JBT MAREL Corp: Form 10-Q for the period ended Sep 30, 2023

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 the Securities 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 our business and our results of operations, 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:

• fluctuations in our financial results;
• unanticipated delays or acceleration in our sales cycles;
• deterioration of economic conditions; including impacts from supply chain delays and reduced material or component availability;
• inflationary pressures, including increases in energy, raw material, freight, and labor costs;
• 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;
• 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;
• acts of terrorism or war, including the ongoing conflicts in Ukraine and the Middle East;
• 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;
• 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 with U.S. and international laws governing our operations and industries;
• increases in tax liabilities;
• work stoppages;
• fluctuations in interest rates and returns on pension assets;
• a systemic failure of the banking system in the United States or globally impacting our customers' financial condition and their demand for our goods and services;
• availability of and access to financial and other resources; and
• 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.

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 industries. We design, produce, and service sophisticated products and systems for multi-national and regional customers.

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

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

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

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

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

Business Conditions and Outlook

In terms of orders within our continuing operations, we saw the demand environment improving in Europe and Asia Pacific markets while softening in in North America as a result of poultry and meat markets. Higher demand in the current quarter was driven by customer needs for aftermarket parts and services as well as new equipment. The overall demand environment remains mixed and challenging due to uncertain geopolitical conditions and higher interest rates impacting our customers globally. We are seeing healthier dynamics in the poultry end markets, which are expected to translate to improved order activity in the fourth quarter and into 2024.

Looking forward, we continue to focus on optimizing our opportunities as a pure-play food and beverage technology company, seeking out ways to deploy capital to acquire businesses that complement existing operations, as well as expanding our end markets to build a compelling portfolio of solutions for our customers.

Our operating margins for continuing operations have improved in the quarter as a result of price increases, savings from our restructuring plan and benefits from our sourcing initiatives. We expect operating margins to continue to improve as we implement additional strategic sourcing and productivity initiatives and realize incremental benefits from our previously announced restructuring program.

Components of Results of Operations

Revenue

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

Cost of Sales

Cost of sales are costs that are directly related to manufacturing equipment or parts we sell, providing services that generate service revenue, and other direct costs incurred to fulfill contracts with the customer. Costs includes direct costs, such as labor and raw materials and indirect costs such as manufacturing overhead and amortization of capitalized software to be sold, and patents and acquired technology intangible assets.

Selling, General and Administrative

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

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

Restructuring expense

Restructuring expense consists of costs from our 2022/2023 Restructuring Plan. For additional financial information about restructuring, refer to Note 15. Restructuring of the Notes to the Condensed Consolidated Financial Statements.

Pension expense, other than service costs

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

Interest Expense, net

Interest expense, net consists of interest expense on our outstanding debt obligations including amortization of debt discounts and offering costs, partially offset by any interest income earned.

CONSOLIDATED RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(In millions, except %)

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

Revenue

Total revenue for the three months ended September 30, 2023 increased $4.8 million compared to the same period in 2022. Acquisitions provided additional revenue of $11.0 million, partially offset by a decline in organic revenue by $8.3 million in the period, and foreign currency translation was favorable by $2.1 million in the period compared to the prior year. The decline in organic revenue was the result of a decrease in volume for non-recurring revenue, partially offset by higher pricing and an increase in volume for recurring revenue.

Gross Profit and Gross Profit Margin

Gross profit margin increased 170 bps to 35.7% compared to 34.0% in the same period last year. This increase was driven primarily by higher pricing, savings from our restructuring plan and supply chain efforts, and favorable mix of higher recurring revenue, partially offset by the lost leverage of fixed costs from lower volume for non-recurring revenue year over year.

Selling, general and administrative expense

Selling, general and administrative expense increased $2.3 million from prior year, and as a percent of revenue increased by 20 bps to 25.1% compared to 24.9% in the same period last year. This increase in Selling, general and administrative expense is the result of higher incentive compensation expense accruals as well as higher relative expenses from recently acquired companies, including higher amortization costs of acquired intangible assets. This increase was partially offset by a decrease in M&A related costs and costs related to the implementation of the OmniBluTM platform.

Interest expense, net

Interest expense, net decreased $2.3 million compared to same period last year. This decrease is due to lower average debt balance reducing overall interest expense as well as higher interest income on cash on hand from sale proceeds of AeroTech.

Income tax provision

The Company's tax rate from continuing operations was 12.3% for the three months ended September 30, 2023 compared to 18.3% in the same period in 2022. The tax rate for the three months ended September 30, 2023 was favorably impacted by discrete items totaling $2.9 million, primarily driven by benefits from prior year tax returns.The tax rate for the three months ended September 30, 2022 was favorably impacted by discrete items totaling $0.9 million, primarily driven by benefits from prior year tax returns.

Income from continuing operations and Adjusted EBITDA

Income from continuing operations for the three months ended September 30, 2023 increased to $30.5 million compared to $25.7 million for the same period in 2022, representing an increase of $4.8 million. Adjusted EBITDA was $66.3 million for the three months ended September 30, 2023 compared to $60.6 million during the same period in 2022, representing an increase of $5.7 million. The increase in Adjusted EBITDA was primarily driven by a higher gross profit partially offset by a higher selling, general and administrative expense, excluding the impacts of our depreciation, amortization and acquisition and integration costs.

Income from discontinued operations

For the three months ended September 30, 2023 and 2022, we recognized income from discontinued operations, net of income taxes, of $437.1 million and $8.5 million, respectively. The results of our discontinued operations for both quarterly periods include the operations of our AeroTech business. The results of our discontinued operations for the three months ended September 30, 2023, also includes a $444.1 million gain from the sale of AeroTech, net of tax, that was completed during the third quarter of 2023.

CONSOLIDATED RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(In millions, except %)

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

Revenue

Total revenue for the nine months ended September 30, 2023 increased $70.7 million compared to the same period in 2022. Acquisitions provided additional revenue of $76.8 million, organic revenue grew $6.2 million in the period, and foreign currency translation was unfavorable by $12.3 million in the period compared to the prior year. Growth from organic revenue was the result of higher pricing as well as increase in volume for recurring revenue partially offset by a decrease in volume for non-recurring revenue.

Gross Profit

Gross profit margin increased 120 bps to 34.6% compared to 33.4% in the same period last year. This increase was driven primarily by higher pricing, savings from our restructuring plan, and favorable mix higher recurring revenue, partially offset by the lost leverage of fixed costs from lower volume year over year and higher LIFO expense resulting from the on-going inflationary environment.

Selling, general and administrative expense

Selling, general and administrative expense increased $14.3 million from prior year, but as a percent of revenue decreased 20 bps to 25.1% compared to 25.3% in the same period last year. This increase in Selling, general and administrative expense is a result of higher incentive compensation expense accruals and higher relative expenses from recently acquired companies, including higher amortization costs of acquired intangible assets, as well as higher costs related to the implementation of the OmniBluTM platform. This increase was partially offset by a decrease in M&A related costs.

Interest expense, net

Interest expense, net increased $7.4 million compared to same period last year. This increase was primarily due to higher interest rates as well as a higher average debt balance to fund the acquisitions we made in the third quarter of 2022. These were partially offset by higher interest income on cash on hand from the proceeds of the sale of AeroTech in 2023.

Income tax provision

The Company's tax rate from continuing operations was 18.7% for the nine months ended September 30, 2023 compared to 13.7% in the same period in 2022. The tax rate for the nine months ended September 30, 2023 was favorably impacted by discrete items totaling $2.7 million, primarily driven by benefits from prior year tax returns. The tax rate for the nine months ended September 30, 2022 was favorably impacted by discrete items totaling $6.0 million, primarily driven by benefits from stock based compensation, the UK patent box regime, and Brazilian tax litigation.

Income from continuing operations and Adjusted EBITDA

Income from continuing operations for the nine months ended September 30, 2023 increased to $74.6 million compared to $71.3 million for the same period in 2022, representing an increase of $3.3 million. Adjusted EBITDA was $192.1 million for the nine months ended September 30, 2023 compared to $158.9 million during the same period in 2022, representing an increase of $33.2 million. The increase in Adjusted EBITDA was primarily driven by a higher gross profit partially offset by a higher selling, general and administrative expense, excluding the impacts of our depreciation, amortization, and acquisition, and integration costs.

Income from discontinued operations

For the nine months ended September 30, 2023 and 2022, we recognized income from discontinued operations, net of income taxes, of $449.6 million and $21.9 million, respectively. The results of our discontinued operations for both nine month periods include the operations of our AeroTech business. The results of our discontinued operations for the nine months ended September 30, 2023, also includes a $444.1 million gain from the sale of AeroTech, net of tax, that was completed during the third quarter of 2023.

Reconciliation of Non-GAAP Measures

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

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

(In millions)

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

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

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

(4) The impact of LIFO charges are excluded because it reduces volatility that is not reflective of our operations and allows for better comparability to our peers.

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

Restructuring

In the third quarter of 2022, the Company implemented a restructuring plan (the "2022/2023 restructuring plan") to optimize our overall cost structure on a global basis. The initiatives under this plan includes streamlining operations and our general and administrative infrastructure. As of September 30, 2023, we recognized restructuring charges of $15.1 million, net of a cumulative release of the related liability of $2.9 million. The total estimated cost, net of releases was revised in the prior quarter from $8.0 million to $10.0 million to a range of $16.0 million to $18.0 million, all of which is expected to be recognized by the end of 2023. These changes are due to additional actions being taken to support our streamlining operations under this plan.

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

(In millions)

Cumulative savings for the 2022/2023 restructuring plan were revised in the prior quarter from the range of $9.0 million to $12.0 million to a range of $18.0 million to $20.0 million to reflect the impact of additional actions being taken to streamline operations. Full year 2023 savings were revised in the prior quarter from $5.0 million to $6.0 million to a range of $9.0 million to $10.0 million and the remainder will be realized in 2024.

For additional financial information about restructuring, refer to Note 15. Restructuring of the Notes to the Condensed Consolidated Financial Statements.

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. We completed the sale of our AeroTech business on August 1, 2023 and received proceeds of $808.2 million. During the three months ended September 30, 2023, we used the proceeds to repay $305.4 million of our debt, to pay $15.4 million for transaction costs related to the sale of AeroTech and to make a $9.0 million contribution to our U.S. qualified pension plan. We expect to use the remaining net proceeds from the transaction to pay approximately $143.4 million in tax on the gain from the sale of AeroTech, which is expected to be paid by the end of 2023, and for our stated capital allocation priorities, including continued disciplined inorganic growth for the Company.

As of September 30, 2023, we had $401.7 million of cash and cash equivalents, $39.9 million of which was held by our foreign subsidiaries, and $125 million in highly-liquid marketable securities. Although certain funds are considered permanently invested in our foreign subsidiaries, we are not presently aware of any restriction on the repatriation of these funds. We maintain significant operations outside of the U.S., and many of our uses of cash for working capital, capital expenditures and business acquisitions arise in these foreign jurisdictions. If these funds were needed to fund our operations or satisfy obligations in the U.S., they could be repatriated and their repatriation into the U.S. could cause us to incur additional U.S. income tax and foreign withholding taxes. The foreign withholding taxes on these repatriations to the U.S. would potentially be partially offset by U.S. foreign tax credits.

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

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and required taxpayers to amortize such expenditures in the U.S. over five years. As a result, we expect an adverse impact of approximately $15 million to our cash from continuing operations in 2023. The impact will continue over the remaining four-year amortization period but decrease each year.

For the nine months ended September 30, 2023, we had total operating cash flow of $95.6 million. For full year 2023, we expect to generate positive cash flows. Our liquidity as of September 30, 2023, or cash plus borrowing ability under our revolving credit facilities, was $1.19 billion.

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

Based on our current capital allocation objectives, during 2023, we anticipate capital expenditures to be between $50 million and $60 million, which includes about $12 million to $14 million of continued capitalized investment in our OmniBluTM digital platform. 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 September 30, 2023, 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.

Cash Flows

Cash flows for the nine months ended September 30, 2023 and 2022 were as follows:

(In millions)

Cash provided by continuing operating activities during the nine months ended September 30, 2023 was $95.6 million, representing a $8.6 million increase compared to the same period in 2022. This increase was driven primarily by increased customer collections of trade receivables and reduced inventory investment. The operating cash inflows were partially offset by increased payments on accounts payable, lower customer collections of advanced payments, and increased pension contributions.

Cash provided by investing activities during the nine months ended September 30, 2023 was $612.7 million, an increase of $1.0 billion compared to the same period in 2022. The increase is primarily from the proceeds received on the sale of the AeroTech business, lower spending on acquisitions and capital expenditures year over year, partially offset by purchase of marketable securities in the current period with the proceeds form the AeroTech sale.

Cash required by financing activities was $345.7 million during the nine months ended September 30, 2023, representing an increase in cash outflows of $644.3 million compared to same period in 2022. This increase in cash outflows year over year was primarily due to higher debt repayments for our revolving credit facility in the current period with proceeds from the AeroTech sale compared to higher borrowings from our credit facility to fund acquisitions during the same period in 2022.

Financing Arrangements

As of September 30, 2023 we had $250.0 million drawn on and $1.04 billion of availability under the revolving credit facility. Our ability to use this revolving credit facility is limited by the leverage ratio covenant described below.

Our credit agreement includes restrictive covenants that, if not met, could lead to a renegotiation of our credit lines, a requirement to repay our borrowings and/or a significant increase in our cost of financing. Restrictive covenants include a minimum interest coverage ratio, a maximum leverage ratio, as well as certain events of default. As of September 30, 2023, we were in compliance with all covenants in our credit agreement. We expect to remain in compliance with all covenants in the foreseeable future. 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 to qualified institutional buyers, resulting in net proceeds to us of approximately $392.2 million after deducting initial purchasers’ discounts. The convertible notes will mature on May 15, 2026 unless earlier converted, redeemed or repurchased. Concurrently with the issuance of the Notes, we entered into the convertible note hedge transactions that reduce potential dilution upon conversion of the Notes and entered 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 convertible secured notes, convertible note hedge and warrant transactions, refer to Note 7. Debt of the Notes to the Condensed Consolidated Financial Statements.

As of September 30, 2023, we have four interest rate swaps executed in March 2020 with a combined notional amount of $200 million expiring in April 2025, and one interest rate swap executed in May 2020 with a notional amount of $50 million expiring in May 2025. We have designated these swaps as cash flow hedges and all changes in fair value of the swaps are recognized in Accumulated other comprehensive income (loss).

As a result, as of September 30, 2023, all of our total outstanding debt of $652.5 million effectively remains fixed rate debt, with the Convertible Senior Notes subject to a fixed rate of 0.25% and a portion of revolving credit facility subject to an average fixed rate of 0.76% in addition to the premium charged for the credit spread on our revolving credit facility.

CRITICAL ACCOUNTING ESTIMATES

There were no material changes in our judgments and assumptions associated with the development of our critical accounting estimates during the period ended September 30, 2023. Refer to our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of our critical accounting estimates.

There have been no material changes in reported market risks from the information reported in our Annual Report on Form 10-K for the year ended December 31, 2022.

Under the direction of our principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of September 30, 2023. We have concluded that, as of September 30, 2023, our disclosure controls and procedures were:

i) effective in ensuring that information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

ii) effective in ensuring that information required to be disclosed is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

In the ordinary course of business, we review our system of internal control over financial reporting and make changes to our systems and processes to improve such controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, automating manual processes and updating existing systems.

There were no changes in controls that occurred during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.

In addition to the other information set forth in this report, you should carefully consider the risk factors

discussed in Item 1A. "Risk Factors" in JBT's Annual Report on Form 10-K for the year ended December 31, 2022.