JBT MAREL Corp (JBTM) FY 2022 MD&A

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.