JBT 10-Q Summary — First Quarter 2014
Reporting period: Three months ended March 31, 2014; comparisons are with the three months ended March 31, 2013 unless noted. The filing is for John Bean Technologies Corporation (JBT), which describes food-processing and air-transportation technology businesses; it is not identified in the filing as JBT Marel Corp.
Financial results
| Metric | Q1 2014 | Q1 2013 / comparison |
|---|---|---|
| Revenue | $198.0 million | $185.7 million; up 6.6% |
| Gross profit / gross margin | $52.0 million / 26.3% | $50.3 million / 27.1% |
| Operating income (loss) | $(5.2) million | $6.6 million |
| Continuing-operations income (loss) | $(4.7) million | $4.1 million |
| Net income (loss) / diluted EPS | $(4.8) million / $(0.16) | $4.1 million / $0.14 |
| Continuing-operations adjusted income / adjusted diluted EPS (non-GAAP) | $4.5 million / $0.15 | $4.3 million / $0.15 |
| Cash from continuing operating activities | $21.1 million | $17.9 million |
| Cash and cash equivalents | $19.1 million at March 31 | $29.4 million at December 31, 2013 |
| Total debt / cash (approximate) | $83.4 million / $19.1 million | Debt declined from about $100.4 million at December 31, 2013 |
Q1 operating results included $10.2 million of restructuring expense. The company reported $13.8 million of combined segment operating profit, offset by $8.8 million of corporate expense and restructuring charges. The $4.5 million adjusted income and $0.15 adjusted EPS figures are non-GAAP measures and exclude specified items; they are not substitutes for GAAP results.
Cash used in investing was $9.9 million, including $8.5 million of capital expenditures and $1.7 million for acquisitions. Cash used in financing was $21.7 million, including $14.1 million of net credit-facility repayments and $2.8 million of dividends. The quarter’s cash decrease was $10.3 million. The reported balance sheet implies current assets of $378.5 million and current liabilities of $289.3 million.
Business and changes versus prior period
- FoodTech revenue rose 21.0% to $135.4 million; segment operating profit increased to $11.4 million from $7.9 million, and margin improved to 8.5% from 7.1%. Management attributed growth mainly to converting prior-year backlog and higher aftermarket sales.
- AeroTech revenue fell 11.4% to $62.6 million; segment operating profit declined to $2.4 million from $4.2 million, and margin fell to 3.8% from 5.9%. Lower ground-support equipment sales and passenger-bridge completions were partly offset by aftermarket activity.
- Inbound orders increased to $260.9 million from $232.1 million. Backlog was $439.4 million at March 31, up from $376.5 million at December 31, 2013 and $329.5 million a year earlier.
- Revenue increased, but gross margin declined, and reported operating and net income moved to losses. The principal unusual cost was the newly recorded restructuring charge; corporate expenses also rose.
Outlook, risks and contingencies
- Full-year 2014 outlook: revenue growth in the mid-single digits; total segment operating margin expected to remain relatively flat versus 2013; adjusted diluted EPS of $1.35–$1.50 and GAAP diluted EPS of $0.90–$1.50.
- Management estimated $12–$13 million total cost for the global cost-optimization plan, with $10.2 million recorded in Q1 and approximately $2–$3 million expected by year-end. It expected about $10 million of restructuring cash payments in 2014 and the balance in 2015. The company also forecast approximately $6 million in savings from operational-excellence and restructuring initiatives.
- Management expected $6.7 million of full-year management-succession costs, including approximately $3 million related to non-qualified pension plans for retiring executives. It expected $18 million of contributions to U.S. qualified and other pension and postretirement plans in 2014.
- The company had a $300 million revolving credit facility, with $2.3 million drawn and approximately $289 million available at March 31; it reported compliance with debt covenants and expected to remain compliant, while cautioning that economic volatility could affect compliance or access to credit. The $75 million of 6.66% senior unsecured notes mature July 31, 2015.
- Cash included $16.1 million held by foreign subsidiaries. Management said repatriation could result in additional U.S. and foreign withholding taxes. Foreign-exchange exposure is managed partly through forward contracts, with $428.7 million aggregate notional value at quarter-end.
- Performance guarantees and similar instruments totaled approximately $87.7 million; additional bank guarantees and letters of credit securing existing obligations were approximately $6.2 million. Maximum future payments under customer-financing guarantees were $2.7 million. Management did not expect ordinary-course litigation, including assumed legacy proceedings, to have a material adverse effect.
- The interim financial statements were reviewed, not audited, by the independent registered public accounting firm. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether FoodTech growth and the substantial backlog convert into revenue and margin, and whether AeroTech’s lower sales and profitability recover.
- Actual restructuring charges, cash payments, savings, and management-succession costs versus the company’s estimates.
- Progress against full-year revenue and EPS guidance, noting the wide difference between adjusted and GAAP EPS ranges.
- Debt reduction, cash generation, covenant headroom, and the timing and funding of pension contributions, dividends, and the Florida plant investment.
- Foreign-currency exposure, the tax implications of any cash repatriation, and developments in guarantees, litigation, and other contingencies.