Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, our Annual Report on Form 10-K and other materials filed or to be filed by us with theSecurities and Exchange Commission , as well as information in oral statements or other written statements made or to be made by us, contain statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are forward-looking statements. You can identify these forward-looking statements by the use of forward-looking words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates," "foresees" or the negative version of those words or other comparable words and phrases. Any forward-looking statements contained in this Form 10-Q are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. These forward-looking statements include, among others, statements relating to the expected impact of the COVID-19 pandemic on our business and our results of operations, our plans to mitigate the impact of the pandemic, our strategic plans, our restructuring plans and expected cost savings from those plans, our liquidity and our covenant compliance. The factors that could cause our actual results to differ materially from expectations include but are not limited to the following factors: •higher energy and other input costs adversely impacting financial condition of our customers, especially inEurope , and demand for our goods and services from our customers; •impact of the on-going COVID-19 pandemic on our ability to operate our business and facilities, on our customers, on our workforce resulting in higher labor absenteeism, on our supply chains due to extended delivery times and unavailability of required components, labor and freight, on our cost of labor due to higher labor turnover and shortage of skilled labor and on the economy generally; •fluctuations in our financial results; •unanticipated delays or acceleration in our sales cycles; •deterioration of economic conditions; •disruptions in the political, regulatory, economic and social conditions of the countries in which we conduct business; •changes to trade regulation, quotas, duties or tariffs; •risks associated with acquisitions or strategic investments; •fluctuations in currency exchange rates; •increases in energy or raw material prices, freight costs, and inflationary pressures; •changes in food consumption patterns; •impacts of pandemic illnesses, food borne illnesses and diseases to various agricultural products; •weather conditions and natural disasters; •impact of climate change and environmental protection initiatives; •our ability to comply with the laws and regulations governing ourU.S. government contracts; •acts of terrorism or war, including the current conflict betweenRussia andUkraine ; •termination or loss of major customer contracts and risks associated with fixed-price contracts, particularly during periods of high inflation; •customer sourcing initiatives; •competition and innovation in our industries; •difficulty in implementing our business strategies, including the timing of our previously announced review of strategic alternatives for the AeroTech platform, our ability to identify or develop any strategic alternatives, execute on material aspects of such strategic alternatives, and whether we can achieve the potential benefits of such strategic alternatives; •our ability to develop and introduce new or enhanced products and services and keep pace with technological developments; •difficulty in developing, preserving and protecting our intellectual property or defending claims of infringement; •catastrophic loss at any of our facilities and business continuity of our information systems; •cyber-security risks such as network intrusion or ransomware schemes; •loss of key management and other personnel; •potential liability arising out of the installation or use of our systems; •our ability to comply withU.S. and international laws governing our operations and industries; •increases in tax liabilities; •work stoppages; •fluctuations in interest rates and returns on pension assets; •availability of and access to financial and other resources; and 24
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•the factors described under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q.
In addition, the uncertainty surrounding the COVID-19 pandemic and in global economic conditions can result in substantial volatility in our operating results depending on economic environment in the markets we serve. Given the highly fluid nature of the COVID-19 pandemic and current deteriorating global economic conditions, it is not possible to predict all such risks and uncertainties. Refer to the section below titled "Business Conditions and Outlook" in this Form 10-Q for additional information. If one or more of those or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Consequently, actual events and results may vary significantly from those included in or contemplated or implied by our forward-looking statements. The forward-looking statements included in this Form 10-Q are made only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement made by us or on our behalf, whether as a result of new information, future developments, subsequent events or changes in circumstances or otherwise.
Executive Overview
We are a 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 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.
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.
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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 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.
Business Conditions and Outlook
During the third quarter of 2022, demand for our goods and services has declined
in
Despite the continued growth in our revenues, our operating margins declined in
the current year due to the challenges associated with supply chain disruptions,
high inflation, and labor availability affecting both FoodTech and AeroTech.
Unlike in the past, where our JBT Business 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
these trends to continue throughout 2022, and potentially be further impacted by
the ongoing conflict in
As a result of the war in
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