
John Bean Technologies Corporation (JBT), which provides food-processing and air-transportation technology and services through JBT FoodTech and JBT AeroTech, reported the quarter and six months ended June 30, 2015. The unaudited interim statements were reviewed by KPMG, not audited. The filing describes the registrant as John Bean Technologies Corporation.
Financial performance
Amounts in millions, except per-share data. Comparisons are with the same periods in 2014.
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | $254.6 | $247.6 | $479.6 | $445.6 |
| Gross profit | $72.7 | $68.3 | $135.7 | $120.3 |
| Operating income | $23.2 | $18.5 | $36.9 | $13.3 |
| Income from continuing operations | $14.4 | $11.4 | $22.4 | $6.7 |
| Net income | $14.4 | $11.4 | $22.4 | $6.6 |
| Diluted EPS from continuing operations | $0.48 | $0.38 | $0.75 | $0.23 |
| Cash provided by continuing operating activities | Not provided for quarter | Not provided for quarter | $39.8 | $20.3 |
Gross margin was approximately 28.6% in Q2 versus 27.6%; operating margin was approximately 9.1% versus 7.5%. For the six months, gross margin was approximately 28.3% versus 27.0%, and operating margin approximately 7.7% versus 3.0%. These percentages are calculated from reported amounts. H1 capital expenditures were $19.4 million; cash and cash equivalents decreased $13.4 million to $19.9 million.
Segments and demand
- Q2 FoodTech revenue was $163.9 million, down 5.5% reported, while segment operating profit was $22.5 million, down $0.6 million. In constant currency, revenue increased $9.1 million; lower protein-processing equipment sales in Asia weighed on organic performance.
- Q2 AeroTech revenue was $90.8 million, up 22.5%, and segment operating profit was $8.3 million, up $3.0 million. Growth reflected airport equipment and service demand.
- H1 inbound orders totaled $547.5 million versus $471.8 million; backlog at June 30 was $427.5 million versus $401.0 million. Q2 orders were $241.6 million versus $210.9 million.
Balance sheet, debt and liquidity
At June 30, 2015, cash was $19.9 million, current assets $370.3 million and current liabilities $287.6 million. Total assets were $671.6 million, down from $697.8 million at year-end 2014. Debt was $157.5 million in total, including $3.2 million current and $154.3 million long-term; long-term debt was $173.8 million at year-end. The company reported liquidity of $264.2 million, defined as cash plus borrowing availability under revolving credit facilities.
JBT entered a new five-year $450 million revolving credit facility in February; $76.8 million was drawn at June 30. The company also had $75 million of 6.66% senior notes due July 31, 2015 and planned to repay them using the revolver. It reported compliance with debt covenants. Two forward-starting swaps cover $175 million of borrowings, fixing base rates of 1.592% and 1.711%, respectively, plus leverage-based margins.
Material changes, outlook and risks
- Q2 revenue grew 2.8%; management attributed this to 6.2% organic growth and 4.5% acquired-company contribution, partly offset by a 7.9% currency-translation impact. H1 revenue grew 7.6%, with 10.6% organic growth, a 4.7% acquisition contribution and a 7.7% currency headwind.
- H1 operating income rose substantially, partly because 2014 included $11.2 million of restructuring expense. Q2 2015 had no restructuring expense, compared with $1.0 million in Q2 2014. Management cited sales volume, pricing, productivity and restructuring benefits; interest expense increased with higher average debt.
- For 2015, management forecast revenue growth of 7%, operating-margin expansion of 50–75 basis points and diluted continuing-operations EPS of $1.70–$1.80. The forecast included an estimated $0.15-per-share foreign-exchange headwind and the announced acquisition expected to close in Q3.
- On July 17, JBT signed an agreement to acquire Stork Food & Dairy Systems for €47 million (approximately $53 million), before customary adjustments. Completion was expected in Q3; closing and financing remained prospective at the filing date.
- The Halvorsen U.S. Air Force cargo-loader support contract expired March 31, 2015. Management estimated an approximately $2 million quarterly earnings impact versus the prior year and expected a similar impact for the next three quarters.
- Risks include foreign-currency exposure, debt covenant and refinancing requirements, and execution of restructuring and acquisition plans. A Delaware unclaimed-property audit covering 1986 onward was ongoing; the company said a possible loss could not be estimated. Outstanding performance guarantees totaled approximately $132.4 million, and customer-financing guarantees had $1.6 million net exposure.
Most important facts for investors to verify
- Whether 2015 guidance was achieved, particularly the EPS range and forecast margin expansion, and how currency movements affected results.
- Subsequent repayment or refinancing of the $75 million notes due July 31, 2015, revolver utilization, and covenant headroom.
- Completion, purchase accounting, financing and realized benefits of the Stork Food & Dairy Systems acquisition.
- Whether order growth and backlog converted into revenue and cash, especially given segment-level differences.
- Developments in the Delaware audit, guarantee exposures and the expected pension contributions, including the remaining approximately $10 million projected for 2015.