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John Bean Technologies Corp (JBT -1.81%)
Q4Â 2018 Earnings Conference Call
Feb. 26, 2019, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Good morning and welcome to JBT Corporation's Fourth Quarter 2018 Earnings Conference. My name is Tiffany and I will be your conference operator today. 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 will now turn the call over to JBT's VP of Investor Relations, Megan Rattigan to begin today's conference.
Megan J. Rattigan -- Vice President of Investor Relations and Controller
Thank you, Tiffany. Good morning everyone and welcome to our year-end 2018 conference call. With me on the call are our Chairman, President and CEO, Tom Giacomini and our Executive Vice President and CFO, Brian Deck. In today's call, we will use forward-looking statements that 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 risk factors that may have an impact on our results. These documents are available in the Investor Relations section of our 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 in the Investor Relations section of our website. Now, I would like to turn the call over to Tom.
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Thanks, Megan and thank you all for joining us this morning. I was encouraged by the results we posted in the final quarter of 2018, particularly our record margins (technical difficulty) cash flow. As I look at JBT, a company (ph) that has made meaningful operational improvements throughout 2018 and is better positioned strategically to take advantage of long-term macroeconomic tailwinds in food and aero. We remain confident in our ability to capture the benefits of our restructuring program demonstrated by delivering cost savings ahead of plan (technical difficulty) we've increased the size of our restructuring, generating additional benefits. At the same time, the first phase of our new JBT operating system which simplifies and standardizes our business processes is up and running, bringing more rigor and accountability to how we run our business.
Looking to 2019, while JBT exited 2018 with strong orders and backlog, there is still some uncertainty in the marketplace and we expect top line growth at the lower-end of our (technical difficulty). In terms of profitability, we anticipate significant margin expansion placing us solidly in our framework. Still (ph) optimistic about our ability to capitalize on the robust M&A pipeline JBT matured in the back half of 2018.
I'll turn the call over to Brian to provide more detail on the fourth quarter and full-year 2018 performance. He will also provide guidance for 2019. Afterward, I'll add color about market dynamics in our active M&A program.
Brian A. Deck -- Executive Vice President and Chief Financial Officer
Thanks, Tom and good morning everyone. We finished 2018 on a strong note with expanding margins as well as good order rates and outstanding cash flow. For 2018, JBT revenue of $1.9 billion increased 17.4% from 2017 with gains of 6.5% organic, 3.1% from acquisitions and 7.8% from the new ASC 606 revenue recognition standard. At FoodTech, full-year revenue growth of 16% was comprised of 3% organic, 4% from acquisitions and 9% or $114 million from ASC 606 benefits. FoodTech's revenue in the fourth quarter of 2018 excluding the benefit of ASC 606 was below our expectation with about half of the shortfall due to a negative FX impact and the other half from the timing of customer projects and shipments.
On the other hand, FoodTech's excellent fourth quarter profitability reflected JBT's focus on operational (technical difficulty). Additionally, we had an improved product mix and we're able to pass through higher costs as expected. All told, FoodTech's operating margin hit 16.1% in the fourth quarter, exceeding the previous quarterly record from the year ago period by more than 200 basis points.
AeroTech revenue was ahead 21% for the year comprised of 16% organic growth, 2% from acquisitions (ph) and 3% from ASC 606. In the fourth quarter, Aero's margins hit a record 13.8%, besting last year's fourth quarter by more than 150 basis points. (technical difficulty) while we still experienced pressure from higher input costs, we benefited from a favorable equipment mix with more higher margin (ph) equipment shipments. We also leveraged our volume and created -- and captured greater than expected benefits from the restructuring.
For the year, FoodTech and AeroTech orders were ahead 10% and 24% respectively. In the fourth quarter, we posted year-over-year gains of 20% at FoodTech and 12% at AeroTech. As for free cash flow, we meaningfully exceeded our guidance (ph). Excluding pension contributions, we generated $137 million in free cash flow for the year, which represented a conversion rate of 133%. We did a great job of getting orders shipped (technical difficulty) so we can convert to cash in the period. Our folks also did a great job managing inventory, upping (ph) AR and improving the accounts payable processes. At FoodTech specific, we had a high level of advanced payments in connection with robust orders in the period.
Overall, our ability to generate cash was bolstered by our restructuring program, which goes beyond the P&L and enhances how we manage processes such as payables and receivables. Strong cash flow had a nice impact on our ending debt position. We exited the year with debt, net of cash of $345 million, representing a bank leverage ratio of about 1.6 times.
Regarding the restructuring, we recorded an expense of $47 million in 2018. We are well on track capturing savings of about $7 million in 2018, including approximately $5 million in the fourth quarter. In the process, we determined there are additional opportunities to enhance operating efficiencies. As you saw in the earnings release, we plan to take an additional restructuring charge of $10 million to $15 million in 2019. Those charges will be front-end loaded.
With the total spend now of approximately $60 million, we now expect program to capture total benefits of about $55 million versus our prior estimate of $45 million. That is comprised of the $7 million we realized in 2018 and incremental $20 million in 2019, and the remaining $28 million in 2020.
With all that, we reported diluted earnings per share from continuing operations of $3.24 in 2018 compared with $2.58 in 2017. On an adjusted basis, excluding restructuring expense and the one-time charge associated with the 2017 Tax Act, diluted earnings per share was $4.28 versus $3.10 a year ago.
In addition, 2018 earnings included the benefit of $28 million of operating income or $0.64 per share from the transition to ASC 606. This predominantly represents the rerecording of revenue previously recorded in 2017 as required by the accounting rules governing the transition to 606.
EBITDA was $201 million in 2018. Adjusted for restructuring charges, it was $248 million, which includes the $28 million benefit from the transition to ASC 606. This compares to adjusted EBITDA of $199 million in 2017. (technical difficulty), we look at EBITDA and EPS excluding both (technical difficulty) charges and ASC 606. We have provided a detailed schedule in the earnings release designed to help investors better understand 2018 results and will serve as a basis for comparison in 2019.
Looking ahead to 2019, while we ended 2018 with strong orders and backlog and enjoyed strength in our markets, we believe the lengthening of order cycles and trends we've seen (technical difficulty) and Asia may pressure FoodTech orders in the first half of the year. This will be reflected in our guidance for the year.
For full-year 2019, we forecast revenue growth to include 4% organic, 2% to 3% from completed acquisitions less about 1% from foreign exchange. The majority of the acquisition-related revenues is from the recently announced purchase of LEKTRO. Due to the $127 million of ASC 606 previously recognized revenue included in 2018, GAAP revenue is forecasted to be about flat year-over-year. We project segment operating margins of 13% to 13.5%. That breaks down into 13.25% to 14% for FoodTech and about 12.5% to 13% for AeroTech. For 2019, we expect corporate expense of about 2.6% of revenue. Interest and other non-operating expense is forecasted about $17 million (ph).
As it relates to taxes, in 2018, the effective tax rate of 19% represented a 25% rate that is approximately $7 million in discrete tax benefits associated with stock compensation accounting as well as final Tax Act adjustments. In 2019, we see a tax rate of (technical difficulty) including about $1 million (ph) of discrete tax benefits associated with stock comp.
We anticipate diluted earnings per share from continuing operations in the range of $3.90 to $4.10 in 2019. That translates to $4.20 to $4.40 on an adjusted basis excluding restructuring charges. We project adjusted EBITDA of $250 million (ph) to $270 million and about $60 million of depreciation and amortization expense. We expect CapEx of about $40 million to $50 million and a free cash flow conversion rate excluding pension contributions of about 90%.
For the first quarter of 2019, JBT anticipates meaningful improvement versus prior year with revenue of $375 million to $395 million representing 4% to 5% (ph) organic growth around the midpoint of the range. Reported revenue of $409 million in the first quarter of 2018 included $50 million benefit from ASC 606. We expect diluted earnings per share from continuing operations of $0.30 to $0.34 or an adjusted $0.44 to $0.48. Reported earnings per share (inaudible) in the year ago first quarter included a restructuring charge of $0.29 and a $0.30 benefit from ASC 606. All told, we are pleased how we exited 2018 and look forward to continued progress in 2019. With that, I'll turn the call back to Tom.
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Thanks, Brian. Let's start with our markets. With respect to AeroTech, both our fixed and mobile businesses continued to enjoy strong market conditions. For fixed, airport infrastructure investments remain positive based on facility upgrades driven by continued passenger mile growth. Mobile is benefiting from increased air cargo activity driven by e-commerce and a solid replacement cycle for aging equipment.
For FoodTech, protein customer activity for 2018 was robust in the US and Europe with signs of early improvement in South America. Asia continues to lag expectations due to trade and geopolitical issues, delaying equipment orders. Encouragingly, pre-order project activity in Asia continued to improve.
Liquid Foods customer orders improved overall in the fourth quarter across all geographies, but as mentioned last quarter, we are experiencing order delays from traditional customers whose products typically reside in the center of the grocery store. While we expect this trend to continue in 2019, JBT has been actively investing resources toward the faster-growing categories you see around the perimeter of the grocery store.
This investment is reflected in acquisitions like Avure and FTNON that sell to the fresh produce juice and ready to eat categories. We're also focusing JBT's internal selling and product development activity to better target these same categories and customers.
Across FoodTech, we are experiencing strong interest from our customers in automation that removes labor, clean labels and other forms of high quality food, ready meals, and convenience all leading to meaningful project activity and investment. In addition, iOPS, our Internet of Things platform starting from very small base is an area of future value creation for our customers in JBT as we move forward. Last, our aftermarket performed well in 2018 and we continue to see opportunities to grow this business faster than the markets overall.
Let me close with a discussion of our M&A program. In 2018, we made two strategic additions to our FoodTech business with Schroder and FTNON. In February this year, we completed the acquisition of LEKTRO, which gives us a competitive advantage in the rapidly growing market for emission-free ground support equipment. As we end 2018, JBT has matured our M&A pipeline including many proprietary opportunities.
While proprietary transactions require significant relationship building and take time to develop, we believe they better position JBT to complete acquisitions that fit both our strategic and financial goals while enhancing value creation for our customers. With that, we'll open the call to your questions. Operator?
Questions and Answers:
Operator
(Operator Instructions) Your first question comes from the line of Allison Poliniak with Wells Fargo. Your line is open.
Allison Poliniak -- Wells Fargo -- Analyst
Hi guys, good morning.
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Good morning, Allison.
Allison Poliniak -- Wells Fargo -- Analyst
I think Brian you mentioned the mix on FoodTech margin. Is there any way to I think quantify (technical difficulty).
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Well, what I would tell you, Allison, if you look at the margins in the quarter of 16% for FoodTech, I'd say about two-thirds of that impact was from the restructuring and really the remainder is from the mix benefits.
Allison Poliniak -- Wells Fargo -- Analyst
Great, that's helpful. And then on the core outlook for the year, is there any way to -- I might have missed it, but the FoodTech versus AeroTech, any color on the growth opportunities for them in '19 relative to your core expectations?
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Well, Allison, as I look at it, certainly just a little clarity in terms of the trade and macroeconomic situations and the geopolitical situation would certainly help us because we see that impacting Asia as we've talked about and that would certainly be a tailwind beyond where we're at today.
Allison Poliniak -- Wells Fargo -- Analyst
Got it, thanks.
Operator
Your next question comes from the line of Larry De Maria with William Blair. Your line is open.
Lawrence De Maria -- William Blair -- Analyst
Thanks, good morning everybody. Just to start off, the 4% seems, given the constraints of the market I get it, but also seems a little bit conservative. Can you maybe dissect that from a price and volume perspective, I would think price gets you probably halfway there and then also just food versus aero in terms of the organic outlook into 2019?
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Yes, Larry, as I look at it, we certainly ended the year on a strong note. If you look at the way the orders and backlog came together and I think as you sit here at the beginning of the year and you're looking across all of 2019, I think we're just trying to be appropriately balanced in our view of the year and certainly we'll continue to refine that as we go through the year. I talk about the way we are strategically positioning the business and investments we're making to do that. I have every confidence that we're putting JBT in front of these important trends that are happening in the food industry and over the mid to long-term part of our cycle, we do believe the markets grow faster than the rates we've identified in our framework and it's just about a little bit of uncertainty this year in general in the markets and if we get some of this sorted out and there's clarity, we'll certainly refine that going forward and have every hope to be able to position ourselves to see that improve through the year, but given where we're at and at this point in the journey, we think it's appropriate, our framework for the year.
Lawrence De Maria -- William Blair -- Analyst
Okay and maybe asked a different way. What would you think about for a net price expectation for 2019. And then my second question would be, given the strength and bounce back of orders we saw in the 4Q, can you just talk about how we progressed through the quarter? If it got better as the quarter went on. And you talked about labor constraints, was that a major -- is that currently a major factor in orders that folks are placing (ph) right now?
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Larry, as it relates to pricing, we're always cautious I mean in terms of the way we communicate as a company and we need to be appropriately cautious about that. I would tell you that the orders were strong throughout the fourth quarter and there wasn't any real trend that you would read into the timing of the way the orders came in and as I look at it, I was encouraged to see the strength of the orders and in particular the backlog as we start the year and certainly from our perspective, that gives us a good start in 2019. If you look into the first quarter, as we look at it, it's going to be a strong performance with good organic growth and a return to operating margins that we'd like to see even though we do have kind of historically low volumes in the first quarter.
Lawrence De Maria -- William Blair -- Analyst
Okay. Thanks, I'll guess I'll jump back in. Thanks.
Operator
(Operator Instructions) Your next question comes from the line of George Godfrey with CL King. Your line is open.
George Godfrey -- CL King -- Analyst
Thank you. Good morning Brian. Tom, nice job on the quarter.
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Thank you.
George Godfrey -- CL King -- Analyst
You may have said this Brian, but the lines kind of broke up. What was the organic growth rate for FoodTech and Aero in the quarter?
Brian A. Deck -- Executive Vice President and Chief Financial Officer
In the fourth quarter? (multiple speakers) Yes, so I don't think I specifically gave it, but I can tell you on AeroTech, it was quite strong and in FoodTech, it was down organically year-over-year by about 5%.
George Godfrey -- CL King -- Analyst
Got it, OK. And then looking ahead to next year, you mentioned there was some weakness in Asian orders? Is there a capacity pressure on the customers that they can only delay these orders for so long, where their customer demands and processing requirements are going to force them to come to you and start placing orders or can they work with the processing they have to delay this through all of '19?
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
George, that's a little bit tough to call, but I would tell you, if you look in the long-term, we absolutely believe that the trends are very positive in Asia. If you look at the consumption proteins based on rising incomes in Asia driving that, so that's a real positive and what we believe is playing out here is really the geopolitical and trade situation causing a disruption in some of the ordinary flows between the countries and the way they trade and that affects the way the proteins move back and forth. So the customers are just being more cautioned, but I would say as we start to see that return to more relative stability, our expectation is in the mid -- even in the mid-term, that, that will improve and whether that happens in six months, 12 months or 18 months, I really can't predict that, but I know the right thing for JBT is for us to be very active and involved in that market, we see a lot of encouraging, as I mentioned in my commentary, project activity, which is the first indicator of customers planned investment, which is at the front end of that. So certainly they see an opportunity as they -- our customers do as they think a little bit through this and we would expect that to return to more normal trends as we work our way through the year assuming some of this trade stuff and just in general, the macroeconomic set (ph) are resulting from the trade be returned to normal.
George Godfrey -- CL King -- Analyst
Got it. Thank you very much, Tom. Appreciate you taking my questions.
Operator
Your next question comes from the line of Mig Dobre with RW Baird. Your line is open.
Mircea Dobre -- Robert W. Baird & Co. -- Analyst
Hey, good morning guys. A few folks before me tried to get at this. Can you provide some clarification as to how you are thinking about and Food versus Aero in terms of organic growth relative to your combined guidance, I'm not clear at all on that?
Brian A. Deck -- Executive Vice President and Chief Financial Officer
Sure, Mig. So at this point, we're suggesting that the guidance is similar for both Food and Aero at the 4%-ish range before the impact of FX of about 1% (ph). I will say the FX impact is going to be a little bit stronger in the first half than the back half, but overall, as we sit here today, we're suggesting similar growth.
Mircea Dobre -- Robert W. Baird & Co. -- Analyst
Okay and then maybe I missed it, but I'm not entirely clear as to the fourth quarter FoodTech orders, how those progressed and how you ended up with a quarter that you had because if I'm looking at your commentary, I interpret it as being still relatively cautious as you talk about trade disruptions so on and so forth. That's certainly has been the case in the fourth quarter and you know on the third quarter call, we were talking about headwinds lasting into the fourth quarter related to trade and related to macro uncertainty and so on. So something happened in terms of orders in the fourth quarter that I think surprised you positively. I'm trying to understand exactly what that was and I'm also trying to understand why that would not carry through into 2019.
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Yes, Mig, as we always talk about on the calls, there is some lumpiness to our order activity and I think if you just kind of step back and look through the year, the full-year results were consistent with -- and supportive of certainly the organic growth we're indicating for 2019 and some quarters we just happened to see a little bit of a higher closure rate than we do from quarter to quarter. So although we were encouraged by the orders we're able to realize and they position us well for next years (ph) we always caution as it relates to orders or timing of our shipments, there is a bit of lumpiness in there and it's difficult for us to predict perfectly, but as I see us, we're positioned solidly as we head into 2019, we've got a nice backlog and our focus is on delivering the growth and equally importantly, the margin expansion which puts us right solidly in that framework as we've communicated which for me is a meaningful achievement for JBT.
Mircea Dobre -- Robert W. Baird & Co. -- Analyst
Right, that's helpful. And now to talk a little bit about margin, that's a good segue. When I'm looking at your implied incremental margins excluding ASC 606 in FoodTech and the incrementals here are pretty high, by my math is something north of maybe 60% (ph), but I recognize that there are a few elements at play here in terms of (technical difficulty) over, maybe you can quantify those. And then how some of these savings (technical difficulty), the $20 million. That'd be helpful.
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Right. As it relates to the savings overall, the $20 million. It is fairly evenly split based on the revenue contributions of those businesses, maybe slightly more toward FoodTech but not much. As it relates to kind of the margin progression for next year, the way we generally think about it is we did note that last year we had some things go wrong in the first quarter and a couple of things go wrong in the third quarter from a supply chain perspective.
Now all those don't go away completely next year, but overall, we're kind of thinking about $10 million of bad news going away, if you will. So you've got $10 million or so of the costs going away, you got the $20 million of restructuring benefits and then from there, you add (ph) your contribution margin from the growth and then we have a fair amount of strength in investments for things like iOPS and other growth activities, which offset some of those growth numbers in the margins.
Mircea Dobre -- Robert W. Baird & Co. -- Analyst
I see and then when (technical difficulty) $20 million of ramp for the year like front half versus back half.
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
It will be a fairly continuous ramp as you go through the year, fairly even. So as a result of that, you will see margins progressively improve throughout the year as will revenue for that matter. Generally speaking, we'll see each successive quarter will be a little bit better from a revenue perspective.
Mircea Dobre -- Robert W. Baird & Co. -- Analyst
So, I'm sorry, are you talking year-over-year or sequentially?
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Sequentially.
Mircea Dobre -- Robert W. Baird & Co. -- Analyst
Sequentially? I appreciate it. Thanks.
Operator
Your next question comes from the line of Andrew Obin with Bank of America. Your line is open.
Andrew Obin -- Bank of America Merrill Lynch -- Analyst
Hey guys, good morning, great quarter.
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Good morning. Thank you.
Brian A. Deck -- Executive Vice President and Chief Financial Officer
Thanks, Andrew.
Andrew Obin -- Bank of America Merrill Lynch -- Analyst
Just a question if there were any sort of reversal of any accruals related to compensation in Q4, just want to confirm that.
Brian A. Deck -- Executive Vice President and Chief Financial Officer
In Q4, within our corporate expense, you'll see that the corporate numbers were fairly low, came in a little bit better than expected that it was because -- the primary reason was the variable compensation associated with where we shook out (ph) for the year.
Andrew Obin -- Bank of America Merrill Lynch -- Analyst
And how much was that?
Brian A. Deck -- Executive Vice President and Chief Financial Officer
It was a couple of million dollars.
Andrew Obin -- Bank of America Merrill Lynch -- Analyst
Okay and then the second question, just regarding cash flow, very strong cash in the quarter. You did highlight advanced payments in the fourth quarter. So, looking into the next year, A, are we going to see reversals in the first half of the year. And second, what should we be thinking about free cash flow generation for the year?
Brian A. Deck -- Executive Vice President and Chief Financial Officer
Right, generally for the year, we're thinking it's about 90%, which effectively represents about 100%, but in 2018, we had $47 million of restructuring expense, but only spent from a cash perspective about $32 million. So you effectively had a $15 million headwind and so that's what brings you from that 100%-ish range to about 90%. Obviously, that (ph) was a tailwind in 2018. In terms of -- I'm sorry, what was the first part of the question?
Andrew Obin -- Bank of America Merrill Lynch -- Analyst
If --
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Oh the timing, all right.
Andrew Obin -- Bank of America Merrill Lynch -- Analyst
Yes, the timing because there was a lot of advance payments.
Brian A. Deck -- Executive Vice President and Chief Financial Officer
Yes, generally speaking, when you think about JBT and our growth as it improves throughout the year, you will invest -- every quarter sequentially you will start to invest more in your working capital and then be very -- and you'll deplete that working capital in the fourth quarter. So generally I expect the first half to be lower, if potentially negative in the first half and then a strong cash flow in the back half, getting to your 100% before the impact of the restructuring cash-outs.
Andrew Obin -- Bank of America Merrill Lynch -- Analyst
But effectively, other than seasonality pattern, you expect your cash next year to be fairly normal relative to your goals?
Brian A. Deck -- Executive Vice President and Chief Financial Officer
Yes, sir.
Andrew Obin -- Bank of America Merrill Lynch -- Analyst
Thank you very much.
Operator
Your next question comes from the line of Jason Rodgers with Great Lakes Review. Your line is open.
Jason Rodgers -- Great Lakes Review -- Analyst
Yes, good morning. Looking at your guidance for organic growth for the year on AeroTech segment, you had a very strong year obviously last year and that's quite a bit slower from what you put up in 2018. So just wondering about that AeroTech organic growth guidance, why you see it slowing for the year?
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Sure. It's really in two parts. The first we had mentioned in an earlier call that we did have some mobile equipment that we had some outsized orders in that we didn't expect to repeat this year. So we had already mentioned that and then you just start to think of the size of the growth we had in 2018 and then lapping that -- you put the two years together, it's just a really solid organic growth story.
So from my perspective, that's how we arrived at the number. I would tell you that if you look at our backlog and the strength of that backlog, it's in AeroTech, it's not just about 2019, but a nice size of that is booked out in 2020. So, there's just some nice stability that as we look forward in Aero that extends beyond '19 also.
Jason Rodgers -- Great Lakes Review -- Analyst
Okay and then for the 2019 forecast (technical difficulty) tariffs in raw material costs.
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
I'm sorry, you broke up on your call. Could you repeat your question please?
Jason Rodgers -- Great Lakes Review -- Analyst
Sure. Just wondering your expectations for tariffs in raw material costs that you have embedded in your 2019 forecast.
Brian A. Deck -- Executive Vice President and Chief Financial Officer
Sure, AeroTech we do, showing some impact in the first quarters. As a result of that, the margins will be fairly similar to the first quarter of last year despite some growth. We do see that starting to go away to more normalcy by Q2 or there will be some minor impact in Q2. Then the back half will be -- I'll say clear in terms of being able to price for where we stand on tariffs.
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Right and I would just say our expectations in general, we're just -- a continuation of what we saw in '18. So if there was improvement, that would be a benefit in some way, shape or form and if for some reason, the trade situation got more onerous, that would be more of a headwind in terms of the impact on the financials.
Jason Rodgers -- Great Lakes Review -- Analyst
And then debt currently is under your target range, wonder if you talk about the M&A pipeline. Do you expect the amount of deals to be roughly the same as it was last year as well as share repurchase which it looked like you stepped up a bit?
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Yes, so it's a two-part answer here. On the M&A pipeline, as you know, M&A is always episodic, but I did want to communicate and was pleased with the progress of work we made in the back half of the year, the strength of the opportunities we're engaged in and our ability to translate those into M&A in '19, but as always, it takes a willing seller and the economics that makes sense, but from our perspective, we've got some great strategic opportunities we're working on our M&A pipeline. They are maturing. So, all the arrows are pointing in the right indication. As you mentioned, our balance sheet is in good spot. I'm pleased that we're able to strengthen that and that gives us capacity as we head into '19 to do some value creating M&A and continue to build our strategy around the food in particular. And as it relates to the share repurchases, I mean, obviously, our intent there is to offset dilution for management shares and we work toward that, but we're also a bit disciplined. So when we see an opportunity when the stock price makes sense to catch up on that, we try to take advantage of that.
Jason Rodgers -- Great Lakes Review -- Analyst
And could you -- would you mind repeating what the tax rate expectations for 2019 was, my line broke up.
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Sure, for 2019, we expect about a 25% to 26% rate all in, which includes about $1 million discrete benefit in 2018 (ph). We had about $7 million of discrete benefits and that's largely around the stock comp accounting and when stock best (ph) relative to the stock price at that time versus the strike price. So that's why there's a big difference in the discretes next year.
Jason Rodgers -- Great Lakes Review -- Analyst
Thanks.
Operator
Your next question comes from the line of John Joyner with BMO. Your line is open.
John Joyner -- BMO Capital Markets -- Analyst
Hi. So just a quick question on the AeroTech business. I know you've discussed this many times before, but at what point in terms of sales or other financial metrics does that business need to get to, to really start thinking about it as a stand-alone entity?
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Well, certainly for JBT, we think AeroTech is doing a great job. We continue to invest in the business and from our perspective we look through -- at that through the lens of shareholder value creation and we certainly review those decisions and when the timing and what that looks like makes sense, but from our perspective, we're certainly supportive of the business, we were pleased to make the LEKTRO acquisition this year that really positions it as we mentioned for the emissions free ground support equipment and we're very much focused on maximizing the value that AeroTech can generate for JBT shareholders.
John Joyner -- BMO Capital Markets -- Analyst
Okay, thank you. And then just last, and maybe you answered this already, but the comment on FoodTech orders possibly being pressured in the first half of 2019. So how does that square I guess with the overall expected ramp beyond 1Q and then into the back half other than maybe slightly easier comparisons.
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
So generally I would tell you that's just how our years typically work with our customers. I would say it's more than normal seasonal pattern than any particular extra growth in the back half, but we do see at 4%-ish or so, we think that's an appropriate balanced look into next year and then the ramp is really reflective of the seasonal activity more than anything.
John Joyner -- BMO Capital Markets -- Analyst
Okay, thank you.
Operator
Your next question comes from the line of George Godfrey with CL King. Your line is open.
George Godfrey -- CL King -- Analyst
Thank you. Tom, I just wanted to ask one more question on the M&A activity. Is there a particular area or geography or regional catalysts that you look for to decide which of the M&A opportunities in the pipeline you go after or is it simply price or the sellers willingness to negotiate what would you say is the one thing that really pushes you to choose which M&A deal you pursue? Thanks.
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Yes, thank you for asking that George. This is a very thoughtful process at JBT. I talk about the long-term macroeconomic tailwinds we're trying to position JBT in front of as we talked about increasing protein demand, the need for automation, clean labels, positioning our business around that. So you should expect and understand that the opportunities that we're pursuing are very much in line with those thematics and it's a very disciplined approach where we understand the players out there, many of the ones we're working with today and how they fit into that picture so that as JBT pivots and as we invest in our portfolio, we're not trying to invest in the technology that might have been appropriate 10 years ago, but the ones that we think have upside as we go forward. And the benefit and leverage that joining JBT is really in a couple of parts, George, we see a food industry, our customers are going primarily from being regional players to global players and the equipment and the service of the equipment historically has been also a very regional base of players.
JBT is one of the few companies that have this true global operating footprint, which is important for equipment sale, right, I mean you would want obviously, if you're a large multinational food company, ideally you would want the same equipment and processes installed in all your plants across the geography which JBT can certainly do, but I would argue, more importantly, JBT can service that equipment, right, you make this large installation, you want that to run every day, day in and day out reliably and if you're using a let's say, you are in Latin America, but you using a supplier from Europe, getting service can be quite difficult for some of our competitors and when we have JBT being able to have those people in region, hopefully, just a couple of hours away, but usually no more than that. That's very valuable. So by bringing these technologies that are tend to be in regional companies and putting them in our global platform creates value for JBT's customers and equally creates a lot of value for JBT's shareholders because we can grow faster and we can provide that sales and service around the world. And the second part is, it's a very thoughtful and strategic process in terms of buying the technologies that position JBT for the future and put us in front of those macroeconomic tailwinds like we talked about at Technology Day.
George Godfrey -- CL King -- Analyst
Understood. Thank you, Tom.
Operator
There are no further questions in queue at this time. I will now turn the conference back over to Tom Giacomini.
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Thank you again for joining us this morning. I would also like to thank the JBT team for the strong finish to 2018.
Operator
This concludes today's conference call. You may now disconnect.
Duration: 41 minutes
Call participants:
Megan J. Rattigan -- Vice President of Investor Relations and Controller
Thomas W. Giacomini -- Chairman, President and Chief Executive Officer
Brian A. Deck -- Executive Vice President and Chief Financial Officer
Allison Poliniak -- Wells Fargo -- Analyst
Lawrence De Maria -- William Blair -- Analyst
George Godfrey -- CL King -- Analyst
Mircea Dobre -- Robert W. Baird & Co. -- Analyst
Andrew Obin -- Bank of America Merrill Lynch -- Analyst
Jason Rodgers -- Great Lakes Review -- Analyst
John Joyner -- BMO Capital Markets -- Analyst
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