NOTE 2. ACQUISITIONS
During the six months ended June 30, 2021 and fiscal year 2020 the Company acquired 100% of voting equity of one business, and the assets and liabilities of another business. A summary of the acquisitions made during the periods is as follows:
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Date
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Type
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Company/Product Line
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Location (Near)
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Segment
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February 28, 2021
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Stock
|
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AutoCoding Systems Ltd. ("ACS")
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Cheshire, U.K.
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JBT FoodTech
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A provider of a central command solution for the integration of packaging process devices. The ACS acquisition extends the Company's capabilities in packaging line equipment and associated devices, including coding and label inspection and verification.
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May 29, 2020
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Asset
|
|
MARS Food Processing Solutions, LLC ("MARS")
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Denver, North Carolina
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JBT FoodTech
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A provider of solutions for monitoring and managing the efficiency of poultry processing plants. The MARS acquisition allows the Company to offer its Protein customers proprietary solutions for monitoring and managing the efficiency of poultry processing plants.
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Each acquisition has been accounted for as a business combination. Tangible and identifiable intangible assets acquired and liabilities assumed were recorded at their respective estimated fair values. The excess of the consideration transferred over the estimated fair value of the net assets received has been recorded as goodwill. The factors that contributed to the recognition of goodwill primarily relate to acquisition-driven anticipated cost savings and revenue enhancement synergies coupled with the assembled workforce acquired.
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ACS(1)
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(In millions)
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|
|
Financial assets
|
$
|
2.9
|
|
|
Inventories
|
0.7
|
|
|
Other intangible assets (2)
|
7.9
|
|
|
Deferred taxes
|
(1.4)
|
|
|
Financial liabilities
|
(2.9)
|
|
|
Total identifiable net assets
|
$
|
7.2
|
|
|
|
|
|
Cash consideration paid
|
$
|
17.0
|
|
|
Cash acquired
|
1.1
|
|
|
Net consideration
|
$
|
15.9
|
|
|
|
|
|
Goodwill (3)
|
$
|
9.8
|
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(1)The purchase accounting for ACS is provisional. The valuation of certain working capital balances, intangibles, income tax balances and residual goodwill is not complete. These amounts are subject to adjustment as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date). During the quarter ended June 30, 2021, the Company refined its estimates for other intangibles by ($2.0) million, deferred taxes by $0.5 million, and other working capital balances by immaterial amounts. The impact of these adjustments was reflected as a net increase in goodwill of $2.0 million. These adjustments resulted in an immaterial impact to the consolidated statement of income.
(2)The intangible assets acquired include customer relationships of $3.7 million with 14 years of useful life, technology of $3.4 million with 4 years of useful life, and trade names of $0.8 million with 19 years of useful life.
(3)The Company expects goodwill of $0.7 million from this acquisition to be deductible for income tax purposes.
During the second quarter of 2020, the Company acquired certain assets and liabilities of MARS Food Processing Solutions, LLC ("MARS") for a purchase price of $5 million. The Company expects goodwill of $3.1 million from this acquisition to be deductible for income tax purposes.
NOTE 3. GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying amount of goodwill by business segment were as follows:
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|
|
|
|
|
|
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|
|
(In millions)
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JBT FoodTech
|
|
JBT AeroTech
|
|
Total
|
|
Balance as of December 31, 2020
|
$
|
505.7
|
|
|
$
|
38.2
|
|
|
$
|
543.9
|
|
|
Acquisitions
|
9.8
|
|
|
—
|
|
|
9.8
|
|
|
Currency translation
|
(1.6)
|
|
|
—
|
|
|
(1.6)
|
|
|
Balance as of June 30, 2021
|
$
|
513.9
|
|
|
$
|
38.2
|
|
|
$
|
552.1
|
|
Intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
(In millions)
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Customer relationship
|
$
|
259.9
|
|
|
$
|
92.0
|
|
|
$
|
256.9
|
|
|
$
|
82.8
|
|
|
Patents and acquired technology
|
154.7
|
|
|
75.4
|
|
|
151.3
|
|
|
65.2
|
|
|
Trademarks
|
45.5
|
|
|
14.3
|
|
|
44.8
|
|
|
16.8
|
|
|
Non-amortizing intangible assets
|
10.7
|
|
|
—
|
|
|
10.8
|
|
|
—
|
|
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Other
|
8.8
|
|
|
8.7
|
|
|
9.4
|
|
|
9.3
|
|
|
Total intangible assets
|
$
|
479.6
|
|
|
$
|
190.4
|
|
|
$
|
473.2
|
|
|
$
|
174.1
|
|
NOTE 4. INVENTORIES
Inventories consisted of the following:
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|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
June 30, 2021
|
|
December 31, 2020
|
|
Raw materials
|
$
|
92.1
|
|
|
$
|
87.3
|
|
|
Work in process
|
55.8
|
|
|
51.4
|
|
|
Finished goods
|
137.1
|
|
|
136.4
|
|
|
Gross inventories before LIFO reserves and valuation adjustments
|
285.0
|
|
|
275.1
|
|
|
LIFO reserves
|
(50.8)
|
|
|
(49.2)
|
|
|
Valuation adjustments
|
(30.1)
|
|
|
(28.6)
|
|
|
Net inventories
|
$
|
204.1
|
|
|
$
|
197.3
|
|
NOTE 5. PENSION
Components of net periodic benefit cost were as follows:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
(In millions)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Service cost
|
$
|
0.6
|
|
|
$
|
0.6
|
|
|
$
|
1.2
|
|
|
$
|
1.1
|
|
|
Interest cost
|
1.7
|
|
|
2.3
|
|
|
3.3
|
|
|
4.6
|
|
|
Expected return on plan assets
|
(3.9)
|
|
|
(3.3)
|
|
|
(7.8)
|
|
|
(6.6)
|
|
|
Amortization of net actuarial losses
|
2.3
|
|
|
2.0
|
|
|
4.6
|
|
|
4.0
|
|
|
Net periodic cost
|
$
|
0.7
|
|
|
$
|
1.6
|
|
|
$
|
1.3
|
|
|
$
|
3.1
|
|
The Company expects to contribute $15.2 million to its pension and other post-retirement benefit plans in 2021. The pension contributions will be primarily for the U.S. qualified pension plan. All of the contributions are expected to be in the form of cash. The Company has made no contribution to its U.S. qualified pension plan during the six months ended June 30, 2021.
NOTE 6. DEBT
Five-year Revolving Credit Facility
On June 19, 2018, the Company entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent, and the other lenders party thereto. The Credit Agreement provides for a $1 billion revolving credit facility that matures in June 2023. On May 25, 2021, the Company entered into the first amendment to the Credit Agreement with Wells Fargo Bank, National Association, as administrative agent, and the other lenders party thereto (the “Credit Agreement Amendment”). The purpose of the Credit Agreement Amendment was to permit the issuance of the Convertible Senior Notes.
Convertible Senior Notes
On May 28, 2021, the Company closed a private offering of $402.5 million aggregate principal amount of the Company's 0.25% Convertible Senior Notes due 2026 (the "Notes") to qualified institutional buyers, resulting in net proceeds of approximately $392.2 million after deducting initial purchasers’ discounts of the Notes. Interest on the Notes will accrue from May 28, 2021 and is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021, at a rate of 0.25% per year. The Notes will mature on May 15, 2026 unless earlier converted, redeemed or repurchased. No sinking fund is provided for the Notes.
The initial conversion rate of the Notes is 5.8958 shares of the Company's common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $169.61 per share. The conversion rate of the Notes is subject to adjustment upon the occurrence of certain specified events. In addition, upon the occurrence of a make-whole fundamental change (as defined in the indenture governing the Notes (the "Indenture")) or upon a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder that elects to convert its Notes in connection with such make-whole fundamental change or notice of redemption, as the case may be.
On or after March 20, 2024, the Company has the option to redeem for cash all or part of the Notes, if the last reported sales price of the Company's common stock (the "common stock") has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides redemption notice, during any 30 consecutive trading days ending on, and including, the last trading day immediately before the date the Company sends the related redemption notice. The redemption price of each Note to be redeemed will be the principal amount of such note, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company redeems less than all the outstanding Notes, at least $100 million aggregate principal amount of Notes must be outstanding and not subject to redemption as of the relevant redemption notice date.
Prior to the close of business on the business day immediately preceding February 15, 2026, the Notes are convertible at the option of the holders only under the following circumstances:
•during any calendar quarter commencing after the calendar quarter ending on September 30, 2021 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not
consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
•during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the common stock and the conversion rate on each such trading day;
•if the Company calls such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called (or deemed called) for redemption; or
•upon the occurrence of certain corporate events, as specified in the Indenture governing the Notes.
At any time on or after February 15, 2026, holders may convert their Notes at their option, and in multiples of $1,000 principle amount, without regard to the foregoing circumstances. Upon conversion, the Company will pay cash up to the aggregate principal amount of the Notes and for the remainder of our conversion obligation in excess of the aggregate principal amount will pay or deliver cash, shares of common stock, or a combination of cash and shares of common stock at the Company’s election.
The Notes were not convertible during the quarter ended June 30, 2021 and none have been converted to date. Also given the average market price of the common stock has not exceeded the exercise price since inception, there is no impact to the diluted earnings per share.
Upon the occurrence of a fundamental change (as defined in the Indenture), subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their Notes in multiples of $1,000 principal amounts, at its repurchase price, plus accrued and unpaid interest to, but excluding, the repurchase date.
The Notes are senior unsecured obligations and rank equally in right of payment with all of the Company's existing and unsubordinated debt and senior in right of payment to any future debt that is expressly subordinated in right of payment to the Notes. The Notes will be effectively subordinated to any of the Company's existing and future secured debt to the extent of the assets securing such indebtedness.
The Indenture includes customary terms and covenants, including certain events of default after which the Notes may become due and payable immediately.
Convertible Note Hedge Transactions
The Company paid an aggregate amount of $65.6 million for the Convertible Note Hedge Transactions (the "Hedge Transactions"). The Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those in the Notes, approximately 2.4 million shares of the Company's common stock. These are the same number of shares initially underlying the Notes, at a strike price of $169.61, subject to customary adjustments. The Hedge Transactions will expire upon the maturity of the Notes, subject to earlier exercise or termination.
The Hedge Transactions are expected generally to reduce the potential dilutive effect of the conversion of the Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted Notes, in the event that the market price per share of the Company's common stock, as measured under the terms of the Hedge Transactions, is greater than the Hedge Transactions strike price of $169.61. The Hedge Transactions meet the criteria in ASC 815-40 to be classified within Stockholders' Equity, and therefore these transactions are not revalued after their issuance.
The Company made a tax election to integrate the Notes and the Hedge Transactions. The accounting impact of this tax election makes the Hedge Transactions deductible as original issue discount interest for tax purposes over the term of the note, and results in a $17.1 million deferred tax asset recorded as an adjustment to Additional paid-in capital on our Balance Sheet as of June 30, 2021.
Warrant Transactions
In addition, concurrently with entering into the Hedge Transactions, the Company separately entered into privately-negotiated Warrant Transactions (the "Warrant Transactions"), whereby the Company sold to the counterparties warrants to acquire, collectively, subject to anti-dilution adjustments, 2.4 million shares of its common stock at an initial strike price of $240.02 per share. The Company received aggregate proceeds of $29.5 million from the Warrant Transactions with the counterparties, with
such proceeds partially offsetting the costs of entering into the Hedge Transactions. The warrants expire in August 2026. If the market value per share of the common stock, exceeds the strike price of the warrants, the warrants will have a dilutive effect on our earnings per share, unless the Company elects, subject to certain conditions, to settle the warrants in cash. The warrants meet the criteria in ASC 815-40 to be classified within Stockholders' Equity, and therefore the warrants are not revalued after issuance.
The components of the Company's borrowings were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Maturity Date
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Revolving credit facility (1)
|
June 19, 2023
|
|
$
|
250.0
|
|
|
$
|
523.9
|
|
|
Less: unamortized debt issuance costs
|
|
|
$
|
(0.5)
|
|
|
$
|
(1.4)
|
|
|
Revolving credit facility, net
|
|
|
$
|
249.5
|
|
|
$
|
522.5
|
|
|
|
|
|
|
|
|
|
Convertible senior notes (2)
|
May 15, 2026
|
|
$
|
402.5
|
|
|
$
|
—
|
|
|
Less: unamortized debt issuance costs
|
|
|
$
|
(10.9)
|
|
|
$
|
—
|
|
|
Convertible senior notes, net
|
|
|
$
|
391.6
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Long-term debt, net
|
|
|
$
|
641.1
|
|
|
$
|
522.5
|
|
(1) Weighted-average interest rate at June 30, 2021 was 1.32%
(2) Effective interest rate for the Notes for the quarter ended June 30, 2021 was 0.82%
Interest expense of $0.3 million recognized for the Notes included contractual interest expense of $0.1 million and the amortization of debt issuance cost of $0.2 million for the three and six month ended June 30, 2021.
NOTE 7. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income or loss (“AOCI”) represents the cumulative balance of other comprehensive income, net of tax, as of the Balance Sheet date. For the Company, AOCI is composed of adjustments related to pension and other postretirement benefit plans, derivatives designated as hedges, and foreign currency translation adjustments. Changes in the AOCI balances for the three months ended June 30, 2021 and 2020 by component are shown in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and Other Postretirement Benefits (1)
|
|
Derivatives Designated as Hedges (1)
|
|
Foreign Currency Translation (1)
|
|
Total (1)
|
|
(In millions)
|
|
|
|
|
|
|
|
|
Beginning balance, March 31, 2021
|
$
|
(159.7)
|
|
|
$
|
(0.6)
|
|
|
$
|
(50.2)
|
|
|
$
|
(210.5)
|
|
|
Other comprehensive income (loss) before reclassification
|
—
|
|
|
(0.7)
|
|
|
4.1
|
|
|
3.4
|
|
|
Amounts reclassified from accumulated other comprehensive income
|
1.7
|
|
|
0.4
|
|
|
(0.5)
|
|
|
1.6
|
|
|
Ending balance, June 30, 2021
|
$
|
(158.0)
|
|
|
$
|
(0.9)
|
|
|
$
|
(46.6)
|
|
|
$
|
(205.5)
|
|
(1) All amounts are net of income taxes.
Reclassification adjustments from AOCI into earnings for pension and other postretirement benefit plans for the three months ended June 30, 2021 were $2.3 million of charges to pension expense, other than service cost, net of $0.6 million in benefit for income taxes. Reclassification adjustments for derivatives designated as hedges for the same period were $0.5 million of interest expense, net of $0.1 million income tax benefit. Reclassification adjustments for foreign currency translation related to net investment hedges for the three months ended June 30, 2021 were $0.7 million of benefit in interest expense, net of $0.2 million income tax provision.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and Other Postretirement Benefits (1)
|
|
Derivatives Designated as Hedges (1)
|
|
Foreign Currency Translation(1)
|
|
Total (1)
|
|
(In millions)
|
|
|
|
|
|
|
|
|
Beginning balance, March 31, 2020
|
$
|
(145.5)
|
|
|
$
|
(2.3)
|
|
|
$
|
(71.1)
|
|
|
$
|
(218.9)
|
|
|
Other comprehensive income (loss) before reclassification
|
—
|
|
|
(2.3)
|
|
|
0.5
|
|
|
(1.8)
|
|
|
Amounts reclassified from accumulated other comprehensive income
|
1.3
|
|
|
0.3
|
|
|
(0.6)
|
|
|
1.0
|
|
|
Ending balance, June 30, 2020
|
$
|
(144.2)
|
|
|
$
|
(4.3)
|
|
|
$
|
(71.2)
|
|
|
$
|
(219.7)
|
|
(1) All amounts are net of income taxes.
Reclassification adjustments from AOCI into earnings for pension and other postretirement benefit plans for the three months ended June 30, 2020 were $1.7 million of charges to pension expense, other than service cost, net of $0.4 million in benefit for for income taxes. Reclassification adjustments for derivatives designated as hedges for the same period were $0.4 million of interest expense, net of $0.1 million income tax benefit. Reclassification adjustments for foreign currency translation related to net investment hedges for the three months ended June 30, 2020 were $0.7 million of benefit in interest expense, net of $0.1 million income tax provision.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and Other Postretirement Benefits (1)
|
|
Derivatives Designated as Hedges (1)
|
|
Foreign Currency Translation (1)
|
|
Total (1)
|
|
(In millions)
|
|
|
|
|
|
|
|
|
Beginning balance, December 31, 2020
|
$
|
(161.4)
|
|
|
$
|
(3.8)
|
|
|
$
|
(54.7)
|
|
|
$
|
(219.9)
|
|
|
Other comprehensive income (loss) before reclassification
|
—
|
|
|
2.2
|
|
|
9.1
|
|
|
11.3
|
|
|
Amounts reclassified from accumulated other comprehensive income
|
3.4
|
|
|
0.7
|
|
|
(1.0)
|
|
|
3.1
|
|
|
Ending balance, June 30, 2021
|
$
|
(158.0)
|
|
|
$
|
(0.9)
|
|
|
$
|
(46.6)
|
|
|
$
|
(205.5)
|
|
(1) All amounts are net of income taxes.
Reclassification adjustments from AOCI into earnings for pension and other postretirement benefit plans for the six months ended June 30, 2021 were $4.6 million of charges to pension expense, other than service cost, net of $1.2 million in benefit for income taxes. Reclassification adjustments for derivatives designated as hedges for the same period were $0.9 million of interest expense, net of $0.2 million income tax benefit. Reclassification adjustments for foreign currency translation related to net investment hedges for the six months ended June 30, 2021 were $1.4 million of benefit in interest expense, net of $0.4 million income tax provision.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and Other Postretirement Benefits (1)
|
|
Derivatives Designated as Hedges (1)
|
|
Foreign Currency Translation(1)
|
|
Total (1)
|
|
(In millions)
|
|
|
|
|
|
|
|
|
Beginning balance, December 31, 2019
|
$
|
(147.0)
|
|
|
$
|
0.1
|
|
|
$
|
(45.9)
|
|
|
$
|
(192.8)
|
|
|
Other comprehensive income (loss) before reclassification
|
—
|
|
|
(4.7)
|
|
|
(24.2)
|
|
|
(28.9)
|
|
|
Amounts reclassified from accumulated other comprehensive income
|
2.8
|
|
|
0.3
|
|
|
(1.1)
|
|
|
2.0
|
|
|
Ending balance, June 30, 2020
|
$
|
(144.2)
|
|
|
$
|
(4.3)
|
|
|
$
|
(71.2)
|
|
|
$
|
(219.7)
|
|
(1) All amounts are net of income taxes.
Reclassification adjustments from AOCI into earnings for pension and other postretirement benefit plans for the six months ended June 30, 2020 were $3.7 million of charges to pension expense, other than service cost, net of $0.9 million in benefit for income taxes. Reclassification adjustments for derivatives designated as hedges for the same period were $0.4 million of interest expense, net of $0.1 million income tax benefit. Reclassification adjustments for foreign currency translation related to net investment hedges for the six months ended June 30, 2020 were $1.4 million of benefit in interest expense, net of $0.3 million income tax provision.
NOTE 8. REVENUE RECOGNITION
Transaction price allocated to the remaining performance obligations
The Company has estimated that $880.1 million in revenue is expected to be recognized in the future periods related to remaining performance obligations from the Company's contracts with customers outstanding as of June 30, 2021. The Company expects to complete these obligations and recognize 68% as revenue in 2021, 26% in 2022 and the remainder in 2023.
Disaggregation of Revenue
In the following table, revenue is disaggregated by type of good or service, primary geographical market, and timing of recognition for each reportable segment. The table also includes a reconciliation of the disaggregated revenue to total revenue of each reportable segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30, 2021
|
|
June 30, 2021
|
|
(In millions)
|
JBT FoodTech
|
|
JBT AeroTech
|
|
JBT FoodTech
|
|
JBT AeroTech
|
|
Type of Good or Service
|
|
|
|
|
|
|
|
|
Recurring (1)
|
$
|
164.4
|
|
|
$
|
44.3
|
|
|
$
|
314.8
|
|
|
$
|
85.8
|
|
|
Non-recurring (1)
|
196.3
|
|
|
70.5
|
|
|
357.7
|
|
|
135.0
|
|
|
Total
|
360.7
|
|
|
114.8
|
|
|
672.5
|
|
|
220.8
|
|
|
|
|
|
|
|
|
|
|
|
Geographical Region (2)
|
|
|
|
|
|
|
|
|
North America
|
197.1
|
|
|
100.0
|
|
|
366.2
|
|
|
190.0
|
|
|
Europe, Middle East and Africa
|
90.2
|
|
|
12.0
|
|
|
174.1
|
|
|
23.5
|
|
|
Asia Pacific
|
45.3
|
|
|
1.4
|
|
|
86.6
|
|
|
4.7
|
|
|
Latin America
|
28.1
|
|
|
1.4
|
|
|
45.6
|
|
|
2.6
|
|
|
Total
|
360.7
|
|
|
114.8
|
|
|
672.5
|
|
|
220.8
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Recognition
|
|
|
|
|
|
|
|
|
Point in Time
|
169.2
|
|
|
51.7
|
|
|
316.3
|
|
|
95.2
|
|
|
Over Time
|
191.5
|
|
|
63.1
|
|
|
356.2
|
|
|
125.6
|
|
|
Total
|
360.7
|
|
|
114.8
|
|
|
672.5
|
|
|
220.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30, 2020
|
|
June 30, 2020
|
|
(In millions)
|
JBT FoodTech
|
|
JBT AeroTech
|
|
JBT FoodTech
|
|
JBT AeroTech
|
|
Type of Good or Service
|
|
|
|
|
|
|
|
|
Recurring (1)
|
$
|
147.7
|
|
|
$
|
32.9
|
|
|
$
|
301.4
|
|
|
$
|
78.6
|
|
|
Non-recurring (1)
|
155.1
|
|
|
75.8
|
|
|
311.1
|
|
|
178.1
|
|
|
Total
|
302.8
|
|
|
108.7
|
|
|
612.5
|
|
|
256.7
|
|
|
|
|
|
|
|
|
|
|
|
Geographical Region (2)
|
|
|
|
|
|
|
|
|
North America
|
167.1
|
|
|
94.8
|
|
|
321.2
|
|
|
225.2
|
|
|
Europe, Middle East and Africa
|
88.2
|
|
|
7.5
|
|
|
187.8
|
|
|
18.1
|
|
|
Asia Pacific
|
32.0
|
|
|
5.8
|
|
|
67.4
|
|
|
11.5
|
|
|
Latin America
|
15.5
|
|
|
0.6
|
|
|
36.1
|
|
|
1.9
|
|
|
Total
|
302.8
|
|
|
108.7
|
|
|
612.5
|
|
|
256.7
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Recognition
|
|
|
|
|
|
|
|
|
Point in Time
|
141.7
|
|
|
47.5
|
|
|
290.1
|
|
|
124.6
|
|
|
Over Time
|
161.1
|
|
|
61.2
|
|
|
322.4
|
|
|
132.1
|
|
|
Total
|
302.8
|
|
|
108.7
|
|
|
612.5
|
|
|
256.7
|
|
(1) Aftermarket parts and services and revenue from lease and long-term service contracts are considered recurring revenue. Non-recurring revenue includes new equipment and installation.
(2) Geographical region represents the region in which the end customer resides.
Contract balances
The timing of revenue recognition, billings and cash collections results in trade receivables, contract assets, and advance and progress payments (contract liabilities). Contract assets exist when revenue recognition occurs prior to billings. Contract assets are transferred to trade receivables when the right to payment becomes unconditional (i.e., when receipt of the amount is dependent only on the passage of time). Conversely, the Company often receives payments from its customers before revenue is recognized, resulting in contract liabilities. These assets and liabilities are reported on the Balance Sheet as Contract assets and within Advance and progress payments, respectively, on a contract-by-contract net basis at the end of each reporting period.
Contract asset and liability balances for the period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of
|
|
(In millions)
|
June 30, 2021
|
|
December 31, 2020
|
|
Contract assets
|
$
|
89.1
|
|
|
$
|
68.3
|
|
|
Contract liabilities
|
135.9
|
|
|
123.8
|
|
|
|
|
|
|
|
|
Balances as of
|
|
|
June 30, 2020
|
|
December 31, 2019
|
|
Contract assets
|
76.4
|
|
|
74.4
|
|
|
Contract liabilities
|
90.9
|
|
|
92.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The revenue recognized during the six months ended June 30, 2021 and 2020 that was included in contract liabilities at the beginning of the period amounted to $86.3 million and $68.4 million, respectively. The remainder of the change from December 31, 2020 and December 31, 2019 is driven by the timing of advance and milestone payments received from customers, customer returns and fulfillment of performance obligations. There were no significant changes in the contract balances other than those described above.
NOTE 9. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share from continuing operations for the respective periods and basic and diluted shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
(In millions, except per share data)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
$
|
30.5
|
|
|
$
|
32.5
|
|
|
$
|
57.5
|
|
|
$
|
61.5
|
|
|
Weighted average number of shares outstanding
|
32.0
|
|
|
32.0
|
|
|
32.0
|
|
|
31.9
|
|
|
Basic earnings per share from continuing operations
|
$
|
0.95
|
|
|
$
|
1.02
|
|
|
$
|
1.80
|
|
|
$
|
1.92
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
$
|
30.5
|
|
|
$
|
32.5
|
|
|
$
|
57.5
|
|
|
$
|
61.5
|
|
|
Weighted average number of shares outstanding
|
32.0
|
|
|
32.0
|
|
|
32.0
|
|
|
31.9
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Restricted stock
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
0.2
|
|
|
Total shares and dilutive securities
|
32.1
|
|
|
32.0
|
|
|
32.1
|
|
|
32.1
|
|
|
Diluted earnings per share from continuing operations
|
$
|
0.95
|
|
|
$
|
1.01
|
|
|
$
|
1.79
|
|
|
$
|
1.92
|
|
NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:
•Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities that the Company can assess at the measurement date.
•Level 2: Observable inputs other than those included in Level 1 that are observable for the asset or liability, either directly or indirectly. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
•Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.
Financial assets and financial liabilities measured at fair value on a recurring basis are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021
|
|
As of December 31, 2020
|
|
(In millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
$
|
13.1
|
|
|
$
|
13.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12.3
|
|
|
$
|
12.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Derivatives
|
7.4
|
|
|
—
|
|
|
7.4
|
|
|
—
|
|
|
10.0
|
|
|
—
|
|
|
10.0
|
|
|
—
|
|
|
Total assets
|
$
|
20.5
|
|
|
$
|
13.1
|
|
|
$
|
7.4
|
|
|
$
|
—
|
|
|
$
|
22.3
|
|
|
$
|
12.3
|
|
|
$
|
10.0
|
|
|
$
|
—
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
$
|
4.8
|
|
|
$
|
—
|
|
|
$
|
4.8
|
|
|
$
|
—
|
|
|
$
|
18.8
|
|
|
$
|
—
|
|
|
$
|
18.8
|
|
|
$
|
—
|
|
|
Contingent consideration
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19.1
|
|
|
—
|
|
|
—
|
|
|
19.1
|
|
|
Total liabilities
|
$
|
4.8
|
|
|
$
|
—
|
|
|
$
|
4.8
|
|
|
$
|
—
|
|
|
$
|
37.9
|
|
|
$
|
—
|
|
|
$
|
18.8
|
|
|
$
|
19.1
|
|
Investments represent securities held in a trust for the non-qualified deferred compensation plan. Investments are classified as trading securities and are valued based on quoted prices in active markets for identical assets that the Company has the ability to access. Investments are reported separately in other assets on the Balance Sheet, and include an unrealized gain of $0.9 million as of June 30, 2021 and unrealized gain of $1.1 million as of December 31, 2020.
The Company uses the income approach to measure the fair value of derivative instruments on a recurring basis. This approach calculates the present value of the future cash flow by measuring the change between the derivative contract rate and the published market indicative currency rate, multiplied by the contract notional values, and applying an appropriate discount rate as well as a factor of credit risk.
The Notes are not registered securities nor listed on any securities exchange but may be traded by qualified institutional buyers. The fair value of the Notes estimated using Level 2 inputs was $427.5 million as of June 30, 2021.
The purchase agreement for the Company's acquisition of Proseal, in the second quarter of 2019, included contingent consideration due to the sellers of Proseal upon achievement of certain earnings targets. The contingent consideration obligation included in the Balance Sheet as other current liabilities as of December 31, 2020, was paid during the current quarter.
The following table provides a summary of changes in fair value of contingent consideration during the six months ended June 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
June 30, 2021
|
|
June 30, 2020
|
|
Beginning balance
|
$
|
19.1
|
|
|
$
|
17.4
|
|
|
Measurement adjustments recorded to earnings
|
—
|
|
|
(0.1)
|
|
|
Cash payment
|
(19.4)
|
|
|
—
|
|
|
Foreign currency translation adjustment
|
0.3
|
|
|
(1.2)
|
|
|
Ending balance
|
$
|
—
|
|
|
$
|
16.1
|
|
The carrying amounts of cash and cash equivalents, trade receivables and payables, as well as financial instruments included in other current assets and other current liabilities, approximate fair values because of their short-term maturities.
The carrying values of the Company's long-term debt approximate their fair values due to their variable interest rates.
NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Derivative Financial Instruments
All derivatives are recorded as assets or liabilities in the Balance Sheet at their respective fair values. For derivatives designated as cash flow hedges, the unrealized gain or loss related to the derivatives is recorded in Other comprehensive income (loss) until the hedged transaction affects earnings. The Company assesses at inception of the hedge, whether the derivative in the hedging transaction will be highly effective in offsetting changes in cash flows of the hedged item. Changes in the fair value of derivatives that do not meet the criteria for designation as a hedge are recognized in earnings.
Foreign Exchange: The Company manufactures and sells products in a number of countries throughout the world and, as a result, the Company is exposed to movements in foreign currency exchange rates. Major foreign currency exposures involve the markets in Western Europe, South America and Asia. Some of the Company's sales and purchase contracts contain embedded derivatives due to the nature of doing business in certain jurisdictions, which are taken into consideration as part of the Company's risk management policy. The purpose of the Company's foreign currency hedging activities is to manage the economic impact of exchange rate volatility associated with anticipated foreign currency purchases and sales made in the normal course of business. The Company primarily utilizes forward foreign exchange contracts with maturities of less than 2 years in managing this foreign exchange rate risk. The Company has not designated these forward foreign exchange contracts, which had a notional value at June 30, 2021 of $830.1 million, as hedges and therefore does not apply hedge accounting.
The following table presents the fair value of foreign currency derivatives and embedded derivatives included within the Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021
|
|
As of December 31, 2020
|
|
(In millions)
|
Derivative Assets
|
|
Derivative Liabilities
|
|
Derivative Assets
|
|
Derivative Liabilities
|
|
Total
|
$
|
5.5
|
|
|
$
|
3.5
|
|
|
$
|
10.0
|
|
|
$
|
12.7
|
|
A master netting arrangement allows counterparties to net settle amounts owed to each other as a result of separate offsetting derivative transactions. The Company enters into master netting arrangements with its counterparties when possible to mitigate credit risk in derivative transactions by permitting the Company to net settle for transactions with the same counterparty. However, it does not net settle with such counterparties. As a result, derivatives are presented at their gross fair values in the Balance Sheet.
As of June 30, 2021 and December 31, 2020, information related to these offsetting arrangements was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
As of June 30, 2021
|
|
Offsetting of Assets
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts Offset in the Consolidated Balance Sheet
|
|
Net Presented in the Consolidated Balance Sheet
|
|
Amount Subject to Master Netting Agreement
|
|
Net Amount
|
|
Derivatives
|
$
|
7.3
|
|
|
$
|
—
|
|
|
$
|
7.3
|
|
|
$
|
(1.2)
|
|
|
$
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
As of June 30, 2021
|
|
Offsetting of Liabilities
|
Gross Amounts of Recognized Liabilities
|
|
Gross Amounts Offset in the Consolidated Balance Sheet
|
|
Net Presented in the Consolidated Balance Sheet
|
|
Amount Subject to Master Netting Agreement
|
|
Net Amount
|
|
Derivatives
|
$
|
3.9
|
|
|
$
|
—
|
|
|
$
|
3.9
|
|
|
$
|
(1.2)
|
|
|
$
|
2.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
As of December 31, 2020
|
|
Offsetting of Assets
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts Offset in the Consolidated Balance Sheet
|
|
Net Presented in the Consolidated Balance Sheet
|
|
Amount Subject to Master Netting Agreement
|
|
Net Amount
|
|
Derivatives
|
$
|
10.0
|
|
|
$
|
—
|
|
|
$
|
10.0
|
|
|
$
|
(8.6)
|
|
|
$
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
As of December 31, 2020
|
|
Offsetting of Liabilities
|
Gross Amounts of Recognized Liabilities
|
|
Gross Amounts Offset in the Consolidated Balance Sheet
|
|
Net Presented in the Consolidated Balance Sheet
|
|
Amount Subject to Master Netting Agreement
|
|
Net Amount
|
|
Derivatives
|
$
|
16.6
|
|
|
$
|
—
|
|
|
$
|
16.6
|
|
|
$
|
(8.6)
|
|
|
$
|
8.0
|
|
The following table presents the location and amount of the gain (loss) on foreign currency derivatives and on the remeasurement of assets and liabilities denominated in foreign currencies, as well as the net impact recognized in the Income Statement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated
as Hedging Instruments
|
|
Location of Gain (Loss) Recognized
in Income on Derivatives
|
|
Amount of Gain (Loss) Recognized in Income
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
(In millions)
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Foreign exchange contracts
|
|
Revenue
|
|
$
|
1.6
|
|
|
$
|
2.3
|
|
|
$
|
0.4
|
|
|
$
|
(2.3)
|
|
|
Foreign exchange contracts
|
|
Cost of sales
|
|
(0.1)
|
|
|
(2.9)
|
|
|
0.8
|
|
|
(0.1)
|
|
|
Foreign exchange contracts
|
|
Selling, general and administrative expense
|
|
0.3
|
|
|
0.9
|
|
|
0.3
|
|
|
1.3
|
|
|
Total
|
|
|
|
1.8
|
|
|
0.3
|
|
|
1.5
|
|
|
(1.1)
|
|
|
Remeasurement of assets and liabilities in foreign currencies
|
|
|
|
(1.6)
|
|
|
(1.2)
|
|
|
(1.8)
|
|
|
1.8
|
|
|
Net gain (loss) on foreign currency transactions
|
|
|
|
$
|
0.2
|
|
|
$
|
(0.9)
|
|
|
$
|
(0.3)
|
|
|
$
|
0.7
|
|
Interest Rates: The Company has entered into four interest rate swaps executed in March 2020 with a combined notional amount of $200 million expiring in April 2025, and one interest rate swap executed in May 2020 with a notional amount of $50 million expiring in May 2025. These interest rate swaps fix the interest rate applicable to certain of the Company's variable-rate debt. The agreements swap one-month LIBOR for fixed rates. The Company has designated these swaps as cash flow hedges and all changes in fair value of the swaps are recognized in accumulated other comprehensive income (loss).
At June 30, 2021, the fair value of these derivatives designated as cash flow hedges were recorded in the Balance Sheet as other liabilities of $1.3 million and as accumulated other comprehensive income, net of tax, of $1.0 million.
Net Investment: The Company has entered into a cross currency swap agreement that synthetically swaps $116.4 million of fixed rate debt to Euro denominated fixed rate debt. The agreement is designated as a net investment hedge for accounting
purposes. Accordingly, the gain or loss on this derivative instrument is included in the foreign currency translation component of other comprehensive income until the net investment is sold, diluted, or liquidated. Coupons received for the cross currency swap are excluded from the net investment hedge effectiveness assessment and are recorded in interest expense, net on the condensed consolidated statements of income. For the six months ended June 30, 2021 and 2020, gains recorded in interest expense, net under the cross currency swap agreement were approximately $1.4 million.
At June 30, 2021, the fair value of these derivatives designated as net investment hedges were recorded in the Balance Sheet as other assets of $1.9 million and as accumulated other comprehensive income, net of tax, of $1.4 million.
Refer to Note 10. Fair Value Of Financial Instruments for a description of how the values of the above financial instruments are determined.
Credit Risk
By their nature, financial instruments involve risk including credit risk for non-performance by counterparties. Financial instruments that potentially subject the Company to credit risk primarily consist of trade receivables and derivative contracts. The Company manages the credit risk on financial instruments by transacting only with financially secure counterparties, requiring credit approvals and establishing credit limits, and monitoring counterparties’ financial condition. Maximum exposure to credit loss in the event of non-performance by the counterparty, for all receivables and derivative contracts as of June 30, 2021, is limited to the amount drawn and outstanding on the financial instrument. Refer to Note 1. Description of Business and Basis of Presentation in Item 8. Financial Statements and Supplementary Data of the Company's most recent Annual Report on Form 10-K, for a description of how allowance for credit loss is determined on financial assets measured at amortized cost, which includes Trade receivables, Contract assets, and non-current receivables.
NOTE 12. LEASES
The following table provides the required information regarding operating and sales-type leases for which the Company is lessor.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
(In millions)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Fixed payment revenue
|
$
|
16.6
|
|
|
$
|
16.3
|
|
|
$
|
32.9
|
|
|
$
|
32.6
|
|
|
Variable payment revenue
|
3.9
|
|
|
3.7
|
|
|
8.4
|
|
|
8.8
|
|
|
Operating lease revenue
|
$
|
20.5
|
|
|
$
|
20.0
|
|
|
$
|
41.3
|
|
|
$
|
41.4
|
|
|
|
|
|
|
|
|
|
|
|
Sales-type lease revenue
|
$
|
3.1
|
|
|
$
|
2.1
|
|
|
$
|
4.3
|
|
|
$
|
3.6
|
|
Refer to Note 16. Related Party Transactions for details of operating lease agreements with related parties.
NOTE 13. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is at times subject to pending and threatened legal actions, some for which the relief or damages sought may be substantial. Although the Company is not able to predict the outcome of such actions, after reviewing all pending and threatened actions with counsel and based on information currently available, management believes that the outcome of such actions, individually or in the aggregate, will not have a material adverse effect on the Company's results of operations or financial position. However, it is possible that the ultimate resolution of such matters, if unfavorable, may be material to its results of operations in a particular future period as the time and amount of any resolution of such actions and its relationship to the future results of operations are not currently known.
Liabilities are established for pending legal claims only when losses associated with the claims are judged to be probable, and the loss can be reasonably estimated. In many lawsuits and arbitrations, it is not considered probable that a liability has been incurred or not possible to estimate the ultimate or minimum amount of that liability until the case is close to resolution, in which case no liability would be recognized until that time.
Guarantees and Product Warranties
In the ordinary course of business with customers, vendors and others, the Company issues standby letters of credit, performance bonds, surety bonds and other guarantees. These financial instruments, which totaled $202.1 million at June 30, 2021, represent guarantees of future performance. The Company has also provided $7.6 million of bank guarantees and letters of credit to secure a portion of its existing financial obligations. The majority of these financial instruments expire within one year and are expected to be replaced through the issuance of new or the extension of existing letters of credit and surety bonds.
In some instances, the Company guarantees its customers’ financing arrangements. The Company is responsible for payment of any unpaid amounts, but will receive indemnification from third parties for ninety-five percent of the contract values. In addition, the Company generally retains recourse to the equipment sold. As of June 30, 2021, the gross value of such arrangements was $1.0 million, of which its net exposure under such guarantees was $0.1 million.
The Company provides warranties to certain of its customers based on standard terms and conditions and negotiated agreements. The Company provides for the estimated cost of warranties at the time revenue is recognized. Cost of warranties includes an estimate for products where reliable, historical experience of failure rates, as well as the related costs in correcting a product failure warranty claims and cost exist. The Company also provides a warranty liability when additional specific warranty costs are identified. The warranty obligation reflected in other current liabilities in the consolidated Balance Sheet is based on historical experience by product and considers failure rates and the related costs in correcting a product failure. Warranty cost and accrual information were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
(In millions)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Balance at beginning of period
|
$
|
11.6
|
|
|
$
|
11.7
|
|
|
$
|
11.5
|
|
|
$
|
12.0
|
|
|
Expense for new warranties
|
3.4
|
|
|
3.9
|
|
|
7.1
|
|
|
6.9
|
|
|
Adjustments to existing accruals
|
—
|
|
|
(0.6)
|
|
|
(0.2)
|
|
|
(0.4)
|
|
|
Claims paid
|
(2.6)
|
|
|
(3.0)
|
|
|
(5.8)
|
|
|
(6.4)
|
|
|
Added through acquisition
|
—
|
|
|
(0.1)
|
|
|
—
|
|
|
—
|
|
|
Translation
|
0.1
|
|
|
0.1
|
|
|
(0.1)
|
|
|
(0.1)
|
|
|
Balance at end of period
|
$
|
12.5
|
|
|
$
|
12.0
|
|
|
$
|
12.5
|
|
|
$
|
12.0
|
|
NOTE 14. BUSINESS SEGMENT INFORMATION
Operating segments for the Company are determined based on information used by the chief operating decision maker (CODM) in deciding how to evaluate performance and allocate resources to each of the segments. JBT’s CODM is the Chief Executive Officer (CEO). While there are many measures the CEO reviews in this capacity, the key segment measures reviewed include operating profit, operating profit margin, EBITDA, adjusted when applicable, and EBITDA margins.
Reportable segments are:
•JBT FoodTech—provides comprehensive solutions throughout the food production value chain extending from primary processing through packaging systems for a large variety of food and beverage groups, including poultry, beef, pork, seafood, ready-to-eat meals, fruits, vegetables, dairy, bakery, pet foods, soups, sauces, and juices.
•JBT AeroTech— supplies customized solutions and services used for applications in the air transportation industry, including airport authorities, airlines, airfreight, ground handling companies, militaries and defense contractors.
Segment operating profit is defined as total segment revenue less segment operating expenses. The following items have been excluded in computing segment operating profit: corporate expense, restructuring costs, pension expense, other than service cost, interest income and expense, and income taxes. See the table below for further details on corporate expense.
Business segment information was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
(In millions)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Revenue
|
|
|
|
|
|
|
|
|
JBT FoodTech
|
$
|
360.7
|
|
|
$
|
302.8
|
|
|
$
|
672.5
|
|
|
$
|
612.5
|
|
|
JBT AeroTech
|
114.8
|
|
|
108.7
|
|
|
220.8
|
|
|
256.7
|
|
|
Total revenue
|
475.5
|
|
|
411.5
|
|
|
893.3
|
|
|
869.2
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
|
|
|
|
Segment operating profit:
|
|
|
|
|
|
|
|
|
JBT FoodTech
|
51.5
|
|
|
49.0
|
|
|
93.0
|
|
|
89.7
|
|
|
JBT AeroTech
|
12.1
|
|
|
10.3
|
|
|
22.0
|
|
|
28.8
|
|
|
Total segment operating profit
|
63.6
|
|
|
59.3
|
|
|
115.0
|
|
|
118.5
|
|
|
Corporate items:
|
|
|
|
|
|
|
|
|
Corporate expense (1)
|
15.3
|
|
|
9.6
|
|
|
27.9
|
|
|
23.1
|
|
|
Restructuring expense (2)
|
1.0
|
|
|
2.1
|
|
|
2.0
|
|
|
4.1
|
|
|
Operating income
|
47.3
|
|
|
47.6
|
|
|
85.1
|
|
|
91.3
|
|
|
|
|
|
|
|
|
|
|
|
Pension expense, other than service cost
|
—
|
|
|
1.0
|
|
|
—
|
|
|
2.0
|
|
|
Interest expense, net
|
2.1
|
|
|
3.5
|
|
|
4.2
|
|
|
8.3
|
|
|
Income from continuing operations before income taxes
|
$
|
45.2
|
|
|
$
|
43.1
|
|
|
$
|
80.9
|
|
|
$
|
81.0
|
|
|
|
|
|
|
|
|
|
|
(1)Corporate expense generally includes corporate staff-related expense, stock-based compensation, LIFO adjustments, certain foreign currency-related gains and losses, and the impact of unusual or strategic events not representative of segment operations.
(2)Refer to Note 15. Restructuring for further information on restructuring charges.
NOTE 15. RESTRUCTURING
Restructuring charges primarily consist of employee separation benefits under existing severance programs, foreign statutory termination benefits, certain one-time termination benefits, contract termination costs, asset impairment charges and other costs that are associated with restructuring actions. Certain restructuring charges are accrued prior to payments made in accordance with applicable guidance. For such charges, the amounts are determined based on estimates prepared at the time the restructuring actions were approved by management. Inventory write offs due to restructuring are reported in Cost of products and are included in each segment's operating profit given the nature of the item. All other restructuring charges that are reported as Restructuring expenses are excluded from the calculation of each segment's operating profit.
In the first quarter of 2018, the Company implemented a restructuring plan ("2018 restructuring plan") to address its global processes to flatten the organization, improve efficiency and better leverage general and administrative resources primarily within the JBT FoodTech segment. The Company recognized cumulative restructuring charges of $62.2 million, net of cumulative releases of the related liability of $11.9 million. The Company completed this plan in the third quarter of 2020 and transferred the remaining liability into the 2020 restructuring plan in the fourth quarter of 2020.
In the first quarter of 2020, the Company implemented an immaterial restructuring plan primarily within the JBT AeroTech segment. The Company recognized cumulative restructuring charges of $2.4 million related to severance, net of a cumulative release of related liability of $0.2 million. The Company completed this plan in the third quarter of 2020 and transferred the remaining liability into the 2020 restructuring plan in the fourth quarter of 2020.
In the third quarter of 2020, the Company implemented a restructuring plan ("2020 restructuring plan") for manufacturing capacity rationalization affecting both the JBT FoodTech and JBT AeroTech segments. The total estimated cost in connection
with this plan is in the range of $9.0 million to $10.0 million for FoodTech and approximately $6.0 million for AeroTech. The Company recognized restructuring charges of $13.0 million, net of a cumulative release of the related liability of $1.1 million, through June 30, 2021, and expect to recognize the remaining costs by end of the year 2021.
The following table details the cumulative restructuring charges reported in operating income for the 2020 restructuring plan since the implementation of this plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Amount
|
|
For The Three Months Ended
|
|
Cumulative Amount
|
|
(In millions)
|
Balance as of December 31, 2020
|
|
March 31, 2021
|
|
June 30, 2021
|
|
Balance as of June 30, 2021
|
|
2020 restructuring plan
|
|
|
|
|
|
|
|
|
Severance and related expense
|
7.0
|
|
|
0.2
|
|
|
0.8
|
|
|
8.0
|
|
|
Inventory write-off
|
1.9
|
|
|
—
|
|
|
—
|
|
|
1.9
|
|
|
Employee overlap costs
|
0.3
|
|
|
0.4
|
|
|
0.3
|
|
|
1.0
|
|
|
Retention bonus
|
0.3
|
|
|
0.4
|
|
|
—
|
|
|
0.7
|
|
|
Other
|
0.7
|
|
|
0.2
|
|
|
0.5
|
|
|
1.4
|
|
|
Total Restructuring charges
|
$
|
10.2
|
|
|
$
|
1.2
|
|
|
$
|
1.6
|
|
|
$
|
13.0
|
|
Liability balances for restructuring activities are included in other current liabilities in the accompanying Balance Sheet. The table below details the activities in 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact to Earnings
|
|
|
(In millions)
|
Balance as of December 31, 2020
|
|
Charged to Earnings
|
|
Releases
|
|
Cash Payments
|
|
Balance as of June 30, 2021
|
|
2020 restructuring plan
|
|
|
|
|
|
|
|
|
|
|
Severance and related expense
|
$
|
3.7
|
|
|
$
|
1.0
|
|
|
$
|
(0.8)
|
|
|
$
|
(2.1)
|
|
|
$
|
1.8
|
|
|
Employee overlap costs
|
—
|
|
|
0.7
|
|
|
—
|
|
|
(0.7)
|
|
|
—
|
|
|
Retention bonus
|
0.1
|
|
|
0.4
|
|
|
—
|
|
|
(0.1)
|
|
|
0.4
|
|
|
Other
|
0.2
|
|
|
0.7
|
|
|
—
|
|
|
(0.9)
|
|
|
—
|
|
|
Total
|
$
|
4.0
|
|
|
$
|
2.8
|
|
|
$
|
(0.8)
|
|
|
$
|
(3.8)
|
|
|
$
|
2.2
|
|
The Company released $0.8 million of liability during the six months ended June 30, 2021 which it no longer expects to pay in connection with the 2020 restructuring plan due to actual severance payments differing from the original estimates and natural attrition of employees.
NOTE 16. RELATED PARTY TRANSACTIONS
The Company is a party to an agreement to lease a manufacturing facility in Columbus, Ohio from an entity owned by certain of the Company's employees who were former owners or employees of an acquired business. The lease commenced on September 1, 2019, with an eight year term. The operating lease right-of-use asset and the lease liability related to this agreement is $3.3 million and $3.6 million, respectively.
NOTE 17. SUBSEQUENT EVENTS
On July 2, 2021, the Company completed the acquisition of Prevenio, located in Bridgewater, New Jersey. Prevenio is a provider of innovative food safety solutions primarily for the poultry industry. Prevenio provides highly effective pathogen protection through its unique anti-microbial delivery solution that significantly enhances food safety and integrity, and creates a safer work environment for its customers and their employees. This acquisition will enhance the Company’s recurring revenue portfolio and furthers its investment in solutions that support its customers’ daily operations. The purchase price was $172.4 million, which was funded with cash on hand as well as borrowings under the Company's revolving credit facility. Due to the timing of the acquisition, the initial accounting for the acquisition, including the valuation of assets and liabilities acquired is incomplete. As such, the Company is not able to disclose the preliminary fair value of assets acquired and liabilities assumed.