JBT MAREL Corp quarterly report, Q2 FY2021

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JBT 10-Q Summary — Quarter Ended June 30, 2021

Business context: The filing is for John Bean Technologies Corporation (JBT), not a filing under the name JBT MAREL Corp. JBT provides equipment, services and technology to the food and beverage and air transportation industries through FoodTech and AeroTech. Results cover the second quarter and first six months of 2021; financial amounts are in U.S. dollars.

Financial performance

  • Second-quarter revenue: $475.5 million, up 15.6% year over year, including 11% organic growth, 4% foreign-currency benefit and 1% from acquisitions. FoodTech revenue rose 19.1% to $360.7 million; AeroTech rose 5.6% to $114.8 million.
  • Second-quarter earnings and margins: Operating income was $47.3 million versus $47.6 million; operating margin declined to 9.9% from 11.6%. Net income was $30.5 million versus $32.5 million; diluted EPS was $0.95 versus $1.01. Adjusted diluted EPS, a non-GAAP measure, was $1.19 versus $1.09.
  • First-half results: Revenue was $893.3 million, up 2.8%; operating income was $85.1 million, down 6.8%; net income was $57.5 million, down 6.5%. Diluted EPS was $1.79 versus $1.92; adjusted diluted EPS was $2.09 versus $2.10.
  • Segment trends: Q2 FoodTech operating profit increased 5.1% to $51.5 million, while its margin fell to 14.3% from 16.2%. AeroTech operating profit increased 17.5% to $12.1 million and its margin improved to 10.5% from 9.5%. For the first half, AeroTech revenue declined 14.0% and operating profit declined 23.6%, reflecting pandemic-related weakness in air travel and customer delays.
  • Cash flow: First-half operating cash flow was $130.3 million, up from $101.0 million. Free cash flow, as defined by JBT, was $112.2 million versus $86.9 million. Capital expenditures were $20.3 million.
  • Liquidity and debt: Cash was $202.3 million at June 30, versus $47.5 million at year-end. Long-term debt, net, was $641.1 million, with $0.6 million of short-term debt. JBT reported $490.8 million of liquidity, including cash and revolving-credit availability, and said it was compliant with credit covenants.

Changes, outlook and commentary

  • Q2 gross margin was 31.5%, roughly flat year over year; higher equipment mix, supply-chain inefficiencies, material costs and labor shortages weighed on FoodTech. Higher SG&A, including restored variable compensation and M&A costs, contributed to lower consolidated operating margin.
  • Inbound orders rose to $580.1 million in Q2 from $344.6 million; first-half orders were $1,066.2 million versus $814.7 million. Management cited a 51% year-over-year increase in Q2 FoodTech inbound orders and record AeroTech fixed-equipment inbound orders.
  • Management expects positive cash flow for full-year 2021 and capital expenditures of $45–$50 million. It expects remaining costs under the 2020 restructuring plan to be recognized by year-end 2021; projected incremental savings are $3.2 million for the remainder of 2021 and $3.1 million in 2022. The filing does not provide specific full-year revenue or EPS guidance.
  • COVID-19 recovery remained uneven: food-service activity and airport services improved, but global passenger traffic remained below pre-pandemic levels. Management expected pandemic effects on AeroTech mobile equipment to continue at least into 2022. Supply availability, logistics and labor constraints remained risks.
  • On May 28, JBT issued $402.5 million principal amount of 0.25% convertible senior notes due 2026, receiving $392.2 million net proceeds. It paid $65.6 million for note hedges and received $29.5 million from warrant transactions. The notes and warrants may create dilution under specified conditions.
  • On July 2, after quarter-end, JBT completed its $172.4 million acquisition of Prevenio, funded with cash and revolver borrowings; purchase accounting was incomplete at filing. JBT also acquired AutoCoding Systems in February for net consideration of $15.9 million.
  • A $4.4 million discrete tax expense from remeasurement of U.K. deferred taxes reduced reported Q2 and first-half earnings. Legal matters were described as not expected to materially affect overall results or financial position, though an unfavorable resolution could materially affect a future period.

Key facts investors should verify

  • Whether higher order levels convert into revenue and profit, especially given supply-chain, labor and customer-delay constraints.
  • Whether FoodTech’s equipment-heavy mix and AeroTech’s recovery support margins as pandemic-related demand patterns change.
  • Post-Prevenio acquisition debt, integration results and the final purchase-price allocation.
  • Revolver covenant headroom and the potential dilution, cash-settlement obligations and counterparty risks associated with the convertible notes, hedges and warrants.
  • How reported earnings compare with non-GAAP adjusted results, including the effects of the U.K. tax remeasurement and restructuring and M&A costs.