JBT Corporation — Q3 2015 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2015. The filing is for John Bean Technologies Corporation (JBT), which provides food-processing and air-transportation systems and services through JBT FoodTech and JBT AeroTech. Financial statements are unaudited; the independent accountant performed an interim review, not an audit.
Financial performance
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $273.3m | $243.2m | $752.9m | $688.8m |
| Gross profit / margin | $74.5m / 27.3% | $64.2m / 26.4% | $210.2m / 27.9% | $184.5m / 26.8% |
| Operating income / margin | $21.1m / 7.7% | $15.2m / 6.3% | $58.0m / 7.7% | $28.5m / 4.1% |
| Continuing-operations income | $12.7m | $9.0m | $35.1m | $15.7m |
| Diluted continuing-operations EPS | $0.43 | $0.30 | $1.18 | $0.53 |
| Cash provided by operating activities | Not presented for quarter | Not presented for quarter | $47.9m | $49.5m |
Cash and liquidity: Cash was $37.9m at September 30, versus $33.3m at December 31, 2014. The company reported liquidity of $227.2m, defined as cash plus borrowing ability under revolving credit facilities. Current assets were $423.8m and current liabilities $325.3m.
Debt: Balance-sheet short- and long-term debt totaled approximately $233.0m, compared with $178.0m at year-end 2014. The company had drawn $229.1m on its new $450m five-year revolving facility, at a weighted-average rate of 1.6%. It repaid $75m of 6.66% senior notes at maturity using revolver borrowings. The filing reports compliance with debt covenants.
Cash flows and investment: Nine-month investing cash use was $74.5m, including $50.9m for acquisitions and $26.5m in capital expenditures. Financing provided $37.2m. Cash increased $4.6m overall; operating cash flow was slightly below the prior-year period.
Changes versus prior comparable periods
- Q3 revenue rose 12.4%; management attributed growth to 11.9% organic growth and acquisitions adding 8.6%, partly offset by an 8.1% currency-translation drag. For the nine months, revenue increased 9.3%, with 11.0% organic growth, 6.1% from acquisitions and a 7.8% currency headwind.
- Q3 operating income rose 38.8%; nine-month operating income more than doubled. Higher volume, pricing, productivity and restructuring benefits helped, while acquisitions and Next Level initiatives increased selling, administrative and R&D expenses.
- FoodTech drove Q3 growth: revenue increased 20.1% and segment operating profit 32.3%. AeroTech Q3 revenue was nearly flat and operating profit declined 7.8%, despite nine-month revenue growth of 17.4% and profit growth of 46.4%.
- Nine-month restructuring expense fell to zero from $12.5m in 2014; Q3 expense was also zero versus $1.3m. The company said its European restructuring remained underway and was expected to finish in 2016.
- Nine-month inbound orders increased to $834.0m from $743.8m; September 30 backlog was $461.0m versus $427.3m a year earlier. FoodTech backlog increased while AeroTech backlog declined.
Outlook, commentary and notable items
- Management forecast 2015 revenue growth of 9%–10%, including an estimated 7% foreign-exchange headwind; segment operating-margin expansion of 50–75 basis points; and diluted continuing-operations EPS of $1.75–$1.80. EPS guidance included an estimated $0.18-per-share currency headwind and approximately $0.08-per-share dilution from two 2015 acquisitions.
- On October 1, 2015, after quarter-end, JBT completed its $102m acquisition of A&B Process Systems, funded with cash and revolver borrowings. The acquisition expands its liquid-foods business. SFDS, acquired July 31 for approximately $50.7m net of cash acquired, strengthened the same portfolio; its purchase accounting was preliminary.
- Other risks and contingencies include foreign-currency exposure (including $296m notional of non-designated forward contracts), debt covenant and refinancing risks, and a Delaware unclaimed-property audit covering 1986 to the present for which a possible loss could not be estimated. Management said pending legal matters were not expected to materially affect results or financial position, though an unfavorable resolution could be material in a particular period.
- JBT had $128.9m of performance-related letters of credit, bonds and other guarantees, plus $6.6m securing existing obligations. Customer-financing guarantees had gross value of $10.3m and stated net exposure of $1.6m.
- The company amended its retiree welfare plan to end future healthcare benefits effective January 1, 2016. It recognized a $0.4m gain in Q3 related to the amendment. Expected 2015 pension and postretirement contributions were $17m; $10m had been contributed through September.
Important facts for investors to verify
- Whether the 2015 revenue, margin and EPS outlook was achieved, particularly after currency effects and the A&B acquisition.
- Acquisition integration, returns and final purchase accounting for SFDS, as well as the funding and performance of A&B.
- Debt levels, revolver availability, covenant headroom and interest-rate exposure following acquisition borrowing; the filing’s disclosed liquidity figure is $227.2m.
- Whether order growth and FoodTech backlog translate into revenue, and whether AeroTech’s lower Q3 orders/backlog persist.
- Resolution and potential financial exposure from the Delaware audit, guarantees and other contingencies; the audit’s possible loss was not estimable in this filing.