JBT MAREL Corp (JBTM)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

JBT Marel Corporation is a leading global food and beverage technology solutions provider to high-value segments of the food and beverage industry. JBT Marel brings together the combined strengths of JBT and Marel with the goal of transforming the future of food.

We specialize in designing, manufacturing, and servicing cutting-edge technology, systems, and software for a broad range of food and beverage end markets. We aim to create better outcomes for our diverse customers by optimizing food yield and efficiency, improving food safety and quality, and enhancing uptime and proactive maintenance, all while reducing waste and resource use across the global food supply chain.

Our strategy capitalizes on favorable trends, as well as our leadership position, in the food and beverage processing industry. This strategy is based on a five-pronged approach to deliver continued growth and margin expansion.

•Strengthening Solutions and Value Proposition. We offer a broad portfolio of solutions developed for various food and beverage end markets to meet diverse customer and sustainability needs with precision and flexibility to fuel organic growth.

•Enhancing Service Offerings and Customer Relationships. Leveraging our industry expertise, we deliver high-quality service to minimize downtime, optimize performance, and strengthen customer partnerships with responsive support and reliable parts delivery.

•Advanced Digital and Software Capabilities. We deliver greater value through cutting-edge digital tools and software to improve productivity, reduce downtime, and optimize food and beverage processing.

•Focus on Innovation. By expanding our portfolio through cutting edge innovation we enhance technology leadership and deepen customer partnerships with advanced capabilities.

•Leveraging Our Scale to Expand Margins. By utilizing our resources and great talent, we drive efficiencies, achieve synergies, and deliver margin expansion, all while creating more value for our customers.

Our approach to Environmental, Social and Corporate Governance (ESG) builds on our culture and long tradition of concern for our employees’ health, safety, and well-being; partnering with our customers to find ways to make better use of the earth’s precious resources; and giving back to the communities where we live and work. Our equipment and technologies continue to deliver quality performance while striving to minimize food waste, extend food product life, support customer sustainability objectives, and maximize efficiency in order to create shared value for our food and beverage customers. While the majority of our impact lies within the solutions offered to our customers, our commitment to environmental responsibility extends to our own operations. We strive for our own facilities to operate efficiently and safely, much like the solutions we provide to our customers. We recognize the responsibility we have to make a positive impact on our shareholders, the environment and our communities in a manner that is consistent with our fiduciary duties. We have engaged in structured education for enhancing inclusive leadership skills in our organization designed to ensure more diversity in our leadership and hiring practices.

Strategic Acquisition of Marel hf.

On January 2, 2025, the Company closed the acquisition of Marel hf., a multi-national food processing company based in Gardabaer, Iceland that manufactures equipment and provides other services for food processing in the poultry, meat, fish, and pet food industries. The purpose of the Marel Transaction was to create a leading and diversified global food and beverage technology solutions provider by bringing together two renowned companies with long histories, complementary product portfolios, highly respected brands, and cutting-edge technology to enable global customers to more efficiently access industry leading technology worldwide. Refer to Note 22. Subsequent Events of the Notes to the Consolidated Financial Statements for additional information on the Marel Transaction.

In conjunction with the combination of JBT and Marel, JBT changed its corporate name and stock ticker symbol to “JBT Marel Corporation” and “JBTM,” respectively, on January 2, 2025.

The disclosures in this "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Annual Report on Form 10-K speak to the combined company subsequent to the Marel Transaction unless otherwise noted.

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Business Conditions and Outlook

JBT’s 2024 operating performance was strong, and the year-over-year revenue and orders growth was driven by JBT’s diverse end market solutions. In 2024, equipment demand from global poultry customers increased year over year as market conditions and customer cash flow improved. Additionally, JBT experienced strong demand across its diverse end markets, including warehouse automation, fruit and vegetable, ready meals, and pharmaceuticals. JBT generated record orders in the fourth quarter of 2024 with broad strength across most end markets. JBT also achieved record margins in full year 2024 primarily driven by supply chain cost savings and continuous improvement initiatives.

Looking ahead, JBT Marel expects that the demand environment will continue to improve in 2025 driven by the Company’s holistic solutions offering, further recovery in equipment demand from global poultry customers, and resilient demand for aftermarket parts and service. JBT Marel is focused on improving margins through volume growth, continuous improvement initiatives, and synergy realization.

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Results of Continuing Operations

A discussion of JBT's results of operations for 2024 compared to 2023 is set forth below.

CONSOLIDATED RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2024 AND 2023

(1) Refer to the 'Reconciliation of Non-GAAP Measures' section below for additional information on Adjusted EBITDA from continuing operations and Adjusted EBITDA margin from continuing operations.

2024 Compared With 2023

Revenue

Total revenue in 2024 increased $51.6 million or 3.1% compared to 2023. Organic revenue grew by $59.4 million and foreign currency translation was unfavorable by $7.8 million compared to the prior year. The increase in organic revenue was primarily the result of higher pricing as well as an increase in volume for non-recurring revenue. Recurring revenue was flat year over year.

Gross Profit and Gross Profit Margin

Gross profit margin increased 130 bps to 36.5% compared to 35.2% in 2023. The increase was driven primarily by higher volume and pricing as well as savings from our 2022/2023 restructuring plan and sourcing initiatives. This was partially offset by input cost inflation and a stronger mix of non-recurring revenue compared to the prior year, which tends to have lower margins than recurring revenue.

Selling, general and administrative expense

Selling, general and administrative expense increased $97.1 million compared to the prior year, and as a percent of revenue increased 490 bps to 29.5% compared to 24.6% in 2023. This increase was primarily due to higher M&A related cost in the amount of $79.9 million incurred in connection with the Marel Transaction, higher compensation expense from the long term incentive plan as well as merit increases, and higher marketing expenses. The increase was partially offset by savings from our restructuring program.

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Pension expense, other than service cost

Pension expense, other than service cost increased $26.6 million compared to the same period in the prior year. This increase was primarily due to the settlement charge of $23.3 million recognized in the fourth quarter of 2024 as part of the partial termination of the U.S. qualified defined benefit pension plan. The remaining increase was primarily due to a lower expected return on pension assets in 2024 compared to the prior year.

Interest income

Interest income increased $10.3 million compared to 2023. This increase was due to interest income earned on cash on hand from the proceeds from the sale of the AeroTech business ("AeroTech") which was completed during the third quarter of 2023.

Interest expense

Interest expense decreased $4.9 million compared to 2023. This decrease was due to the Company having a lower average debt balance and lower weighted average interest rate, including the impacts of the interest rate swaps, during 2024 compared to 2023.

Income tax provision

The Company's tax rate from continuing operations was 11.2% for the year ended December 31, 2024 compared to 15.3% in 2023. The tax rate for the year ended December 31, 2024 was favorably impacted by discrete items totaling $10.0 million, primarily driven by a non-recurring deferred tax benefit related to an internal reorganization. The tax rate for the year ended December 31, 2023 was favorably impacted by discrete items totaling $9.5 million, primarily driven by a benefit related to the disposition of a subsidiary which generated a capital loss that was partially allocated to continuing operations.

The Organization for Economic Co-operation and Development established a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar Two), with certain aspects of Pillar Two effective January 1, 2024 and other aspects effective January 1, 2025, depending on the jurisdictions in which the Company operates. While it is uncertain whether the U.S. will enact legislation to adopt Pillar Two, certain countries in which the Company operates have enacted legislation, and other countries are in the process of introducing legislation, to implement Pillar Two. Pillar Two did not have a material impact on the Company's effective tax rate, consolidated results of operations, financial position, or cash flows for the year ended December 31, 2024.

Income from continuing operations and Adjusted EBITDA

Income from continuing operations for the year ended December 31, 2024 was $84.6 million compared to $129.3 million in 2023, representing a decrease of $44.7 million. Adjusted EBITDA was $295.0 million for the year ended December 31, 2024 compared to $273.1 million in 2023, representing an increase of $21.9 million or 8.0%. The increase in Adjusted EBITDA was primarily driven by higher gross profit, partially offset by higher selling, general and administrative expense, excluding the impacts of our depreciation, amortization, and acquisition and integration costs.

Income from discontinued operations

For the year ended December 31, 2024, we recognized income from discontinued operations, net of income taxes, of $0.8 million. For the year ended December 31, 2023, we recognized income from discontinued operations, net of income taxes, of $453.3 million, which included the gain on the sale of AeroTech of $443.7 million, net of tax, that was completed during the third quarter of 2023.

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Reconciliation of Non-GAAP Measures

We present non-GAAP (as defined below) financial measures in this annual report on Form 10-K. These non-GAAP financial measures adjust for certain amounts that are otherwise included or excluded from a measure calculated under U.S. generally accepted accounting principles ("GAAP"). By adjusting for these items, we believe we provide greater transparency into our operating results and trends, and a more meaningful comparison of our ongoing operating results, consistent with how management evaluates performance. Management uses these non-GAAP financial measures in financial and operational evaluation, planning and forecasting. We also believe that these non-GAAP measures are useful to investors as a way to evaluate and compare our operating performance against peers in the Company's industry. The adjustments generally fall within the following categories: restructuring costs, M&A related costs, pension-related costs, constant currency adjustments and other major items affecting comparability of our ongoing operating results.

The non-GAAP financial measures presented in this report may differ from similarly-titled measures used by other companies. The non-GAAP financial measures are not intended to be used as a substitute for, nor should they be considered in isolation of, financial measures prepared in accordance with U.S. GAAP.

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Additional details for each Non-GAAP financial measure follow:

•EBITDA and Adjusted EBITDA: We define EBITDA as earnings before income taxes, interest expense and depreciation and amortization. We define Adjusted EBITDA as EBITDA before restructuring, pension expense other than service cost, and M&A related costs.

•Adjusted income from continuing operations and Adjusted diluted earnings per share from continuing operations: We adjust earnings for restructuring expense, M&A related costs, which include integration costs and the amortization of inventory step-up from business combinations, advisory and transaction costs for both potential and completed M&A transactions and strategy (“M&A related costs”), amortization of debt issuance costs related to bridge financing for potential M&A transactions, and impact on tax provision from remeasurement of deferred taxes for material tax rate changes and internal reorganizations.

•Free cash flow: We define free cash flow as cash provided by continuing operating activities, less capital expenditures, plus proceeds from sale of fixed assets and pension contributions. For free cash flow purposes, we consider contributions to pension plans to be more comparable to the payment of debt, and therefore exclude these contributions from the calculation of free cash flow.

•Constant currency measures: We evaluate our results of operations on both an as reported and a constant currency basis as it provides greater transparency into our operating results and trends, and a more meaningful comparison of our ongoing operating results. The constant currency presentation excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency percentages by converting our financial results in local currency for a period using the average exchange rate for the prior period to which we are comparing.

The tables below reconcile each non-GAAP financial measure to the most comparable GAAP financial measure.

The following table presents a reconciliation of the Company's reported Income from continuing operations to Adjusted EBITDA.

(1) Costs incurred as a direct result of the restructuring program are excluded because they are not part of the ongoing operations of our underlying business.

(2) Pension expense, other than service cost is excluded as it represents all non service-related pension expense, which consists of non-cash interest cost, expected return on plan assets, amortization of actuarial gains and losses, and settlement charges.

(3) M&A related costs include integration costs, amortization of inventory step-up from business combinations, impacts of foreign currency derivatives and trades to hedge variability of exchange rates on the cash consideration paid for business combination, advisory and transaction costs for both potential and completed M&A transactions and strategy. M&A related costs are excluded as they are not part of the ongoing operations of our underlying business.

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The table below provides a reconciliation of income from continuing operations as reported to adjusted income from continuing operations and adjusted diluted earnings per share from continuing operations.

(1) Impact on tax provision was calculated using the enacted rate for the relevant jurisdiction for the years ended December 31, 2024, 2023, and 2022, respectively.

The table below provides a reconciliation of cash provided by operating activities to free cash flow:

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Restructuring

In the third quarter of 2020, the Company implemented a restructuring plan ("2020 restructuring plan") for manufacturing capacity rationalization across the Company. The Company completed the 2020 restructuring plan as of June 30, 2022 and total cost in connection with the 2020 restructuring plan was $11.0 million with $2.1 million incurred in the year 2022.

In the third quarter of 2022, the Company implemented a restructuring plan (the "2022/2023 restructuring plan") to optimize the overall cost structure for the Company on a global basis. The initiatives under this plan included streamlining operations and enhancing our general and administrative infrastructure. The Company recognized restructuring charges of $18.2 million, net of a cumulative release of the related liability of $7.7 million. The 2022/2023 restructuring plan was completed as of March 31, 2024.

The following table details the cumulative amount of annualized savings and incremental savings for the 2022/2023 restructuring plan:

For additional financial information about restructuring, refer to Note 20. Restructuring of the Notes to Consolidated Financial Statements.

Inbound Orders and Order Backlog

Inbound orders represent the estimated sales value of confirmed customer orders received during the year. JBT's inbound orders from continuing operations during the years ended December 31, 2024 and 2023 were $1,788.3 million and $1,667.5 million, respectively.

JBT's inbound orders from continuing operations increased $120.8 million for the year ended December 31, 2024 compared to 2023, which includes an unfavorable foreign currency translation impact of $8.8 million in the period resulting in an increase of $129.6 million on a constant currency basis.

Order backlog is calculated as the estimated sales value of unfilled, confirmed customer orders. JBT's order backlog from continuing operations was $720.5 million and $678.2 million as of December 31, 2024 and 2023, respectively.

JBT's order backlog from continuing operations at December 31, 2024 increased by $42.3 million compared to December 31, 2023. We expect to convert 88% of backlog at December 31, 2024 into revenue during 2025.

Seasonality

We experience seasonality in our operating results. Our revenue and operating income are generally lower in the first quarter and highest in the fourth quarter, primarily as a result of our customers' purchasing trends.

Liquidity and Capital Resources

Overview of Sources and Uses of Cash

Our primary sources of liquidity are cash flows provided by operating activities from our U.S. and foreign operations, our revolving credit facility and our cash and cash equivalents on hand. In connection with the Marel Transaction, we drew an additional $604 million from our existing revolving credit facility on December 30, 2024. On January 2, 2025, we secured takeout financing comprised of the amended and restated 5-year, $1.8 billion revolving credit facility and $900 million in the Senior Secured Term Loan B ("Term Loan B"). The take out financing resulted in the carryforward of the initial $604 million borrowing from our existing revolving credit facility and additional borrowings of $900 million drawn from the Term Loan B and $18.6 million from the amended credit facility to fund the Marel Transaction and related expenditures.

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On January 2, 2025, we closed the Marel Transaction by acquiring approximately 97.5% of Marel's issued and outstanding common shares. On of February 4, 2025, we acquired the remaining 2.5% of Marel's issued and outstanding common shares ("Squeeze out"). Upon the closing of the Marel Transaction on January 2, 2025 and for the Squeeze out on February 4, 2025, we used available cash and additional borrowings from the takeout financing to fund $1.0 billion of cash consideration paid to the Marel shareholders, $867.8 million for repayment of Marel's debt, $111.4 million for transaction related expenses, and $16.1 million for debt issuance costs.

For the year ended December 31, 2024, we had total operating cash flows from continuing operations of $232.6 million. Our liquidity as of December 31, 2024, or cash plus borrowing ability under our revolving credit facilities, was $1.4 billion. As a result of the take-out financing related to the Marel Transaction, we now have access to additional liquidity, if needed, through further borrowings on our amended revolving credit facility. Therefore, the liquidity for the combined company as of the Marel Transaction close date of January 2, 2025 was approximately $909.3 million. Take-out financing includes a leverage holiday that permits a maximum secured leverage ratio of 5.0x for the initial 12-months after the Marel Transaction close date and a total leverage ratio of 5.75x.

We expect to use the liquidity available for the combined company for the integration of JBT and Marel and our other capital allocation priorities. Based on our current capital allocation objectives for the combined company, we anticipate capital expenditures to be between $90 million and $100 million during 2025. Our level of capital expenditures varies from time to time as a result of actual and anticipated business conditions. During 2025, we also expect to incur integration costs and other synergy related costs in the range of $55 million to $65 million related to the acquisition of Marel.

Additionally, the cash flows generated by the continuing operations of the combined company are expected to be sufficient to satisfy our principal cash requirements that include our working capital needs, new product development, restructuring expenses, capital expenditures, income taxes, debt interest and repayments, dividends, and other financing arrangements.

As of December 31, 2024, we had $1.2 billion of cash and cash equivalents, $411.6 million of which was held by our foreign subsidiaries. Although certain funds are considered permanently invested in our foreign subsidiaries, we are not presently aware of any restriction on the repatriation of these funds. We maintain significant operations outside of the U.S., and many of our uses of cash for working capital, capital expenditures and business acquisitions arise in these foreign jurisdictions. If these funds were needed to fund our operations or satisfy obligations in the U.S., they could be repatriated and their repatriation into the U.S. could cause us to incur additional U.S. income tax and foreign withholding taxes. The foreign withholding taxes on these repatriations to the U.S. would potentially be partially offset by U.S. foreign tax credits.

As noted above, certain funds held outside of the U.S. are considered permanently invested in our non-U.S. subsidiaries. At times, these foreign subsidiaries have cash balances that exceed their immediate working capital or other cash needs. In these circumstances, the foreign subsidiaries may loan funds to the U.S. parent company on a temporary basis; the U.S. parent company has in the past and may in the future use the proceeds of these temporary intercompany loans to reduce outstanding borrowings under our committed credit facilities. By using available non-U.S. cash to repay our debt on a short-term basis, we can optimize our leverage ratio, which has the effect of lowering our interest costs.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures in the U.S. over five years. As a result, we experienced an adverse impact to our cash from continuing operations of $11 million in 2024 and will experience approximately a $7 million decrease in cash from continuing operations in 2025. The impact will continue over the five-year amortization period but decrease each year.

Contractual Obligations and Cash Requirements

The following is a summary of our significant contractual and other obligations at December 31, 2024:

(a)A summary of our long-term debt obligations as of December 31, 2024 can be found in Note 7, “Debt”, of the Notes to the Consolidated Financial Statements.

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(b)Amounts include contractual interest payments using the interest rates as of December 31, 2024 and include the effect of our interest rate swaps.

(c)A summary of our operating lease obligations as of December 31, 2024 can be found in Note 18, “Leases”, of the Notes to the Consolidated Financial Statements.

(d)This table does not include obligations under our pension and postretirement benefit plans, which are included in Note 9, Pension and Post-Retirement and Other Benefit Plans, of the Notes to the Consolidated Financial Statements.

We also have outstanding firm purchase orders with certain suppliers for the purchase of raw materials and services, which are not included in the table above. These purchase orders are generally short-term in nature and include a requirement that our supplier provide products or services to our specifications and require us to make a firm purchase commitment to our supplier. The costs associated with these agreements will be reflected in cost of sales on our Consolidated Statements of Income as substantially all of these commitments are associated with purchases made to fulfill our customers’ orders.

The following is a summary of other off-balance sheet arrangements at December 31, 2024:

To provide required security regarding our performance on certain contracts, we provide letters of credit, surety bonds and bank guarantees, for which we are contingently liable. In order to obtain these financial instruments, we pay fees to various financial institutions in amounts competitively determined in the marketplace. Our ability to generate revenue from certain contracts is dependent upon our ability to obtain these off-balance sheet financial instruments.

Our off-balance sheet financial instruments may be renewed, revised or released based on changes in the underlying commitment. Historically, our commercial commitments have not been drawn upon to a material extent; consequently, management believes it is not likely that there will be claims against these commitments that would result in a negative impact on our key financial ratios or our ability to obtain financing.

Cash Flows

Cash flows for each of the years ended December 31, 2024 and 2023 were as follows:

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2024 Compared with 2023

Cash provided by continuing operating activities in 2024 was $232.6 million, representing a $158.4 million increase compared to 2023. The increase was driven by higher collections of customer advanced payments, and lower payments of accounts payable as a result of improved vendor terms. These increases were partially offset by lower collections of trade receivables and higher inventory purchases during the period. Operating cash flows in the prior year were also lower due to tax payments of $133.2 million for income taxes on gain from sale of AeroTech.

Cash required by continuing investing activities during 2024 was $41.3 million, compared to cash provided of $729.3 million in 2023. The cash outflow during the period was driven primarily by spending on capital expenditures, which was lower compared to the prior year as we completed the initial development and deployment of our OmniBluTM platform in 2023. The prior year cash provided was primarily comprised of the proceeds received on the sale of the AeroTech business.

Cash provided by continuing financing activities of $561.8 million in 2024 was primarily due to net proceeds from the fourth quarter draw on our revolving credit facility, partially offset by the payment of debt issuance costs related to the amended revolving credit facility and Term Loan B secured during the fourth quarter of 2024, and the Bridge Credit Agreement entered into during the second quarter of 2024. Cash required by financing activities of $354.1 million in 2023 was primarily due to payments made on our borrowings on the revolving credit facility, which did not recur in 2024.

Financing Arrangements

As of December 31, 2024 we had $854.0 million drawn on and $439.0 million of availability under the revolving credit facility. Our ability to use this revolving credit facility is limited by the leverage ratio covenant referenced below.

Our credit agreement includes restrictive covenants that, if not met, could lead to a renegotiation of our credit lines, a requirement to repay our borrowings and/or a significant increase in our cost of financing. Restrictive covenants include a minimum interest coverage ratio, a maximum leverage ratio, as well as certain events of default. As of December 31, 2024, we were in compliance with all covenants in our credit agreement. We expect to remain in compliance with all covenants.

On January 2, 2025, we executed takeout financing consisting of an amended and restated 5-year, $1.8 billion revolving credit facility and a 7-year, $900 million senior secured term loan B. The amended credit facility will retain the same pricing grid as our existing revolving credit facility. The Term Loan B will have secured pricing of SOFR plus 225 basis points. This pricing structure will step down to SOFR plus 200 basis points once leverage is below 3.25x.

In connection with the Marel Transaction, on April 4, 2024, the Company entered into a Bridge Credit Agreement with certain financial institutions that committed to provide the Company with secured bridge financing in an aggregate principal amount of €1.9 billion. The Bridge Credit Agreement was terminated on January 2, 2025, upon the closing of the Marel Transaction and related takeout financing.

Additionally, we entered into deal-contingent forward contracts during October 2024 to hedge the impact of variability in exchange rates on the euro-denominated purchase price of the Marel Transaction. The deal-contingent forward contracts had an aggregate notional amount of EUR 731.7 million, and effectively fixed the exchange rate for a portion of the purchase price for the Marel Transaction at 1.093 EUR to USD. At December 31, 2024, we recognized a mark-to-market loss on the forward contracts of $42.4 million, resulting from a decrease in the EUR to USD exchange rate.

On May 28, 2021, we closed a private offering of $402.5 million aggregate principal amount of the Company's 0.25% Convertible Senior Notes due 2026 (the "Notes") to qualified institutional buyers, resulting in net proceeds to us of approximately $392.2 million after deducting initial purchasers’ discounts. The Notes will mature on May 15, 2026 unless earlier converted, redeemed or repurchased. Concurrently with the issuance of the Notes, we entered into the Note hedge transactions that reduce potential dilution upon conversion of the Notes and into the warrant transactions to raise additional capital to partially offset the costs of entering into the Note hedge transactions.

For additional information about our credit agreement, Notes, convertible note hedge and warrant transactions, refer to Note 7. Debt of the Notes to the Consolidated Financial Statements.

As of December 31, 2024, we have 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. 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).

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As a result, as of December 31, 2024, a significant portion of our total outstanding debt of $1,256.5 million effectively remains fixed rate debt, with the Convertible Senior Notes subject to a fixed rate of 0.25% and a portion of the revolving credit facility subject to an average fixed rate of 0.76%. Approximately $604.0 million or 48%, remained subject to floating, or market rates in addition to the premium charged for the credit spread on our revolving credit facility. To the extent interest rates increase in future periods, our earnings could be negatively impacted by higher interest expense.

On January 3, 2025, we entered into five cross-currency swaps related to the U.S. dollar denominated debt of $700 million of the Term Loan B drawn down by JBT Marel's European entity expiring in January 2032. These cross currency swap agreements have a combined notional amount of $700 million and synthetically swap interest rates from SOFR to EURIBOR and hedge the impact of variability in exchange rates on the U.S. dollar dominated debt and related interest payments, excluding credit spread, by our euro-functional entity.

Critical Accounting Estimates

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles. As such, we are required to make certain estimates, judgments and assumptions about matters that are inherently uncertain. On an ongoing basis, our management re-evaluates these estimates, judgments and assumptions for reasonableness because of the critical impact that these factors have on the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the periods presented. Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed this disclosure. We believe that the following are the critical accounting estimates used in preparing our financial statements.

Revenue Recognition

We recognize a large portion of our product revenue over time, using the "cost-to-cost" input method for contracts that provide highly customized equipment and refurbishments of customer-owned equipment for which we have a contractual, enforceable right to collect payment upon customer cancellation for performance completed to date. The input method of “cost-to-cost” to recognize revenue over time requires that we measure progress based on costs incurred to date relative to total estimated cost at completion. These cost estimates are based on assumptions and estimates to project the outcome of future events including estimated labor and material costs required to complete open projects.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements see Note 1 of the Notes to Consolidated Financial Statements.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

We are a leading global technology solutions provider to high-value segments of the food and beverage industry. We design, produce, and service sophisticated products and systems for multi-national and regional customers.

In early 2022, we announced our Elevate 2.0 strategy that capitalizes on favorable trends, as well as our leadership position, in the food and beverage processing industry. This strategy is based on a four-pronged approach to deliver continued growth and margin expansion.

•Organic Growth. Our broad application knowledge, engineering expertise, and global sales and service allow us to work alongside our customers to develop critical products and solutions across a diverse set of food & beverage end markets. JBT is benefiting from strong commercial and market trends, which create meaningful opportunities for continued new product innovation and R&D in support of our customers' needs. Additionally, our cross-selling abilities, investment opportunities in developing geographies, and aftermarket capabilities provide meaningful growth opportunities for us globally.

•Digital Transformation. We continue to invest in our digital solution, OmniBlu™, a customer-centric platform that delivers improved access to inventory and service, advanced functionality, and measurable results for customers, while also expanding JBT's recurring revenue from aftermarket parts and services.

•Margin Enhancement. We see opportunities to improve our operating margins by 200 basis points or more in the medium-term, primarily through supply chain and strategic sourcing initiatives. Key areas of focus include supply base consolidation, make versus buy decisions, value engineering and component standardization, and best cost country sourcing.

•Acquisitions. We are also continuing our strategic acquisition program focused on companies that add complementary products and technology solutions, which enable us to offer more comprehensive solutions to customers and meet our economic criteria for returns and synergies.

On August 1, 2023, we completed the sale of the AeroTech business segment ("AeroTech"). This sale was completed pursuant to the Stock and Asset Purchase Agreement, dated May 26, 2023, to sell AeroTech to Oshkosh Corporation. This divestiture supports the Company's strategy to become a pure-play food and beverage solutions provider. For additional information, refer to Note 2. Discontinued Operations of the Notes to the Consolidated Financial Statements.

We operate under the JBT Business System, which provides a level of process rigor across the Company and is designed to standardize and streamline reporting and problem resolution processes for increased visibility, efficiency, effectiveness and productivity in all business units.

Our approach to Environmental, Social and Corporate Governance (ESG) builds on our culture and long tradition of concern for our employees’ health, safety, and well-being; partnering with our customers to find ways to make better use of the earth’s precious resources; and giving back to the communities where we live and work. Our equipment and technologies continue to deliver quality performance while striving to minimize food waste, extend food product life, support customer sustainability objectives, and maximize efficiency in order to create shared value for our food and beverage customers. While the majority of our impact lies within the solutions offered to our customers, our commitment to environmental responsibility extends to our own operations. We strive for our own facilities to operate efficiently and safely, much like the solutions we provide to our customers. We recognize the responsibility we have to make a positive impact on our shareholders, the environment and our communities in a manner that is consistent with our fiduciary duties. We have engaged in structured education for enhancing inclusive leadership skills in our organization designed to ensure more diversity in our leadership and hiring practices.

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Business Conditions and Outlook

Our operational performance was strong in 2023 despite a mixed commercial environment. We experienced healthy equipment demand across diverse end markets, including beverages, warehouse automation, and pharmaceuticals and nutraceuticals. Meanwhile, this was offset by the impact of higher interest rates and market dynamics in the poultry industry which affected customers' investment. Our aftermarket parts and service model remained resilient with year-over-year growth in recurring revenue.

Our operating margins improved meaningfully compared to 2022, driven by improved price-cost realizations, restructuring program savings, and strategic sourcing initiatives.

Looking ahead, we expect the demand environment to improve in 2024 as interest rates decline, poultry market dynamics continue to improve as well as benefit from our organic growth initiatives. Additionally, we expect our margins to continue to increase as we realize benefits from our continuous improvement efforts, restructuring program savings, and strategic sourcing initiatives.

Components of Results of Operations

Revenue

We derive our revenue from sales or operating leases of equipment as well as sales of related aftermarket goods and services and software. Revenue from equipment and software licenses is considered as non-recurring, whereas revenue from aftermarket goods and services, re-build service for customer-owned equipment, operating lease of equipment, and subscription-based software applications is considered as recurring.

Cost of Sales

Cost of sales are costs that are directly related to the procurement and manufacturing of equipment and parts sold, services provided, and other direct costs incurred to fulfill contracts with customers. Costs include direct costs, such as labor and raw materials and indirect costs such as manufacturing overhead and amortization of capitalized software to be sold, and patents and acquired technology intangible assets.

Selling, General and Administrative

Selling expense primarily consists of employee-related expenses for sales, marketing and public relations employees. Selling expense also includes trade show, market research, advertising and other related external marketing expense as well as office and software related costs to support sales.

General and administrative expense consists of employee-related expenses, stock based compensation and other expenses that support finance, human resource, legal, and internal-use information technology functions at our business units and our corporate offices. General and administrative expense incurred at our corporate offices, including the impact of unusual or strategic events not representative of operations, as well as stock based compensation for all employees are considered as our corporate expenses.

Restructuring expense

Restructuring expense consists of costs from our 2022/2023 Restructuring Plan. For additional financial information about restructuring, refer to Note 20. Restructuring of the Notes to the Consolidated Financial Statements.

Pension expense, other than service costs

Pension expense, other than service costs are related to our domestic and foreign defined benefit pension and other post-employment benefit plans.

Interest income

Interest income consists of interest earned on our cash equivalents and short-term marketable securities.

Interest expense

Interest expense consists of interest expense on our outstanding debt obligations including amortization of debt discounts and offering costs.

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Results of Continuing Operations

A discussion of our results of operations for 2023 compared to 2022 is set forth below.

CONSOLIDATED RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2023 AND 2022

(1)The key measures reviewed by the CODM to evaluate our performance are most notably Adjusted EBITDA from continuing operations and Adjusted EBITDA % from continuing operations. For additional information, refer to the 'Reconciliation of Non-GAAP Measures' section below.

2023 Compared With 2022

Revenue

Total revenue in 2023 increased $74.1 million or 4.7% compared to 2022. Acquisitions provided additional revenue of $76.8 million, organic revenue grew by $4.7 million, and foreign currency translation was unfavorable by $7.4 million compared to the prior year. Growth in organic revenue was the result of higher pricing as well as an increase in volume for recurring revenue, partially offset by a decrease in volume for non-recurring revenue.

Gross Profit and Gross Profit Margin

Gross profit margin increased 190 bps to 35.2% compared to 33.3% in 2022. The increase was driven primarily by higher pricing, savings from our restructuring plan, and favorable mix of higher recurring revenue, partially offset by the lost leverage of fixed costs from lower equipment volume year over year.

Selling, general and administrative expense

Selling, general and administrative expense increased $19.9 million from prior year, and as a percent of revenue increased by 10 bps to 24.6% compared to 24.5% in 2022. The increase in Selling, general and administrative expense is the result of higher incentive compensation expense accruals and higher relative expenses from recently acquired companies, including higher amortization costs of acquired intangible assets, as well as higher costs related to the implementation of the OmniBluTM platform. The increase was partially offset by a decrease in M&A related costs.

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Interest income

Interest income increased $9.7 million compared to 2022. This increase is due to higher interest income on cash on hand from the sale proceeds of AeroTech.

Interest expense

Interest expense increased $8.0 million compared to 2022. This increase was primarily due to higher interest rates as well as a higher average debt balance to fund the acquisitions we made in the third quarter of 2022.

Income tax provision

The Company's tax rate from continuing operations was 15.3% for the year ended December 31, 2023 compared to 13.5% in 2022. The tax rate for the year ended December 31, 2023 was favorably impacted by discrete items totaling $9.5 million, primarily driven by a benefit related to the disposition of a subsidiary which generated a capital loss that was partially allocated to continuing operations. The tax rate for the year ended December 31, 2022 was favorably impacted by discrete items totaling $8.9 million, primarily driven by benefits from stock based compensation, the UK patent box regime, and Brazilian tax litigation.

Income from continuing operations and Adjusted EBITDA

Income from continuing operations for the year ended December 31, 2023 increased to $129.3 million compared to $103.8 million in 2022, representing an increase of $25.5 million. Adjusted EBITDA was $273.1 million for the year ended December 31, 2023 compared to $227.7 million in 2022, representing an increase of $45.4 million. The increase in Adjusted EBITDA was primarily driven by a higher gross profit partially offset by a higher selling, general and administrative expense, excluding the impacts of our depreciation, amortization, and acquisition, and integration costs.

Income from discontinued operations

For the years ended December 31, 2023 and 2022, we recognized income from discontinued operations, net of income taxes, of $453.3 million and $33.6 million, respectively. Discontinued operations consists of the results of operations of the AeroTech business, as well as the gain on the sale of AeroTech of $443.7 million, net of tax, that was completed during the third quarter of 2023.

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A discussion of our results of operations for 2022 compared to 2021 is set forth below.

CONSOLIDATED RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2022 AND 2021

(1)The key measures reviewed by the CODM to evaluate our performance are most notably Adjusted EBITDA from continuing operations and Adjusted EBITDA % from continuing operations. For additional information, refer to the 'Reconciliation of Non-GAAP Measures' section below.

2022 Compared With 2021

Revenue

Total revenue in 2022 increased $189.5 million or 13.5% compared to 2021. Organic revenue grew $171.8 million in the period and acquisitions provided additional revenue of $93.5 million, partially offset by unfavorable currency translation of $75.8 million compared to the prior year. The growth from organic revenue was the result of increases in sales volume for both recurring and non-recurring revenues.

Gross Profit and Gross Profit Margin

Gross profit margin decreased 110 bps to 33.3% in 2022 compared to 34.4% for the year ended December 31, 2021. The decrease was primarily due to supply chain disruptions and pressures resulting in inefficiencies that drove increases in material, freight, and labor costs as well as due to a higher mix of organic revenue growth from lower-margin non-recurring revenue compared to recurring revenue.

Selling, general and administrative expense

Selling, general and administrative expense increased $38.3 million from prior year, and as a percent of revenue increased by 60 bps to 24.5% compared to 25.1% in 2021. The increase in Selling, general and administrative expense was the result of higher relative expenses from recently acquired companies, including higher amortization costs of acquired intangible assets, as well as the costs related to the implementation of the OmniBluTM platform.

Interest expense

Interest expense increased $5.1 million compared to 2021. The increase was primarily due to higher interest rates as well as a higher average debt balance used to fund the acquisitions in the third quarter of 2022.

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Income tax provision

The Company's tax rate from continuing operations was 13.5% for the year ended December 31, 2022 compared to 22.6% for 2021. The tax rate for the year ended December 31, 2022 was favorably impacted by discrete items totaling $8.9 million, primarily driven by benefits from stock based compensation, the UK patent box regime, and Brazilian tax litigation.

Income from continuing operations and Adjusted EBITDA

Income from continuing operations for the year ended December 31, 2022 increased to $103.8 million compared to $92.5 million in 2021, representing an increase of $11.3 million. Adjusted EBITDA was $227.7 million for the year ended December 31, 2022 compared to $212.2 million in 2021, representing an increase of $15.5 million. The increase in Adjusted EBITDA was primarily driven by a higher gross profit partially offset by a higher selling, general and administrative expense, excluding the impacts of our depreciation, amortization, and acquisition, and integration costs.

Income from discontinued operations

For the years ended December 31, 2022 and 2021, we recognized income from discontinued operations, net of income taxes, of $33.6 million and $26.6 million, respectively.

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Reconciliation of Non-GAAP Measures

The key measures reviewed by the CODM for allocating resources and evaluating financial performance of our ongoing operations are most notably Adjusted EBITDA from continuing operations and Adjusted EBITDA margin from continuing operations. These non-GAAP financial measures adjust for certain amounts that are otherwise included or excluded from a measure calculated under US GAAP. By adjusting for these items, we believe we provide greater transparency into our operating results and trends, and a more meaningful comparison of our ongoing operating results, consistent with how management evaluates performance. Management uses these non-GAAP financial measures in financial and operational evaluation, planning and forecasting. We also believe that these non-GAAP measures are useful to investors as a way to evaluate and compare our operating performance against peers in the Company's industry. The adjustments generally fall within the following categories: restructuring related costs, M&A related costs, pension-related costs, constant currency adjustments and other major items affecting comparability of our ongoing operating results. The definition of Adjusted EBITDA used here may differ from that used by other companies.

The following table presents a reconciliation of the Company's reported Income from continuing operations to Adjusted EBITDA.

(1) Costs incurred as a direct result of the restructuring program are excluded because they are not part of the ongoing operations of our underlying business.

(2) Pension expense (income), other than service cost is excluded as it represents all non service-related pension expense, which consists of non-cash interest cost, expected return on plan assets and amortization of actuarial gains and losses.

(3) M&A related costs include integration costs, amortization of inventory step-up from business combinations, advisory and transaction costs for both potential and completed M&A transactions and strategy. M&A related costs are excluded as they are not part of the ongoing operations of our underlying business.

We also present certain financial information on a constant currency basis to provide greater transparency into our operating results and trends, and a more meaningful comparison of our ongoing operating results, consistent with how management evaluates performance. We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency percentages by converting our financial results in local currency for a period using the average exchange rate for the prior period to which we are comparing.

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Restructuring

In the third quarter of 2020, the Company implemented a restructuring plan ("2020 restructuring plan") for manufacturing capacity rationalization across the Company. The Company completed the 2020 restructuring plan as of June 30, 2022 and total cost in connection with the 2020 restructuring plan was $11.0 million.

In the third quarter of 2022, the Company implemented a restructuring plan (the "2022/2023 restructuring plan") to optimize our overall cost structure on a global basis. The initiatives under this plan include streamlining operations and our general and administrative infrastructure. As of December 31, 2023, the Company recognized restructuring charges of $16.8 million, net of a cumulative release of the related liability of $6.5 million. The total estimated cost, net of releases was revised in the second quarter from $8.0 million to $10.0 million to a range of $16.0 million to $18.0 million, which was originally expected to be recognized by the end of 2023. During the quarter we have refined our range to $17.0 million to $18.0 million and now expect the full amount to be recognized by the first quarter of 2024. These changes are due to additional actions being taken, as well as delays in certain actions that support our streamlining operations under this plan.

The following table details the cumulative amount of annualized savings and incremental savings for the 2022/2023 restructuring plan:

Cumulative savings for the 2022/2023 restructuring plan were revised in the second quarter from the range of $9.0 million to $12.0 million to a range of $18.0 million to $20.0 million to reflect the impact of additional actions being taken to streamline operations. Full year 2023 savings were revised in the second quarter from $5.0 million to $6.0 million to a range of $9.0 million to $10.0 million, which was below our actual savings for 2023 due to timing of the expected benefits. The remainder of the savings will be realized in 2024.

For additional financial information about restructuring, refer to Note 20. Restructuring of the Notes to Consolidated Financial Statements.

Inbound Orders and Order Backlog

Inbound orders represent the estimated sales value of confirmed customer orders received during the year. Inbound orders from continuing operations during the years ended December 31, 2023 and 2022 were $1,667.5 million and $1,587.4 million, respectively.

Inbound orders from continuing operations increased $80.1 million for the year ended December 31, 2023 compared to 2022, which includes an unfavorable foreign currency translation impact of $3.7 million in the period resulting in an increase of $83.8 million on a constant currency basis.

Order backlog is calculated as the estimated sales value of unfilled, confirmed customer orders. Order backlog from continuing operations was $678.2 million and $664.4 million as of December 31, 2023 and 2022, respectively.

Order backlog from continuing operations at December 31, 2023 increased by $13.8 million compared to December 31, 2022. We expect to convert 93% of backlog at December 31, 2023 into revenue during 2024.

Seasonality

We experience seasonality in our operating results. Our revenue and operating income are generally lower in the first quarter and highest in the fourth quarter, primarily as a result of our customers' purchasing trends.

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Liquidity and Capital Resources

Overview of Sources and Uses of Cash

Our primary sources of liquidity are cash flows provided by operating activities from our U.S. and foreign operations, borrowings from our revolving credit facility, and proceeds from the issuance of the convertible notes on May 28, 2021. In addition, we completed the sale of the AeroTech business on August 1, 2023 and received proceeds of $808.2 million. During the second half of 2023, we used the proceeds to repay $305.4 million of our debt as well as to make payments of $15.4 million for transaction costs related to the sale of AeroTech, $133.2 million for tax on the gain from the sale of AeroTech, and $9.0 million for contribution to our U.S. qualified pension plan. We expect to use the remaining net proceeds from the transaction for potential acquisitions as well as our other stated capital allocation priorities.

As of December 31, 2023, we had $483.3 million of cash and cash equivalents, $35.5 million of which was held by our foreign subsidiaries. Although certain funds are considered permanently invested in our foreign subsidiaries, we are not presently aware of any restriction on the repatriation of these funds. We maintain significant operations outside of the U.S., and many of our uses of cash for working capital, capital expenditures and business acquisitions arise in these foreign jurisdictions. If these funds were needed to fund our operations or satisfy obligations in the U.S., they could be repatriated and their repatriation into the U.S. could cause us to incur additional U.S. income tax and foreign withholding taxes. The foreign withholding taxes on these repatriations to the U.S. would potentially be partially offset by U.S. foreign tax credits.

As noted above, certain funds held outside of the U.S. are considered permanently invested in our non-U.S. subsidiaries. At times, these foreign subsidiaries have cash balances that exceed their immediate working capital or other cash needs. In these circumstances, the foreign subsidiaries may loan funds to the U.S. parent company on a temporary basis; the U.S. parent company has in the past and may in the future use the proceeds of these temporary intercompany loans to reduce outstanding borrowings under our committed credit facilities. By using available non-U.S. cash to repay our debt on a short-term basis, we can optimize our leverage ratio, which has the effect of lowering our interest costs.

For the year ended December 31, 2023, we had total operating cash flow of $74.2 million. Our liquidity as of December 31, 2023, or cash plus borrowing ability under our revolving credit facilities, was $1.2 billion.

The cash flows generated by our operations and borrowings are expected to be sufficient to satisfy our principal cash requirements that include our working capital needs, new product development, restructuring expenses, capital expenditures, income taxes, debt repayments, dividends, periodic pension contributions, and other financing arrangements.

Based on our current capital allocation objectives, during 2024 we anticipate capital expenditures to be between $50 million and $60 million. Our level of capital expenditures varies from time to time as a result of actual and anticipated business conditions.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures in the U.S. over five years. As a result, the Company experienced a decrease in cash from operations in 2023 of $16 million and will experience approximately a $10 million decrease in cash from operations in 2024. The impact will continue over the five-year amortization period but decrease each year.

Contractual Obligations and Cash Requirements

The following is a summary of our significant contractual and other obligations at December 31, 2023:

(a)A summary of our long-term debt obligations as of December 31, 2023 can be found in Note 8, “Debt”, of the Notes to the Consolidated Financial Statements.

(b)Amounts include contractual interest payments using the interest rates as of December 31, 2023 and include the effect of our interest rate swaps.

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(c)A summary of our operating lease obligations as of December 31, 2023 can be found in Note 19, “Leases”, of the Notes to the Consolidated Financial Statements.

(d)This table does not include obligations under our pension and postretirement benefit plans, which are included in Note 10, Pension and Post-Retirement and Other Benefit Plans, of the Notes to the Consolidated Financial Statements.

We also have outstanding firm purchase orders with certain suppliers for the purchase of raw materials and services, which are not included in the table above. These purchase orders are generally short-term in nature and include a requirement that our supplier provide products or services to our specifications and require us to make a firm purchase commitment to our supplier. The costs associated with these agreements will be reflected in cost of sales on our Consolidated Statements of Income as substantially all of these commitments are associated with purchases made to fulfill our customers’ orders.

The following is a summary of other off-balance sheet arrangements at December 31, 2023:

To provide required security regarding our performance on certain contracts, we provide letters of credit, surety bonds and bank guarantees, for which we are contingently liable. In order to obtain these financial instruments, we pay fees to various financial institutions in amounts competitively determined in the marketplace. Our ability to generate revenue from certain contracts is dependent upon our ability to obtain these off-balance sheet financial instruments.

Our off-balance sheet financial instruments may be renewed, revised or released based on changes in the underlying commitment. Historically, our commercial commitments have not been drawn upon to a material extent; consequently, management believes it is not likely that there will be claims against these commitments that would result in a negative impact on our key financial ratios or our ability to obtain financing.

Cash Flows

Cash flows for each of the years ended December 31, 2023 and 2022 were as follows:

2023 Compared with 2022

Cash provided by continuing operating activities in 2023 was $74.2 million, representing a $61.0 million decrease compared to 2022. The decrease was primarily due to tax payments of $133.2 million for income taxes on gain from sale of AeroTech. Excluding the impact of this tax payment in 2023, cash provided by continuing operations increased by $72.2 million year over year, primarily due to reduced inventory investment and increased customer collections of trade receivables and advance payments, partially offset by an increased payments for accounts payable and for pension contributions.

Cash provided by continuing investing activities during 2023 was $729.3 million, representing a $1.1 billion increase compared to 2022. The increase is primarily from the proceeds received on the sale of the AeroTech business and lower spending on acquisitions and capital expenditures year over year.

Cash required by continuing financing activities of $354.1 million in 2023 represents an increase in cash outflows of $624.7 million compared to 2022. This increase in cash outflows year over year was primarily due to higher debt repayments of our revolving credit facility using proceeds from the AeroTech sale, compared to higher borrowings from our credit facility to fund acquisitions during 2022.

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2022 Compared with 2021

Cash provided by continuing operating activities in 2022 was $135.2 million, representing a $39.7 million decrease compared to 2021. Decrease was primarily driven by a decrease in customer advance payments and an increase in inventory, partially offset by lower pension contributions and an increase in accounts payable.

Cash required by investing activities during 2022 was $413.2 million, representing a $142.7 million increase compared to 2021, primarily due to increased acquisition and capital expenditure spending year over year.

Cash provided by financing activities of $270.6 million in 2022 represents an increase of $189.8 million compared to 2021. This increase was primarily driven by higher borrowings to fund acquisitions in 2022, partially offset by prior year activity that did not recur in the current year. Specifically the cash provided by financing activities of $80.8 million in 2021 was primarily due to proceeds from the issuance of the convertible notes, bond hedge and warrant transactions, partially offset by paying down borrowings under our revolving credit facility and payment of acquisition date earn-out liability.

Financing Arrangements

As of December 31, 2023 we had $250.0 million drawn on and $1,043.8 million of availability under the revolving credit facility. Our ability to use this availability is subject to our compliance with the leverage ratio covenant described below.

Our credit agreement includes restrictive covenants that, if not met, could lead to a renegotiation of our credit lines, a requirement to repay our borrowings and/or a significant increase in our cost of financing. Restrictive covenants include a minimum interest coverage ratio, a maximum leverage ratio, as well as certain events of default. As of December 31, 2023, we were in compliance with all covenants in our credit agreement. We expect to remain in compliance with all covenants in the foreseeable future.

On May 28, 2021, we closed a private offering of $402.5 million aggregate principal amount of the Company's 0.25% Convertible Senior Notes due 2026 (the "Notes") to qualified institutional buyers, resulting in net proceeds to us of approximately $392.2 million after deducting initial purchasers’ discounts. The Notes will mature on May 15, 2026 unless earlier converted, redeemed or repurchased. Concurrently with the issuance of the Notes, we entered into the Note hedge transactions that reduce potential dilution upon conversion of the Notes and into the warrant transactions to raise additional capital to partially offset the costs of entering into the Note hedge transactions.

For additional information about our credit agreement, Notes, convertible note hedge and warrant transactions, refer to Note 8. Debt of the Notes to the Consolidated Financial Statements.

As of December 31, 2023, we have 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. 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).

As a result, as of December 31, 2023, all of our total outstanding debt of $652.5 million effectively remains fixed rate debt, with the Convertible Senior Notes subject to a fixed rate of 0.25% and all of the revolving credit facility subject to an average fixed rate of 0.76% in addition to the premium charged for the credit spread on our revolving credit facility.

Critical Accounting Estimates

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles. As such, we are required to make certain estimates, judgments and assumptions about matters that are inherently uncertain. On an ongoing basis, our management re-evaluates these estimates, judgments and assumptions for reasonableness because of the critical impact that these factors have on the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the periods presented. Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed this disclosure. We believe that the following are the critical accounting estimates used in preparing our financial statements.

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Revenue Recognition

We recognize a large portion of our product revenue over time, using the "cost-to-cost" input method for contracts that provide highly customized equipment and refurbishments of customer-owned equipment for which we have a contractual, enforceable right to collect payment upon customer cancellation for performance completed to date. The input method of “cost-to-cost” to recognize revenue over time requires that we measure progress based on costs incurred to date relative to total estimated cost at completion. These cost estimates are based on assumptions and estimates to project the outcome of future events including estimated labor and material costs required to complete open projects.

Defined Benefit Pension Plans

The measurement of pension plans’ costs requires the use of assumptions for discount rates, investment returns, employee turnover rates, retirement rates, mortality rates and other factors. The actuarial assumptions used in our pension reporting are reviewed annually and compared with external benchmarks to ensure that they appropriately account for our future pension and post-retirement benefit obligations. While we believe that the assumptions used are appropriate, differences between assumed and actual experience may affect our operating results.

Our accrued pension liability reflects the funded status of our worldwide plans, or the projected benefit obligation net of plan assets. Our discount rate assumption is determined by developing a yield curve based on high quality corporate bonds with maturities matching the plan’s expected benefit payment streams. The plans’ expected cash flows are then discounted by the resulting year-by-year spot rates. The projected benefit obligation is sensitive to changes in our estimate of the discount rate. The discount rate used in calculating the projected benefit obligation for the U.S. pension plan, which represents 86% of all pension plan obligations, was 4.99% in 2023, 5.18% in 2022 and 2.90% in 2021. A decrease of 50 basis points in the discount rate used in our calculation would increase our projected benefit obligation by $11.7 million.

Our pension expense is sensitive to changes in our estimate of the expected rate of return on plan assets. The expected return on assets used in calculating the pension expense for the U.S. pension plan, which represents 94% of all pension plan assets, was 6.25% for 2023, 5.50% for 2022 and 5.75% for 2021. For 2024, the rate is expected to be 5.50%. A change of 50 basis points in the expected return on assets assumption would impact pension expense by $1.3 million (pre-tax).

See Note 10. Pension and Post-Retirement and Other Benefit Plans of the notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data for additional discussion of our assumptions and the amounts reported in the Consolidated Financial Statements.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements see Note 1 of the Notes to Consolidated Financial Statements.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

We are a leading global technology solutions provider to high-value segments of the food and beverage industry. We design, produce, and service sophisticated products and systems for multi-national and regional customers through our FoodTech segment. We also sell critical equipment and services to domestic and international air transportation customers through our AeroTech segment.

In early 2022, we announced our Elevate 2.0 strategy that capitalizes on favorable trends, as well as our leadership position, in the food and beverage processing industry. This strategy is based on a four-pronged approach to deliver continued growth and margin expansion.

•Organic Growth. Our broad application knowledge, engineering expertise, and global sales and service allow us to work alongside our customers to develop critical FoodTech products and solutions across a diverse set of food & beverage end markets. JBT is operating in commercial markets which we believe over the long term create meaningful opportunities for continued new product innovation and R&D in support of our customers’ needs. Additionally, our cross-selling abilities, investment opportunities in developing geographies, and aftermarket capabilities provide meaningful growth opportunities for FoodTech globally.

•Digital Transformation. We are investing to evolve our iOPS® platform into a new digital solution called OmniBlu™, a customer-centric platform that delivers improved access to parts and service, advanced functionality, and measurable results for customers, while also expanding JBT's recurring revenue from aftermarket parts and services.

•Margin Enhancement. We see opportunities to improve our operating margins by 200 basis points or more in the medium-term, primarily through supply chain and strategic sourcing initiatives. Key areas of focus include supply base consolidation, make versus buy decisions, value engineering and component standardization, and best cost country sourcing.

•Acquisitions. We are also continuing our strategic acquisition program focused on companies that add complementary products and technology solutions, which enable us to offer more comprehensive solutions to customers and meet our economic criteria for returns and synergies.

In pursuit of the above strategy, we are considering a full range of strategic alternatives for AeroTech and expect to complete our strategic assessment in the first half of 2023.

We operate under the JBT Business System, which provides a level of process rigor across the Company and is designed to standardize and streamline reporting and problem resolution processes for increased visibility, efficiency, effectiveness and productivity in all business units.

Our approach to Environmental, Social and Corporate Governance (ESG) builds on our culture and long tradition of concern for our employees’ health, safety, and well-being; partnering with our customers to find ways to make better use of the earth’s precious resources; and giving back to the communities where we live and work. Our FoodTech equipment and technologies continue to deliver quality performance while striving to minimize food waste, extend food product life, and maximize efficiency in order to create shared value for our food and beverage customers. Our AeroTech equipment business offers a variety of power options, including electrically powered ground support equipment, that help customers meet their environmental objectives. While the majority of our impact lies within the solutions offered to our customers, our commitment to environmental responsibility extends to our own operations. We strive for our own facilities to operate efficiently and safely, much like the solutions we provide to our customers. We recognize the responsibility we have to make a positive impact on our shareholders, the environment and our communities in a manner that is consistent with our fiduciary duties. We have engaged in structured education for enhancing inclusive leadership skills in our organization designed to ensure more diversity in our leadership and hiring practices.

We evaluate our operating results considering key performance indicators including segment operating profit, segment operating profit margin, segment EBITDA (adjusted when appropriate) and segment EBITDA margins.

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Business Conditions and Outlook

In terms of top–line growth, the commercial environment in 2022 was characterized by strong demand for our goods and services, particularly in North America. Higher demand in FoodTech is driven primarily by our customer's needs for greater capacity, labor savings, yield, food safety and sustainability. On the AeroTech side, we continued to experience a strong recovery in our served markets. Looking ahead, we anticipate continued revenue growth in 2023 due to sustained momentum in overall customer demand for our products and services, a strong backlog entering into 2023 and a mix of recurring revenue streams consistent with prior years.

Despite significant growth in our revenues, our operating margins declined due to the challenges associated with supply chain disruptions, high inflation, and labor availability affecting both FoodTech and AeroTech. While our JBT operating system enables us to plan and optimize production efficiency, continued supply chain disruptions and labor shortages has often resulted in the stop and start of production based on availability of critical parts and components. However, we expect an improvement in our supply chain performance and for inflation to moderate as we continue to take action to address these challenges. These include making productivity improvements in our production plants, expanding our supplier network, and implementing price increases which have generally been successful in offsetting some, but not all, of the impact of these challenges.

As a result of the war in Ukraine, we have suspended commercial activities in Russia, Belarus and occupied regions of Ukraine since March 2022. This consisted of ceasing our efforts to seek new business opportunities in these areas, as well as suspending any in-process projects to allow for an assessment of our ability to complete those projects and to receive payments in full compliance with applicable sanction programs, and without risk to our personnel and subcontractors. The direct impact of these actions to our consolidated results of operations is and is expected to remain immaterial. Furthermore, we have no direct active operations in any of these countries or regions.

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Results of Continuing Operations

A discussion of our results of operations for 2022 compared to 2021 is set forth below. For a discussion of our results of operations, including our segment results of operations, for 2021 compared to 2020, refer to the discussion under the sub-caption "2021 Compared With 2020" in Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II of our Annual Report on Form 10–K for the fiscal year ended December 31, 2021, which discussion is incorporated by reference herein.

CONSOLIDATED RESULTS OF OPERATIONS

2022 Compared With 2021

Total revenue in 2022 increased $297.7 million or 15.9% compared to 2021. Organic revenue grew $282.0 million in the period, acquisitions provided additional revenue of $93.5 million, and foreign currency translation was unfavorable by $77.8 million in the period compared to the prior year. Growth from organic revenue was the result of increases in both recurring and non-recurring revenues.

Operating income margin was 7.8% in 2022 compared to 8.6% in 2021, a decrease of 80 bps, and was caused by the following items:

•Gross profit margin decreased 180 bps to 28.5% compared to 30.3% in 2021. This decrease was in part due to ongoing supply chain disruptions and resulting inefficiencies driving increases in material, logistics and labor costs. Additionally, gross profit margin declined due to more growth in lower-margin AeroTech revenue compared to FoodTech revenue, as well as a higher mix in both segments of lower-margin non-recurring revenue compared to recurring revenue.

•Selling, general and administrative expense increased $40.8 million from prior year driven by higher costs attributable to recently acquired businesses as well as costs related to the implementation of OmniBluTM. It improved, however, as a percentage of total revenue by 110 bps to 20.4% compared to 21.5% in the same period last year.

•Currency translation decreased operating income by $9.6 million.

Increase in net interest expense was primarily due to higher interest rates as well as a higher average debt balance to fund the acquisitions in the third quarter of 2022.

Income tax expense for 2022 reflected an effective income tax rate of 15.3% compared to 22.4% in 2021, primarily driven by beneficial discrete items.

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Restructuring

In the third quarter of 2020, the Company implemented a restructuring plan ("2020 restructuring plan") for manufacturing capacity rationalization affecting both the FoodTech and AeroTech segments. The Company completed the 2020 restructuring plan as of June 30, 2022. The total cost in connection with the 2020 restructuring plan was $11.0 million for FoodTech and $6.0 million for AeroTech.

In the third quarter of 2022, the Company implemented a restructuring plan (the "2022/2023 restructuring plan") to optimize the overall FoodTech cost structure on a global basis. The initiatives under this plan will include streamlining operations and our general and administrative infrastructure. As of December 31, 2022, the cost of this plan is $5.4 million and we estimate the total cost of full implementation will be in the range of $8.0 million to $10.0 million expected to be recognized by the end of 2023. Cumulative savings associated with this plan is in the range of $9.0 million to $12.0 million with a range of $5.0 million to $6.0 million expected to be realized in 2023 and the remainder in 2024.

The following table details the cumulative amount of annualized and incremental savings for the 2020 restructuring plan:

For the 2020 restructuring plan, incremental cost savings has been completed as of June 30, 2022.

For additional financial information about restructuring, refer to Note 20. Restructuring of the Notes to Consolidated Financial Statements.

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OPERATING RESULTS OF BUSINESS SEGMENTS

(1)Refer to Note 19. Business Segments of the Notes to Consolidated Financial Statements.

(2)Segment operating profit is defined as total segment revenue less segment operating expense. Corporate expense, restructuring expense, interest income and expense and income taxes are not allocated to the segments. 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.

FoodTech

2022 Compared With 2021

FoodTech revenue increased by $190.2 million or 13.6% for the year ended December 31, 2022 compared to 2021. Organic revenue grew $171.8 million in the period, revenue from acquisitions grew $93.5 million. Foreign currency translation was unfavorable by $75.0 million in the period. Non-recurring revenue represented 54% of the organic revenue growth, with $92.2 million of additional revenue in the year compared to 2021. Recurring revenue drove the remaining increase in organic revenue of $79.6 million.

FoodTech operating profit increased $24.5 million, net of an unfavorable foreign currency translation of $9.7 million during the period, or 13.1%, for the year ended December 31, 2022 compared to 2021. Operating profit margin declined 10 bps primarily due to a decline in gross profit margin partially offset by an improved selling general and administrative expense as a percent of revenue compared to 2021. Gross profit margins declined ~110 bps primarily due to the continued supply chain disruptions and pressures resulting in inefficiencies that drove ongoing increases in material, freight, and labor costs as well as due to a higher mix of organic revenue growth from lower-margin non-recurring revenue compared to recurring revenue. Selling, general and administrative expense increased $22.3 million from prior year, including $15.9 million from acquired companies, but as a percent of revenue improved 115 bps to 20.1%.

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AeroTech

2022 Compared With 2021

AeroTech's revenue increased $108.2 million or 23.1% compared to 2021. This increase is comprised of a $74.0 million increase from our mobile equipment business, a $15.1 million increase in our fixed equipment business and a $22.0 million increase in our service business. Foreign currency translation was unfavorable by $2.9 million. The increase in our mobile equipment business was driven by higher equipment sales to cargo and other customers and higher aftermarket sales primarily as a result of the continued industry recovery from COVID-19. The increase in our fixed equipment business was primarily due to higher demand for passenger boarding bridges and related equipment from domestic customers. The increase in service revenue was a result of an increase in service hours on our maintenance contracts and project related revenues as activity at US airports continued to increase as a result of the elimination of customer-imposed service hour reductions relating to COVID-19 compared to the prior year.

AeroTech’s operating profit increased $10.9 million or 33.4% compared to 2021. AeroTech’s operating profit margin was 7.6% compared to 7.0% in the prior year, reflecting an increase of 60 bps. Gross profit margins decreased 140 bps driven by higher material, labor and freight costs. Selling, general and administrative expenses in 2022 were $0.8 million above 2021 which is an increase of 1.5%, but 200 bps below the prior year as a percent of sales. Currency translation had an immaterial impact.

Corporate Expense

2022 Compared With 2021

Corporate expense increased by $25.7 million compared to 2021. The increase was driven primarily by costs related to the development of OmniBluTM, additional LIFO expense resulting from the inflationary environment, and higher incentive compensation expense.

Use of Non-GAAP Financial Measures

We present certain financial information on a constant currency basis in this annual report on Form 10-K to provide greater transparency into our operating results and trends, and a more meaningful comparison of our ongoing operating results, consistent with how management evaluates performance. We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency percentages by converting our financial results in local currency for a period using the average exchange rate for the prior period to which we are comparing.

Inbound Orders and Order Backlog

Inbound orders represent the estimated sales value of confirmed customer orders received during the years ended December 31,

Inbound orders for our FoodTech segment decreased $32.7 million for the year ended December 31, 2022 compared to 2021, which includes an unfavorable foreign currency translation impact of $71.4 million in the period resulting in an increase of $38.7 million on a constant currency basis.

Inbound orders for our AeroTech segment increased by $42.1 million for the year ended December 31, 2022 compared to 2021, which includes an unfavorable foreign currency translation impact of $3.3 million in the period resulting in an increase of $45.4 million on a constant currency basis.

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Order backlog is calculated as the estimated sales value of unfilled, confirmed customer orders as of December 31,

Order backlog in our FoodTech segment at December 31, 2022 increased by $29.4 million compared to December 31, 2021. We expect to convert 84% of FoodTech backlog at December 31, 2022 into revenue during 2023.

Order backlog in our AeroTech segment at December 31, 2022 increased by $18.8 million compared to December 31, 2021. We expect to convert 84% of the AeroTech backlog at December 31, 2022 into revenue during 2023.

Seasonality

We experience seasonality in our operating results. Historically, our revenue and operating income have been lower in the first quarter and highest in the fourth quarter, primarily as a result of our customers' purchasing trends.

Liquidity and Capital Resources

Overview of Sources and Uses of Cash

Our primary sources of liquidity are cash flows provided by operating activities from our U.S. and foreign operations, borrowings from our revolving credit facility, and proceeds from the issuance of the convertible notes on May 28, 2021.

As of December 31, 2022, we had $73.1 million of cash and cash equivalents, $52.5 million of which was held by our foreign subsidiaries. Although certain funds are considered permanently invested in our foreign subsidiaries, we are not presently aware of any restriction on the repatriation of these funds. We maintain significant operations outside of the U.S., and many of our uses of cash for working capital, capital expenditures and business acquisitions arise in these foreign jurisdictions. If these funds were needed to fund our operations or satisfy obligations in the U.S., they could be repatriated and their repatriation into the U.S. could cause us to incur additional U.S. income tax and foreign withholding taxes. The foreign withholding taxes on these repatriations to the U.S. would potentially be partially offset by U.S. foreign tax credits.

As noted above, certain funds held outside of the U.S. are considered permanently invested in our non-U.S. subsidiaries. At times, these foreign subsidiaries have cash balances that exceed their immediate working capital or other cash needs. In these circumstances, the foreign subsidiaries may loan funds to the U.S. parent company on a temporary basis; the U.S. parent company has in the past and may in the future use the proceeds of these temporary intercompany loans to reduce outstanding borrowings under our committed credit facilities. By using available non-U.S. cash to repay our debt on a short-term basis, we can optimize our leverage ratio, which has the effect of lowering our interest costs.

For the year ended December 31, 2022, we had total operating cash flow of $142.3 million. Our liquidity as of December 31, 2022, or cash plus borrowing ability under our revolving credit facilities was $526.3 million.

The cash flows generated by our operations and borrowings are expected to be sufficient to satisfy our principal cash requirements that include our working capital needs, new product development, restructuring expenses, capital expenditures, income taxes, debt repayments, dividends, periodic pension contributions, and other financing arrangements.

Based on our current capital allocation objectives, during 2023 we anticipate capital expenditures to be between $60 million and $70 million, which includes about $12 million to $14 million of capitalized investment in our digital platform OmniBluTM. Our level of capital expenditures varies from time to time as a result of actual and anticipated business conditions. We believe JBT's strong balance sheet, operating cash flows, and access to capital as of December 31, 2022, positions us to successfully navigate through the current challenging economic conditions as we continue to invest in growth strategies including our acquisition program and new product development.

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Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures in the U.S. over five years. The Company experienced approximately a $25 million decrease in cash from operations in 2022 as a result and will experience approximately a $20 million decrease in cash from operations in 2023 The impact will continue over the five-year amortization period but decrease each year.

Contractual Obligations and Cash Requirements

The following is a summary of our significant contractual and other obligations at December 31, 2022:

(a)A summary of our long-term debt obligations as of December 31, 2022 can be found in Note 7, “Debt”, of the Notes to the Consolidated Financial Statements.

(b)Interest payments were determined using the weighted average rates for all debt outstanding as of December 31, 2022.

(c)A summary of our operating lease obligations as of December 31, 2022 can be found in Note 18, “Leases”, of the Notes to the Consolidated Financial Statements.

(d)This amount reflects planned contributions in 2023 to our pension plans. Required contributions for future years depend on factors that cannot be determined at this time.

We also have outstanding firm purchase orders with certain suppliers for the purchase of raw materials and services, which are not included in the table above. These purchase orders are generally short-term in nature and include a requirement that our supplier provide products or services to our specifications and require us to make a firm purchase commitment to our supplier. The costs associated with these agreements will be reflected in cost of sales on our Consolidated Statements of Income as substantially all of these commitments are associated with purchases made to fulfill our customers’ orders.

The following is a summary of other off-balance sheet arrangements at December 31, 2022:

To provide required security regarding our performance on certain contracts, we provide letters of credit, surety bonds and bank guarantees, for which we are contingently liable. In order to obtain these financial instruments, we pay fees to various financial institutions in amounts competitively determined in the marketplace. Our ability to generate revenue from certain contracts is dependent upon our ability to obtain these off-balance sheet financial instruments.

Our off-balance sheet financial instruments may be renewed, revised or released based on changes in the underlying commitment. Historically, our commercial commitments have not been drawn upon to a material extent; consequently, management believes it is not likely that there will be claims against these commitments that would result in a negative impact on our key financial ratios or our ability to obtain financing.

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Cash Flows

Cash flows for each of the years ended December 31, 2022 and 2021 were as follows:

2022 Compared with 2021

Cash provided by continuing operating activities in 2022 was $142.3 million, representing a $83.4 million decrease compared to 2021.

A lower operating cash flow in 2022 was primarily driven by a higher investment in inventory and an increase in outstanding trade receivables, partially offset by an increase in accounts payable. A higher operating cash flow in 2021 was primarily driven by an increase in customer advance payments and in accounts payable, partially offset by a higher investment in inventory and an increase in outstanding trade receivables.

Cash required by investing activities during 2022 was $416.1 million, representing a $143.2 million increase compared to 2021, primarily due to increased acquisition and capital expenditure spending year over year.

Cash provided by financing activities of $270.6 million in 2022 represents an increase of $189.8 million compared to same period in 2021. This increase is primarily driven by higher borrowings to fund acquisitions in the current year, partially offset by prior year activity that did not recur in the current year. Specifically the cash provided by financing activities of $80.8 million in 2021 was primarily due to proceeds from the issuance of the convertible notes, bond hedge and warrant transactions, partially offset by paying down borrowings under our revolving credit facility and payment of acquisition date earn-out liability.

Financing Arrangements

As of December 31, 2022 we had $584.6 million drawn on and $709.0 million of availability under the revolving credit facility. Our ability to use this availability is limited by the restrictive covenants described below.

Our credit agreement includes restrictive covenants that, if not met, could lead to a renegotiation of our credit lines, a requirement to repay our borrowings and/or a significant increase in our cost of financing. Restrictive covenants include a minimum interest coverage ratio, a maximum leverage ratio, as well as certain events of default. As of December 31, 2022, we were in compliance with all covenants in our credit agreement. We expect to remain in compliance with all covenants in the foreseeable future. However, there can be no assurance that continued or increased volatility in global economic conditions will not impair our ability to meet our covenants, or that we will continue to be able to access the capital and credit markets on terms acceptable to us or at all.

On May 28, 2021, we closed a private offering of $402.5 million aggregate principal amount of the Company's 0.25% Convertible Senior Notes due 2026 (the "Notes") to qualified institutional buyers, resulting in net proceeds to us of approximately $392.2 million after deducting initial purchasers’ discounts. The Notes will mature on May 15, 2026 unless earlier converted, redeemed or repurchased. Concurrently with the issuance of the Notes, we entered into the Note hedge transactions that reduce potential dilution upon conversion of the Notes and into the warrant transactions to raise additional capital to partially offset the costs of entering into the Note hedge transactions.

For additional information about our credit agreement, Notes, convertible note hedge and warrant transactions, refer to Note 7. Debt of the Notes to Consolidated Financial Statements.

As of December 31, 2022, we have 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. 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).

As a result, as of December 31, 2022, a significant portion of our total outstanding debt of $987.1 million effectively remains fixed rate debt, with the Convertible Senior Notes subject to a fixed rate of 0.25% and a portion of the revolving credit facility subject to an average fixed rate of 0.82%. Approximately $334.6 million, or 34%, remained subject to floating, or market rates. To the extent interest rates increase in future periods, our earnings could be negatively impacted by higher interest expense.

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Critical Accounting Estimates

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles. As such, we are required to make certain estimates, judgments and assumptions about matters that are inherently uncertain. On an ongoing basis, our management re-evaluates these estimates, judgments and assumptions for reasonableness because of the critical impact that these factors have on the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the periods presented. Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed this disclosure. We believe that the following are the critical accounting estimates used in preparing our financial statements.

Intangible Asset Valuation

Accounting for business combinations requires management to make significant estimates and assumptions at the acquisition date specifically for the valuation of intangible assets. We use the multi-period excess earnings method to determine the fair value of the customer relationships and the relief-from-royalty approach to determine the fair value of the tradename and proprietary technology.

Critical estimates and assumptions in valuing certain of the intangible assets we have acquired include, but are not limited to, forecasted revenue growth rates, EBITDA margins, discount rates, customer attrition rates and royalty rates. The discount rates used to discount expected future cash flows to present value are typically derived from a weighted-average cost of capital analysis and adjusted to reflect inherent risks. Unanticipated events and circumstances may occur that could affect either the accuracy or validity of such assumptions, estimates or actual results.

Sensitivities related to the acquisition of Bevcorp, LLC ("Bevcorp")

The valuation of Bevcorp's intangible assets were based in part on the key assumptions of customer attrition rate and discount rate for customer relationship intangible assets, and royalty rate for patents and acquired technology intangible assets. The customer attrition rate was selected based on historical experience and information obtained from Bevcorp's management. An increase or decrease of 100 basis points in the customer attrition rate would result in a decrease of $12 million or an increase of $13 million, respectively, in the value of Bevcorp's customer relationship intangible assets. Additionally, an increase or decrease in the discount rate of 50 basis points would result in a decrease of $5 million or an increase of $6 million, respectively, in the value of Bevcorp's customer relationship intangible assets. The royalty rate used in the valuation of Bevcorp's trade name, patents and acquired technology intangible asset was based on a detailed analysis considering the importance of the trade name and technology to the overall enterprise and market royalty data. An increase or decrease of 50 basis points in the royalty rate would result in an increase or decrease of $5.6 million in the valuation of these assets.

Revenue Recognition

We recognize a large portion of our product revenue over time, for contracts that provide highly customized equipment and refurbishments of customer-owned equipment for which we have a contractual, enforceable right to collect payment upon customer cancellation for performance completed to date. We utilize the input method of “cost-to-cost” to recognize revenue over time which requires that we measure progress based on costs incurred to date relative to total estimated cost at completion. These cost estimates are based on assumptions and estimates to project the outcome of future events including estimated labor and material costs required to complete open projects.

Defined Benefit Pension Plans

The measurement of pension plans’ costs requires the use of assumptions for discount rates, investment returns, employee turnover rates, retirement rates, mortality rates and other factors. The actuarial assumptions used in our pension reporting are reviewed annually and compared with external benchmarks to ensure that they appropriately account for our future pension and post-retirement benefit obligations. While we believe that the assumptions used are appropriate, differences between assumed and actual experience may affect our operating results.

Our accrued pension liability reflects the funded status of our worldwide plans, or the projected benefit obligation net of plan assets. Our discount rate assumption is determined by developing a yield curve based on high quality corporate bonds with maturities matching the plan’s expected benefit payment streams. The plans’ expected cash flows are then discounted by the resulting year-by-year spot rates. The projected benefit obligation is sensitive to changes in our estimate of the discount rate. The discount rate used in calculating the projected benefit obligation for the U.S. pension plan, which represents 87% of all pension plan obligations, was 5.18% in 2022, 2.90% in 2021 and 2.57% in 2020. A decrease of 50 basis points in the discount rate used in our calculation would increase our projected benefit obligation by $11.9 million.

Our pension expense is sensitive to changes in our estimate of the expected rate of return on plan assets. The expected return on assets used in calculating the pension expense for the U.S. pension plan, which represents 94% of all pension plan assets, was 5.50% for

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2022, 5.75% for 2021 and 5.0% for 2020. For 2023, the rate is expected to be 6.25%. A change of 50 basis points in the expected return on assets assumption would impact pension expense by $1.4 million (pre-tax).

See Note 9. Pension and Post-Retirement and Other Benefit Plans of the notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data for additional discussion of our assumptions and the amounts reported in the Consolidated Financial Statements.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements see Note 1 of the Notes to Consolidated Financial Statements.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

We are a leading global technology solutions provider to high-value segments of the food and beverage industry with focus on proteins, diversified food and health and automated guided vehicle systems. We design, produce, and service sophisticated products and systems for multi-national and regional customers through our FoodTech segment. We also sell critical equipment and services to domestic and international air transportation customers through our AeroTech segment.

Our Elevate plan was designed to capitalize on the leadership position of our businesses and favorable macroeconomic trends. The Elevate plan is based on a four-pronged approach to deliver continued growth and margin expansion.

•Accelerate New Product & Service Development. We are accelerating the development of innovative products and services to provide customers with solutions that enhance yield and productivity and reduce lifetime cost of ownership.

•Grow Recurring Revenue. We are capitalizing on our extensive installed base to expand recurring revenue from aftermarket parts and services, equipment leases, consumables and our Airport Services offerings.

•Execute Impact Initiatives. We are enhancing organic growth through initiatives that enable us to sell the entire FoodTech portfolio globally, including enhancing our international sales and support infrastructure, localizing targeted products for emerging markets, and strategic cross selling of products. In AeroTech, we plan to continue to develop advanced defense product offering and customer support capability to service global defense customers. Additionally, our impact initiatives are designed to support the reduction in operating costs including strategic sourcing, relentless continuous improvement (lean) efforts, and the optimization of organizational structure.

•Maintain a Disciplined Acquisition Program. We are also continuing our strategic acquisition program focused on companies that add complementary products, which enable us to offer more comprehensive solutions to customers, and meet our strict economic criteria for returns and synergies.

We operate under the JBT Operating System which provides a level of process rigor across the Company and is designed to standardize and streamline reporting and problem resolution processes for increased visibility, efficiency, effectiveness and productivity in all business units.

Our approach to Environmental, Social and Corporate Governance (ESG) builds on our culture and long tradition of concern for our employees’ health, safety, and well-being; partnering with our customers to find ways to make better use of the earth’s precious resources; and giving back to the communities where we live and work. Our FoodTech equipment and technologies continue to deliver quality performance while striving to minimize food waste, extend food product life, and maximize efficiency in order to create shared value for our food and beverage customers. Our AeroTech equipment business offers a variety of power options, including electrically powered ground support equipment, that help customers meet their environmental objectives.We recognize the responsibility we have to make a positive impact on our shareholders, the environment and our communities in a manner that is consistent with our fiduciary duties. We have engaged in structured education for enhancing inclusive leadership skills in our organization designed to ensure more diversity in our leadership and hiring practices. We have completed a comprehensive evaluation to determine which ESG topics are most pressing for our business resulting in a materiality matrix informing our development of an ESG strategy, balanced to ensure we invest responsibly in initiatives that can address the risks and opportunities presented by ESG.

We evaluate our operating results considering key performance indicators including segment operating profit, segment operating profit margin, segment EBITDA (adjusted when appropriate) and segment EBITDA margins.

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Business Conditions and Outlook

In terms of top–line growth, the commercial environment in 2021 was characterized by a robust demand for our goods and services in most geographical regions. Higher demand in FoodTech is driven by customer needs for greater capacity, labor savings, and new product introductions. On the AeroTech side, we continue to experience a slower recovery, as expected, however we believe we are moving in a positive direction. We are not expecting full recovery for AeroTech to pre-pandemic level until the year 2023, at the earliest. Looking ahead, we anticipate revenue growth to be consistent and solid through 2022 due to continued momentum in overall customer demand for our products and services and a record backlog entering into 2022.

Despite significant growth in our revenues, our operating margins declined due to the unprecedented challenges associated with supply chain disruptions, high inflation, and labor availability affecting both FoodTech and AeroTech. Unlike in the past, where our JBT operating system enabled us to plan and optimize production efficiency, supply chain disruptions and labor shortages meant we often had to stop and start production based on availability. We expect that these trends will continue into 2022 as we anticipate further disruptions, shortages and price increases - the effect of which will depend in part on our ability to successfully mitigate and offset the impact of these events. Thus far, actions taken by us to mitigate supply chain disruptions and inflation, including productivity improvements, expanding our supplier network, and price increases, have generally been successful in offsetting some, but not all, of the impact of these trends. Additionally, we have continued to enhance our internal operating efficiency with the ongoing benefits of our restructuring program.

Impact of COVID-19 on our Business

The COVID-19 pandemic has resulted and is expected to continue to result in significant economic disruption, and our business has been adversely affected as a result. While we have seen and expect to continue to see positive signs of economic recovery, the following uncertainties still exist and may contribute to additional negative impacts on our overall financial results, particularly if there is a significant resurgence of COVID-19 infections in locations where we or our customers operate:

•our ability to obtain raw material and required components from domestic and international suppliers required to manufacture our products and provide services;

•our ability to efficiently operate our facilities and meet customer obligations due to modified employee work patterns resulting from social distancing guidelines, absence due to illness and cautionary quarantines and/or government ordered closures, or due to labor shortages;

•our ability to secure inbound and outbound logistics to and from our facilities, with additional delays linked to international border crossings and the associated approvals and documentation;

•our ability to access customer locations in order to execute installations, new product deliveries, maintenance and repair services;

•limitations on the ability of our customers to conduct their business, and resulting impacts to our customers' purchasing patterns, from food and travel disruption, social distancing guidelines, absence due to illness or government ordered closures; and

•limitations on the ability of our customers to meet their financial obligations to JBT.

As a result of the global COVID-19 related restrictions and social distancing requirements that have continued from 2020 through 2021, the food industry continues to experience a notable rise in retail demand. In addition, with these global health restrictions lifting in certain parts of the world as a result of decreased infection rates and political pressures, foodservice continues to revitalize as restaurants reopen and travel increases. These increases in demand, however promising, are dependent on the continued trend towards reopening which can be negatively impacted by new variants, such as the omicron variant first identified in November 2021, and a resulting increase in COVID-19 infections and hospitalizations. As there continues to be uncertainty, the pace of recovery from the COVID-19 pandemic remains unpredictable.

As FoodTech customers are present in both the retail and foodservice channels, the shifts in demand have and may continue to create volatility and uncertainty in our customer's purchasing patterns. However, in the fourth quarter of 2021, our inbound FoodTech orders increased by 25% compared to the same period in 2020 as we continued to see positive recovery specifically for food processors in the quick service restaurant businesses, those servicing the sustained "eat-at-home" trend and ready meals, as well as capital investments continuing to ramp back up for our foodservice and pet food customers. Our customers appear to be investing more to support these trends, addressing immediate capacity needs and creating strong interest in FoodTech's broad product offerings. This is the fourth consecutive quarter of year over year improvement in orders for the FoodTech segment, a positive indicator of recovery in the industry. Despite these improvements, we expect that continued supply chain challenges as well as labor shortages that have impacted many of our markets will continue to drive delays and inefficiencies in our production process and offset some of these improvements

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in orders. In addition to the above considerations, although the pandemic continues to have negative impacts on our results of operations in FoodTech, we believe it has accelerated the demand for automation solutions, increased focus on food safety and hygiene requirements and lead to innovation to respond to changes in consumer preferences. Furthermore, recurring revenue for the FoodTech segment has increased 10% year over year. This improvement is driven largely by the continued increase in demand across the foodservice industry noted above, price increases as well as sustained operations within the food processing companies requiring critical maintenance and parts.

For AeroTech, a large portion of our revenue depends on the passenger airline industry. Passenger air travel continues to increase from 2020 levels with declining infection rates and reopening of travel routes. Activity at US airports continued to increase during the third and fourth quarters compared to the prior year, driving improving demand for our equipment and services. However, global passenger traffic continues to be well below pre-pandemic levels which directly impact our mobile equipment business. We are not expecting full recovery for AeroTech to pre-pandemic level until the year 2023, at the earliest . Although our projections are subject to more uncertainty than in pre-pandemic periods, we expect higher demand and inbound orders for these products in the year 2022. During the fourth quarter, supply chain disruptions and labor shortages continued to drive shipment delays, operational inefficiencies, and higher material, labor and freight costs which reduced AeroTech's profitability. However, with the ongoing benefits of cost controls including restructuring, as well as the diversity of revenue streams within the business, AeroTech remained profitable despite these headwinds with further improvement in its profitability expected in the year 2022.

Specifically for aftermarket revenue streams within the AeroTech segment, we have begun to see recovery in demand as equipment utilization increases for our customers in line with air traffic demand. While aftermarket revenue during the fourth quarter of 2021 was lower by 4.5% compared to third quarter of 2021, it was higher by 15.3% on a year over year basis compared to the fourth quarter of 2020. We note, however, that these improvements may not continue if a broader resurgence in COVID-19 cases causes broader restrictions to be reinstated.

Furthermore, while an outbreak of COVID-19 in any of our production manufacturing facilities could lead to a temporary shut-down that may negatively impact our results, there are no significant concentrations of our operations across our manufacturing facilities such that a short-term single plant closure would be expected to have a material impact to our consolidated results.

Although we cannot reasonably estimate the duration and severity, or potential for resurgence, of these COVID-19 related events or the continued impact pandemic will have on the global economy or our business, we believe that our positive order trends, improving revenues and strong balance sheet and cash flows will allow us to emerge from these events well-positioned for long-term growth.

Our Strategy to Mitigate Impacts of COVID-19

As we manage through these uncertainties, our focus is on obtaining orders, maintaining disciplined working capital management, identifying ways to mitigate the supply chain disruptions, labor shortages and resulting inefficiencies, and investing in key growth strategies so that we can continue to execute our operating strategies as a critical supplier to the essential food and air transportation industries. As of the date of this filing, all of our factories and warehouses are operational.

We continue to maintain protocols under the guidance of our Crisis Response Team to protect the health and safety of our workers in our facilities, including daily symptoms screening for clearance to work, social distancing requirements in our workplaces, face covering requirements where social distancing is not possible, facilitation of work from home arrangements for our employees who can perform work functions remotely, and global travel restrictions consistent with the Centers for Disease Control and Prevention and local government guidelines. We are evaluating our options to source and manage COVID testing at our facilities in order to assist our employees' efforts to remain healthy and reduce absenteeism. Our Crisis Response Team issues frequent guidance to our managers and employees to reinforce these protocols and policies which are designed to keep our employees safe, maintain our business operations, and allow us to effectively and efficiently manage through positive COVID cases and potential shut downs in our facilities. Furthermore, we are providing enhanced remote support options and extended hours to our customers to support them through the disruption caused by the pandemic.

We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees and our other stakeholders.

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Non-GAAP Financial Measures

The results for the periods ended December 31, 2021, 2020 and 2019 include several items that affect the comparability of our results. These non-GAAP financial measures exclude certain amounts that are included in a measure calculated under U.S. GAAP, or include certain amounts that are excluded from a measure calculated under U.S. GAAP. By excluding or including these items, we believe we provide greater transparency into our operating results and trends, and a more meaningful comparison of our ongoing operating results, consistent with how management evaluates performance. Management uses these non-GAAP financial measures in financial and operational evaluation, planning and forecasting. The adjustments generally fall within the following categories: restructuring costs, M&A related costs, pension-related costs, constant currency adjustments and other major items affecting comparability of our ongoing operating results.

The non-GAAP financial measures presented in this report may differ from similarly-titled measures used by other companies. The non-GAAP financial measures are not intended to be used as a substitute for, nor should they be considered in isolation of, financial measures prepared in accordance with U.S. GAAP.

Additional details for each Non-GAAP financial measure follow:

•Free cash flow: We define free cash flow as cash provided by continuing operating activities, less capital expenditures, plus proceeds from sale of fixed assets and pension contributions. For free cash flow purposes we consider contributions to pension plans to be more comparable to payment of debt, and therefore exclude these contributions from the calculation of free cash flow. We use free cash flow internally as a key indicator of our liquidity and ability to service debt, invest in business combinations, and return money to shareholders. We believe this information is useful to investors because it provides an understanding of the cash available to fund these initiatives.

•Adjusted income from continuing operations and Adjusted diluted earnings per share from continuing operations: We adjust earnings for restructuring and merger and acquisition related costs, which include integration costs and the amortization of inventory step-up from business combinations, earnout adjustments to fair value, transaction costs for both potential and completed M&A transactions (“M&A related costs”), management succession costs, and the impacts from remeasurements of deferred taxes.

•EBITDA and Adjusted EBITDA: We define EBITDA as earnings before income taxes, interest expense and depreciation and amortization. We define Adjusted EBITDA as EBITDA before restructuring, pension expense other than service cost, M&A related costs, and management succession costs. While the Company's acquired intangible assets and fixed assets contribute to generation of our revenue, management believes that due to the Company's focus on growth through acquisitions EBITDA and Adjusted EBITDA facilitate an evaluation of business performance by excluding the impact of amortization and depreciation, and, in the case of Adjusted EBITDA, without the fluctuations in the amount of certain costs that do not reflect our underlying operating results. We use EBITDA and Adjusted EBITDA internally to make operating decisions and believe this information is helpful to investors because it allows more meaningful period-to-period comparisons of our ongoing operating results.

•Segment Adjusted Operating Profit and Segment Adjusted EBITDA: We report segment operating profit, which is the measure of segment profit or loss required to be disclosed in accordance with GAAP. We adjust segment operating profit for restructuring, and M&A related costs. We calculate segment Adjusted EBITDA by subtracting depreciation and amortization from segment adjusted operating profit. We believe segment adjusted operating profit allows more meaningful period-to period comparisons of our ongoing operating results, without the fluctuations in the amount of certain costs that do not reflect our underlying operating results. We calculate segment Adjusted EBITDA by subtracting depreciation and amortization from segment adjusted operating profit. While Company's acquired intangible assets and fixed assets contribute to generation of Company's revenue, management believes that due to the Company's focus on growth through acquisitions segment Adjusted EBITDA facilitates an evaluation of business segment performance by excluding the impact of amortization due to the step up in value of intangible assets and depreciation of fixed assets.

•Constant currency measures: We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency percentages by converting our financial results in local currency for a period using the average exchange rate for the prior period to which we are comparing.

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In the third quarter of 2020, we adjusted certain of our non-GAAP financial measures for management succession costs. We are excluding these succession costs from certain non-GAAP financial measures because they are not part of our regular compensation program, and we believe that excluding the effects of costs associated with the recruiting and implementing transition of our chief executive officer and chief financial officer positions allows more meaningful period-to-period comparisons of our ongoing operating results. Refer to Note 20. Management Succession Costs of the Notes to Consolidated Financial Statements for additional information about management succession costs incurred during the year 2020.

The tables included below reconcile each non-GAAP financial measure to the most comparable GAAP financial measure.

The table below provides a reconciliation of cash provided by continuing operating activities to free cash flow:

The table below provides a reconciliation of income from continuing operations as reported to adjusted income from continuing operations and adjusted diluted earnings per share from continuing operations:

(1)     Impact on tax provision was calculated using the enacted rate for the relevant jurisdiction for the years ended December 31, 2021, 2020, and 2019, respectively. In 2020 and 2019, we have also included certain discrete adjustments related to management succession costs and restructuring related costs, respectively.

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The table below provides a reconciliation of net income to EBITDA to Adjusted EBITDA:

The tables below provide a reconciliation of segment operating profit to segment adjusted operating profit and segment Adjusted EBITDA:

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We evaluate our results of operations on both as reported and a constant currency basis. The constant currency presentation is a non-GAAP financial measure, which excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our financial results in local currency for a period using the average exchange rate for the prior period to which we are comparing. This calculation may differ from similarly-titled measures used by other companies.

The non-GAAP financial measures disclosed in this Annual Report on Form 10-K are not intended to nor should they be considered in isolation or as a substitute for financial measures prepared in accordance with U.S. GAAP.

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Results of Continuing Operations

A discussion of our results of operations for 2021 compared to 2020 is set forth below. For a discussion of our results of operations, including our segment results of operations, for 2020 compared to 2019, refer to the discussion under the sub-caption "2020 Compared With 2019" in Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II of our Annual Report on Form 10–K for the fiscal year ended December 31, 2020, which discussion is incorporated by reference herein.

CONSOLIDATED RESULTS OF OPERATIONS