Jason Industries Reports Second Quarter 2017 Results

Released : 08/03/17

Margin Expansion Continues
Announces Finishing Plant Consolidation

MILWAUKEE, Aug. 03, 2017 (GLOBE NEWSWIRE) -- Jason Industries, Inc. (NASDAQ:JASN) (NASDAQ:JASNW) (“Jason” or the “Company”) today reported results for second quarter 2017.

Key financial results for the second quarter 2017 versus the year ago period include:

  • Net sales of $172.5 million decreased 7.1 percent and included a negative 2.1 percent impact from the planned exit of non-core businesses in the margin expansion program and a negative 1.3 percent from foreign currency translation. 
  • Operating income of $9.9 million, or 5.7 percent of net sales, improved $2.8 million from 3.8 percent of net sales on improved operational results on lower sales and lower restructuring and corporate costs.
  • Net loss of $3.5 million, or $0.17 diluted loss per share, increased $1.1 million or $0.04 per share, significantly impacted by a loss on the planned divestiture of the Acoustics European operations of $5.4 million net of tax, or $0.21 per share.
  • Free cash flow was $14.2 million, an increase of $10.2 million, due to higher operating income, lower capital expenditures and a non-cash preferred dividend. Total liquidity was $101.1 million, an increase of $12.7 million.

On an adjusted basis, second quarter 2017 results versus the year ago period include:

  • Adjusted EBITDA of $20.6 million, or 11.9 percent of net sales, improved $1.8 million from 10.1 percent of net sales, driven by margin expansion from improved operational efficiencies and lower selling and administrative expenses.
  • Adjusted net income of $2.0 million, or $0.07 Adjusted earnings per share, improved $0.14 per share.

“While revenues decreased with lower volumes in certain end markets, margins improved in three of our four businesses with better operational performance.  We increased our liquidity and made progress in lowering our leverage by improving operating income, generating cash and retiring debt,” said Brian Kobylinski, chief executive officer of Jason.  “We also continue to gain traction with our targeted growth initiatives.”

Highlights during the quarter include:

  • Total Cost Reduction and Margin Expansion program savings were $2.4 million in the second quarter with a total of $17.0 million since the inception of the program.  Actions taken and announced to-date are expected to achieve $22 million in annual run-rate cost savings. 
     
  • Completed a sale leaseback of a core U.S. facility, generating $5.6 million in net proceeds.
     
  • Repurchased $8.0 million Second Lien Term Loans for $6.1 million.
     
  • In June, announced the closure of a Finishing manufacturing facility in Richmond, Virginia as part of the Company’s ongoing footprint rationalization. Operations will be consolidated into an existing facility in Richmond, Indiana by the end of the fourth quarter. The closure will achieve annual run-rate cost savings of $0.6 million beginning in the first quarter of 2018.  As a result of this action, Jason expects to record a pre-tax restructuring charge to earnings of approximately $1.7 million in 2017 funded by the expected proceeds from sale of the facility.
  • The Company expects to complete the sale of the Acoustics European operations in the third quarter of 2017 for a gross sales price of approximately $10 million. The divestiture will exit approximately $30 million of non-core revenue and will result in approximately $7 million of net cash proceeds from the sale of the business.

Key financial results within the segments for the second quarter 2017 versus the year ago period include:

  • Finishing net sales of $49.8 million decreased $3.4 million, or 6.4 percent, including a negative foreign currency translation impact of 3.7 percent and a negative 2.6 percent impact from the exit of a non-core market in Brazil. Organic sales decreased 0.1 percent and were impacted by strategic decisions to exit low-margin business and products, partially offset by higher volumes in industrial end markets. Adjusted EBITDA was $7.3 million, or 14.7 percent of net sales, a decrease of $0.3 million from 14.4 percent of net sales. Adjusted EBITDA margin increased on improved pricing and lower administrative costs.
     
  • Components net sales of $21.7 million decreased $2.9 million, or 11.9 percent, including a negative 9.9 percent impact from the exit of non-core product lines upon closure of the Buffalo Grove, Illinois facility. Organic sales decreased 2.0 percent with lower rail volumes, partially offset by increased volumes of smart utility meter components. Adjusted EBITDA was $2.5 million, or 11.3 percent of net sales, a decrease of $0.9 million from 13.5 percent of net sales, and was negatively impacted by lower volumes, unfavorable product mix, higher material costs and lower labor productivity, partially offset by savings resulting from the cost reduction program.
     
  • Seating net sales of $44.9 million increased $0.2 million, or 0.5 percent, including a negative foreign currency translation impact of 0.5 percent.  Organic sales increased 1.0 percent on improved pricing and higher volumes in the construction and power sports markets, partially offset by lower volumes in motorcycle and turf care. Adjusted EBITDA was $5.9 million, or 13.1 percent of net sales, an increase of $0.3 million from 12.6 percent of net sales, and was positively impacted by savings resulting from the cost reduction program, partially offset by material cost inflation. 
     
  • Acoustics net sales of $56.1 million decreased $7.1 million, or 11.3 percent, including a negative foreign currency translation impact of 0.3 percent. Organic sales decreased 11.0 percent due to automotive assembly plant shutdowns on declining light vehicle demand, partially offset by new platform awards. Adjusted EBITDA was $8.0 million, or 14.2 percent of net sales, an increase of $1.2 million from 10.7 percent of net sales due to improved labor and material productivity and savings resulting from the cost reduction program, partially offset by lower volumes.
     
  • Corporate expenses of $3.1 million decreased $1.5 million on lower third-party consulting fees.

2017 Guidance:

“Our ability to identify, prioritize and complete projects is increasing and we are moving toward the next wave of operational improvements and growth initiatives. While our revenues are impacted by weaker market conditions, we expect to maintain our profitability and reaffirm our EBITDA guidance for ongoing operations. We have more to do, but are encouraged by this quarter’s margin enhancement, cash flow generation and improved liquidity.”

Jason’s net sales outlook is impacted by lower than expected North American automotive production in Acoustics. The Adjusted EBITDA impact of lower volumes is expected to be offset by improved operating efficiencies and lower overall SG&A spend. The impact of the third quarter Acoustics European divestiture is expected to reduce 2017 net sales by $10 million and Adjusted EBITDA by $1 million.

For the full year 2017, Jason now expects net sales in the range of $625 to $640 million, previously $650 to $670 million. Adjusted EBITDA is now expected to be $63 to $66 million, previously $64 to $67 million, adjusted for the Acoustics European divestiture.

Conference Call:

The Company will hold a conference call to discuss its second quarter results today at 10:00 a.m. Eastern time. A live webcast of the call may be accessed over the Internet from the Company’s Investor Relations website at investors.jasoninc.com. Participants should follow the instructions provided on the website to download and install the necessary audio applications. The conference call is also available by dialing 877-451-6152 (domestic) or 201-389-0879 (international). Participants should ask for the Jason Industries Second Quarter Earnings conference call.

A replay of the live conference call will be available beginning approximately one hour after the call. The replay will be available on the Company’s website or by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the replay passcode 13642137. The telephonic replay will be available until 11:59 pm (Eastern Time), August 10, 2017. The online replay will be available on the website immediately following the call.

About Jason Industries, Inc.
The Company is the parent company to a global family of manufacturing leaders within the finishing, components, seating, and automotive acoustics markets, including Osborn (Richmond, Ind. and Burgwald, Germany), Metalex (Libertyville, Ill.), Milsco (Milwaukee, Wis.), and Janesville Acoustics (Southfield, Mich.). Headquartered in Milwaukee, Wis., Jason employs more than 4,400 people in 13 countries.

Forward Looking Statements
This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “anticipate,” “believe,” “expect,” “estimate,” “plan,” “guidance,” and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Such forward-looking statements include projected financial information. Such forward-looking statements with respect to revenues, earnings, performance, strategies, prospects and other aspects of the Company’s businesses are based on current expectations that are subject to risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. Such factors include, but are not limited to, the level of demand for the Company’s products; competition in the Company’s markets; the Company’s ability to grow and manage growth profitably; the Company’s ability to access additional capital; changes in applicable laws or regulations; the Company’s ability to attract and retain qualified personnel; the possibility that the Company may be adversely affected by other economic, business and/or competitive factors; and other risks and uncertainties identified in the Company’s most recent Annual Report on Form 10-K, as such may be amended or supplemented by subsequent Quarterly Reports on Form 10-Q or other reports filed with the Securities and Exchange Commission.

The forward-looking statements contained in this press release are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you review and consider this press release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual results and cause them to differ materially from those anticipated in the forward-looking statements.

Any forward-looking statement made by us in this press release speaks only as of the date on which we make it. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Non-GAAP and Other Company Information
Included in this press release are certain non-GAAP financial measures designed to complement the financial information presented in accordance with generally accepted accounting principles in the United States of America because management believes such measures are useful to investors. Because the Company’s calculations of these measures may differ from similar measures used by other companies, you should be careful when comparing the Company’s non-GAAP financial measures to those of other companies. In this earnings release, we disclose the following non-GAAP financial measures, and we reconcile these non-GAAP financial measures to the most directly comparable GAAP financial measures: EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings Per Share, Net Debt to Adjusted EBITDA, and Free Cash Flow.

EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin - The Company defines EBITDA as net income (loss) before interest expense, provision (benefit) for income taxes, depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA, excluding the impact of operational restructuring charges and non-cash or non-operational losses or gains, including goodwill and long-lived asset impairment charges, gains or losses on disposal of property, plant and equipment, integration and other operational restructuring charges, transactional legal fees, other professional fees, purchase accounting adjustments, and non-cash share based compensation expense. The Company defines Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of net sales.

Management believes that Adjusted EBITDA provides a more clear picture of the Company’s operating results by eliminating expenses and income that are not reflective of the underlying business performance. The Company uses this metric to facilitate a comparison of operating performance on a consistent basis from period to period and to analyze the factors and trends affecting its segments. The Company’s internal plans, budgets and forecasts use Adjusted EBITDA as a key metric and the Company uses this measure to evaluate its operating performance and segment operating performance and to determine the level of incentive compensation paid to its employees.

Adjusted Net Income and Adjusted Earnings Per Share - The Company defines Adjusted Net Income and Adjusted Earnings Per Share (calculated on a diluted basis) as net income and earnings per share (as defined by GAAP), excluding the impact of operational restructuring charges and non-cash or non-operational losses or gains, including goodwill and long-lived asset impairment charges, gains or losses on disposal of property, plant and equipment, integration and other operational restructuring charges, transactional legal fees, other professional fees, purchase accounting adjustments, and non-cash share based compensation expense, net of their income tax impact. The tax rates used to calculate adjusted net income and adjusted earnings per share are based on a transaction specific basis. Adjusted earnings per share includes the impact of share based compensation to the extent it is dilutive in each period. Adjusted earnings per share includes the impact to Jason Industries common shares upon conversion of JPHI Holdings Inc. rollover shares and conversion of preferred stock. Management believes that Adjusted Net Income and Adjusted Earnings Per Share are useful in assessing the Company’s financial performance by eliminating expenses and income that are not reflective of the underlying business performance.

Net Debt to Adjusted EBITDA - The Company defines Net Debt to Adjusted EBITDA as current and long-term debt plus debt discounts less cash and cash equivalents, divided by pro forma Adjusted EBITDA for the trailing twelve months.  Pro forma Adjusted EBITDA is calculated as Adjusted EBITDA as reported plus Adjusted EBITDA of acquisitions prior to the date of the acquisition during the trailing twelve months. Management believes that Net Debt to Adjusted EBITDA is useful in assessing the Company’s financial leverage.

Free Cash Flow - The Company defines Free Cash Flow as net cash flows from operating activities (as defined by GAAP) less capital expenditures and cash dividends on preferred stock.  Management believes that Free Cash Flow is useful in assessing our ability to generate cash from business operations that is available for strategic capital decisions.

In addition to these non-GAAP financial measures, we also use the term “organic sales” to refer to GAAP net sales from existing operations excluding (i) sales from acquired businesses recorded prior to the first anniversary of the acquisition, (ii) sales from divested businesses or exited non-core businesses, and (iii) the impact of foreign currency translation. The impact of foreign currency translation is calculated as the difference between (a) the period-to-period change in results (excluding acquisitions, divestitures, and exited non-core businesses) and (b) the period-to-period change in results (excluding acquisitions, divestitures, and exited non-core businesses) after applying current period average foreign exchange rates to the prior year period. We use the term “organic sales growth” to refer to the measure of comparing current period organic sales with the corresponding prior year period organic sales.


Jason Industries, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts) (Unaudited)
 
 Three Months Ended Six Months Ended
 June 30, 2017 July 1, 2016 June 30, 2017 July 1, 2016
Net sales$172,477  $185,687  $347,670  $376,661 
Cost of goods sold136,758  148,531  277,187  301,614 
Gross profit35,719  37,156  70,483  75,047 
Selling and administrative expenses25,242  28,273  51,898  60,574 
Loss (gain) on disposals of property, plant and equipment - net65  (14) (265) 689 
Restructuring543  1,783  1,224  4,500 
Operating income9,869  7,114  17,626  9,284 
Interest expense(8,395) (7,963) (16,761) (15,987)
Gain on extinguishment of debt1,564    1,564   
Equity income277  142  420  311 
Loss on divestiture(6,686)   (6,686)  
Other income - net90  283  203  401 
Loss before income taxes(3,281) (424) (3,634) (5,991)
Tax provision (benefit)200  1,946  228  (605)
Net loss$(3,481) $(2,370) $(3,862) $(5,386)
Less net (loss) gain attributable to noncontrolling interests  (400) 5  (910)
Net loss attributable to Jason Industries$(3,481) $(1,970) $(3,867) $(4,476)
Accretion of preferred stock dividends936  900  1,854  1,800 
Net loss available to common shareholders of Jason Industries$(4,417) $(2,870) $(5,721) $(6,276)
        
Net loss per share available to common shareholders of Jason Industries:             
Basic and diluted$(0.17) $(0.13) $(0.22) $(0.28)
        
Weighted average number of common shares outstanding:       
Basic and diluted26,042  22,395  25,914  22,392 



Jason Industries, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts) (Unaudited)
 
 June 30, 2017 December 31, 2016
Assets   
Current assets   
Cash and cash equivalents$54,919  $40,861 
Accounts receivable - net81,560  77,837 
Inventories - net69,313  73,601 
Assets held for sale17,684   
Other current assets16,418  17,866 
Total current assets239,894  210,165 
Property, plant and equipment - net158,653  178,318 
Goodwill44,203  42,157 
Other intangible assets - net136,968  144,258 
Other assets - net9,836  9,433 
Total assets$589,554  $584,331 
    
Liabilities and Shareholders' Equity (Deficit)   
Current liabilities   
Current portion of long-term debt$7,368  $8,179 
Accounts payable61,881  61,160 
Accrued compensation and employee benefits16,016  13,207 
Accrued interest128  191 
Liabilities held for sale8,321   
Other current liabilities26,279  24,807 
Total current liabilities119,993  107,544 
Long-term debt410,302  416,945 
Deferred income taxes36,302  42,747 
Other long-term liabilities21,956  19,881 
Total liabilities588,553  587,117 
    
Commitments and contingencies   
    
Shareholders' Equity (Deficit)   
Preferred stock47,745  45,899 
Jason Industries common stock3  2 
Additional paid-in capital145,271  144,666 
Retained deficit(166,743) (162,876)
Accumulated other comprehensive loss(25,275) (30,372)
Shareholders’ equity (deficit) attributable to Jason Industries                            1,001  (2,681)
Noncontrolling interests  (105)
Total shareholders' equity (deficit)1,001  (2,786)
Total liabilities and shareholders' equity (deficit)$589,554  $584,331 



Jason Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
 
 Six Months Ended
 June 30, 2017   July 1, 2016
Cash flows from operating activities   
Net loss$(3,862) $(5,386)
Adjustments to reconcile net loss to net cash provided by operating activities:               
Depreciation of property, plant and equipment13,153  15,322 
Amortization of intangible assets6,107  6,315 
Amortization of deferred financing costs and debt discount1,498  1,504 
Equity income(420) (311)
Deferred income taxes(5,311) (2,313)
(Gain) loss on disposals of property, plant and equipment - net(265) 689 
Gain on extinguishment of debt(1,564)  
Loss on divestiture6,686   
Dividends from joint venture  836 
Share-based compensation673  (1,373)
Net increase (decrease) in cash due to changes in:   
Accounts receivable(6,316) (17,322)
Inventories4,417  2,346 
Other current assets542  4,142 
Accounts payable1,156  14,206 
Accrued compensation and employee benefits4,955  1,342 
Accrued interest(63) 106 
Accrued income taxes2,122  (652)
Other - net(2,676) 1,326 
Total adjustments24,694  26,163 
Net cash provided by operating activities20,832  20,777 
Cash flows from investing activities   
Proceeds from disposals of property, plant and equipment6,400  3,017 
Payments for property, plant and equipment(7,161) (12,129)
Acquisitions of patents(33) (101)
Net cash used in investing activities(794) (9,213)
Cash flows from financing activities   
Payments of First and Second Lien term loans(9,549) (1,550)
Proceeds from other long-term debt6,134  4,571 
Payments of other long-term debt(3,671) (6,316)
Payments of preferred stock dividends(4) (2,700)
Other financing activities - net(35) (125)
Net cash used in financing activities(7,125) (6,120)
Effect of exchange rate changes on cash and cash equivalents1,145  (62)
Net increase in cash and cash equivalents14,058  5,382 
Cash and cash equivalents, beginning of period40,861  35,944 
Cash and cash equivalents, end of period$54,919  $41,326 



Jason Industries, Inc.
Quarterly Financial Information by Segment
(In thousands) (Unaudited)
 
 2016 2017
 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q YTD
Finishing                   
Net sales$50,276  $53,148  $49,162  $44,297  $196,883  $49,476  $49,757      $99,233 
Adjusted EBITDA5,229  7,634  7,042  4,295  24,200  7,067  7,324      14,391 
Adjusted EBITDA % net sales10.4% 14.4% 14.3% 9.7% 12.3% 14.3% 14.7%     14.5%
                    
Components                   
Net sales$26,837  $24,634  $24,876  $21,320  $97,667  $21,117  $21,713      $42,830 
Adjusted EBITDA4,613  3,337  3,658  2,641  14,249  2,720  2,451      5,171 
Adjusted EBITDA % net sales17.2% 13.5% 14.7% 12.4% 14.6% 12.9% 11.3%     12.1%
                    
Seating                   
Net sales$51,950  $44,680  $32,330  $32,090  $161,050  $47,373  $44,921      $92,294 
Adjusted EBITDA6,629  5,620  2,507  1,366  16,122  5,530  5,897      11,427 
Adjusted EBITDA % net sales12.8% 12.6% 7.8% 4.3% 10.0% 11.7% 13.1%     12.4%
                    
Acoustics                   
Net sales$61,911  $63,225  $63,740  $61,043  $249,919  $57,227  $56,086      $113,313 
Adjusted EBITDA6,615  6,758  7,414  6,415  27,202  6,721  7,983      14,704 
Adjusted EBITDA % net sales10.7% 10.7% 11.6% 10.5% 10.9% 11.7% 14.2%     13.0%
                    
Corporate                   
Adjusted EBITDA$(4,747) $(4,595) $(4,098) $(4,173) $(17,613) $(3,477) $(3,075)     $(6,552)
                    
Consolidated                   
Net sales$190,974  $185,687  $170,108  $158,750  $705,519  $175,193  $172,477      $347,670 
Adjusted EBITDA18,339  18,754  16,523  10,544  64,160  18,561  20,580      39,141 
Adjusted EBITDA % net sales9.6% 10.1% 9.7% 6.6% 9.1% 10.6% 11.9%     11.3%



Jason Industries, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(In thousands) (Unaudited)

Organic Sales Growth
 
 2Q 2017
 Finishing Components Seating Acoustics Jason
Consolidated
          
Net sales         
Organic sales growth(0.1)% (2.0)% 1.0% (11.0)% (3.7)%
Currency impact(3.7)% % (0.5)% (0.3)% (1.3)%
Divestiture & Non-Core Exit                  (2.6)% (9.9)% % % (2.1)%
Growth as reported(6.4)% (11.9)% 0.5% (11.3)% (7.1)%
          
 YTD 2017
 Finishing Components Seating Acoustics Jason
Consolidated
          
Net sales         
Organic sales growth1.5% (5.1)% (3.9)% (9.0)% (4.3)%
Currency impact(3.1)% % (0.6)% (0.4)% (1.1)%
Divestiture & Non-Core Exit(2.5)% (11.7)% % % (2.3)%
Growth as reported(4.1)% (16.8)% (4.5)% (9.4)% (7.7)%


Free Cash Flow
 
 2Q YTD
 2016 2017 2016 2017
Operating Cash Flow$10,508  $17,931  $20,777  $20,832 
Less: Capital Expenditures(5,680) (3,765) (12,129) (7,161)
Less: Preferred Stock Dividends(900) (3) (2,700) (4)
Free Cash Flow After Dividends                                        $3,928  $14,163  $5,948  $13,667 


Net Debt to Adjusted EBITDA
 
 June 30, 2017
Current and long-term debt*$419,811 
Add: Debt discounts and deferred financing costs                              10,859 
Less: Cash and cash equivalents*(54,950)
Net Debt$375,720 
  
Adjusted EBITDA 
3Q16$16,523 
4Q1610,544 
1Q1718,561 
2Q1720,580 
TTM Adjusted EBITDA66,208 
  
Net Debt to Adjusted EBITDA**5.7x

*Includes cash of $31 and current and long-term debt of $2,141 associated with Acoustics Europe classified as assets and liabilities held for sale, respectively.

**Note the consolidated first lien net leverage ratio under the Company’s senior secured credit facilities was 3.89x as of June 30, 2017. See
Form 10-Q for further discussion of the Company’s senior secured credit facilities.


Jason Industries, Inc.
Reconciliation of GAAP to Non-GAAP Measures
Adjusted EBITDA
(In thousands) (Unaudited)
 
 2016 2017
 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q YTD
Net income (loss)$(3,016) $(2,370) $(2,452) $(69,859) $(77,697) $(381) $(3,481)                                 $(3,862)
Tax provision (benefit)(2,551) 1,946  (657) (4,895) (6,157) 28  200      228 
Interest expense8,024  7,963  7,906  7,950  31,843  8,366  8,395      16,761 
Depreciation and amortization10,297  11,340  10,937  10,972  43,546  9,848  9,412      19,260 
EBITDA12,754  18,879  15,734  (55,832) (8,465) 17,861  14,526      32,387 
Adjustments:                   
Impairment charges(1)      63,285  63,285           
Restructuring(2)2,717  1,783  566  2,166  7,232  681  543      1,224 
Integration and other restructuring costs(3)1,589  55  (354) 690  1,980           
Share-based compensation(4)576  (1,949) 509  112  (752) 349  324      673 
Loss (gain) on disposals of fixed assets—net(5)  703  (14) 68  123  880  (330) 65      (265)
Gain on extinguishment of debt(6)            (1,564)     (1,564)
Loss on divestitures(7)            6,686      6,686 
Total adjustments5,585  (125) 789  66,376  72,625  700  6,054      6,754 
Adjusted EBITDA$18,339  $18,754  $16,523  $10,544  $64,160  $18,561  $20,580      $39,141 


    
(1)  Represents non-cash impairment of goodwill of $29.8 million and $33.2 million in the acoustics and components segments, respectively.
    
(2)  Restructuring includes costs associated with exit or disposal activities as defined by GAAP related to facility consolidation, including one-time employee termination benefits, costs to close facilities and relocate employees, and costs to terminate contracts other than capital leases.
    
(3)  During 2016, integration and other restructuring costs primarily includes costs incurred in connection with the start-up of a new acoustics segment facility in Richmond, Indiana, and costs incurred in connection with the closure of Finishing operations in Brazil, and during the third quarter of 2016 includes a $0.6 million reversal of a reserve related to the Newcomerstown fire recorded in acquisition accounting for the business combination in 2014.
    
(4)  Represents non-cash share based compensation expense (income) for awards under the Company’s 2014 Omnibus Incentive Plan. During the second quarter of 2016, share-based compensation includes $2.5 million of expense reversal as a result of the lowering of assumed vesting levels for Adjusted EBITDA performance share units.
    
(5)  Loss (gain) on disposals of fixed assets for the first quarter of 2017 includes a gain of $0.4 million on the sale of equipment related to the closure of the components segment’s Buffalo Grove, Illinois facility and for the first quarter of 2016 includes a loss of $0.6 million on the sale of a seating segment facility.
    
(6)  Represents a gain on extinguishment of Second Lien Term Loan debt in the second quarter of 2017.
    
(7)  Represents a write-down of the carrying amount of the long-lived assets to fair value less costs to sell in connection with the planned sale of the Acoustics European operations.
    


Jason Industries, Inc.
Reconciliation of GAAP to Non-GAAP Measures
Adjusted Net Income and Adjusted Earnings per Share
(In thousands, except per share amounts) (Unaudited)
 
 2016 2017
 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q YTD
GAAP Net income (loss)$(3,016) $(2,370) $(2,452) $(69,859) $(77,697) $(381) $(3,481)             $(3,862)
Adjustments:                   
Impairment charges      63,285  63,285           
Restructuring2,717  1,783  566  2,166  7,232  681  543      1,224 
Integration and other restructuring costs1,589  55  (354) 690  1,980           
Share based compensation576  (1,949) 509  112  (752) 349  324      673 
Loss (gain) on disposal of fixed assets - net(3)703  (14) 68  123  880  (330) 65      (265)
Gain on extinguishment of debt(4)            (1,564)     (1,564)
Loss on divestitures(5)            6,686      6,686 
Tax effect on adjustments(1)(1,926) 558  (122) (574) (2,064) (55) (579)     (634)
Adjusted net income (loss)$643  $(1,937) $(1,785) $(4,057) $(7,136) $264  $1,994  $  $  $2,258 
                    
Effective tax rate on adjustments(1)34% 446% 15% 1% 3% 16% 10%     9%
                    
Diluted weighted average number of common shares outstanding (GAAP):22,388  22,395  22,499  22,758  22,507  25,784  26,042      25,914 
Plus: effect of dilutive share-based compensation (non-GAAP)(2)                   
Plus: effect of convertible preferred stock and rollover shares (non-GAAP)(2)7,139  7,139  7,139  6,919  7,083  3,967  3,815      3,897 
Diluted weighted average number of common shares outstanding (non-GAAP)(2)29,527  29,534  29,638  29,677  29,590  29,751  29,857      29,811 
                    
Adjusted (loss) earnings per share$0.02  $(0.07) $(0.06) $(0.14) $(0.24) $0.01  $0.07      $0.08 
                    
GAAP Net (loss) income per share available to common shareholders of Jason Industries$(0.15) $(0.13) $(0.13) $(2.69) $(3.13) $(0.05) $(0.17)     $(0.22)
Adjustments net of income taxes:                   
Impairment charges, net of noncontrolling interest      2.39  2.42           
Restructuring0.08  0.06  0.02  0.09  0.24  0.02  0.01      0.03 
Integration and other restructuring costs0.04    (0.01) 0.03  0.07           
Share based compensation0.02  (0.04) 0.02  0.01  0.01  0.02  0.02      0.04 
Loss (gain) on disposal of fixed assets - net0.02        0.02  (0.01)       (0.01)
Gain on extinguishment of debt            (0.04)     (0.04)
Loss on divestitures            0.21      0.21 
GAAP to non-GAAP impact per share(2)0.01  0.04  0.04  0.03  0.13  0.03  0.04      0.07 
Adjusted (loss) earnings per share$0.02  $(0.07) $(0.06) $(0.14) $(0.24) $0.01  $0.07      $0.08 


    
(1)  The effective tax rate on adjustments is impacted by nondeductible foreign transaction and restructuring costs, nondeductible impairment of goodwill, restructuring charges in foreign jurisdictions at statutory tax rates, and discrete non-cash tax expense related to the vesting of restricted stock units for which no tax benefit will be realized.
    
(2)  Adjusted earnings per share includes the impact of share-based compensation to the extent it is dilutive in each period. Adjusted earnings per share includes the impact to Jason Industries common shares upon conversion of JPHI Holdings Inc. rollover shares and conversion of preferred stock.
    
Contact Information
Investor Relations:
Chad Paris
investors@jasoninc.com
414.277.2007

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Source: Jason Industries Inc.