John Bean Technologies(JBT) - 2021 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Statements of Income Net income increased significantly for both the three and nine months ended September 30, 2021, driven by higher revenue and improved operating income Three Months Ended Sep 30, 2021 vs 2020: | Metric | 2021 (Millions) | 2020 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Total Revenue | $477.4 | $419.2 | $58.2 | 13.9% | | Operating Income | $40.5 | $28.3 | $12.2 | 43.1% | | Net Income | $29.3 | $17.2 | $12.1 | 70.3% | | Diluted EPS | $0.91 | $0.54 | $0.37 | 68.5% | Nine Months Ended Sep 30, 2021 vs 2020: | Metric | 2021 (Millions) | 2020 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Total Revenue | $1,370.7 | $1,288.4 | $82.3 | 6.4% | | Operating Income | $125.6 | $119.6 | $6.0 | 5.0% | | Net Income | $86.8 | $78.7 | $8.1 | 10.3% | | Diluted EPS | $2.71 | $2.45 | $0.26 | 10.6% | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for the three months ended September 30, 2021, increased to $22.5 million from $19.2 million in 2020, while for the nine months, it significantly increased to $94.4 million from $53.8 million, despite negative foreign currency translation adjustments in the current quarter Comprehensive Income (Three Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | | :--------------------------------- | :-------------- | :-------------- | | Net income | $29.3 | $17.2 | | Other comprehensive (loss) income | $(6.8) | $2.0 | | Comprehensive income | $22.5 | $19.2 | Comprehensive Income (Nine Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | | :--------------------------------- | :-------------- | :-------------- | | Net income | $86.8 | $78.7 | | Other comprehensive (loss) income | $7.6 | $(24.9) | | Comprehensive income | $94.4 | $53.8 | Condensed Consolidated Balance Sheets Total assets increased to $2,038.5 million as of September 30, 2021, from $1,805.9 million at December 31, 2020, primarily driven by increases in goodwill, intangible assets, and current assets, with total liabilities also increasing due to higher long-term debt and accounts payable Balance Sheet Highlights (Sep 30, 2021 vs Dec 31, 2020): | Metric | Sep 30, 2021 (Millions) | Dec 31, 2020 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :---------------------- | :---------------------- | :---------------- | :------- | | Total Assets | $2,038.5 | $1,805.9 | $232.6 | 12.9% | | Total Current Assets | $664.4 | $616.1 | $48.3 | 7.8% | | Goodwill | $664.8 | $543.9 | $120.9 | 22.2% | | Intangible Assets, net | $334.6 | $299.1 | $35.5 | 11.9% | | Total Current Liabilities | $502.8 | $457.5 | $45.3 | 9.9% | | Long-term Debt | $652.9 | $522.5 | $130.4 | 25.0% | | Total Stockholders' Equity | $707.3 | $637.1 | $70.2 | 11.0% | Condensed Consolidated Statements of Cash Flows Cash provided by operating activities remained stable at $163.3 million for the nine months ended September 30, 2021, while investing activities significantly increased to $217.2 million due to higher acquisition and capital expenditure spending, and financing activities shifted to providing cash, primarily from convertible senior notes issuance - Acquisitions, net of cash acquired, increased significantly from $(4.5) million in 2020 to $(185.3) million in 2021[15] - Proceeds from issuance of 2026 convertible senior notes, net of issuance costs, contributed $391.5 million in 2021[15] Cash Flow Highlights (Nine Months Ended Sep 30, 2021 vs 2020): | Metric | 2021 (Millions) | 2020 (Millions) | Change (Millions) | | :--------------------------------- | :-------------- | :-------------- | :---------------- | | Cash provided by operating activities | $163.3 | $161.1 | $2.2 | | Cash required by investing activities | $(217.2) | $(26.0) | $(191.2) | | Cash provided (required) by financing activities | $66.9 | $(121.3) | $188.2 | | Increase in cash and cash equivalents | $10.7 | $11.1 | $(0.4) | Condensed Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity increased to $707.3 million as of September 30, 2021, from $637.1 million at December 31, 2020, primarily due to net income, proceeds from the sale of warrants, and pension adjustments, partially offset by the purchase of convertible bond hedges and cash dividends Stockholders' Equity Changes (Dec 31, 2020 to Sep 30, 2021): | Metric | Dec 31, 2020 (Millions) | Sep 30, 2021 (Millions) | Change (Millions) | | :--------------------------------- | :---------------------- | :---------------------- | :---------------- | | Total Equity | $637.1 | $707.3 | $70.2 | | Net income | - | $86.8 | $86.8 | | Proceeds from sale of warrants | - | $29.5 | $29.5 | | Purchase of convertible bond hedge | - | $(48.5) | $(48.5) | | Common stock cash dividends | - | $(9.6) | $(9.6) | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION JBT provides global technology solutions to the food and beverage and air transportation industries through its JBT FoodTech and JBT AeroTech segments, with interim financial statements being unaudited and prepared in accordance with U.S. GAAP, reflecting management's estimates - JBT provides global technology solutions to high-value segments of the food and beverage and air transportation industries[23] - Operates through JBT FoodTech and JBT AeroTech segments with worldwide manufacturing operations[23] - Interim financial statements are unaudited and do not include all information required for complete U.S. GAAP financial statements, and should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2020[24] - Early adopted ASU 2020-06 (Debt with Conversion and Other Options) effective January 1, 2021, with no impact on financial statements at adoption[27] - Early adopted ASU 2021-05 (Leases: Lessors—Certain Leases with Variable Lease Payments) effective September 30, 2021, with immaterial impact to current year financial statements[28] NOTE 2. ACQUISITIONS During the nine months ended September 30, 2021, JBT acquired Prevenio and AutoCoding Systems Ltd. (ACS), both enhancing its JBT FoodTech segment with food safety solutions and packaging integration capabilities, respectively, resulting in significant goodwill recognition - Acquired Prevenio on July 2, 2021, for $173.1 million cash, a provider of innovative food safety solutions for the poultry industry[29][32] - Acquired AutoCoding Systems Ltd. (ACS) on February 28, 2021, for $16.8 million cash, a provider of central command solutions for packaging process devices[29][32] - Total identifiable net assets acquired in 2021 were $61.3 million, with goodwill of $128.6 million recognized[32] NOTE 3. GOODWILL AND INTANGIBLE ASSETS Goodwill increased by $120.9 million from December 31, 2020, to September 30, 2021, primarily due to acquisitions within the JBT FoodTech segment, while intangible assets also increased, with customer relationships and patents/acquired technology being the largest components - Intangible assets, net, increased from $299.1 million (Dec 31, 2020) to $334.6 million (Sep 30, 2021)[12] - Acquired intangible assets in 2021 have weighted average useful lives of 15 years for customer relationship, 8 years for patents and acquired technology, and 12 years for trademarks[34] Goodwill Changes (Dec 31, 2020 to Sep 30, 2021): | Segment | Dec 31, 2020 (Millions) | Acquisitions (Millions) | Currency Translation (Millions) | Sep 30, 2021 (Millions) | | :---------------- | :---------------------- | :---------------------- | :------------------------------ | :---------------------- | | JBT FoodTech | $505.7 | $128.6 | $(7.6) | $626.7 | | JBT AeroTech | $38.2 | $— | $(0.1) | $38.1 | | Total | $543.9 | $128.6 | $(7.7) | $664.8 | NOTE 4. INVENTORIES Net inventories increased to $217.9 million as of September 30, 2021, from $197.3 million at December 31, 2020, primarily due to increases in raw materials, work in process, and finished goods Net Inventories: | Metric | Sep 30, 2021 (Millions) | Dec 31, 2020 (Millions) | | :--------------------------------- | :---------------------- | :---------------------- | | Raw materials | $96.7 | $87.3 | | Work in process | $59.4 | $51.4 | | Finished goods | $143.7 | $136.4 | | Net inventories | $217.9 | $197.3 | NOTE 5. PENSION Net periodic pension cost significantly decreased for both the three and nine months ended September 30, 2021, primarily due to higher expected returns on plan assets and lower interest costs, with the Company expecting to contribute $13.7 million to its pension and other post-retirement benefit plans in 2021 - Expected contributions to pension and other post-retirement benefit plans in 2021: $13.7 million[38] Net Periodic Pension Cost (Three Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | | :--------------------------------- | :-------------- | :-------------- | | Net periodic cost | $0.5 | $1.8 | Net Periodic Pension Cost (Nine Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | | :--------------------------------- | :-------------- | :-------------- | | Net periodic cost | $1.8 | $4.9 | NOTE 6. DEBT JBT issued $402.5 million in 0.25% Convertible Senior Notes due 2026 in May 2021, resulting in net proceeds of $392.2 million, concurrently entering into convertible note hedge transactions for $65.6 million to reduce dilution and warrant transactions for $29.5 million to partially offset hedge costs, leading to a significant increase in long-term debt - Issued $402.5 million aggregate principal amount of 0.25% Convertible Senior Notes due 2026 on May 28, 2021, with net proceeds of approximately $392.2 million[40] - Paid $65.6 million for convertible note hedge transactions covering approximately 2.4 million shares at a strike price of $169.61, expected to reduce potential dilutive effect[49] - Sold warrants to acquire 2.4 million shares at an initial strike price of $240.02 per share, receiving $29.5 million to partially offset hedge costs[52] Debt Components: | Debt Type | Sep 30, 2021 (Millions) | Dec 31, 2020 (Millions) | | :-------------------------- | :---------------------- | :---------------------- | | Revolving credit facility, net | $260.7 | $522.5 | | Convertible senior notes, net | $392.2 | $— | | Long-term debt, net | $652.9 | $522.5 | NOTE 7. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive loss increased slightly to $(212.3) million as of September 30, 2021, from $(205.5) million at June 30, 2021, primarily due to foreign currency translation adjustments, partially offset by pension and derivative adjustments - Foreign currency translation adjustments contributed $(8.7) million to other comprehensive loss for the three months ended September 30, 2021[56] AOCI Balance (Sep 30, 2021 vs Jun 30, 2021): | Component | Jun 30, 2021 (Millions) | Sep 30, 2021 (Millions) | | :--------------------------------- | :---------------------- | :---------------------- | | Pension and Other Postretirement Benefits | $(158.0) | $(156.3) | | Derivatives Designated as Hedges | $(0.9) | $(0.7) | | Foreign Currency Translation | $(46.6) | $(55.3) | | Total AOCI | $(205.5) | $(212.3) | NOTE 8. REVENUE RECOGNITION JBT expects to recognize $914.0 million in future revenue from remaining performance obligations, with 45% in 2021, 47% in 2022, and 8% in 2023, while recurring revenue for JBT FoodTech and JBT AeroTech showed growth for the three and nine months ended September 30, 2021 - $914.0 million in revenue expected from remaining performance obligations as of September 30, 2021, with 45% in 2021, 47% in 2022, and 8% in 2023[65] - Contract assets increased to $92.1 million (Sep 30, 2021) from $68.3 million (Dec 31, 2020), and contract liabilities increased to $147.4 million (Sep 30, 2021) from $123.8 million (Dec 31, 2020)[71] JBT FoodTech Revenue (Three Months Ended Sep 30): | Type | 2021 (Millions) | 2020 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :------- | | Recurring | $169.4 | $151.1 | 12.1% | | Non-recurring | $189.7 | $149.9 | 26.5% | | Total | $359.1 | $301.0 | 19.3% | JBT AeroTech Revenue (Three Months Ended Sep 30): | Type | 2021 (Millions) | 2020 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :------- | | Recurring | $45.1 | $36.4 | 23.9% | | Non-recurring | $73.2 | $81.8 | -10.5% | | Total | $118.3 | $118.2 | 0.1% | NOTE 9. EARNINGS PER SHARE Basic and diluted EPS from continuing operations for the three months ended September 30, 2021, were $0.91, up from $0.54 in the prior year, while for the nine months, EPS increased to $2.71 from $2.46 (basic) and $2.45 (diluted) in the prior year Basic and Diluted EPS (Three Months Ended Sep 30): | Metric | 2021 | 2020 | | :--------------------------------- | :----- | :----- | | Basic EPS | $0.91 | $0.54 | | Diluted EPS | $0.91 | $0.54 | Basic and Diluted EPS (Nine Months Ended Sep 30): | Metric | 2021 | 2020 | | :--------------------------------- | :----- | :----- | | Basic EPS | $2.71 | $2.46 | | Diluted EPS | $2.71 | $2.45 | NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS JBT categorizes financial instruments into three levels based on valuation inputs, with total financial assets measured at fair value of $25.1 million (primarily Level 1 investments and Level 2 derivatives) and total financial liabilities of $5.8 million (primarily Level 2 derivatives) as of September 30, 2021, and the fair value of convertible senior notes at $426.7 million (Level 2) - Fair value of Convertible Senior Notes (Level 2 inputs): $426.7 million as of September 30, 2021[75] - Contingent consideration liability of $19.1 million (Dec 31, 2020) was paid during Q2 2021[76][77] Fair Value of Financial Instruments (Sep 30, 2021): | Category | Total (Millions) | Level 1 (Millions) | Level 2 (Millions) | Level 3 (Millions) | | :--------------------------------- | :--------------- | :----------------- | :----------------- | :----------------- | | Assets: Investments | $12.9 | $12.9 | $— | $— | | Assets: Derivatives | $12.2 | $— | $12.2 | $— | | Liabilities: Derivatives | $5.8 | $— | $5.8 | $— | | Liabilities: Contingent consideration | $— | $— | $— | $— | NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT JBT uses derivative instruments, primarily forward foreign exchange contracts, interest rate swaps, and cross-currency swaps, to manage foreign currency and interest rate risks, with foreign currency derivatives not designated as hedges having a notional value of $843.3 million as of September 30, 2021 - Utilizes forward foreign exchange contracts with maturities of less than 2 years to manage foreign exchange rate risk, with a notional value of $843.3 million at Sep 30, 2021[80] - Entered into five interest rate swaps with a combined notional amount of $250 million, expiring in April/May 2025, designated as cash flow hedges to fix variable-rate debt[84] - Cross currency swap agreement synthetically swaps $116.4 million of fixed rate debt to Euro denominated fixed rate debt, designated as a net investment hedge[86] NOTE 12. LEASES Operating lease revenue for the three months ended September 30, 2021, was $20.5 million, and sales-type lease revenue was $5.6 million Lease Revenue (Three Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | | :--------------------------------- | :-------------- | :-------------- | | Operating lease revenue | $20.5 | $19.1 | | Sales-type lease revenue | $5.6 | $2.2 | Lease Revenue (Nine Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | | :--------------------------------- | :-------------- | :-------------- | | Operating lease revenue | $61.8 | $60.5 | | Sales-type lease revenue | $9.9 | $5.8 | NOTE 13. COMMITMENTS AND CONTINGENCIES JBT is subject to legal actions in the normal course of business, but management believes the outcome will not have a material adverse effect, and the company issues various guarantees and product warranties, with total financial instruments of $150.0 million at September 30, 2021 - Issued standby letters of credit, performance bonds, surety bonds, and other guarantees totaling $150.0 million at September 30, 2021[94] - Gross value of customer financing arrangement guarantees: $0.8 million, with net exposure of $0.04 million at September 30, 2021[95] Warranty Expense (Three Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | | :--------------------------------- | :-------------- | :-------------- | | Expense for new warranties | $3.1 | $2.7 | | Balance at end of period | $13.0 | $11.7 | NOTE 14. BUSINESS SEGMENT INFORMATION JBT operates through two reportable segments: JBT FoodTech (food production value chain solutions) and JBT AeroTech (air transportation industry solutions), with segment operating profit being a key performance measure, excluding corporate expenses, restructuring costs, pension expense (other than service cost), interest, and income taxes - JBT FoodTech provides comprehensive solutions throughout the food production value chain[100] - JBT AeroTech supplies customized solutions and services for the air transportation industry[100] Segment Operating Profit (Three Months Ended Sep 30): | Segment | 2021 (Millions) | 2020 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :------- | | JBT FoodTech | $48.9 | $37.9 | 29.0% | | JBT AeroTech | $7.0 | $11.4 | -38.6% | | Total | $55.9 | $49.3 | 13.4% | Segment Operating Profit (Nine Months Ended Sep 30): | Segment | 2021 (Millions) | 2020 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :------- | | JBT FoodTech | $141.9 | $127.6 | 11.2% | | JBT AeroTech | $29.0 | $40.2 | -27.9% | | Total | $170.9 | $167.8 | 1.8% | NOTE 15. RESTRUCTURING JBT implemented a 2020 restructuring plan for manufacturing capacity rationalization in both FoodTech and AeroTech segments, with estimated costs for FoodTech revised to $10-11 million (to be completed by Q2 2022) and AeroTech's estimated cost at $6 million, resulting in cumulative restructuring charges of $14.2 million through September 30, 2021 - The 2020 restructuring plan's estimated costs for FoodTech were revised to $10-11 million (completion by Q2 2022), and AeroTech's estimated cost is approximately $6 million[171] - Cumulative restructuring charges through September 30, 2021: $14.2 million[171] Restructuring Expense (Three & Nine Months Ended Sep 30): | Metric | 3 Months 2021 (Millions) | 3 Months 2020 (Millions) | 9 Months 2021 (Millions) | 9 Months 2020 (Millions) | | :---------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Restructuring expense | $1.1 | $7.1 | $3.1 | $11.2 | NOTE 16. MANAGEMENT SUCCESSION COSTS In Q3 2020, JBT incurred $6.4 million in separation payment for its former CEO, Tom Giacomini, and recognized a $2.9 million benefit from the reversal of accrued stock-based compensation for forfeited shares - Lump sum separation payment of $6.4 million to former CEO Tom Giacomini in Q3 2020[109] - Recognized a $2.9 million benefit from reversal of accrued stock-based compensation for 96,427 forfeited nonvested shares in Q3 2020[110] NOTE 17. RELATED PARTY TRANSACTIONS JBT has an operating lease agreement for a manufacturing facility in Columbus, Ohio, with an entity owned by former owners/employees of an acquired business, with a right-of-use asset of $3.2 million and lease liability of $3.5 million - Operating lease for a manufacturing facility from an entity owned by certain employees (former owners of an acquired business)[111] - Lease commenced September 1, 2019, with an eight-year term, with a right-of-use asset of $3.2 million and lease liability of $3.5 million[111] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Note Regarding Forward-Looking Statements This section highlights that the report contains forward-looking statements based on current plans and expectations, which are subject to various risks and uncertainties, including the ongoing impact of the COVID-19 pandemic, economic conditions, supply chain disruptions, and labor shortages - Forward-looking statements are based on historical performance, current plans, estimates, and expectations[113] - Risks include COVID-19 impact (supply chains, labor costs, customer operations), economic conditions, acquisitions, currency fluctuations, raw material prices, and cyber-security risks[114] - The company undertakes no obligation to publicly update or revise any forward-looking statement[115] Executive Overview JBT is a global technology solutions provider for the food and beverage and air transportation industries, with its strategic plan, "Elevate," focusing on accelerating new product development, growing recurring revenue, executing impact initiatives for organic growth and cost reduction, and maintaining a disciplined acquisition program - JBT is a leading global technology solutions provider to high-value segments of the food and beverage and air transportation industries[116] - The 'Elevate' strategic plan focuses on accelerating new product & service development, growing recurring revenue, executing impact initiatives, and maintaining a disciplined acquisition program[117][120] - The company operates under the JBT Operating System for process rigor and is committed to Environmental, Social and Corporate Governance (ESG) initiatives[118][119] Impact of COVID-19 on our Business The COVID-19 pandemic continues to cause economic disruption, impacting JBT's supply chains, labor availability, and customer purchasing patterns, with FoodTech seeing increased orders and recurring revenue due to sustained retail demand and foodservice revitalization, while AeroTech's mobile equipment business remains below pre-pandemic levels, though aftermarket revenue is recovering - COVID-19 pandemic continues to result in significant economic disruption, affecting supply chains, labor shortages, and customer purchasing patterns[121][124] - FoodTech inbound orders increased by 23% in Q3 2021 compared to Q3 2020, and recurring revenue increased by 12% year-over-year, driven by sustained retail demand and revitalizing foodservice[123] - AeroTech's passenger air travel-dependent business remains below pre-pandemic levels, but aftermarket revenue increased 24% in Q3 2021 compared to Q3 2020[124][125] Our Strategy to Mitigate Impacts of COVID-19 JBT's strategy to mitigate COVID-19 impacts includes focusing on order acquisition, disciplined working capital management, addressing supply chain disruptions, maintaining critical supplier status, and investing in growth strategies, while also implementing health and safety protocols for employees and providing enhanced remote customer support - Strategy focuses on obtaining orders, disciplined working capital management, mitigating supply chain disruptions, executing as a critical supplier, and investing in key growth strategies[128] - All factories and warehouses are operational, and the company maintains health and safety protocols for workers and provides enhanced remote customer support[128][129] Non-GAAP Financial Measures JBT presents non-GAAP financial measures like Free Cash Flow, Adjusted Income from Continuing Operations, Adjusted Diluted EPS, EBITDA, Adjusted EBITDA, Segment Adjusted Operating Profit, Segment Adjusted EBITDA, and Constant Currency measures to provide greater transparency and comparability of operating results Free Cash Flow (FCF) (Nine Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | | :--------------------------------- | :-------------- | :-------------- | | Cash provided by continuing operating activities | $163.3 | $161.1 | | Less: capital expenditures | $(33.9) | $(22.7) | | Plus: proceeds from sale of fixed assets | $2.0 | $1.2 | | Plus: pension contributions | $12.3 | $0.6 | | Free cash flow (FCF) | $143.7 | $140.2 | Adjusted Diluted EPS (Three Months Ended Sep 30): | Metric | 2021 | 2020 | | :--------------------------------- | :----- | :----- | | Diluted EPS (as reported) | $0.91 | $0.54 | | Adjusted Diluted EPS | $1.02 | $0.83 | Adjusted EBITDA (Three Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | | :--------------------------------- | :-------------- | :-------------- | | EBITDA | $60.4 | $45.2 | | Adjusted EBITDA | $65.2 | $59.7 | CONSOLIDATED RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020 Total revenue increased by 13.9% to $477.4 million, driven by organic growth, acquisitions, and foreign currency translation, while operating income surged by 43.1% to $40.5 million, despite a slight decrease in gross profit margin due to supply chain issues and labor shortages - Revenue growth was driven by 10% organic revenue, 3% from acquisitions, and 1% from foreign currency translation[144] - Gross profit margin decreased 50 bps due to supply chain disruptions and labor shortages, driving higher material, labor, and logistics costs[147] Consolidated Financial Performance (Three Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Total Revenue | $477.4 | $419.2 | $58.2 | 13.9% | | Gross Profit | $142.5 | $127.2 | $15.3 | 12.0% | | Gross Profit % | 29.8% | 30.3% | -50 bps | - | | Operating Income | $40.5 | $28.3 | $12.2 | 43.1% | | Operating Income % | 8.5% | 6.8% | 170 bps | - | | Net Income | $29.3 | $17.2 | $12.1 | 70.3% | NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020 Total revenue increased by 6.4% to $1,370.7 million, driven by organic growth, foreign currency translation, and acquisitions, while operating income increased by 5.0% to $125.6 million, with a slight decrease in operating income margin due to supply chain disruptions and higher SG&A as a percentage of revenue - Revenue growth was driven by 3% organic revenue, 2% from foreign currency translation, and 1% from acquisitions[158] - Selling, general and administrative expense increased $27.3 million, and as a percentage of revenue increased 80 bps to 21.7%[160] - Discrete tax expense of $4.4 million related to the remeasurement of UK deferred taxes due to an income tax rate increase[160] Consolidated Financial Performance (Nine Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Total Revenue | $1,370.7 | $1,288.4 | $82.3 | 6.4% | | Gross Profit | $425.6 | $400.4 | $25.2 | 6.3% | | Gross Profit % | 31.0% | 31.1% | -10 bps | - | | Operating Income | $125.6 | $119.6 | $6.0 | 5.0% | | Operating Income % | 9.2% | 9.3% | -10 bps | - | | Net Income | $86.8 | $78.7 | $8.1 | 10.3% | OPERATING RESULTS OF BUSINESS SEGMENTS THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020 (Segment) JBT FoodTech revenue increased by 19.3% with operating profit up 29.0%, driven by organic growth and acquisitions, despite declining gross profit margins due to supply chain and labor issues, while JBT AeroTech revenue was flat, but operating profit declined by 38.6% due to higher material, labor, and freight costs, and increased SG&A - FoodTech's gross profit margins declined 90 bps due to supply chain disruptions and labor shortages, while AeroTech's gross profit margins decreased 210 bps due to higher material, labor, and freight costs[152][154] JBT FoodTech Performance (Three Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :------- | | Revenue | $359.1 | $301.0 | 19.3% | | Operating Profit | $48.9 | $37.9 | 29.0% | | Operating Profit % | 13.6% | 12.6% | 100 bps | | Inbound Orders | $382.0 | $310.4 | 23.1% | JBT AeroTech Performance (Three Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :------- | | Revenue | $118.3 | $118.2 | 0.1% | | Operating Profit | $7.0 | $11.4 | -38.6% | | Operating Profit % | 5.9% | 9.6% | -370 bps | | Inbound Orders | $138.7 | $110.8 | 25.2% | NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020 (Segment) JBT FoodTech revenue increased by 12.9% with operating profit up 11.2%, driven by organic growth and foreign currency, but operating profit margin slightly declined due to a higher mix of lower-margin equipment revenue and supply chain issues, while JBT AeroTech revenue declined by 9.5% and operating profit by 27.9%, impacted by labor shortages, customer delays, and supply chain issues - FoodTech's operating profit margin declined due to a higher mix of lower-margin equipment revenue and negative impacts from supply chain disruptions and labor costs[166] - AeroTech's decline was primarily due to labor shortages, customer-related delays in fixed equipment, and supply chain issues impacting mobile equipment sales[167] JBT FoodTech Performance (Nine Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :------- | | Revenue | $1,031.6 | $913.5 | 12.9% | | Operating Profit | $141.9 | $127.6 | 11.2% | | Operating Profit % | 13.8% | 14.0% | -20 bps | | Inbound Orders | $1,165.3 | $888.6 | 31.1% | JBT AeroTech Performance (Nine Months Ended Sep 30): | Metric | 2021 (Millions) | 2020 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :------- | | Revenue | $339.1 | $374.9 | -9.5% | | Operating Profit | $29.0 | $40.2 | -27.9% | | Operating Profit % | 8.6% | 10.7% | -210 bps | | Inbound Orders | $421.6 | $347.3 | 21.4% | Restructuring The 2020 restructuring plan for manufacturing capacity rationalization has revised estimated costs for FoodTech to $10-11 million (completed by Q2 2022) and AeroTech to $6 million, with cumulative charges through September 30, 2021, of $14.2 million, and expected incremental cost savings of $1.6 million for the remainder of 2021 and $2.6 million for 2022 - The 2020 restructuring plan's estimated costs for FoodTech were revised to $10-11 million (completion by Q2 2022), and AeroTech's estimated cost is approximately $6 million[171] - Cumulative restructuring charges through September 30, 2021, were $14.2 million[171] Expected Incremental Cost Savings from 2020 Restructuring Plan: | Category | Remainder of 2021 (est.) (Millions) | 2022 (est.) (Millions) | | :--------------------------------- | :---------------------------------- | :--------------------- | | Cost of sales | $1.1 | $1.4 | | Selling, general and administrative | $0.5 | $1.2 | | Total | $1.6 | $2.6 | Liquidity and Capital Resources JBT's liquidity as of September 30, 2021, was $388.3 million (cash plus revolving credit facility availability), with the company expecting sufficient cash flows from operations and financing arrangements, including proceeds from convertible notes, to meet its needs, despite investing activities significantly increasing due to acquisitions and capital expenditures - Liquidity (cash plus borrowing capacity) as of September 30, 2021, was $388.3 million[174] - Cash provided by operating activities for the nine months ended September 30, 2021, was $163.3 million, a $2.2 million increase year-over-year[179] - Cash required by investing activities increased by $191.2 million to $217.2 million, primarily due to increased acquisition and capital expenditure spending[180] - Cash provided by financing activities was $66.9 million, primarily from the issuance of convertible notes, partially offset by revolving credit facility paydowns[181] - As of September 30, 2021, $261.2 million was drawn on and $731.1 million was available under the revolving credit facility, and the company was in compliance with all covenants[182][183] CRITICAL ACCOUNTING ESTIMATES No material changes in critical accounting estimates were reported for the period ended September 30, 2021 - No material changes in judgments and assumptions associated with the development of critical accounting estimates during the period ended September 30, 2021[187] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK No material changes in reported market risks from the information in the Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes in reported market risks from the information reported in the Annual Report on Form 10-K for the year ended December 31, 2020[188] ITEM 4. CONTROLS AND PROCEDURES JBT's disclosure controls and procedures were evaluated as effective as of September 30, 2021, ensuring timely and accurate information disclosure, with no material changes in internal control over financial reporting identified - Disclosure controls and procedures were evaluated as effective as of September 30, 2021, ensuring timely and accurate information disclosure[189][190] - No changes in controls were identified that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[190] PART II — OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS No material legal proceedings or developments were identified during the three months ended September 30, 2021 - No material legal proceedings identified or material developments in existing material legal proceedings during the three months ended September 30, 2021[191] ITEM 1A. RISK FACTORS JBT highlights risks related to its securities, including potential negative effects of convertible note hedge and warrant transactions on stock value and dilution, and counterparty risk, while business and operational risks include labor shortages and cost increases, and general risks involve indebtedness limiting cash flow and potential financial failure - Convertible note hedge and warrant transactions may negatively affect the value of the Notes and common stock, and could have a dilutive effect on common stock[193][197] - The company is subject to counterparty risk with respect to the convertible note hedge transactions, with exposure not secured by collateral[195][196] - Results of operations can be adversely affected by labor shortages, turnover, and labor cost increases, exacerbated by the COVID-19 pandemic[198] - Indebtedness and liabilities could limit cash flow available for operations, increase vulnerability to adverse economic conditions, and potentially lead to financial failure if covenants are not met[199][200][201] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS No shares were repurchased under the $30 million share repurchase program during the three months ended September 30, 2021, with the program set to expire on December 31, 2021 - No shares were purchased under the share repurchase program during the three months ended September 30, 2021[206] - Approximate dollar value of shares that may yet be purchased under the program is $30.0 million, with the program set to expire on December 31, 2021[206] ITEM 3. DEFAULTS UPON SENIOR SECURITIES None - No defaults upon senior securities[203] ITEM 4. MINE SAFETY DISCLOSURES Not applicable - Not applicable[203] ITEM 5. OTHER INFORMATION None - No other information to report[204] ITEM 6. EXHIBITS This section lists the exhibits filed with the Form 10-Q, including offer letters, plan amendments, certifications, and XBRL documents - Includes offer letters, plan amendments, CEO/CFO certifications, and XBRL documents[207] SIGNATURE The report was signed by Jessi L. Corcoran, Vice President, Corporate Controller, and Principal Accounting Officer, on October 29, 2021 - The report was signed by Jessi L. Corcoran, Vice President, Corporate Controller and Principal Accounting Officer, on October 29, 2021[209]