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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2021
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)
Delaware91-1650317
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization)
Identification No.)
70 West Madison Street,Suite 4400
Chicago,Illinois60602
(Address of principal executive offices)(Zip code)
(312) 861-5900
(Registrant’s telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareJBTNew York Stock Exchange

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 every Interactive Data File required to be submitted 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 such files).     Yes     No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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.
ClassOutstanding at April 26, 2021
Common Stock, par value $0.01 per share31,750,335
1


PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JOHN BEAN TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended March 31,
(In millions, except per share data)20212020
Revenue:
Product revenue$360.7 $400.1 
Service revenue57.1 57.6 
Total revenue417.8 457.7 
Operating expenses:
Cost of products245.1 273.2 
Cost of services39.5 41.5 
Selling, general and administrative expense94.4 97.3 
Restructuring expense1.0 2.0 
Operating income 37.8 43.7 
Pension expense, other than service cost 1.0 
Interest expense, net2.1 4.8 
Income from continuing operations before income taxes35.7 37.9 
Income tax provision8.7 8.9 
Income from continuing operations27.0 29.0 
Net income $27.0 $29.0 
Basic earnings per share:
Income from continuing operations$0.84 $0.91 
Net income $0.84 $0.91 
Diluted earnings per share:
Income from continuing operations$0.84 $0.90 
Net income $0.84 $0.90 

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.  
2


JOHN BEAN TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended March 31,
(In millions)20212020
Net income$27.0 $29.0 
Other comprehensive income (loss), net of income taxes
Foreign currency translation adjustments4.5 (25.2)
Pension and other postretirement benefits adjustments1.7 1.5 
Derivatives designated as hedges3.2 (2.4)
Other comprehensive income (loss)9.4 (26.1)
Comprehensive income$36.4 $2.9 

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.  
3


JOHN BEAN TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except per share data and number of shares)March 31, 2021December 31, 2020
Assets:
Current Assets:
Cash and cash equivalents$57.5 $47.5 
Trade receivables, net of allowances204.6 236.1 
Contract assets76.9 68.3 
Inventories195.7 197.3 
Other current assets62.7 66.9 
Total current assets597.4 616.1 
Property, plant and equipment, net of accumulated depreciation of $332.8 and $334.8 respectively
263.3 268.0 
Goodwill548.0 543.9 
Intangible assets, net298.6 299.1 
Other assets87.0 78.8 
Total Assets$1,794.3 $1,805.9 
Liabilities and Stockholders' Equity:
Current Liabilities:
Short-term debt$0.5 $2.4 
Accounts payable, trade and other150.0 140.7 
Advance and progress payments145.9 137.5 
Other current liabilities173.0 176.9 
Total current liabilities469.4 457.5 
Long-term debt469.3 522.5 
Accrued pension and other postretirement benefits, less current portion89.9 94.1 
Other liabilities93.6 94.7 
Commitments and contingencies (Note 12)
Stockholders' Equity:
Preferred stock, $0.01 par value; 20,000,000 shares authorized; no shares issued in 2021 or 2020
  
Common stock, $0.01 par value; 120,000,000 shares authorized; March 31, 2021: 31,741,607 issued and 31,730,206 outstanding and December 31, 2020: 31,741,607 issued and 31,729,736 outstanding
0.3 0.3 
Common stock held in treasury, at cost March 31, 2021: 11,401 shares and December 31, 2020: 11,871 shares
(0.9)(1.0)
Additional paid-in capital231.6 229.9 
Retained earnings651.6 627.8 
Accumulated other comprehensive loss(210.5)(219.9)
Total stockholders' equity672.1 637.1 
Total Liabilities and Stockholders' Equity$1,794.3 $1,805.9 

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
4


JOHN BEAN TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
(In millions)20212020
Cash flows from operating activities:
Net income $27.0 $29.0 
Adjustments to reconcile income from continuing operations to cash provided by continuing operating activities:
Depreciation and amortization18.3 17.5 
Stock-based compensation1.8 2.5 
Other1.0 1.9 
Changes in operating assets and liabilities:
Trade receivables, net and contract assets20.1 14.7 
Inventories(0.9)(2.8)
Accounts payable, trade and other11.1 (36.3)
Advance and progress payments11.3 (0.8)
Accrued pension and other postretirement benefits, net(0.2)(0.2)
Other assets and liabilities, net(3.8)(11.7)
Cash provided by continuing operating activities85.7 13.8 
Cash provided by operating activities85.7 13.8 
Cash flows from investing activities:
Acquisitions, net of cash acquired(15.9) 
Capital expenditures(8.9)(9.2)
Proceeds from disposal of assets0.6 0.8 
Cash required by investing activities(24.2)(8.4)
Cash flows from financing activities:
Net payments on short-term debt(1.9)(0.6)
Net (payments) proceeds from domestic credit facilities(44.9)38.1 
Dividends(3.2)(3.2)
Cash (required) provided by financing activities(50.0)34.3 
Effect of foreign exchange rate changes on cash and cash equivalents(1.5)(3.8)
Increase in cash and cash equivalents10.0 35.9 
Cash and cash equivalents, beginning of period47.5 39.5 
Cash and cash equivalents, end of period$57.5 $75.4 

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
5



JOHN BEAN TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
For the three months ended March 31, 2021
(In millions)Common StockCommon Stock Held in TreasuryAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Equity
Balance at December 31, 2020$0.3 $(1.0)$229.9 $627.8 $(219.9)$637.1 
Net income— — — 27.0 — 27.0 
Issuance of treasury stock— 0.1 (0.1)— —  
Common stock cash dividends, $0.10 per share
— — — (3.2)— (3.2)
Foreign currency translation adjustments, net of income taxes of $1.1
— — — — 4.5 4.5 
Derivatives designated as hedges, net of income taxes of $1.1
— — — — 3.2 3.2 
Pension and other postretirement liability adjustments, net of income taxes of $0.6
— — — — 1.7 1.7 
Stock-based compensation expense— — 1.8 — — 1.8 
Balance at March 31, 2021$0.3 $(0.9)$231.6 $651.6 $(210.5)$672.1 

For the three months ended March 31, 2020
(In millions)Common StockCommon Stock Held in TreasuryAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Equity
Balance at December 31, 2019$0.3 $(12.6)$241.8 $532.8 $(192.8)$569.5 
Net income— — — 29.0 — 29.0 
Common stock cash dividends, $0.10 per share
— — — (3.2)— (3.2)
Foreign currency translation adjustments, net of income taxes of $(1.6)
— — — — (25.2)(25.2)
Derivatives designated as hedges, net of income taxes of $(0.6)
— — — — (2.4)(2.4)
Pension and other postretirement liability adjustments, net of income taxes of $0.5
— — — — 1.5 1.5 
Stock-based compensation expense— — 2.5 — — 2.5 
Adoption of ASC 326
— — — (1.0)— (1.0)
Balance at March 31, 2020$0.3 $(12.6)$244.3 $557.6 $(218.9)$570.7 

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
6


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 (the “Company,” “JBT,” “our,” “us,” or “we”) provide global technology solutions to high-value segments of the food and beverage and air transportation industries. The Company designs, produces and services sophisticated products and systems for multi-national and regional customers through JBT FoodTech and JBT AeroTech segments. The Company has manufacturing operations worldwide that are strategically located to facilitate delivery of its products and services to its 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 Annual Report on Form 10-K for the year ended December 31, 2020, which provides a more complete description 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, but does not include all annual disclosures required by accounting principles generally accepted in the United States of America.

In the opinion of management, the interim financial statements reflect all normal recurring adjustments necessary for a fair statement of the Company's 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 the interim financial statements may not be representative of those for the full year or any future period.

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 revenue and expenses during the reporting period. Actual results could differ from these estimates.
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NOTE 2. ACQUISITIONS

During 2021 and 2020 the Company acquired 100% of voting equity of one business and assets and liabilities of another business. A summary of the acquisitions made during the period is as follows:
DateType Company/Product LineLocation (Near)Segment
February 28, 2021StockAutoCoding Systems Ltd. ("ACS")Cheshire, U.K.JBT FoodTech
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.
May 29, 2020AssetMARS Food Processing Solutions, LLCDenver, North CarolinaJBT FoodTech
A provider of solutions for monitoring and managing the efficiency of poultry processing plants. The MARS acquisition allows us to offer our Protein customers proprietary solutions for monitoring and managing the efficiency of poultry processing plants.
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.
ACS(1)
(In millions)
Financial assets$3.0 
Inventories0.8 
Property, plant and equipment0.1 
Other intangible assets (2)
9.9 
Deferred taxes(1.9)
Financial liabilities(2.7)
Total identifiable net assets$9.2 
Cash consideration paid$17.0 
Cash acquired1.1 
Net consideration$15.9 
Goodwill (3)
$7.8 

(1)The purchase accounting for ACS is provisional. The valuation of certain working capital balances, property, plant and equipment, 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).

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(2)The intangible assets acquired include customer relationships of $4.4 million with 13 years of useful life, technology of $4.8 million with 7 years of useful life, and trade names of $0.7 million with 18 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, we acquired certain assets and liabilities of MARS Food Processing Solutions, LLC ("MARS") with a purchase price of $5 million. The Company expects goodwill of $3.1 million from this acquisition to be deductible for income tax purpose.
NOTE 3. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill by business segment were as follows:
(In millions)JBT FoodTechJBT AeroTechTotal
Balance as of December 31, 2020$505.7 $38.2 $543.9 
Acquisitions7.8  7.8 
Currency translation(3.7) (3.7)
Balance as of March 31, 2021$509.8 $38.2 $548.0 

Intangible assets consisted of the following:
March 31, 2021December 31, 2020
(In millions)Gross carrying amountAccumulated amortizationGross carrying amountAccumulated amortization
Customer relationship$260.1 $87.1 $256.9 $82.8 
Patents and acquired technology154.3 70.8 151.3 65.2 
Trademarks45.1 13.9 44.8 16.8 
Non-amortizing intangible assets10.7 — 10.8 — 
Other9.5 9.3 9.4 9.3 
Total intangible assets$479.7 $181.1 $473.2 $174.1 


NOTE 4. INVENTORIES

Inventories consisted of the following:
(In millions)March 31, 2021December 31, 2020
Raw materials $84.4 $87.3 
Work in process 55.8 51.4 
Finished goods 135.2 136.4 
Gross inventories before LIFO reserves and valuation adjustments 275.4 275.1 
LIFO reserves(50.8)(49.2)
Valuation adjustments(28.9)(28.6)
Net inventories $195.7 $197.3 


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NOTE 5. PENSION

Components of net periodic benefit cost were as follows:
Three Months Ended March 31,
(In millions)20212020
Service cost$0.6 $0.5 
Interest cost1.6 2.3 
Expected return on plan assets(3.9)(3.3)
Amortization of net actuarial losses2.3 2.0 
Net periodic cost$0.6 $1.5 

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. We have made no contribution to our U.S. qualified pension plan during the three months ended March 31, 2021.

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 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 March 31, 2021 and 2020 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, December 31, 2020$(161.4)$(3.8)$(54.7)$(219.9)
Other comprehensive income (loss) before reclassification 2.9 5.0 7.9 
Amounts reclassified from accumulated other comprehensive income1.7 0.3 (0.5)1.5 
Ending balance, March 31, 2021$(159.7)$(0.6)$(50.2)$(210.5)
(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 March 31, 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 $0.4 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 March 31, 2021 were $0.7 million of benefit in interest expense, net of $0.2 million income tax provision.
Pension and Other Postretirement Benefits (1)
Derivatives Designated as Hedges (1)
Foreign Currency Translation
Total (1)
(In millions)
Beginning balance, December 31, 2019$(147.0)$0.1 $(45.9)$(192.8)
Other comprehensive income (loss) before reclassification (2.4)(24.7)(27.1)
Amounts reclassified from accumulated other comprehensive income1.5  (0.5)1.0 
Ending balance, March 31, 2020$(145.5)$(2.3)$(71.1)$(218.9)
(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 March 31, 2020 were $2.0 million of charges to pension expense, other than service cost, net of $0.5 million benefit for
10


income taxes. There were no reclassification adjustments for derivatives designated as hedges for the same period. Reclassification adjustments for foreign currency translation related to net investment hedges for the three months ended March 31, 2020 were $0.7 million of benefit in interest expense, net of $0.2 million income tax provision.

NOTE 7. REVENUE RECOGNITION

Transaction price allocated to the remaining performance obligations

The majority of the Company's contracts are completed within twelve months. For performance obligations that extend beyond one year, the Company estimated that $238.1 million in revenue is expected to be recognized in the future periods related to remaining performance obligations as of March 31, 2021. The Company expects to complete these obligations and recognize 49% of the remaining transaction price in 2021, 34% of the remaining transaction price in 2022 and the remainder in 2023. The Company has elected the following optional exemptions from the remaining performance obligation disclosures:

Contracts that have an original expected duration of one year or less; and
Performance obligations related to revenue recognized over time using the as-invoiced practical expedient.

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 EndedThree Months Ended
March 31, 2021March 31, 2020
(In millions)JBT FoodTechJBT AeroTechJBT FoodTechJBT AeroTech
Type of Good or Service
Recurring (1)
$150.4 $41.5 $153.7 $45.7 
Non-recurring (1)
161.4 64.5 156.0 102.3 
Total311.8 106.0 309.7 148.0 
Geographical Region (2)
North America169.1 90.0 154.1 130.4 
Europe, Middle East and Africa83.9 11.5 99.6 10.6 
Asia Pacific41.3 3.3 35.4 5.7 
Latin America17.5 1.2 20.6 1.3 
Total311.8 106.0 309.7 148.0 
Timing of Recognition
Point in Time147.1 43.5 148.4 77.1 
Over Time164.7 62.5 161.3 70.9 
Total311.8 106.0 309.7 148.0 

(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.

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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)March 31, 2021December 31, 2020
Contract assets$76.9 $68.3 
Contract liabilities132.9 123.8 
Balances as of
March 31, 2020December 31, 2019
Contract assets80.6 74.4 
Contract liabilities90.0 92.5 

The revenue recognized during the three months ended March 31, 2021 and 2020 that was included in contract liabilities at the beginning of the period amounted to $59.0 million and $50.0 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 and fulfillment of performance obligations. There were no significant changes in the contract balances other than those described above.

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 basic and diluted shares outstanding:
Three Months Ended March 31,
(In millions, except per share data)20212020
Basic earnings per share:
Income from continuing operations$27.0 $29.0 
Weighted average number of shares outstanding32.0 31.9 
Basic earnings per share from continuing operations$0.84 $0.91 
Diluted earnings per share:
Income from continuing operations$27.0 $29.0 
Weighted average number of shares outstanding32.0 31.9 
Effect of dilutive securities:
Restricted stock0.1 0.2 
Total shares and dilutive securities32.1 32.1 
Diluted earnings per share from continuing operations$0.84 $0.90 


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NOTE 9. 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 March 31, 2021As of December 31, 2020
(In millions)TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Assets:
Investments$13.0 $13.0 $ $ $12.3 $12.3 $ $ 
Derivatives12.7  12.7  10.0  10.0  
Total assets$25.7 $13.0 $12.7 $ $22.3 $12.3 $10.0 $ 
Liabilities:
Derivatives$9.4 $ $9.4 $ $18.8 $ $18.8 $ 
Contingent consideration19.3   19.3 19.1   19.1 
Total liabilities$28.7 $ $9.4 $19.3 $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 $0.3 million as of March 31, 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 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 was included in the Balance Sheet as other current liabilities as of March 31, 2021, and the accrued amount was subsequently paid prior to the date of this filing.

The following table provides a summary of changes in fair value of contingent consideration during the three months ended March 31, 2021 and 2020:
Three months ended
March 31, 2021March 31, 2020
Beginning balance$19.1 $17.4 
Measurement adjustments recorded to earnings (0.3)
Foreign currency translation adjustment0.2 (1.0)
Ending balance$19.3 $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.

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The carrying values of the Company's long-term debt approximate their fair values due to their variable interest rates.

NOTE 10. 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 March 31, 2021 of $697.2 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 March 31, 2021As of December 31, 2020
(In millions)Derivative AssetsDerivative LiabilitiesDerivative AssetsDerivative Liabilities
Total$9.3 $8.6 $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.  

14


As of March 31, 2021 and December 31, 2020, information related to these offsetting arrangements was as follows:
(In millions)As of March 31, 2021
Offsetting of AssetsGross Amounts of Recognized AssetsGross Amounts Offset in the Consolidated Balance SheetNet Presented in the Consolidated Balance SheetAmount Subject to Master Netting AgreementNet Amount
Derivatives$12.1 $ $12.1 $(5.7)$6.4 
(In millions)As of March 31, 2021
Offsetting of LiabilitiesGross Amounts of Recognized LiabilitiesGross Amounts Offset in the Consolidated Balance SheetNet Presented in the Consolidated Balance SheetAmount Subject to Master Netting AgreementNet Amount
Derivatives$9.3 $ $9.3 $(5.7)$3.6 

(In millions)As of December 31, 2020
Offsetting of AssetsGross Amounts of Recognized AssetsGross Amounts Offset in the Consolidated Balance SheetNet Presented in the Consolidated Balance SheetAmount Subject to Master Netting AgreementNet Amount
Derivatives$10.0 $ $10.0 $(8.6)$1.4 
(In millions)As of December 31, 2020
Offsetting of LiabilitiesGross Amounts of Recognized LiabilitiesGross Amounts Offset in the Consolidated Balance SheetNet Presented in the Consolidated Balance SheetAmount Subject to Master Netting AgreementNet 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
Three Months Ended March 31,
(In millions)20212020
Foreign exchange contractsRevenue$(1.2)$(4.6)
Foreign exchange contractsCost of sales0.9 2.8 
Foreign exchange contractsSelling, general and administrative expense 0.4 
Total(0.3)(1.4)
Remeasurement of assets and liabilities in foreign currencies(0.3)2.9 
Net gain (loss) on foreign currency transactions$(0.6)$1.5 

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. We have 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 March 31, 2021, the fair value of these derivatives designated as cash flow hedges were recorded in the Balance Sheet as other liabilities of $0.9 million and as accumulated other comprehensive income, net of tax, of $0.6 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
15


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 three months ended March 31, 2021 and 2020, gains recorded in interest expense, net under the cross currency swap agreement were approximately $0.7 million.
At March 31, 2021, the fair value of these derivatives designated as net investment hedges were recorded in the Balance Sheet as other assets of $3.4 million and as accumulated other comprehensive income, net of tax, of $2.5 million.

Refer to Note 9. 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 March 31, 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 11. LEASES

The following table provides the required information regarding operating leases for which the Company is lessor.
Three Months Ended March 31,
(In millions)20212020
Fixed payment revenue$16.3 $16.3 
Variable payment revenue4.5 5.1 
Total$20.8 $21.4 

Sales-type lease revenue was $1.2 million and $1.5 million for the three months ended March 31, 2021 and March 31, 2020, respectively.

Refer to Note 15. Related Party Transactions for details of operating lease agreements with related parties.

NOTE 12. 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 $184.4 million at March 31,
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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 March 31, 2021, the gross value of such arrangements was $1.4 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 March 31,
(In millions)20212020
Balance at beginning of period$11.5 $12.0 
Expense for new warranties3.7 3.0 
Adjustments to existing accruals(0.2)0.2 
Claims paid(3.2)(3.5)
Added through acquisition 0.1 
Translation(0.2)(0.2)
Balance at end of period$11.6 $11.6 

NOTE 13. 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.

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Business segment information was as follows:
Three Months Ended March 31,
(In millions)20212020
Revenue
JBT FoodTech$311.8 $309.7 
JBT AeroTech106.0 148.0 
Total revenue417.8 457.7 
Income before income taxes
Segment operating profit:
JBT FoodTech41.5 40.7 
JBT AeroTech9.9 18.5 
Total segment operating profit51.4 59.2 
Corporate items:
Corporate expense (1)
12.6 13.5 
Restructuring expense (2)
1.0 2.0 
Operating income 37.8 43.7 
Pension expense, other than service cost 1.0 
Interest expense, net2.1 4.8 
Income from continuing operations before income taxes$35.7 $37.9 

(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 14. Restructuring for further information on restructuring charges.

NOTE 14. 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. We recognized cumulative restructuring charges of $2.4 million related to severance, net of a cumulative release of related liability of $0.2 million. We 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 $8.0 million to $10.0 million for FoodTech and approximately $6.0 million for AeroTech. We
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recognized restructuring charges of $11.4 million, net of a cumulative release of the related liability of $0.5 million, through March 31, 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 AmountThree Months EndedCumulative Amount
(In millions)Balance as of December 31, 2020March 31, 2021Balance as of March 31, 2021
2020 restructuring plan
Severance and related expense7.0 0.2 7.2 
Inventory write-off1.9  1.9 
Employee overlap costs0.3 0.4 0.7 
Retention bonus0.3 0.4 0.7 
Other0.7 0.2 0.9 
Total Restructuring charges$10.2 $1.2 $11.4 


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, 2020Charged to EarningsReleasesCash PaymentsBalance as of March 31, 2021
2020 restructuring plan
Severance and related expense$3.7 $0.2 $(0.2)$(0.7)$3.0 
Employee overlap costs 0.4  (0.4) 
Retention bonus0.1 0.4 (0.1)0.4 
Other0.2 0.2  (0.2)0.2 
Total$4.0 $1.2 $(0.2)$(1.4)$3.6 

The Company released $0.2 million of liability during the three months ended March 31, 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 15. 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 $3.5 million and $3.7 million, respectively.

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

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on 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 the expected impact of the COVID-19 pandemic on our business and our results of operations, our plans to mitigate the impact of the pandemic, our strategic plans, our restructuring plans and expected cost savings from those plans, our liquidity and our covenant compliance. The factors that could cause our actual results to differ materially from expectations include but are not limited to the following factors:
the duration of the COVID-19 pandemic and the effects of the pandemic on our ability to operate our business and facilities, on our customers, on our supply chains and on the economy generally;
fluctuations in our financial results;
unanticipated delays or acceleration in our sales cycles;
deterioration of economic conditions;
disruptions in the political, regulatory, economic and social conditions of the countries in which we conduct business;
changes to trade regulation, quotas, duties or tariffs;
risks associated with acquisitions;
effects of the U.K.’s exit from the E.U.;
fluctuations in currency exchange rates;
difficulty in implementing our business strategies;
increases in energy or raw material prices, freight costs, and lack of availability of raw materials driven by supply chain delays and inflationary pressures;
changes in food consumption patterns;
impacts of pandemic illnesses, food borne illnesses and diseases to various agricultural products;
weather conditions and natural disasters;
impact of climate change and environmental protection initiatives;
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