JBT Marel Corp (JBTM) 2008 Q2 法說會逐字稿

Good morning.

My name is Carrie and I will be your conference operator today.

At this time, I would like to welcome everyone to the JBT Corporation second-quarter conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session.

(OPERATOR INSTRUCTIONS) Thank you.

I would now like to turn the conference over to the Cindy Shiao, Director of Investor Relations.

Ma'am, you may begin.

Good morning.

Welcome to JBT Corporation second-quarter 2008 earnings conference call.

First of all, I want to apologize for the delay.

We had a technical difficulty with the call center, so sorry for the delay.

Our press release and financial statements were issued yesterday.

If you do not have a copy, the information can be accessed through our website.

During our call any comments and reference to 2007 and 2008 earnings per share are to pro forma earnings per share.

Additionally, we will reference earnings from continuing operations which excludes results from two small FoodTech product lines we exited in 2007.

Historical results have been revised to reflect these operations as discontinued.

I would like to caution you with respect to any forward-looking statements made during this call.

Although these forward-looking statements are based on our current views and assumptions regarding future events, future business conditions and the outlook for us based on current available information, these forward-looking statements are subject to certain risks, uncertainties that could cause actual results to differ materially from those expressed and/or implied by these statements.

I refer you to our disclosures regarding risk factors in our information statement filed with the Securities and Exchange Commission.

Now I would like to turn the call over to Charlie Cannon, JBT Corporation's Chairman and CEO.

Thanks, Cindy.

Good morning and welcome to JBT Corporation's second-quarter of 2008 earnings call and our first call as an independent public (technical difficulty).

Joining me today is Ron Mambu, our Chief Financial Officer.

As most of you know, we completed our tax-free spinoff from our parent company, FMC Technologies on July 31 and our common stock began trading on the NYSE under the ticker symbol JBT on August 1.

100% of the approximately 27.6 million shares of JBT Corporation common stock were distributed in the spinoff.

For the benefit of those of you on the call who might not be fully familiar with our company, we are a leading global solutions provider in the food processing and air transportation industries.

We design, manufacture, test (inaudible) service technically sophisticated systems and products for multi-national industrial food processing customers throughout our JBT FoodTech segment and similarly to domestic and international air transportation customers through our AeroTech segment.

We do this through our various sales, service, manufacturing and sourcing operations located in over 25 countries.

I would like to take this opportunity to thank each and every one of our 3100 employees around the world for the continued hard work and dedication to JBT as we embark on this new path.

Based on our top management teams nearly 20 years of average tenure and international diversity, I am confident that we are well positioned to capture future growth opportunities.

Ron and I have spent the last few weeks on the road meeting with investors and analysts around the country.

We were delighted to have had the opportunity to introduce our company to Wall Street and are pleased to make this our first earnings report with another quarter of solid performance.

I will first give you some highlights for the quarter, then Ron will provide you with additional details on our second-quarter results, our 2008 guidance and the assumptions behind it.

And then finally, we will open up the call for questions.

In the second quarter of 2008, we posted year-over-year revenue and operating profit increases in both segments.

JBT Corporation total revenue was up 16% over last year's second quarter and net income was also up 67% over the prior year quarter.

JBT FoodTech which accounts for approximately 60% of total revenue and operating profit saw revenue increase by 5% while operating profit was up 52% from the prior year quarter.

Favorable product mix and robust aftermarket performance helped boost margins.

As you saw JBT FoodTech backlog lagged the second quarter of 2007 due primarily to timing of orders expected in the first half that were delayed.

However, we are encouraged by recent order activity and expect the third quarter inbound.

You may have seen a press release this morning announcing two recent orders.

The first is a $17 million contract to provide coating, frying, cooking and freezing solutions at a new meat and poultry plant in North America.

These protein processing solutions were developed together with the customer in our state-of-the-art FoodTech Center in Ohio.

The second order is an $11 million contract for a state of the art automated batch retort system by a European headquartered food company with operations in the US.

This system marks an important order for JBT FoodTech as we continue to lead the market in the introduction and sales of technically sophisticated in container sterilization equipment.

We are forecasting completion of these orders early in 2009.

The outlook remains encouraging for the global food processing industry.

We anticipate continued global demand in freezing within the bakery market, and freezing and food processing within the fruit and vegetable markets particularly in Asia, Middle East and Eastern Europe offset somewhat by a slowing poultry segment due to higher energy and feed costs.

Moving to the JBT AeroTech segment which is about 40% of JBT's revenue and operating profit, revenue increased 35% over last year's second quarter.

Operating profit was up 62% from the prior year quarter with the increased volume driving better operating margins.

As you can see, JBT AeroTech backlog is also running behind second quarter of 2007 and as you know, airline and air freight companies are facing major challenges.

We are seeing weakness in ground support equipment demand particularly among air freight and US airline customers, but helping us to offset this weakening are three things.

First, Congress has funded the Air Force Halverson loader program for the next two years.

The production order which we expect later this year, is not reflected in today's backlog.

Second, we are seeing growing opportunities for our airport service business as airport authorities continue to outsource to reduce costs.

Third, interest in our preconditioned air and 400 hertz [8] equipment is increasing as airlines and airports are looking to minimize aircraft fuel usage while sitting at the gate.

So in summary, we continue to post profitable growth in the second quarter and are currently forecasting record revenue and profit in both segments for the full year 2008 based upon our strong first-half results.

However, we expect the second half to be behind the same period of 2007 due to the timing of orders in our FoodTech business and slowing market conditions for the AeroTech business.

Now I will turn it over to Ron Mambu to provide you with some further details of the quarter.

Thanks, Charlie.

We had a solid quarter with revenue increasing 16% over last year's second quarter to $276.7 million and net income increasing 67% over the prior year quarter to $13 million.

On a pro forma basis, diluted earnings per share were $0.42, up 91% from over last year's second quarter.

Turning to segment results, JBT FoodTech revenue increased 5% over last year's second quarter to $159.9 million primarily due to foreign currency translation effect.

Segment operating profit was up 52% from the prior year quarter to $15.8 million and segment operating margin increased to 9.9% of revenue compared to 6.8% in the prior year quarter.

Freezer sales in Europe were strong and we benefited from higher aftermarket business in North America and from higher poultry sales in Latin America.

Despite the large meat and poultry order Charlie mentioned, a rebound in the North American poultry market has not fully materialized as the industry faces higher energy and feed costs.

Second-quarter segment operating profit benefited from the steady growth in our higher margin aftermarket business.

Inbound orders in this segment totaled $147 million, up 3% over last year's second quarter although backlog declined 12% versus the prior year quarter to $154.7 million.

We are, however, encouraged by the recent order activity.

JBT AeroTech revenue increased 35% over last year's second quarter to $117 million and operating profit was up 62% from the prior year quarter to $10.5 million.

Higher ground support equipment volume specifically strong cargo loader sales to international Airlines drove the increase.

Passenger boarding bridge sales to domestic airport authorities also contributed to the year-over-year increase as well as our growing airport maintenance services business.

AeroTech operating profit of $10.5 million is 62% over the prior year quarter.

Segment operating profit as a percent of revenue is 9% for the quarter compared to 7.5% in the prior year quarter.

Segment operating profit and margin during the quarter were both driven by the higher sales volume.

Inbound orders in this segment totaled $98.9 million, down 24% from last year's second quarter and backlog decreased 17% from the prior year quarter to $187.6 million.

On a year-to-date basis, corporate expenses were in line with the prior year level, our effective tax rate was 35.7% and cash flow from continuing operations totaled $22.9 million, up 86% versus last year.

This includes capital expenditures of $12.2 million which remained stable at 2.3% of revenue and year-to-date depreciation and amortization of $12.6 million.

Working capital excluding cash was $61.2 million at the end of the quarter.

This represents 5.7% of annualized sales.

In connection with the spinoff, JBT issued 75 million of 6.7% senior unsecured notes and private placement and entered into a five-year $225 million revolving credit facility.

On July 31, we paid an initial dividend of $150.5 million to FMC Technologies in connection with the spinoff.

The final dividend amount will be determined by a true-up process later this year.

Finally, regarding our outlook for 2008, we expect year-over-year revenue growth in the range of 6% to 10% and fully diluted earnings per share on a pro forma basis in the range of $1.30 to $1.40 per share.

This revised guidance is $0.05 per diluted share higher than our prior guidance due to a reduction in the pro forma debt balance and a slight reduction to our full-year effective tax rates.

Our operating segment assumptions are unchanged.

The outlook assumes a full year of interest expense on $150 million of debt, and corporate related expenses in line with the prior year.

In summary, we reported a strong quarter with diluted earnings-per-share on the pro forma basis of $0.42, up 91%.

We reported segment operating profits up 52% in JBT FoodTech and up 62% for JBT AeroTech.

And we reported continued strong cash flow and efficient management of capital.

With that, we would like to take your questions.

Operator, would you please open the call for questions?

(OPERATOR INSTRUCTIONS) Justin Boisseau, Gates Capital Management.

Thanks.

I was wondering first if you could tell me what estimate you might have for the true up on the payment to parent company later this year?

Justin, the true up is going to be determined probably early in the fourth quarter, late third quarter.

It is subject to the formula that is in the separation and distribution agreement.

So it is not just a straight calculation from July 31 results.

We need to get some of the allocations on our corporate balance sheet.

So I don't have an estimate for you right now.

It includes other things that involve pension, adjustments as well.

So we will know that later in the quarter probably.

Okay.

And then make sure I understand your guidance right because I thought I heard it differently maybe on the call than it was in the press release.

But you are expecting sales in the third and fourth quarter to be down year-over-year and for the full year to be up 6% to 10%, is that correct?

That is correct.

We are giving full-year guidance only.

That is going to be our policy going forward versus quarterly.

And so our full-year guidance is topline growth in the range of 6% to 10% and our total earnings per share of $1.30 to $1.40.

And I think given where we are through June and the strong second quarter performance that we are getting more comfortable in the upper end of those ranges.

And then you talked about the cash flow for the first half of the year, what cash flow expectations do you have for the back half?

Again, we are only going to give full-year guidance.

We're at almost $23 million for the June period -- through June.

We are thinking that cash flow -- this company has been a strong cash flow generator, we think we are going to move forward, we're not going to go back.

But apart from that, I am not prepared at this time to give you a specific point estimate.

Okay, that is it for now.

Thanks.

(OPERATOR INSTRUCTIONS) There are no further questions at this time.

I would like to turn the call back over to management.

This concludes our second-quarter conference call.

A replay of our call will be available on our website beginning at approximately 2 p.m.

Eastern time today.

If you have any further questions, please feel free to contact me.

Thank you for joining us today.

Thank you for your participation.

This does conclude today's conference.

You may now disconnect.