JBT Marel Corp (JBTM) 2016 Q4 法說會逐字稿

Good morning and welcome to JBT Corporation's fourth-quarter 2016 earnings conference call. My name is Sally and I will be your conference operator today. (Operator Instructions) I will now turn the call over to JBT's Director of Financial Planning and Analysis, Mr. Jeff Scipta, to begin today's conference. Please go ahead.

Thank you, Sally. Good morning, everyone, and welcome to our full-year 2016 conference call. With me on the call are our Chairman, President, and CEO, Tom Giacomini, and our Executive Vice President and CFO, Brian Deck.

Before we begin, I would like to remind everyone the forward-looking statements in today's call are subject to the Safe Harbor language in yesterday's press release and 8-K filing. JBT's periodic SEC filings also contain information regarding certain risk factors that may have an impact on our results. These documents are available on our investor relations website.

Also, our discussion today includes references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measure can be found within our earnings announcement.

Now I would like to turn the call over to Tom.

Thanks, Jeff, and good morning. 2016 was another great year for JBT. For 2016, revenue increased 22% due to robust organic growth and our disciplined acquisition program. Segment operating income expanded 28%, with margin gains at both FoodTech and AeroTech. Diluted EPS of $2.28 compared to $1.88 in 2015, with adjusted EPS of $2.56.

Just as important as our solid financial gains in 2016 are the continued actions we've taken and the investments we have made that strengthen JBT for the future. Through new product development and acquisitions, we have expanded our protein and liquid foods portfolios, establishing more comprehensive product lines that enhance our service and importance to customers. In 2016, we increased R&D spend 30%.

In addition to ongoing development of new protein and liquid foods products, we've committed significant resources to iOPS, JBT's Internet of Things initiative. The interconnection of our equipment is designed to deliver significant benefits for our customers and JBT.

For customers, it means we can proactively identify and diagnose issues, improving yields, throughput, and uptime, maximizing profits for our customers. For JBT, it means a deeper relationship with our customers and improved aftermarket opportunities.

On the acquisition side, we completed the acquisition of C.A.T. and Tipper Tie in the fourth quarter of 2016, both of which complement our protein portfolio. While it's only been a few months, we are already pleased with how they are bringing us closer to key customers, blending into the One JBT culture, and capitalizing on our collective resources.

And, as we announced yesterday, we completed acquisition of Avure Technologies. As I'll discuss in a few minutes, it adds a very exciting and important technology to JBT.

We are also pleased with the returns on the investments we've made in our aftermarket business, where we have added sales and service people to allow us to better serve our customers. In 2016, aftermarket revenues increased 17%. With the addition of the consumables business from Tipper Tie and continued strong growth in our aftermarket business across JBT, we expect recurring revenue to return to approximately 40% of total sales in 2017.

On a macro basis, we foresee strong market opportunities created by a growing middle class and the resulting demand for more value-added food in developing markets. As we've discussed before, we've positioned JBT and its global footprint to capitalize on this long-term potential.

In Asia, we upgraded and expanded our team in 2016. Early in the year, we opened the innovation center in China, which is a cornerstone of our customer engagement activity. During 2016, we completed several multi-day tech seminars and hosted more than 40 customers, with many more seminars and customer visits planned for 2017. We are already seeing the benefits of our investment in Asia with strong revenue growth of 13% in the region in 2016.

Our relentless continuous improvement program, or RCI, has also been a significant contributor to our progress and has strengthened our competitive position. Over the last three years, we captured annual manufacturing productivity improvements of greater than 5% and reduced warranty costs by more than 25% as a percentage of sales.

I will next turn it over to Brian to provide color on our 2016 performance and guidance for 2017. Brian?

Thanks Tom, and good morning, everyone. For 2016, JBT's performance remained strong across the board. Our revenue growth of 22% was above expectations, driven by organic growth of 9% compared to our previous estimate of 7%. This includes 5% organic growth in the fourth quarter.

Acquisition-related growth for the year was 13%, as expected. In addition to solid equipment shipment levels, we were very pleased with the return we've seen on our investment in JBT's aftermarket business.

On a segment basis, FoodTech posted revenue growth of 28% in 2016, including 9% organic growth, while AeroTech posted revenue growth of 10%, all organic. Both FoodTech and AeroTech segment operating margins were ahead for the year, with a 56-basis-point improvement overall.

AeroTech's segment margin expanded 70 basis points as we leveraged SG&A expense over a higher revenue base. FoodTech margins were up 42 basis points and would have been higher excluding the costs associated with the year-end acquisitions of C.A.T. and Tipper Tie. Benefits from our sourcing initiatives, optimization efforts, and value selling contributed to margin gains while also funding investments for our future.

We ended the year with particularly strong margins in the fourth quarter, as we had first-rate execution and leveraged higher volume. C.A.T and Tipper performed slightly better than expectations, and we captured an additional $1 million of restructuring benefit ahead of schedule, bringing the full-year 2017 benefit to $4 million. As such, we now expect additional benefits of $3 million in 2017 and $1 million in 2018.

Inbound orders were ahead 11% for full-year 2016, with a 15% increase at FoodTech. As we look ahead to 2017 orders, we are seeing strong customer activity across protein and liquid foods, including project discussions and quote activity. This gives us confidence that the business is trending in line for our expectations for the year.

2016 corporate expense was 3.2% of revenue, in line with our most recent expectations. Net interest expense of $9.4 million was less than expected, primarily due to higher interest income, favorability on acquisition-related financing, and debt reductions during the quarter.

Our income tax rate was about 28% versus 32% in 2015. Excluding a discrete $1.5 million or $0.05 per share favorable adjustment taken in the third quarter, our normalized tax rate was 29% for 2016.

As for working capital management and cash flow, we had projected a full-year free cash flow conversion rate of about 80%, including $11 million in pension contributions -- excuse me, excluding $11 million in pension contributions. Our inventory performance was better than expected. While organic revenue expanded 9%, inventory was only 3% for the year, excluding acquisitions. However, we fell short of our cash flow projection with a conversion rate of 64%.

Year-end receivables increased due to higher-than-expected shipment levels, particularly in the month of December. And customer prepayments were down relative to a markedly strong fourth quarter of 2015.

Turning to the balance sheet, we were able to get our year-end 2016 debt leverage ratio under 3 times, including the acquisition of C.A.T and Tipper Tie, due to our strong fourth-quarter cash flow. Including the Avure acquisition, we are back to about 3.2 times. Absent additional acquisitions, we expect to get debt leverage below 3 times by year-end 2017.

Finally, let me comment on our 2017 guidance. For the year, we anticipate revenue growth of approximately 15%, reflecting organic growth of 3% to 5% and growth from completed acquisitions of about 11%. We expect total segment operating expansion of about 50 basis points relative to 2016.

Corporate expense should be a little less than 3% of revenues, and interest expense of about $19 million to $20 million, including the full cost of debt associated with the three recent acquisitions. We expect stronger cash flow in 2017, with a free cash flow conversion of about 90%, excluding planned pension contributions.

The tax line is a little complicated. We expect our 2017 normalized tax rate to be 30% to 31%, higher than the normalized tax rate in 2016 as a result of higher US-based earnings mix. However, under new GAAP rules adopted in 2017, we will change the way we recognize the tax treatment related to the difference between the vesting price and the grant price of employee stock compensation.

Previously, this was reflected as an adjustment to book equity. As of 2017, it will run through the income statement, and this change has no impact on cash flow. The favorable impact of this change is expected to be $6 million in the tax line or $0.20 per share.

Removing the earlier-mentioned discrete tax benefit of $0.05 in 2016 and adjusting for the slightly higher normalized tax rate in 2017, we expect to have a net year-over-your tax benefit of about $0.10 per share. All said, we are guiding to earnings per share of $3.05 to $3.20 in 2017, including a net tax benefit of $0.10 and the dilutive effect of the Avure acquisition of about $0.05.

Because the full stock comp benefit of $0.20 per share will be recognized in the first quarter of 2017, we expect a net tax gain for the quarter. Excluding this tax benefit, the Company expects first-quarter 2017 earnings to be roughly flat year over year due to the impact of acquisition accounting and the higher interest expense associated with acquisition financing.

With that, I'll turn the call back to Tom.

Thanks, Brian. In November 2016, we introduced our three-year Elevate strategy, building upon the organizational and cultural changes that have created strong growth and margin expansion under Next Level.

The key components of our Elevate strategy include accelerating new product development, growing our recurring revenue stream, executing on selected high-impact organic growth initiatives, and advancing our disciplined acquisition program.

With Elevate, we see JBT as a $1.7 billion to $1.8 billion company by 2019 with EBIT margins north of 10%. We expect to achieve annualized revenue growth of 10%, including 3% to 5% organically and 6% to 7% from acquisitions. This growth, along with our margin expansion program, gets us to annual earnings-per-share growth of about 15% while delivering 15% return on invested capital.

As acquisitions are an important part of our growth plan, let me give you some color on our deal announced yesterday. Avure Technologies is a leading provider of high-pressure processing systems known as HPP.

HPP is a cold pasteurization technology that ensures food safety without heat or preservatives. As a result, it maintains fresh food characteristics such as flavor and nutritional value. We have carefully studied HPP and associated end markets for the last few years.

JBT has long been a leader in other areas of food preservation. Avure brings a new and very exciting technology, one we expect to generate double-digit growth. Together, our portfolio now includes comprehensive thermal and nonthermal food preservation solutions with broad application across both protein and liquid foods.

HPP is gaining rapid acceptance in the food industry, addressing the trend towards clean labels, the need for higher food safety, and the growth in organic foods. Larger protein producers have already started to use HPP. For example, it can ensure safer lunch meats that have longer shelf life without the need for added preservatives.

Liquid foods customers use it in the high-growth market for premium, cold-pressed blended juices. You might have also seen HPP-processed avocado-based dips in your supermarket.

As part of JBT, Avure will benefit significantly from our global sales force and service support, extensive customer relationships, our RCI efficiency improvements, and our commitment to investing in the development of next-generation equipment.

As we've discussed in detail, acquisitions like Avure, C.A.T., and Tipper Tie enhance JBT's ability to provide comprehensive solutions, enriching our value to customers. I saw this demonstrated at the recent poultry show in Atlanta, which is a key annual event in the industry.

Our expanded solutions really resonated with customers. We had a nice pickup in the number of visitors and project leads. Based on customer input, we foresee a favorable outlook for the poultry industry this year.

As Brian and I talked about today, we are pleased with the strong growth and margin expansion we achieved in 2016. Moreover, we are encouraged by the investments and actions we've taken to enhance JBT's product portfolio and strengthen our prospects moving forward.

Our RCI program continues to make us more productive, profitable, and a stronger competitor. Our internal product development efforts and the complementary products we have added through acquisition have expanded our market potential and made us a more valuable partner to our customers.

With that, we will open the call to your questions. Operator?

(Operator Instructions) Chris McGinnis, Sidoti & Company.

Thanks for taking my questions. Congratulations on a strong quarter. Tom, you quickly touched on it I think in your opening remarks about iOPS. Can you maybe just talk about where it's with the portfolio currently and your expectations of how long it will take to get it to where you want in the portfolio?

Sure, Chris. IOPS is an initiative that I'm really encouraged about. As I think about it, we are trying to drive yields, throughput, quality improvements for our customers. And the iOPS really allows us to take all the various equipment that we manufacture and pull it together in a comprehensive solution, and then to monitor it for our customers and provide them feedback in real-time.

We've put the basic framework, or described as the programming side, in place to facilitate the interconnection of our equipment. And now we are in the early stages of doing some demonstrations and interactions with the customers. And I'd say we will be doing that for the greater part of the next year, here in 2017, and then I expect us to really start to gain some traction in 2018 based on that feedback from our customers.

But for JBT, this is really about pulling together our strategy around comprehensive solutions and then putting that together with the iOPS. And just becoming a much more valuable partner to our customers and helping to drive their businesses, which I think and believe in the long run for JBT is great from our perspective, too.

Thanks for that, and I appreciate it. Good luck in 2017.

Larry De Maria, William Blair.

Couple questions. Curious that the segment expectations of 3% to 5% organic, how are you thinking about both the segments? And obviously, you finished up the year strong organically and you had a good year overall organic. Is there anything out there that the market is changing, why we are still looking at 3% to 5% organic versus 9% you just did for 2016? So just by segment and why the slowdown, if there's anything out there.

So the 3% to 5%, that applies to both Food and Aero. And it's consistent with our Elevate strategy. We still see the markets as strong, but that's consistent with our overall framework on revenue growth.

By segment, both of them are in that 3% to 5% range is the way you are thinking about them for this year?

Correct.

Just to answer the second part of your question, as we see the markets develop, obviously we keep a monitor of both the Food and Aero order activity. And we continue to be encouraged by the signals we're getting from the marketplace.

But as we put our framework out here, we felt it was good to stay consistent with our Elevate commitments, and we plan to deliver on those. And we will continue to work hard to drive the business forward.

Okay. So in other words, the fundamentals are still pretty good. It obviously makes sense in February to be where you are.

Yes, they are. And fundamentally, the markets are solid. And we're working on our initiatives both internally and externally. And we are comfortable and confident about the guidance we are putting out there for this year.

Okay, thank you. And what would you think or point towards the downside risks in the outlook? We've had a good protein cycle, obviously. But to see, actually, the protein outlook flow or decline or have a negative comp or something, what would you guys think need to happen in the next maybe year or two? Because we've had a good cycle, so just curious what you see as the downside risks.

It would have to be a major structural change in the industry, that something of a significant confidence, Larry. Because what I would guide you to is if you read a lot about where our customers are heading, they are moving from transforming poultry in its basic form to more value-added foods. Right?

And that's what JBT equipment does. We allow them to deliver more value-added foods, which increases their value to the consumer. So as you look about where they are heading with their portfolios and where they are steering their ship, it's really consistent with what JBT does. So it would have to be something significant that caused them to change that strategy or affected their ability to invest, which we don't see any sign of right now.

Higher commodity prices? Would that affect them very much in terms of squeezing their margins? Is that something you'd be worried about?

It would have to be in the instance that they couldn't price that pass through, Larry. And what I would remind you of is protein continues -- in the developed world and in the developing world, protein continues to be a more important part of a consumer's preference of what they want to eat.

So there's just a strong macroeconomic tailwind that's behind it. People want to eat healthy. They want to eat quality. And then they want to eat more convenient foods, so they want the protein and they want it in a more value-added form, which is exactly where JBT is at.

So from my perspective, to answer your question specifically on commodity prices, it would just be to the extent that they can't pass that through. But as they go up that value curve and provide more value to the consumer, their pricing power and our ability to price for that goes up, too.

Understood. And then I'll just ask one last one and I'll jump off, thanks. Can you just -- that makes a lot of sense and it is helpful. Can you talk about the M&A pipeline? Obviously you announced a new deal today or last night, rather.

Just how it looks, when you might be able to digest and keep going forward with your strategy. And are you looking at any non-meat protein businesses out there to diversify your protein lineup?

We continue, as you know, to have an active pipeline at JBT. And we are looking at both sides, liquid foods and protein, for future opportunities. And it's all to do with our ability to mature those opportunities, get them at the right price, and have economics work for our shareholders.

As you know, we are really disciplined about the way we go about our M&A. But I would tell you that are pipeline is deep and we continue to see opportunities going forward. Although we've made some nice additions to JBT, we are still operating in very large and fragmented spaces. And from our perspective, we see these opportunities going forward, and I'm encouraged about our ability to act on those.

Understood. Okay. Thanks very, very much.

Walter Liptak, Seaport Global.

Congratulations on a strong year. I wanted to ask about -- the revenue growth, the revenue number was better than we expected. So I wonder how did that come in versus your expectation for the quarter?

And I'm thinking about factory throughput and how you performed on shipments. I wonder if you can provide any details there.

Sure, Walt. As you know, and you've tracked us for a few years now, fourth quarters are large at JBT. Right? And as we've always said, there are customer preferences that might move an order in or out within a quarter due to the facility or their project management.

In this particular quarter, the fourth, we had expected a reasonable amount of those orders to slide out, as we always do. And we just had a little better strength in that area. And it wasn't any one specific trend or anything that happened.

And as a result, we do leverage well as a company on volume. And we saw it come through in the strengths of the margins, both in Food and Aero. And we are encouraged by that. And from my perspective, it was a strong and solid quarter, and the JBT folks executed very well on the opportunity.

Okay, great. And with your comments about the sector growth in FoodTech, which of the food categories do you think are growing faster? Is it on the protein side with more prepared foods, or is it liquid foods that you are seeing a better 2017 outlook?

As we look at it, certainly protein, as we talked about, has very strong tailwinds behind it. And we're seeing our customers having continued strength in their results.

On the liquid food side, we are seeing the new products -- the blended juices, the high-quality foods, the convenience foods that have dairy and other blends in them -- as being very strong. And as we have continued to talk about, there's a little softness on some of the traditional core pieces around just the straighter dairy or the milk-related products and some of the cheese that comes out of there. And that continues to be a business that sees a little pressure and challenge.

And from our perspective, it developed materially, as we had anticipated, through the year. And as we ended the year, we were encouraged by the project activity we were seeing in our liquid foods business and our expectation for orders to develop around that.

If you look across the geographies. North America remained strong for both businesses. Europe was strong for protein, a little bit weaker for liquid foods. Asia and Latin America both had very solid years across both categories.

So from our perspective, if we just think about our geography and where we are positioned in it, and equally important, the investments that we are making in those new products that help us grow, we've got a good degree of confidence around our opportunity this year and encouraged to go execute on the year and delivering on our Elevate strategy.

That sounds great. I wonder, with that sort of an outlook, you've had material costs that have been going up recently. Are you able to pass material costs along, especially with larger projects?

There is a bit of a timing issue for us, but we do try and stay in front of material costs. And one of the things we've been working hard at is our supply chain program, which is a nice counter to that. And we look to work across that divide, Walt.

But if you think about JBT products, the base commodities, with the exception of maybe the jet bridge business, where we are a large user of basic carbon steel, most of our products are a combination of much higher value-added components like pumps and controls, etc., and it doesn't seem to swing or shouldn't swing as dramatically as more of a base commodity material. But I will tell you that we keep a very careful eye on it and we adjust our pricing expectations accordingly, given the changes in materials.

Okay. All right, thanks. And Brian, I wonder if I could just ask you about purchase accounting. What was the dollar amount of purchase accounting in the fourth quarter and for the full year?

We actually don't disclose that, Walt. But what I can tell you is if you look at the contribution by C.A.T. and Tipper Tie for the fourth quarter, it was about a $0.05 negative impact versus we had previously expected $0.06 to $0.10. So a little bit better than expectations.

The purchase accounting is always really tricky to try to predict upfront. But overall, basically what you are talking about in purchase accounting is you've got the step up in the inventory, which runs through your cost of goods sold, as well as your amortization expense, including some short-term amortizations on the acquired IP, etc. So it did have an impact of about $0.05 in the fourth quarter.

Okay. All right, thank you.

George Godfrey, CL King & Associates.

Congratulations on a great year in 2016. I just had a couple of questions. I heard you give the organic growth rates on the full year. Could you tell me what the organic growth rates were by segment in the quarter?

By segment in the quarter. So total organic growth rate was 5% for the year, and it was about -- FoodTech was about 4% and AeroTech was about 8%.

FoodTech 4% and AeroTech 8% in the quarter.

Correct.

Okay. And then I just wanted to ask about the inbound order trend. And I know you had a tough compare a year ago, but FoodTech down 1% and AeroTech down 21%. Could you just talk about what the order flow this fourth quarter was, maybe relative to prior quarters?

Sure, George. Fourth quarter last year was exceptionally strong quarter for us. And as we entered the year and exited the year, we did not have an expectation of performing at that level or topping that, clearly, given the tremendous strength we had fourth quarter of last year.

And if you just kind of look at the total order book, how it is developing and the backlog as we are starting the year here, it's very much consistent with our ability to deliver on the guidance we are providing for 2017. And I'm comfortable that we are on track to do just that.

Got it, okay. And I'll just ask one last question on the FoodTech inbound orders. Could you tell me how much Tipper Tie and C.A.T. contributed to the orders in Q4?

From my perspective, we are just focused on the guidance for 2017, which -- where we broke out the 3% to 5% growth organically and the 11% from acquisition. And you should expect our orders to be developing materially that way as we go through the year.

Okay, and then last question. CapEx: roughly flat on a dollar basis each of these last three years. How do you think that trends as we look to 2017 and 2018?

Sure. Generally, George, it's going to be about 3% of revenues. And with the 3 recent acquisitions, that would suggest we will be about somewhere between $45 million and $50 million in 2017. And absent new acquisitions, a similar rate in 2018.

Got it. All right. Thank you very much.

(Operator Instructions) David Stratton, Great Lakes Review.

Thanks for taking the questions. Most have been answered already. I was wondering if you could talk a little bit about Avure and just the run rate for which you see synergies taking place and shaping up over the year and into 2017.

Right. Thanks for the question about Avure. I'm very excited about this acquisition. It's a technology, as I mentioned in my comments, JBT has studied for a long time. And it's just so complementary to what we do.

If you think about our history as a company, JBT really started in food preservation with some of the early canning technology, and we've played a role over so many years in doing this. And Avure and HPP is clearly the new technology that's emerging that's important.

And the reason being is consumers want fresher foods with clean labels. The HPP technology just plays really strongly into that. And from our perspective, we're just really pleased and excited to have the Avure team and the technology as part of our business.

As you look at the end-market growth rates as we've studied them, they are growing in double digits, low double digits, which is very exciting for a food business to grow at that rate. And that's expected to continue for a number of years.

So from our perspective, certainly, there's top-line runway. And how we accelerate that is Avure was a small company, and it certainly did not have a global sales force that could participate at the level of JBT or the service to supports the machines installed around the world. And then last, and equally importantly, we bring to the table purchasing synergies, the ability to help them improve their operations with RCI and to bring leverage on the cost side.

So from our perspective, we believe we are catching Avure at an excellent time early in the growth and implementation of HPP. And we feel JBT is positioned as a company to make this a main line technology with a broad base of installation going forward. So we think this is an important deal for JBT and our shareholders, and we are really excited to bring it to the table this week.

Thank you.

Larry De Maria, William Blair.

Just to follow up, sound like you didn't want to give specific organic orders in the quarter, but I'm not sure. So I want to give you the chance to say what they were. I assume they were obviously down, obviously.

And secondly, the past few years, the organic growth in orders and sales had been driven a lot by pricing, I believe, and volume also. But I think pricing was a big driver. So just curious about thinking about going forward, where you stand in terms of being able to drive further pricing in the outlook.

Because I know you've gotten a lot of low-hanging fruit already. So where we stand there and what the organic orders were in the quarter would be helpful. Thanks.

Larry, as I mentioned, the fourth-quarter comp was a very difficult one. We wouldn't have expected and did not top it year over year. So they were indeed down, but that was very much consistent with our expectations. And we believe the order book is developing and the project activity is developing to deliver on the growth we are guiding to for this year.

On the topic of pricing, obviously we try to think about the total value we create for our customers and the initiatives around more comprehensive solutions, increasing yield. Creating profits for our customers continues to create opportunities for us to participate in that profit creation and help our customers and help ourselves win. So we see those opportunities going forward.

And from my perspective, I'm very much a believer that as long as we remain true to helping our customers profit and improve their productivity, their yield, their throughput, JBT will continue to see those opportunities going forward.

Understood. And then something that just came up -- the Avure acquisition, where would that fit into your processing chart?

Yes, we have an M&A primer, Larry, that we have updated on the web. And we'd encourage you to move to that. But the interesting thing about Avure, and one of the reasons that we were looking forward to discussing this on the call today, is that it resonates equally across protein and liquid foods. There's broad opportunities across both of our businesses, so this is a unique opportunity for JBT. And it just fits our portfolio so well.

Okay, thank you.

Walter Liptak, Seaport Global.

Just a follow on to Avure. In the 2017 guidance, I presume that you've already got Avure as part of your revenue outlook. Is that correct?

That's correct. It includes a -- there is a $0.05 impact in the 2017 guidance, a negative impact, from Avure.

And about $50 million in revenue.

About $50 million in revenue. Well, $50 million is the annual revenue.

Annual. Sorry, sorry.

So 10 months of $50 million.

Okay. I thought I heard you say that the sector is growing double digits. Do you have that kind of growth factored into Avure for 2017?

That is correct, Walt. And we have that factored in, and we have it factored in at a reasonable expectation going forward. And as we talked about: $0.07 to $0.12 benefit in 2018, and $0.12 to $0.17 benefit in 2019 from Avure. So it will move to being a meaningful contributor to JBT's EPS moving forward.

Okay, good. And then on the cash flow conversion for 2017, it's great to see the improvement. I wonder which categories you are expecting improved cash flow next year, or I guess this year.

If you look at 2016, it was interesting. Throughout the year, our inventory underperformed a little bit, but we really rallied in the fourth quarter. So inventory ended up performing fairly well, while receivables, based on the huge revenues in the fourth quarter, actually underperformed a little bit as we ended the year.

So I would expect our receivables to perform a little bit better, inventory fairly consistent 2017 versus 2016, and our customer deposits to be a little bit better in 2017.

Okay, great. And post Avure, what is your liquidity for future acquisitions?

Well, we continue to show, and from JBT's perspective, the strong cash flow creates flexibility for us. And we have communicated some expectations in the Elevate strategy that allow us to continue to deliver on acquisitions.

It has always, depending on how our pipeline richens and what we see in front of us, there are other options for us to look at in terms of our capital structure. Always thinking about it from a shareholder's perspective first.

All right, great. Thank you.

George Godfrey, CL King and Associates.

Thank you for taking my follow-up question. I just wanted to dig in on the iOPS technology a little bit, which was displayed at the poultry show, and very impressive.

Do you see that as being sold in new equipment, I'm sure, but also as an add-on feature to the installed base? I'm just wondering on the timing how that gets rolled out, both the connectivity for machines to connect to the Internet and then going machine-to-machine connectivity.

Right, George. You are absolutely right. It has equal opportunity for our new equipment, where we are starting to make some of that functionally available as we speak.

But equally importantly, there's a lot of installed base for JBT where we have opportunities to go back and retrofit it. It's not a huge task for the equipment we have installed, let's say, in the last 10 years. Looking older, it's more work. Obviously, we do have significant rebuilds of our equipment where we could see an opportunity to install the iOPS also.

But from my perspective, what this year, George, is focused on is taking the technology that we've created and made ready and working with our customers to understand the outputs that they need from our technology. And for our service and support people to do the same thing so that we can really refine the package. And then as we head into 2018, starting to push much more broadly and strongly for installations and connections.

So we are moving forward. We are discussing and piloting things with our customers this year. And then 2018 starts to become a more material realization of that.

The reason that we are pursuing that strategy is that we really want to have a strong value proposition for our customers. And we want to make sure that the system helps them run their business more profitably and more efficiently. And we need that interaction upfront to make sure it does just that.

Understood. Thank you for taking my follow-up question.

There are no further questions at this time. I will now turn the call back over to Mr. Tom Giacomini.

Thank you. I want to thank our team at JBT for building on our customer relationships, the excellent results we delivered in 2016, the foundation we've established for future growth, and the safe and performance-oriented culture we are creating.

Together, we achieved the ambitious goals we set with our next-level strategy in 2014, and together, we plan to elevate through 2019. Thanks again for joining us this morning.

Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect.