JBT 2014 Second-Quarter 10-Q Summary
Business and period: John Bean Technologies Corporation (the registrant named in this filing) provides technology, equipment and services to food processing and air transportation customers through JBT FoodTech and JBT AeroTech. This unaudited report covers the quarter and six months ended June 30, 2014; comparisons are with the same 2013 periods unless noted.
Financial performance
| Metric | Q2 2014 | Q2 2013 | Six months 2014 | Six months 2013 |
|---|---|---|---|---|
| Revenue | $247.6m | $226.9m | $445.6m | $412.6m |
| Gross profit | $68.3m | $59.1m | $120.3m | $109.4m |
| Operating income | $18.5m | $14.8m | $13.3m | $21.4m |
| Income from continuing operations | $11.4m | $8.8m | $6.7m | $12.9m |
| Net income | $11.4m | $8.6m | $6.6m | $12.7m |
| Diluted EPS, continuing operations | $0.38 | $0.30 | $0.23 | $0.44 |
Q2 revenue grew 9.1%; gross margin was approximately 27.6% versus 26.0%, and operating margin was approximately 7.5% versus 6.5%. For the first half, revenue rose 8.0%, but operating income fell 37.9%, primarily reflecting $11.2m of restructuring expense. First-half gross margin was approximately 27.0% versus 26.5%.
Q2 segment revenue was $173.7m for FoodTech (up 7.0%) and $74.1m for AeroTech (up 12.4%). Segment operating profit increased to $23.4m from $21.2m for FoodTech and to $5.2m from $2.4m for AeroTech. First-half revenue growth was concentrated in FoodTech, up $34.9m to $309.1m; AeroTech revenue was essentially flat at $136.7m.
Cash, liquidity and debt
- First-half operating cash flow from continuing operations was $20.3m, down from $30.5m, which management attributed mainly to fewer large orders and lower advance payments. Capital expenditures were $17.1m; investing cash use was $17.7m.
- Cash increased $34.3m to $63.7m. Financing provided $33.4m, including $44.0m net proceeds from credit facilities. Cash and cash equivalents included $48m deposited in a notary account for a July acquisition.
- At June 30, total debt was approximately $140m: $60.3m drawn on the $300m revolving facility, $75m of senior notes due July 31, 2015, and other borrowings. Cash plus available borrowing capacity was reported as $188.8m. The company stated it was covenant-compliant.
- Current assets were $434.5m and current liabilities $281.7m. The company expected approximately $14m of pension contributions and $8m of restructuring payments during the rest of 2014.
Changes, outlook and risks
- Q2 operating profit improved on higher sales volume and margin expansion, including cost-reduction and pricing benefits. First-half operating profit declined despite higher segment profits because of restructuring charges and increased corporate costs, including management succession and consulting expenses.
- First-half inbound orders were $470.1m versus $481.8m. June 30 backlog was $401.0m, up from $352.3m a year earlier; FoodTech backlog declined year over year while AeroTech backlog increased.
- Management forecast full-year 2014 revenue growth in the mid-single digits, a slight improvement in total segment operating profit versus 2013, adjusted diluted EPS of $1.45–$1.55, and GAAP diluted EPS of $0.95–$1.05. Corporate expense was expected to exceed 2013. Restructuring costs were estimated at $12m–$13m total, with up to $2m more expected by year-end.
- In July 2014, the company acquired ICS Solutions for approximately $35m before customary adjustments, funded with cash and revolver borrowings. Purchase accounting was still in progress.
- The $75m senior notes mature in July 2015; management was evaluating refinancing or repayment alternatives. The filing also cites risks from covenant compliance, access to credit markets, foreign exchange exposure and possible taxes on repatriated foreign cash. The U.S. R&D tax credit had expired and was not reflected in the expected tax rate.
- Ordinary-course litigation was not expected to have a material adverse effect. Guarantees included $91.7m of performance-related instruments and $15.4m of customer financing arrangements, with stated net exposure of $2.2m for the latter. These amounts are contingent exposures, not reported debt.
Important facts for investors to verify
- Whether the July ICS Solutions acquisition closes and integrates as expected, and the final purchase price allocation and funding mix.
- Progress on the $12m–$13m restructuring plan, remaining costs and realized savings.
- Order intake and backlog conversion, particularly FoodTech ordering trends and AeroTech backlog delivery.
- Plans to repay or refinance the 2015 senior notes, and ongoing revolver availability and covenant headroom.
- Cash flow conversion, pension and restructuring cash requirements, and the effect of foreign cash repatriation taxes.
- Delivery of the stated full-year EPS outlook; adjusted EPS is a non-GAAP measure and differs materially from GAAP guidance.