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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

   
  For the quarterly period ended June 30, 2015

 

or

 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

   
  For the transition period from              to             

 

Commission File Number 1-34036

 


 

John Bean Technologies Corporation

(Exact name of registrant as specified in its charter)

 


 

Delaware

91-1650317

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

70 West Madison Street, Chicago, Illinois

60602

(Address of principal executive offices)

(Zip code)

 

(312) 861-5900

(Registrant’s telephone number, including area code)

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   ☒   No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

       

Non-accelerated filer

Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at July 24, 2015

Common Stock, par value $0.01 per share

 

29,198,263

 



 

 
 

 

 

PART I—FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS

 

 

John Bean Technologies Corporation

Condensed Consolidated statements of income

(Unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions, except per share data)

 

2015

   

2014

   

2015

   

2014

 

Revenue

  $ 254.6     $ 247.6     $ 479.6     $ 445.6  

Operating expenses:

                               

Cost of sales

    181.9       179.3       343.9       325.3  

Selling, general and administrative expense

    45.1       44.9       91.0       88.5  

Research and development expense

    4.3       3.7       8.0       7.2  

Restructuring expense

    -       1.0       -       11.2  

Other (income) expense, net

    0.1       0.2       (0.2 )     0.1  

Operating income

    23.2       18.5       36.9       13.3  

Interest income

    0.2       0.3       0.5       0.8  

Interest expense

    (2.2 )     (1.8 )     (4.3 )     (3.6 )

Income from continuing operations before income taxes

    21.2       17.0       33.1       10.5  

Provision for income taxes

    6.8       5.6       10.7       3.8  

Income from continuing operations

    14.4       11.4       22.4       6.7  

Loss from discontinued operations, net of taxes

    -       -       -       (0.1 )

Net income

  $ 14.4     $ 11.4     $ 22.4     $ 6.6  
                                 

Basic earnings per share:

                               

Income from continuing operations

  $ 0.49     $ 0.39     $ 0.76     $ 0.23  

Loss from discontinued operations

    -       -       -       -  

Net income

  $ 0.49     $ 0.39     $ 0.76     $ 0.23  

Diluted earnings per share:

                               

Income from continuing operations

  $ 0.48     $ 0.38     $ 0.75     $ 0.23  

Loss from discontinued operations

    -       -       -       (0.01 )

Net income

  $ 0.48     $ 0.38     $ 0.75     $ 0.22  

Cash dividends declared per share

  $ 0.09     $ 0.09     $ 0.18     $ 0.18  

 

 

John Bean Technologies Corporation

Condensed Consolidated statements of comprehensive Income

(Unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2015

   

2014

   

2015

   

2014

 

Net income

  $ 14.4     $ 11.4     $ 22.4     $ 6.6  

Other comprehensive income (loss)

                               

Foreign currency translation adjustments

    6.3       (1.1 )     (10.0 )     (0.4 )

Pension and other postretirement benefits adjustments, net of tax of ($0.1) and $0.3 for 2015; $0.3 and $0.6 for 2014, respectively

    0.7       0.4       1.6       1.0  

Derivatives designated as hedges, net of tax of $0.3 for the second quarter of 2015

    0.4       -       -       -  

Other comprehensive income (loss)

    7.4       (0.7 )     (8.4 )     0.6  

Comprehensive income

  $ 21.8     $ 10.7     $ 14.0     $ 7.2  

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 
2

 

 

John Bean Technologies Corporation

Condensed Consolidated balance sheets

 

   

June 30, 2015

   

December 31, 2014

 

(In millions, except per share data and number of shares)

 

(Unaudited)

         

Assets:

               

Current Assets:

               

Cash and cash equivalents

  $ 19.9     $ 33.3  

Trade receivables, net of allowances of $2.4 and $3.0, respectively

    164.9       176.2  

Inventories

    121.7       111.8  

Other current assets

    40.1       43.4  

Deferred Taxes

    23.7       23.2  

Total current assets

    370.3       387.9  

Property, plant and equipment, net of accumulated depreciation of $226.5 and $232.7, respectively

    150.7       147.6  

Goodwill

    64.2       69.2  

Intangible assets - customer relationships, net of accumulated amortization of $13.8 and $12.4, respectively

    37.9       37.4  

Intangible assets - other, net of accumulated amortization of $34.8 and $34.5, respectively

 

19.5

      22.6  

Other assets

    29.0       33.1  

Total Assets

  $ 671.6     $ 697.8  
                 

Liabilities and Stockholders' Equity:

               

Current Liabilities:

               

Short-term debt and current portion of long-term debt

  $ 3.2     $ 4.2  

Accounts payable, trade and other

    95.6       89.5  

Advance and progress payments

    100.2       86.2  

Other current liabilities

    88.6       106.5  

Total current liabilities

    287.6       286.4  

Long-term debt, less current portion

    154.3       173.8  

Accrued pension and other postretirement benefits, less current portion

    81.9       93.1  

Other liabilities

    23.5       25.3  

Commitments and contingencies (Note 11)

               

Stockholders' Equity:

               

Preferred stock, $0.01 par value; 20,000,000 shares authorized; no shares issued

    -       -  

Common stock, $0.01 par value; 120,000,000 shares authorized; 2015: 29,316,041 issued and 29,198,263 outstanding; 2014: 29,138,162 issued and 29,091,502 outstanding;

    0.3       0.3  

Common stock held in treasury, at cost; 2015: 117,778 shares; 2014: 46,660 shares

    (4.1 )     (1.5 )

Additional paid-in capital

    70.3       71.1  

Retained earnings

    183.3       166.4  

Accumulated other comprehensive loss

    (125.5 )     (117.1 )

Total stockholders' equity

    124.3       119.2  

Total Liabilities and Stockholders' Equity

  $ 671.6     $ 697.8  

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 
3

 

 

John Bean Technologies Corporation

Condensed Consolidated statementS of cash flows

(Unaudited)

 

   

Six Months Ended

 
   

June 30,

 

(In millions)

 

2015

   

2014

 

Cash Flows From Operating Activities:

               

Net income

  $ 22.4     $ 6.6  

Loss from discontinued operations, net of income taxes

    -       0.1  

Income from continuing operations

    22.4       6.7  

Adjustments to reconcile income from continuing operations to cash provided by operating activities of continuing operations:

               

Depreciation and amortization

    13.6       11.6  

Stock-based compensation

    3.3       3.7  

Other

    1.9       3.2  

Changes in operating assets and liabilities:

               

Trade receivables, net

    8.9       28.4  

Inventories

    (13.6 )     (24.0 )

Accounts payable, trade and other

    8.9       (0.7 )

Advance and progress payments

    17.0       (3.9 )

Other assets and liabilities, net

    (22.6 )     (4.7 )

Cash provided by continuing operating activities

    39.8       20.3  

Net cash required by discontinued operating activities

    (0.1 )     (0.3 )

Cash provided by operating activities

    39.7       20.0  
                 

Cash Flows required by Investing Activities:

               

Acquisitions, net of cash acquired

    -       (1.7 )

Capital expenditures

    (19.4 )     (17.1 )

Proceeds from disposal of assets

    0.8       1.1  

Proceeds from property available for sale

    2.0       -  

Cash required by investing activities

    (16.6 )     (17.7 )
                 

Cash Flows provided (required) by Financing Activities:

               

Net decrease in short-term debt

    (1.1 )     (0.6 )

Cash provided by refinancing of credit facility

    183.7       -  

Cash payments to settle existing credit facility

    (183.7 )     -  

Net payments on credit facilities

    (17.8 )     44.0  

Repayment of long-term debt

    (0.7 )     (2.8 )

Excess tax benefits

    1.8       0.9  

Tax withholdings on stock-based compensation awards

    (4.3 )     (2.6 )

Purchase of stock held in treasury

    (4.1 )     -  

Dividends

    (5.6 )     (5.5 )

Other

    (0.1 )     -  

Cash provided (required) by financing activities

    (31.9 )     33.4  
                 

Effect of foreign exchange rate changes on cash and cash equivalents

    (4.6 )     (1.4 )
                 

Increase (decrease) in cash and cash equivalents

    (13.4 )     34.3  

Cash and cash equivalents, beginning of period

    33.3       29.4  

Cash and cash equivalents, end of period

  $ 19.9     $ 63.7  

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 
4

 

 

John Bean Technologies Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

Note 1. Description of Business and Basis of Presentation

 

Description of Business

John Bean Technologies Corporation and its majority-owned consolidated subsidiaries (“JBT” or “we”) provide global technology solutions for the food processing and air transportation industries. We design, manufacture, test and service technologically sophisticated systems and products for customers through our JBT FoodTech and JBT AeroTech segments. We have manufacturing operations worldwide and are strategically located to facilitate delivery of our products and services to our customers.

 

Basis of Presentation

In accordance with Securities and Exchange Commission (“SEC”) rules for interim periods, the accompanying unaudited condensed consolidated financial statements (the “interim financial statements”) do not include all of the information and notes for complete financial statements as required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). As such, the accompanying interim financial statements should be read in conjunction with the JBT Annual Report on Form 10-K for the year ended December 31, 2014, which provides a more complete understanding of the Company’s accounting policies, financial position, operating results, business, properties, and other matters. The year-end condensed consolidated balance sheet was derived from audited financial statements.

 

In the opinion of management, the statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of our financial condition and operating results as of and for the periods presented. Revenue, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the interim results and trends in these statements may not be representative of those for the full year or any future period.

 

We have reclassified the prior year intangible asset balances to conform to the current year presentation.

 

Use of estimates

Preparation of financial statements that follow U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

 

Recently issued accounting standards not yet adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The new standard will replace most existing revenue recognition guidance in U.S. GAAP. The core principle of the ASU requires companies to reevaluate when revenue is recorded on a transaction based upon newly defined criteria, either at a point in time or over time as goods or services are delivered. The ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and estimates, and changes in those estimates. The new standard becomes effective for us as of January 1, 2018, and allows for both retrospective and modified-retrospective methods of adoption. We are currently evaluating the effect, if any, that the updated standard will have on our consolidated financial statements and related disclosures.

 

In April 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30) – Simplifying Presentation of Debt Issuance Costs. The core principle of the ASU is that an entity should present debt issuance costs as a direct deduction from the face amount of that debt in the balance sheet similar to the manner in which a debt discount or premium is presented, and not reflected as a deferred charge or deferred credit. The ASU requires additional disclosure about the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted and the effect of the change on the financial statement line item (that is, the debt issuance cost asset and the debt liability). The new standard becomes effective for us as of January 1, 2016, and requires retrospective implementation in which the balance sheet of each individual period presented is to be adjusted to reflect the period-specific effects of applying the new guidance, early adoption is permitted. We anticipate a reduction of assets and liabilities of $2.6 million and $1.1 million on our balance sheet as of June 30, 2015 and December 31, 2014, respectively, and we are currently evaluating the requirements of the standard to determine when we will adopt and implement its provisions.

 

 
5

 

 

In April 2015, the FASB issued ASU No. 2015-05, Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. The ASU applies to cloud computing arrangements including software as a service, platform as a service, infrastructure as a service, and other similar hosting arrangements. The ASU was issued to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement. The ASU provides guidance about whether the arrangement includes a software license. The core principle of the ASU is that if a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance will not change U.S. GAAP for a customer’s accounting for service contracts. The ASU is effective for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2015. The company anticipates the adoption in the effective period and we are currently evaluating the effect, if any, that the ASU will have on our consolidated financial statements and related disclosures.

 

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330) – Simplifying the Measurement of Inventory. The core principle of the ASU is that entities that historically used the lower of cost or market in the subsequent measurement of inventory will instead be required to measure inventory at the lower of cost and net realizable value. The guidance will not change U.S. GAAP for inventory measured using LIFO or the retail inventory method. The ASU is effective for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2016. The company anticipates the adoption in the effective period and we are currently evaluating the effect, if any, that the ASU will have on our consolidated financial statements and related disclosures.

 

 

Note 2. Acquisitions

 

Fiscal year 2014

 

Consistent with our growth strategy, we completed three acquisitions during 2014 focused on strengthening our protein processing and liquid foods portfolios.

 

Wolf-Tec Acquisition

 

On December 1, 2014, John Bean Technologies Corporation and its wholly-owned subsidiaries JBT Holdings, LLC and John Bean Technologies Limited, acquired substantially all of the assets and assumed certain liabilities of Wolf-Tec, Inc. (Wolf-Tec) for $53.9 million in cash. Consideration for the transaction was provided by cash on hand supplemented with borrowings under our revolving line of credit. The acquisition enables us to better meet customer needs through an expanded portfolio of protein processing equipment and solutions. Our product lines and those of Wolf-Tec are highly complementary, with equipment of both companies frequently utilized on the same production line. The acquisition also provides us with further entry into the beef, pork, and seafood processing markets. The acquisition is strategic in that Wolf-Tec has a strong brand presence, excellent technology and is renowned for its sales and customer support. The acquisition of Wolf-Tec combined with our global reach will create strong future growth opportunities.

 

This 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, revenue enhancement synergies in our protein processing business and the acquisition of an assembled workforce. Approximately $13.4 million of the goodwill is expected to be deductible for tax purposes. Acquisition related costs totaling $0.7 million were recognized as other expense in the condensed consolidated statements of income at the time they were incurred.

 

The Company has substantially completed the purchase price allocation for this acquisition which is based on the fair value of assets acquired and liabilities assumed. However, if additional information is obtained about these assets and liabilities within the measurement period (not to exceed 12 months from the date of the acquisition), including through asset appraisals and learning more about the newly acquired business, the Company will refine its estimates of fair value. During the quarter ended June 30, 2015 the Company refined its estimates of the deferred tax assets by $0.9 million and other liabilities by ($1.0 million). The net impact of these adjustments was reflected as a decrease in goodwill. No other significant refinements of the valuation occurred during the quarter.

 

 
6

 

 

The following table summarizes the provisional fair values recorded for the assets acquired and liabilities assumed for Wolf-Tec:

 

(In millions)

       

Assets:

       

Cash

  $ 0.2  

Accounts receivable

    2.3  

Other current assets

    0.3  

Inventories

    6.5  

Property, plant and equipment

    7.7  

Intangible assets:

       

Customer relationships

    17.2  

Intellectual property

    4.3  

Noncompete agreement

    0.8  

Backlog & other assets

    0.3  

Deferred Tax Asset

    0.9  

Total assets

  $ 40.5  
         

Liabilities:

       

Accounts payable

    1.7  

Deferred revenue

    0.3  

Other liabilities

    1.4  

Total liabilities

  $ 3.4  
         

Total purchase price

  $ 53.9  
         

Goodwill

  $ 16.8  

 

 

The customer relationships and intellectual property will be amortized over their estimated useful lives of fifteen and ten years, respectively. The non-compete agreement will be amortized over its term of five years and the backlog asset was amortized over four months, reflecting its pattern of use.

 

ICS Solutions Acquisition

 

On July 1, 2014, we completed the acquisition of 100% of the outstanding shares of ICS Solutions, a subsidiary of Stork Food & Dairy Systems B.V., for cash consideration of $35.7 million, which is net of cash acquired of $10.0 million. We funded this acquisition with cash on hand as well as borrowings against our revolving line of credit. ICS Solutions, located in Amsterdam, The Netherlands and Gainesville, Georgia, is a worldwide leader in the engineering, installation and servicing of high-capacity food preservation equipment. The acquisition was strategically important as ICS Solutions’ hydromatic continuous sterilizer is complementary to our product portfolio of fillers, seamers and in-container sterilization technologies. With this acquisition, we will leverage our worldwide presence and provide a complete range of high-capacity, in-container sterilization solutions to our customers in the growing global beverage, dairy and canning industries. In addition, this acquisition allows us to improve operational effectiveness as well as enhance sales and service support for our customers through the combination of the businesses.

 

This 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 acquired has been recorded as goodwill. The factors that contributed to the recognition of goodwill primarily relate to expected synergistic benefits from the expansion of our in-container product portfolio. Approximately $1.1 million of the goodwill is expected to be deductible for tax purposes. Acquisition-related costs were recognized in other expense as incurred and totaled $0.9 million for the year ended December 31, 2014.

 

 
7

 

 

The following table summarizes the fair values recorded for the assets acquired and liabilities assumed for ICS:

 

(In millions)

       

Assets:

       

Cash

  $ 10.0  

Accounts receivable

    2.3  

Inventories

    0.4  

Property, plant and equipment and other assets

    0.1  

Intangible assets:

       

Customer relationships

    15.7  

Other intangible assets

    8.4  

Total assets

  $ 36.9  
         

Liabilities:

       

Accounts payable

    1.3  

Deferred revenue

    2.3  

Other liabilities

    2.4  

Deferred taxes

    4.1  

Total liabilities

    10.1  
         

Total purchase price

  $ 45.7  
         

Goodwill

  $ 18.9  

 

The customer relationship and other intangible assets will be amortized over a weighted-average useful life of approximately 12 years.

 

Formcook Acquisition

 

During the first quarter of 2014, John Bean Technologies AB (JBT AB), our wholly-owned subsidiary, acquired certain assets and liabilities of Formcook AB, a regional leader in designing, manufacturing and servicing custom-built industrial cooking and forming technologies for the food processing industry. This transaction was accounted for as a business combination. The purchase price was less than $2 million. While the acquisition was not material to our 2014 results, it is strategically important to our efforts to strengthen our protein processing portfolio.

 

The pro forma impact of these acquisitions is not material individually or in the aggregate and as such, is not presented.

 

Note 3. Inventories

 

Inventories consisted of the following:

 

(In millions)

 

June 30, 2015

   

December 31, 2014

 

Raw materials

  $ 57.2     $ 53.7  

Work in process

    48.6       45.3  

Finished goods

    83.6       79.2  

Gross inventories before LIFO reserves and valuation adjustments

    189.4       178.2  

LIFO reserves and valuation adjustments

    (67.7 )     (66.4 )

Net inventories

  $ 121.7     $ 111.8  

 

 
8

 

 

Note 4. DEBT

 

On February 10, 2015, we entered into a new five-year $450 million revolving credit facility, with Wells Fargo Securities, LLC as lead arranger, and repaid our existing revolving credit facility. This credit facility permits borrowings in the U.S. and in The Netherlands. Borrowings bear interest, at our option, at one month U.S. LIBOR subject to a floor rate of zero or an alternative base rate, which is the greater of Wells Fargo’s Prime Rate, the Federal Funds Rate plus 50 basis points, and LIBOR plus 1%, plus, in each case, a margin dependent on our leverage ratio. We must also pay an annual commitment fee of 15.0 to 30.0 basis points dependent on our leverage ratio. The credit agreement evidencing the facility contains customary representations, warranties, and covenants, including a maximum interest coverage ratio and maximum leverage ratio, as well as certain events of default. As of June 30, 2015 we had $76.8 million drawn on the credit facility at a weighted-average interest rate of 1.353%.

 

 

Note 5. Pension and Other Postretirement Benefits

 

Components of net periodic benefit cost were as follows:

 

   

Pension Benefits

   

Other Postretirement Benefits

 
   

Three Months Ended

   

Six Months Ended

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

   

June 30,

   

June 30,

 

(In millions)

 

2015

   

2014

   

2015

   

2014

   

2015

   

2014

   

2015

   

2014

 

Service cost

  $ 0.4     $ 0.5     $ 0.8     $ 0.9     $ -     $ -     $ -     $ -  

Interest cost

    3.4       3.7       6.9       7.4       0.1       0.1       0.2       0.2  

Expected return on plan assets

    (4.8 )     (5.0 )     (9.6 )     (9.9 )     -       -       -       -  

Amortization of prior service (credit) cost

    -       0.1       -       0.1       -       -       -       -  

Amortization of net actuarial losses

    1.2       0.6       2.3       1.3       (0.6 )     -       (0.7 )     -  

Settlements

    -       -       0.3       0.2       -       -       -       -  

Net periodic cost

  $ 0.2     $ (0.1 )   $ 0.7     $ -     $ (0.5 )   $ 0.1     $ (0.5 )   $ 0.2  

 

We expect to contribute $15 million to our pension and other postretirement benefit plans in 2015. We contributed $5 million to our U.S. qualified pension plan during the six months ended June 30, 2015.

 

 

Note 6. 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 JBT, AOCI is primarily 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, 2015 by component are shown in the following table:

 

   

Pension and Other Postretirement Benefits

   

Derivatives Designated as Hedges

   

Foreign Currency Translation

   

Total

 

(In millions)

                               

Beginning balance, March 31, 2015

  $ (95.5 )   $ (0.4 )   $ (37.0 )   $ (132.9 )

Other comprehensive income before reclassification

    0.5       0.4       6.3       7.2  

Amounts reclassified from accumulated other comprehensive income

    0.2       -       -       0.2  

Ending balance, June 30, 2015

  $ (94.8 )   $ -     $ (30.7 )   $ (125.5 )

 

 

Reclassification adjustments from AOCI into earnings for pension and other postretirement benefit plans for the three months ended June 30, 2015, were $0.1 million in selling, general and administrative expense net of ($0.1) million in benefit from income taxes.

 

 
9

 

 

Changes in the AOCI balances for the six months ended June 30, 2015 by component are shown in the following table:

 

   

Pension and Other Postretirement Benefits

   

Derivatives Designated as Hedges

   

Foreign Currency Translation

   

Total

 

(In millions)

                               

Beginning balance, December 31, 2014

  $ (96.4 )   $ -     $ (20.7 )   $ (117.1 )

Other comprehensive income before reclassification

    0.5       -       (10.0 )     (9.5 )

Amounts reclassified from accumulated other comprehensive income

    1.1       -       -       1.1  

Ending balance, June 30, 2015

  $ (94.8 )   $ -     $ (30.7 )   $ (125.5 )

 

Reclassification adjustments from AOCI into earnings for pension and other postretirement benefit plans for the six months ended June 30, 2015, were $1.4 million in selling, general and administrative expense net of $0.3 million in provision for income taxes.

 

Note 7. stock-based compensation

 

On March 13, 2015, the Company granted 192,589 restricted stock units with a total fair value of $6.7 million to certain employees under an existing stock-based compensation plan. The units will vest three years from the date of grant, in March 2018, and are expected to be amortized over the vesting period. The Company recognizes compensation expense based on estimated grant date fair values for all share-based awards issued to employees and directors. The total compensation expense was $1.9 million and $3.3 million for the three and six months ended June 30, 2015, respectively. The total compensation expense was $2.0 million and $3.7 million for the three and six months ended June 30, 2014, respectively.

 

Note 8. 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 our basic and diluted shares outstanding:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions, except per share data)

 

2015

   

2014

   

2015

   

2014

 

Basic earnings per share:

                               

Income from continuing operations

  $ 14.4     $ 11.4     $ 22.4     $ 6.7  

Weighted average number of shares outstanding

    29.5       29.5       29.5       29.5  

Basic earnings per share from continuing operations

  $ 0.49     $ 0.39     $ 0.76     $ 0.23  

Diluted earnings per share:

                               

Income from continuing operations

  $ 14.4     $ 11.4     $ 22.4     $ 6.7  

Weighted average number of shares outstanding

    29.5       29.5       29.5       29.5  

Effect of dilutive securities:

                               

Restricted stock

    0.3       0.3       0.3       0.3  

Total shares and dilutive securities

    29.8       29.8       29.8       29.8  

Diluted earnings per share from continuing operations

  $ 0.48     $ 0.38     $ 0.75     $ 0.23  

 

 

Note 9. Derivative Financial Instruments and Risk Management

 

Derivative Financial Instruments

 

All derivatives are recorded as other assets or liabilities in the condensed consolidated balance sheets at their respective fair values. For derivatives designated as cash flow hedges, the effective portion of the unrealized gain or loss related to the derivatives are recorded in other comprehensive income (loss) until the transaction affects earnings. We assess both at inception of the hedge and on an ongoing basis, whether the derivative in the hedging transaction has been, and will continue to be, highly effective in offsetting changes in cash flows of the hedged item. The impact of any ineffectiveness is recognized in the condensed consolidated statements of income. Changes in the fair value of derivatives that do not meet the criteria for designation as a hedge are recognized in the condensed consolidated statements of income. 

 

 
10

 

 

Foreign Exchange: The Company manufactures and sells products in a number of countries throughout the world and, as a result, are exposed to movements in foreign currency exchange rates. Our major foreign currency exposures involve the markets in Western Europe, South America and Asia. Some of our sales and purchase contracts contain embedded derivatives due to the nature of doing business in certain jurisdictions, which we take into consideration as part of our risk management policy. The purpose of our 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. We primarily utilize forward foreign exchange contracts with maturities of less than 2 years in managing this foreign exchange rate risk. We have not designated these forward foreign exchange contracts, which have a notional value at June 30, 2015 of $288.5 million, as hedges and therefore do not apply hedge accounting.

 

The following table presents the fair value of foreign currency derivatives included within the condensed consolidated balance sheets:

 

   

As of June 30, 2015

   

As of December 31, 2014

 

(In millions)

 

Derivative Assets

   

Derivative Liabilities

   

Derivative Assets

   

Derivative Liabilities

 

Other current assets / liabilities

  $ 4.5     $ 2.7     $ 6.9     $ 3.9  

Other assets / liabilities

    2.4       -       2.2       -  

Total

  $ 6.9     $ 2.7     $ 9.1     $ 3.9  

 

A master netting arrangement allows counterparties to net settle amounts owed to each other as a result of separate offsetting derivative transactions. We enter into master netting arrangements with our counterparties when possible to mitigate credit risk in derivative transactions by permitting us to net settle for transactions with the same counterparty. However, we do not net settle with such counterparties. As a result, we present derivatives at their gross fair values in the consolidated balance sheets.

 

As of June 30, 2015 and December 31, 2014, information related to these offsetting arrangements was as follows:

 

(in millions)

 

As of June 30, 2015

 

Offsetting of Assets

 

Gross Amounts of Recognized Assets

   

Gross Amounts Offset in the Consolidated Balance Sheets

   

Net Presented in the Consolidated Balance Sheets

   

Amount Subject to Master Netting Agreement

   

Net Amount

 

Derivatives

  $ 6.9     $ -     $ 6.9     $ (2.5 )   $ 4.4  

 

   

As of June 30, 2015

 

Offsetting of Liabilities

 

Gross Amounts of Recognized Liabilities

   

Gross Amounts Offset in the Consolidated Balance Sheets

   

Net Presented in the Consolidated Balance Sheets

   

Amount Subject to Master Netting Agreement

   

Net Amount

 

Derivatives

  $ 2.7     $ -     $ 2.7     $ (2.5 )   $ 0.2  

 

(in millions)

 

As of December 31, 2014

 

Offsetting of Assets

 

Gross Amounts of Recognized Assets

   

Gross Amounts Offset in the Consolidated Balance Sheets

   

Net Presented in the Consolidated Balance Sheets

   

Amount Subject to Master Netting Agreement

   

Net Amount

 

Derivatives

  $ 9.1     $ -     $ 9.1     $ (3.8 )   $ 5.3  

 

   

As of December 31, 2014

 

Offsetting of Liabilities

 

Gross Amounts of Recognized Liabilities

   

Gross Amounts Offset in the Consolidated Balance Sheets

   

Net Presented in the Consolidated Balance Sheets

   

Amount Subject to Master Netting Agreement

   

Net Amount

 

Derivatives

  $ 3.9     $ -     $ 3.9     $ (3.8 )   $ 0.1  

 

 

 
11

 

 

 

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 consolidated statements of income:

 

Derivatives not designated as hedging instruments

 

Location of Gain (Loss) Recognized in Income on Derivatives

 

Amount of Gain (Loss) Recognized in Income on Derivatives

 
       

Three Months Ended

   

Six Months Ended

 
       

June 30,

   

June 30,

 

(In millions)

     

2015

   

2014

   

2015

   

2014

 

Foreign exchange contracts

 

Revenue

  $ 0.2     $ (1.2 )   $ 0.3     $ (1.5 )

Foreign exchange contracts

 

Cost of sales

    0.4       0.4       (0.5 )     0.8  

Foreign exchange contracts

 

Other income, net

    -       0.1       0.1       0.1  

Total

    0.6       (0.7 )     (0.1 )     (0.6 )

Remeasurement of assets and liabilities in foreign currencies

    (0.5 )     0.7       (1.2 )     0.9  

Net gain (loss) on foreign currency transactions

  $ 0.1     $ -     $ (1.3 )   $ 0.3  

 

Interest Rates: On March 23, 2015 the Company entered into two forward starting interest rate swaps, designated as cash flow hedges against the cash flow variability related to the interest rate exposure on a portion of our variable rate debt. The first swap is for the period beginning August 10, 2015 through February 10, 2020 for variability in cash flow related to interest expense on $75 million of our borrowings, fixing the annual interest rate at 1.592% plus a margin dependent on our leverage ratio. The second swap is for the period from January 11, 2016 through February 10, 2020 for variability in cash flow related to interest expense on an additional $100 million of our borrowings, fixing the annual interest rate at 1.711% plus a margin dependent on our leverage ratio. At June 30, 2015, the fair value recorded in other liabilities on the condensed consolidated balance sheet is below $0.1 million. The effective portion of these derivatives designated as cash flow hedges has been reported in other comprehensive income (loss) on the condensed consolidated statements of comprehensive income (loss) and was immaterial as of June 30, 2015.

 

Ineffectiveness from the cash flow hedges, all of which are interest rate swaps, was immaterial as of June 30, 2015.

 

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 us to credit risk primarily consist of trade receivables and derivative contracts. We manage 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. Our maximum exposure to credit loss in the event of non-performance by the counterparty is limited to the amount drawn and outstanding on the financial instrument. Allowances for losses are established based on collectability assessments.

 

 

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.

 

Level 2: Observable inputs other than those included in Level 1. 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.

 

 
12

 

 

Financial assets and financial liabilities measured at fair value on a recurring basis are as follows:

 

   

As of June 30, 2015

   

As of December 31, 2014

 

(In millions)

 

Total

   

Level 1

   

Level 2

   

Level 3

   

Total

   

Level 1

   

Level 2

   

Level 3

 

Assets:

                                                               

Investments

  $ 9.1     $ 9.1     $ -     $ -     $ 10.7     $ 10.7     $ -     $ -  

Derivatives

    6.9       -       6.9       -       9.1       -       9.1       -  

Total assets

  $ 16.0     $ 9.1     $ 6.9     $ -     $ 19.8     $ 10.7     $ 9.1     $ -  

Liabilities:

                                                               

Derivatives

  $ 2.7     $ -     $ 2.7     $ -     $ 3.9     $ -     $ 3.9     $ -  

 

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 we have the ability to access. Investments are reported separately on the consolidated balance sheet. Investments include an unrealized loss of $0.2 million as of June 30, 2015 and $0.2 million as of December 31, 2014.

 

We use 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. We also perform a qualitative assessment of counterparty credit risk.

 

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 and the estimated fair values of our debt financial instruments are summarized on the table below:

 

   

As of June 30, 2015

   

As of December 31, 2014

 

(In millions)

 

Carrying Value

   

Estimated Fair Value

   

Carrying Value

   

Estimated Fair Value

 

Senior unsecured notes due July 31, 2015

  $ 75.0     $ 75.4     $ 75.0     $ 77.6  

Five-year revolving credit facility, expires February 10, 2020

    76.8       76.8       94.3       94.3  

Brazilian loan due April 15, 2016

    1.1       1.0       2.0       1.8  

Brazilian loan due October 16, 2017

    3.7       3.3       4.3       3.7  

Foreign credit facilities

    0.9       0.9       2.3       2.3  

Other

    -       -       0.1       0.1  

 

There is no active or observable market for our fixed rate borrowings, which include our senior unsecured notes and our Brazilian loans. Therefore, the estimated fair value of the notes and the Brazilian loans are based on discounted cash flows using current interest rates available for debt with similar terms and remaining maturities. The estimates of the all-in interest rate for discounting the notes and the loans are based on a broker quote for notes and loans with similar terms. We do not have a rate adjustment for risk profile changes, covenant issues or credit rating changes, therefore the broker quote is deemed to be the closest approximation of current market rates. The carrying values of the remaining borrowings approximate their fair values due to their variable interest rates.

 

 

Note 11. Commitments and Contingencies

 

In the normal course of our business, we are at times subject to pending and threatened legal actions, some for which the relief or damages sought may be substantial. Although we are 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 results of operations or financial position of our Company. However, it is possible that the ultimate resolution of such matters, if unfavorable, may be material to the 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.

 

 
13

 

 

We are currently the subject of an audit being conducted by the State of Delaware to determine whether the Company has complied with Delaware unclaimed property (escheat) laws. This audit is being conducted by an outside firm on behalf of the State of Delaware and covers the years from 1986 through the present. In addition to seeking the turnover of unclaimed property subject to escheat laws, the State of Delaware may seek interest, penalties, and other relief. An estimate of a possible loss from this audit cannot be made at this time.

 

Guarantees and Product Warranties

 

In the ordinary course of business with customers, vendors and others, we issue standby letters of credit, performance bonds, surety bonds and other guarantees. These financial instruments, which totaled approximately $132.4 million at June 30, 2015, represent guarantees of our future performance. We also have provided approximately $8.4 million of bank guarantees and letters of credit to secure a portion of our existing financial obligations. The majority of these financial instruments expire within two years; we expect to replace them through the issuance of new or the extension of existing letters of credit and surety bonds.

 

In some instances, we guarantee our customers’ financing arrangements. We are responsible for payment of any unpaid amounts but will receive indemnification from third parties for between sixty and ninety-five percent of the contract values. In addition, we generally retain recourse to the equipment sold. As of June 30, 2015, the gross value of such arrangements was $10.7 million, of which our net exposure under such guarantees is $1.6 million.

 

We provide warranties of various lengths and terms to certain of our customers based on standard terms and conditions and negotiated agreements. We provide for the estimated cost of warranties at the time revenue is recognized for products where reliable, historical experience of warranty claims and costs exists. We also provide a warranty liability when additional specific obligations are identified. The warranty obligation reflected in other current liabilities in the consolidated balance sheets 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 is as follows:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2015

   

2014

   

2015

   

2014

 

Balance at beginning of period

  $ 9.9     $ 10.0     $ 10.2     $ 10.1  

Expense for new warranties

    2.6       2.0       4.9       4.2  

Adjustments to existing accruals

    (0.3 )     (0.4 )     (0.2 )     (0.6 )

Claims paid

    (2.3 )     (1.9 )     (4.7 )     (4.0 )

Translation

    0.1       (0.1 )     (0.2 )     (0.1 )

Balance at end of period

  $ 10.0     $ 9.6     $ 10.0     $ 9.6  

 

 
14

 

 

 

Note 12. Business Segment Information

 

Segment operating profit is defined as total segment revenue less segment operating expenses. Business segment information was as follows:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2015

   

2014

   

2015

   

2014

 

Revenue

                               

JBT FoodTech

  $ 163.9     $ 173.5     $ 303.1     $ 309.0  

JBT AeroTech

    90.8       74.1       177.0       136.8  

Intercompany eliminations

    (0.1 )     -       (0.5 )     (0.2 )

Total revenue

  $ 254.6     $ 247.6     $ 479.6     $ 445.6  

Income before income taxes

                               

Segment operating profit:

                               

JBT FoodTech

  $ 22.5     $ 23.1     $ 35.6     $ 34.9  

JBT AeroTech

    8.3       5.3       16.7       7.6  

Total segment operating profit

    30.8       28.4       52.3       42.5  

Corporate items:

                               

Corporate expense (1)

    (7.6 )     (8.9 )     (15.4 )     (18.0 )

Restructuring expense (2)

    -       (1.0 )     -       (11.2 )

Operating income

    23.2       18.5       36.9       13.3  
                                 

Net interest expense

    (2.0 )     (1.5 )     (3.8 )     (2.8 )

Income from continuing operations before income taxes

  $ 21.2     $ 17.0     $ 33.1     $ 10.5  

                                        

 

(1)

Corporate expense generally includes corporate staff costs, stock-based compensation, pension and other postretirement benefit expenses not related to service, 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 13.

 

 

NOTE 13. RESTRUCTURING

 

Restructuring costs primarily consist of employee separation benefits under our 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.

 

During the fourth quarter of 2013, we implemented a restructuring plan that included management changes both in the U.S. and in non-U.S. subsidiaries. We incurred severance costs of $1.6 million in connection with this plan in the fourth quarter of 2013. We expect to complete the plan in 2015.

 

In the first quarter of 2014, we implemented a plan to optimize the overall JBT cost structure on a global basis. The initiatives under this plan include streamlining operations, consolidating certain facilities and enhancing the Company’s general and administrative infrastructure. Remaining payments required under this plan are expected to be paid during 2015 and 2016.

 

Additional information regarding the restructuring activities is presented in the tables below: 

 

(In millions)

                               
   

Charges incurred during the three months ended June 30,

   

Charges incurred during the six months ended June 30,

 
   

2015

   

2014

   

2015

   

2014

 

Severance and related expense

  $ -     $ 0.1     $ -     $ 9.4  

Asset write-offs

    -       -       -       0.5  

Other

    -       0.9       -       1.3  
    $ -     $ 1.0     $ -     $ 11.2  

 

 
15

 

 

While restructuring charges are excluded from our calculation of segment operating profit, the table below presents the restructuring charges associated with each segment and with corporate activities:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2015

   

2014

   

2015

   

2014

 

JBT FoodTech

  $ -     $ 0.9     $ -     $ 9.5  

JBT AeroTech

    -       -       -       1.1  

Corporate

    -       0.1       -       0.6  
    $ -     $ 1.0     $ -     $ 11.2  

 

Liability balances for restructuring activities are included in other current liabilities in the accompanying condensed consolidated balance sheets. The table below details the activities in 2015:

 

   

Balance as of

   

Charged to

   

Payments Made

   

Foreign Exchange

   

Balance as of

 

(In millions)

 

December 31, 2014

   

Earnings

   

/Charges Applied

   

Translation

   

June 30, 2015

 
                                         

Severance and related expense

  $ 7.6     $ -     $ (2.7 )   $ (0.1 )   $ 4.8  

 

 

NOTE 14. SUBSEQUENT EVENT

 

On July 17, 2015, the Company signed a definitive agreement to acquire the shares of Stork Food & Dairy Systems, B.V. (“SFDS”), located in Amsterdam, The Netherlands. SFDS develops, produces and supplies integrated aseptic processing /sterilization and filling systems to the beverage and food processing industries. This acquisition will enable us to add complementary aseptic and thermal processing and filling technologies to JBT’s liquid foods product portfolio, and will significantly strengthen our ability to provide complete solutions to our customers in the global liquid foods industry.

 

The agreed to purchase price is €47 million (approximately $53 million) before customary post-closing adjustments. We expect to complete the purchase during the third quarter.

 

 
16

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Cautionary Note Regarding Forward-Looking Statements

 

This Form 10-Q, our Annual Report on Form 10-K and other materials filed or to be filed by us with the Securities and Exchange Commission, as well as information in oral statements or other written statements made or to be made by us, contain statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are forward-looking statements. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “foresees” or the negative version of those words or other comparable words and phrases. Any forward-looking statements contained in this Form 10-Q are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. These forward-looking statements include, among others, statements relating to our restructuring and optimization plans, our acquisitions, our covenant compliance and our outlook.

 

We believe that the factors that could cause our actual results to differ materially from expectations include but are not limited to the factors we described in our Form 10-K under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If one or more of those or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Consequently, actual events and results may vary significantly from those included in or contemplated or implied by our forward-looking statements. The forward-looking statements included in this Form 10-Q are made only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement made by us or on our behalf, whether as a result of new information, future developments, subsequent events or changes in circumstances or otherwise.

 

Executive Overview

 

We are a global technology solutions provider for the food processing and air transportation industries. We design, manufacture, test and service technologically sophisticated systems and products for customers throughout our JBT FoodTech and JBT AeroTech segments.

 

In 2014, we instituted management changes and developed our Next Level strategy to capitalize on the leadership position of our businesses and accelerate growth and profitability. The Next Level strategy is based on a three-pronged plan to “fix”, “strengthen”, and “grow” JBT.

 

In the “fix” category, we embarked on efforts to streamline our organization. We incurred restructuring charges in 2014 to improve efficiency and right-size our business. We completed our corporate office and almost all of our U.S. restructuring in 2014. Our European restructuring is well underway, and we expect it to be complete in 2016.

 

To strengthen the business, we introduced the JBT Excellence Model (or JEM). JEM includes value-based pricing, which has been rolled out across all major businesses. JEM also includes implementation of Lean initiatives or what we call “Relentless Continuous Improvement” (RCI). This is an integrated focus on safety, quality, delivery, and cost that establishes a sustainable competitive advantage. We have introduced RCI via extensive leadership training and have implemented it at many JBT production facilities.

 

There are several specific components to our strategy to enhance growth. We are investing in the profitable aftermarket business, building a dedicated sales and service network that will capitalize on our global installed base of equipment. We also are capitalizing on growth opportunities in emerging markets through locally-tailored products. We are establishing a robust, direct presence in Asia, which we believe is critical to winning business from local producers. In addition to our ongoing new product development across our businesses, acquisitions are an integral part of JBT’s growth strategy. In 2014, we completed three acquisitions. In July 2015, we signed a definitive agreement for an acquisition that is expected to close in the third quarter. These acquisitions reflect our strategic focus on companies that complement our protein processing and liquid foods portfolios.

 

As we evaluate our operating results, we consider our key performance indicators of segment revenue, segment operating profit, EBITDA (earnings before interest, taxes, depreciation and amortization), and the level of inbound orders and order backlog.

 

 
17

 

 

 

Non-GAAP Financial Measures

 

The results for the three and six months ended June 30, 2015 and 2014 include several items that affect the comparability of our results.

 

These include significant expenses that are not indicative of our ongoing operations as detailed in the table below:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2015

   

2014

   

2015

   

2014

 
                                 

Income from continuing operations as reported

  $ 14.4     $ 11.4     $ 22.4     $ 6.7  
                                 

Non-GAAP adjustments

                               

Restructuring expense

    -       1.0       -       11.2  

Management succession costs

    -       1.1       -       2.6  

Strategy and pricing consulting

    -       1.0       -       1.9  
                                 

Impact on tax provision from Non-GAAP adjustments

    -       (1.1 )     -       (4.8 )

Adjusted income from continuing operations

  $ 14.4     $ 13.4     $ 22.4     $ 17.6  
                                 

(In millions, except per share data)

                               
                                 

Income from continuing operations as reported

    14.4       11.4       22.4       6.7  

Total shares and dilutive securities

    29.8       29.8       29.8       29.8  

Diluted earnings per share from continuing operations

  $ 0.48     $ 0.38     $ 0.75     $ 0.23  
                                 

Adjusted income from continuing operations

    14.4       13.4       22.4       17.6  

Total shares and dilutive securities

    29.8       29.8       29.8       29.8  

Adjusted diluted earnings per share from continuing operations

  $ 0.48     $ 0.45     $ 0.75     $ 0.59  

 

The above table contains non-GAAP financial measures, including adjusted income from continuing operations and adjusted diluted earnings per share from continuing operations. Adjusted income from continuing operations and adjusted diluted earnings per share from continuing operations are intended to provide an indication of our underlying ongoing operating results and to enhance investors’ overall understanding of our financial performance by eliminating the effects of certain items that are not comparable from one period to the next. In addition, this information is used as a basis for evaluating Company performance and for the planning and forecasting of future periods. This information is not intended to nor should it be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP.

 

The tables below show a calculation of EBITDA and adjusted EBITDA by segment and as consolidated for JBT.

 

For the three months ended June 30, 2015:

 

(In millions)

 

Operating income

   

Depreciation and Amortization

   

EBITDA

   

Adjustments

   

Adjusted EBITDA

 

JBT FoodTech

  $ 22.5     $ 5.9     $ 28.4     $ -     $ 28.4  

JBT AeroTech

    8.3       0.5       8.8       -       8.8  

Corporate expense

    (7.6 )     0.4       (7.2 )     -       (7.2 )

Restructuring expense

    -       -       -       -       -  

Total

  $ 23.2     $ 6.8     $ 30.0     $ -     $ 30.0  

 

 
18

 

 

For the three months ended June 30, 2014:

 

(In millions)

 

Operating income

   

Depreciation and Amortization

   

EBITDA

   

Adjustments

   

Adjusted EBITDA

 

JBT FoodTech

  $ 23.1     $ 5.2     $ 28.3     $ -     $ 28.3  

JBT AeroTech

    5.3       0.4       5.7       -       5.7  

Corporate expense

    (8.9 )     0.4       (8.5 )     2.1       (6.4 )

Restructuring expense

    (1.0 )     -       (1.0 )     1.0       -  

Total

  $ 18.5