Jason Industries, Inc. (JASN) 8-K Earnings Release

MILWAUKEE, March 5, 2019 -- Jason Industries, Inc. (NASDAQ: JASN, JASNW) (“Jason” or “the Company”) today reported results for both fourth quarter and full-year 2018.

Key financial results for the fourth quarter 2018 versus the year ago period include:


•	Net sales of $132.0 million decreased 9.3 percent and included a negative 1.1 percent impact from the divestiture and planned exit of non-core businesses in the margin expansion program and a negative 0.9 percent from foreign currency translation.


•	Operating loss of $0.4 million or 0.3 percent of net sales, increased $1.9 million, impacted by $1.4 million of accelerated depreciation related to the closure of the Richmond, Indiana Acoustics facility and a $1.3 million gain on the sale of the Nuneaton, United Kingdom Seating facility.


•	Net loss of $12.4 million, or $0.48 diluted loss per share, increased $14.8 million or $0.53 per share, significantly impacted by a discrete tax benefit in 2017 of $3.8 million from enactment of the Tax Cut and Jobs Act (the “Tax Act”), and incremental tax expense in 2018 of $6.0 million resulting from provisions of the Tax Act.


•	Free cash flow was $5.6 million, an increase of $5.5 million, due to lower working capital and capital expenditures.

On an adjusted basis, fourth quarter 2018 results versus the year ago period include:


•	Adjusted EBITDA of $10.9 million, or 8.3 percent of net sales, decreased $1.6 million from 8.6 percent of net sales, driven primarily by lower sales volumes with material inflation largely offset by operational improvements and price.


•	Adjusted net loss of $12.5 million, or $0.40 Adjusted loss per share, decreased $0.39 per share.

Key financial results for the full year 2018 versus the year ago period include:


•	Net sales of $612.9 million decreased 5.5 percent and included a negative 2.9 percent impact from the divestiture and planned exit of non-core businesses and a positive 0.8 percent from foreign currency translation.


•	Adjusted EBITDA of $67.2 million, or 11.0 percent of net sales, with Adjusted EBITDA margins increasing from 10.4 percent of net sales. Adjusted EBITDA margin expansion was driven by improved operational efficiencies.


•	Free cash flow was $16.0 million, an increase of $1.8 million, due to lower capital expenditures, reduced working capital, partially offset by higher cash restructuring.

“We delivered our full year guidance on all key measures for a second consecutive year,” said Brian Kobylinski, chief executive officer of Jason. “While our fourth quarter was impacted by select market headwinds and input cost inflation, our team continues to pursue growth opportunities and margin expansion plans to generate cash and drive further leverage reduction.”

Highlights during the quarter include:


•	Total Cost Reduction and Margin Expansion program savings were $0.4 million in the fourth quarter with a total of $23 million since the inception of the program. Actions taken and announced to-date will achieve the three-year program goal of $25 million, and the Company will continue to evaluate cost reduction and footprint rationalization opportunities as part of its normal operating activities.


•	Completed the sale and consolidation of the Nuneaton, United Kingdom Seating facility. Net proceeds from the sale were $3.5 million.

Key financial results within the segments for the fourth quarter 2018 versus the year ago period include:

•

Finishing net sales of $47.2 million decreased $2.8 million, or 5.6 percent, including a negative foreign currency translation impact of 2.5 percent. Organic sales decreased 3.1 percent and were impacted by lower volumes in a weakening European industrial economy partially offset by growth in North America end markets. Adjusted EBITDA was $5.2 million, or 10.9 percent of net sales, a decrease of $0.6 million from 11.5 percent of net sales. Adjusted EBITDA decreased on lower volumes and investments in selling resources to drive targeted growth.


•	Components net sales of $14.7 million decreased $5.2 million, or 26.1 percent, including a negative 8.1 percent impact from the exit of the non-core smart meter product line. Organic sales decreased 18.0 percent due to decreased rail and expanded metals product volumes resulting from unfavorable content mix and heightened competitive pressures.

Adjusted EBITDA was $0.6 million, or 3.7 percent of net sales, a decrease of $1.7 million from 11.4 percent of net sales, and was negatively impacted by lower volumes.

•

Seating net sales of $33.7 million decreased $0.2 million, or 0.5 percent, including a negative foreign currency translation impact of 0.2 percent. Organic sales were essentially flat with lower motorcycle volumes offset by growth in turf care and pricing actions. Adjusted EBITDA was $3.4 million, or 10.0 percent of net sales, an increase of $1.1 million from 6.8 percent of net sales. Adjusted EBITDA margin growth was driven by operational efficiencies resulting from continuous improvement projects.

•

Acoustics net sales of $36.4 million decreased $5.4 million, or 12.9 percent, due to end-of-life platform changes. Adjusted EBITDA was $4.6 million, or 12.6 percent of net sales, a decrease of $1.4 million from 14.3 percent of net sales. Adjusted EBITDA margin decreased on contractual price decreases and input cost inflation, partially offset by savings related to the closure of the Richmond, Indiana facility.


•	Corporate expenses of $2.7 million decreased $1.1 million due to lower professional fees and incentive compensation.

Other Information:


•	Net debt to Adjusted EBITDA on a trailing twelve-month basis was 5.1x as of the end of the fourth quarter, a decrease from 5.5x as of the end of 2017. Total liquidity as of the end of the fourth quarter was $99.4 million, comprised of $58.2 million of cash and cash equivalents and $41.2 million of availability on revolving loan facilities globally.

•

In 2017 the income tax benefit of $10.4 million included $3.8 million of discrete net tax benefits related to the Tax Act, including $5.3 million of tax expense for the deemed repatriation of foreign earnings, $11.1 million of tax benefit for the revaluation of net deferred tax liabilities, and $2.1 million of tax expense for other discrete items related to tax positions impacted by the Tax Act. In 2018 the income tax expense of $4.1 million included incremental tax expense of $8.7 million resulting from the Tax Act, including $6.5 million due to the disallowance of interest expense deductions for which a future tax benefit is not expected to be realized and $2.1 million due to Global Intangible Low-Taxed Income (“GILTI”) provisions.

•

During the first quarter of 2019, Mr. Kobylinski, Jason’s chief operating decision maker, changed how he makes operating decisions, assesses performance of the business, and allocates resources in a manner that caused its operating segments to change. Consequently, effective for the first quarter of 2019, the Company will change the reporting of its financial results to reflect the simplified management structure with three reportable segments: Industrial, Engineered Components, and Fiber Solutions.

Industrial, formerly the Finishing segment, is a global provider of solutions for surface preparation and finishing, cleaning and containment, and material and structural positioning, with product lines including brushes, polishing buffs and compounds, abrasives, and roller technology serving diverse industrial end-markets.

Engineered Components, the combined former Seating and Components segments, designs and engineers seating and safety products, serving end-markets including heavy industry, turf care, power sports, rail, and general industrial applications.

Fiber Solutions, formerly the Acoustics segment, is a North American provider of technical, non-woven fiber-based acoustical, thermal, and structural products serving automotive and other end-markets.

2019 Guidance:

“We successfully completed the second year of our turnaround plan, a year in which we improved our operations, upgraded our team, and executed targeted growth initiatives. We continue to simplify our business, generate cash and reduce leverage,” added Kobylinski. "Despite the presence of select end-market headwinds and input cost inflation entering 2019, we remain focused on building upon recent successes.”

For 2019, Jason expects net sales in the range of $565 to $585 million, Adjusted EBITDA of $65 to $68 million and free cash flow of $12 to $16 million, which result in an implied net debt to Adjusted EBITDA range of 5.0 to 4.8 times.

Conference Call:

The Company will hold a conference call to discuss its fourth 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 Fourth 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), March 12, 2019. 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 3,600 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, divestitures and extinguishment of debt, 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, divestitures and extinguishment of debt, 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 or minus Adjusted EBITDA of acquisitions or divestitures prior to the date of the acquisition or divestiture, respectively, 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.

Contact Information

Investor Relations:

Rachel Zabkowicz

investors@jasoninc.com

414.277.2007

Jason Industries, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts) (Unaudited)




	Three Months Ended						Year Ended
	December 31, 2018			December 31, 2017			December 31, 2018			December 31, 2017
Net sales	$	131,975		$	145,516		$	612,948		$	648,616
Cost of goods sold	106,966			116,890			486,668			517,764
Gross profit	25,009			28,626			126,280			130,852
Selling and administrative expenses	25,544			25,787			106,470			103,855
(Gain) loss on disposals of property, plant and equipment - net	(1,296		)	145			(1,142		)	(759		)
Restructuring	1,207			1,270			4,458			4,266
Operating (loss) income	(446		)	1,424			16,494			23,490
Interest expense	(8,659		)	(8,125		)	(33,437		)	(33,089		)
(Loss) gain on extinguishment of debt	—			(182		)	—			2,201
Equity income	121			237			1,024			952
Loss on divestiture	—			—			—			(8,730		)
Other income - net	48			58			654			319
Loss before income taxes	(8,936		)	(6,588		)	(15,265		)	(14,857		)
Tax provision (benefit)	3,463			(8,946		)	4,052			(10,384		)
Net (loss) income	$	(12,399	)	$	2,358		$	(19,317	)	$	(4,473	)
Less net gain attributable to noncontrolling interests	—			—			—			5
Net (loss) gain attributable to Jason Industries	$	(12,399	)	$	2,358		$	(19,317	)	$	(4,478	)
Accretion of preferred stock dividends and redemption premium	796			974			4,070			3,783
Net (loss) income available to common shareholders of Jason Industries	$	(13,195	)	$	1,384		$	(23,387	)	$	(8,261	)

Net (loss) income per share available to common shareholders of Jason Industries:
Basic	$	(0.48	)	$	0.05		$	(0.85	)	$	(0.32	)
Diluted	(0.48		)	$	0.05		(0.85		)	(0.32		)
Weighted average number of common shares outstanding:
Basic	27,683			26,255			27,595			26,082
Diluted	27,683			26,785			27,595			26,082

Jason Industries, Inc.

Condensed Consolidated Balance Sheets

(In thousands) (Unaudited)




	December 31, 2018			December 31, 2017
Assets
Current assets
Cash and cash equivalents	$	58,169		$	48,887
Accounts receivable - net	60,559			68,626
Inventories - net	63,747			70,819
Other current assets	13,664			15,655
Total current assets	196,139			203,987
Property, plant and equipment - net	134,869			154,196
Goodwill	44,065			45,142
Other intangible assets - net	116,529			131,499
Other assets - net	11,995			11,499
Total assets	$	503,597		$	546,323
Liabilities and Shareholders’ (Deficit) Equity
Current liabilities
Current portion of long-term debt	$	6,544		$	9,704
Accounts payable	47,497			53,668
Accrued compensation and employee benefits	14,452			17,433
Accrued interest	89			276
Other current liabilities	17,281			19,806
Total current liabilities	85,863			100,887
Long-term debt	387,244			391,768
Deferred income taxes	23,882			25,699
Other long-term liabilities	20,548			22,285
Total liabilities	517,537			540,639

Shareholders’ (Deficit) Equity
Preferred stock	$	40,612		$	49,665
Jason Industries common stock	3			3
Additional paid-in capital	155,533			143,788
Retained deficit	(186,517		)	(167,710		)
Accumulated other comprehensive loss	(23,571		)	(20,062		)
Total shareholders’ (deficit) equity	(13,940		)	5,684
Total liabilities and shareholders’ (deficit) equity	$	503,597		$	546,323

Jason Industries, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)




	Year Ended December 31, 2018			Year Ended December 31, 2017

Cash flows from operating activities
Net loss	$	(19,317	)	$	(4,473	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	28,356			26,260
Amortization of intangible assets	14,248			12,674
Amortization of deferred financing costs and debt discount	2,937			2,943
Equity income	(1,024		)	(952		)
Deferred income taxes	(1,838		)	(17,345		)
Gain on disposals of property, plant and equipment - net	(1,142		)	(759		)
Gain on extinguishment of debt	—			(2,201		)
Loss on divestiture	—			8,730
Transaction fees on divestiture	—			(932		)
Dividends from joint ventures	833			—
Share-based compensation	2,709			1,119
Net increase (decrease) in cash due to changes in:
Accounts receivable	7,454			6,997
Inventories	5,750			3,804
Other current assets	2,819			1,464
Accounts payable	(6,015		)	(7,897		)
Accrued compensation and employee benefits	(2,710		)	5,946
Accrued interest	(187		)	98
Accrued income taxes	(1,221		)	473
Other - net	(1,895		)	(5,858		)
Total adjustments	49,074			34,564
Net cash provided by operating activities	29,757			30,091
Cash flows from investing activities
Proceeds from disposals of property, plant and equipment	3,531			8,809
Payments for property, plant and equipment	(13,753		)	(15,873		)
Proceeds from divestitures, net of cash divested and debt assumed by buyer	—			7,883
Acquisitions of patents	(152		)	(104		)
Net cash provided by (used in) investing activities	(10,374		)	715
Cash flows from financing activities
Payments of deferred financing costs	(649		)	—
Payments of First and Second Lien term loans	(5,600		)	(21,826		)
Proceeds from other long-term debt	3,387			8,596
Payments of other long-term debt	(7,076		)	(10,816		)
Value added tax collected on building sale	694			—
Payments of preferred stock dividends	(15		)	(12		)
Other financing activities - net	(7		)	(220		)
Net cash used in financing activities	(9,266		)	(24,278		)
Effect of exchange rate changes on cash and cash equivalents	(835		)	1,498
Net increase in cash and cash equivalents	9,282			8,026
Cash and cash equivalents, beginning of period	48,887			40,861
Cash and cash equivalents, end of period	$	58,169		$	48,887

Jason Industries, Inc.

Quarterly Financial Information by Segment

(In thousands) (Unaudited)



	2017															2018
	1Q			2Q			3Q			4Q			FY			1Q			2Q			3Q			4Q			FY
Finishing
Net sales	$	49,476		$	49,757		$	51,065		$	49,986		$	200,284		$	53,978		$	55,454		$	51,016		$	47,189		$	207,637
Adjusted EBITDA	7,067			7,324			7,503			5,767			27,661			7,799			8,437			7,579			5,164			28,979
Adjusted EBITDA % net sales	14.3		%	14.7		%	14.7		%	11.5		%	13.8		%	14.4		%	15.2		%	14.9		%	10.9		%	14.0		%

Components
Net sales	$	21,117		$	21,713		$	19,945		$	19,846		$	82,621		$	22,393		$	24,559		$	21,404		$	14,672		$	83,028
Adjusted EBITDA	2,720			2,451			2,445			2,272			9,888			3,070			3,563			2,563			550			9,746
Adjusted EBITDA % net sales	12.9		%	11.3		%	12.3		%	11.4		%	12.0		%	13.7		%	14.5		%	12.0		%	3.7		%	11.7		%

Seating
Net sales	$	47,373		$	44,921		$	32,963		$	33,872		$	159,129		$	47,034		$	44,993		$	34,609		$	33,686		$	160,322
Adjusted EBITDA	5,530			5,897			2,621			2,300			16,348			5,933			6,870			3,588			3,356			19,747
Adjusted EBITDA % net sales	11.7		%	13.1		%	8.0		%	6.8		%	10.3		%	12.6		%	15.3		%	10.4		%	10.0		%	12.3		%

Acoustics
Net sales	$	57,227		$	56,086		$	51,457		$	41,812		$	206,582		$	43,849		$	43,418		$	38,266		$	36,428		$	161,961
Adjusted EBITDA	6,721			7,983			6,640			5,997			27,341			5,778			6,044			4,465			4,581			20,868
Adjusted EBITDA % net sales	11.7		%	14.2		%	12.9		%	14.3		%	13.2		%	13.2		%	13.9		%	11.7		%	12.6		%	12.9		%

Corporate
Adjusted EBITDA	$	(3,477	)	$	(3,075	)	$	(3,073	)	$	(3,861	)	$	(13,486	)	$	(2,867	)	$	(3,550	)	$	(2,965	)	$	(2,747	)	$	(12,129	)

Consolidated
Net sales	$	175,193		$	172,477		$	155,430		$	145,516		$	648,616		$	167,254		$	168,424		$	145,295		$	131,975		$	612,948
Adjusted EBITDA	18,561			20,580			16,136			12,475			67,752			19,713			21,364			15,230			10,904			67,211
Adjusted EBITDA % net sales	10.6		%	11.9		%	10.4		%	8.6		%	10.4		%	11.8		%	12.7		%	10.5		%	8.3		%	11.0		%

Jason Industries, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(In thousands) (Unaudited)

Organic Sales Growth



	4Q 2018
	Finishing	Components	Seating	Acoustics	Jason Consolidated

Net sales
Organic sales growth	(3.1)%	(18.0)%	(0.3)%	(12.9)%	(7.3)%
Currency impact	(2.5)%	—%	(0.2)%	—%	(0.9)%
Divestiture & Non-Core Exit	—%	(8.1)%	—%	—%	(1.1)%
Growth as reported	(5.6)%	(26.1)%	(0.5)%	(12.9)%	(9.3)%

	YTD 2018
	Finishing	Components	Seating	Acoustics	Jason Consolidated
Net sales
Organic sales growth	1.7%	(4.7)%	0.4%	(10.6)%	(3.4)%
Currency impact	2.3%	—%	0.3%	—%	0.8%
Divestiture & Non-Core Exit	(0.3)%	5.2%	—%	(11.0)%	(2.9)%
Growth as reported	3.7%	0.5%	0.7%	(21.6)%	(5.5)%

Free Cash Flow



	1Q			2Q			3Q			4Q			YTD
	2018			2018			2018			2018			2018
Operating Cash Flow	$	3,817		$	7,323		$	8,875		$	9,742		$	29,757
Less: Capital Expenditures	(3,622		)	(3,317		)	(2,697		)	(4,117		)	(13,753		)
Free Cash Flow After Dividends	$	195		$	4,006		$	6,178		$	5,625		$	16,004

Net Debt to Adjusted EBITDA



	December 31, 2018
Current and long-term debt	$	393,788
Add: Debt discounts and deferred financing costs	6,721
Less: Cash and cash equivalents	(58,169		)
Net Debt	$	342,340

Adjusted EBITDA
1Q18	19,713
2Q18	21,364
3Q18	15,230
4Q18	10,904
TTM Adjusted EBITDA	67,211

Net Debt to Adjusted EBITDA*	5.1		x

*Note the consolidated first lien net leverage ratio under the Company’s senior secured credit facilities was 3.64x as of December 31, 2018. See Form 10-K 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)



	2017															2018
	1Q			2Q			3Q			4Q			FY			1Q			2Q			3Q			4Q			FY
Net loss	$	(493	)	$	(4,737	)	$	(1,601	)	$	2,358		$	(4,473	)	$	(819	)	$	(587	)	$	(5,512	)	$	(12,399	)	$	(19,317	)
Tax provision (benefit)	(15		)	179			(1,602		)	(8,946		)	(10,384		)	275			(238		)	552			3,463			4,052
Interest expense	8,366			8,395			8,203			8,125			33,089			8,027			8,403			8,348			8,659			33,437
Depreciation and amortization	10,003			9,487			9,749			9,695			38,934			10,807			11,046			9,804			10,947			42,604
EBITDA:	17,861			13,324			14,749			11,232			57,166			18,290			18,624			13,192			10,670			60,776
Adjustments:
Restructuring⁽¹⁾	681			543			1,772			1,270			4,266			602			1,464			1,185			1,207			4,458
Integration and other restructuring costs⁽²⁾	—			—			—			(569		)	(569		)	356			712			—			(658		)	410
Share-based compensation⁽³⁾	349			324			231			215			1,119			231			553			944			981			2,709
(Gain) loss on disposals of fixed assets - net⁽⁴⁾	(330		)	65			(639		)	145			(759		)	234			11			(91		)	(1,296		)	(1,142		)
Gain on extinguishment of debt⁽⁵⁾	—			(1,564		)	(819		)	182			(2,201		)	—			—			—			—			—
Loss on divestitures⁽⁶⁾	—			7,888			842			—			8,730			—			—			—			—			—
Total adjustments	700			7,256			1,387			1,243			10,586			1,423			2,740			2,038			234			6,435
Adjusted EBITDA	$	18,561		$	20,580		$	16,136		$	12,475		$	67,752		$	19,713		$	21,364		$	15,230		$	10,904		$	67,211


⁽¹⁾	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.

⁽²⁾

During 2018, integration and other restructuring costs included $0.3 million for costs related to the exit of the non-core smart meter product line in the components segment, $0.2 million for expected settlement costs related to a legal claim in the former Assembled Products business in the components segment associated with periods prior to the Company’s go public business combination, $0.1 million related to legal entity restructuring activities and $0.1 million associated with the insurance deductible related to a force majeure incident at a supplier in the seating segment. The supplier incident had resulted in incremental costs to maintain production throughout 2018, with such costs offset by insurance recoveries received during the third and fourth quarters of 2018. These costs were partially offset by $0.4 million of legal settlement income related to proceeds from a supplier claim in the seating segment associated with periods prior to the Company’s go public business combination. Such costs are not included in restructuring for GAAP purposes. During 2017, integration and other restructuring costs includes a $0.6 million reversal of a liability recorded in acquisition accounting for the business combination in 2014.


⁽³⁾	Represents non-cash share based compensation expense (income) for awards under the Company’s 2014 Omnibus Incentive Plan.

⁽⁴⁾

During 2018, (gain) loss on disposals of property, plant and equipment included for the fourth quarter of 2018 a gain of $1.3 million on the sale of a building related to the closure of the seating segment’s U.K. facility and for the first quarter of 2018 included a loss of $0.2 million from the disposition of equipment in connection with the consolidation of the component segment’s Libertyville, Illinois facilities. During 2017, (gain) loss on disposals of property, plant and equipment included for the third quarter of 2017 a gain of $0.5 million on the sale of a building related to the closure of the finishing segment’s Richmond, Virginia facility and for the first quarter of 2017 a gain of $0.4 million on the sale of equipment related to the closure of the components segment’s Buffalo Grove, Illinois facility.


⁽⁵⁾	Represents a gain on extinguishment of Second Lien Term Loan debt in both the second and third quarters of 2017 and a $0.2 million prepayment fee to retire foreign debt in the fourth quarter of 2017.


(6)	Represents the completed divestiture of the Company’s Acoustics European operations. A pre-tax loss of $7.9 million was recorded in the second quarter of 2017 when the business was classified as held for sale and a pre-tax loss of $0.8 million was recorded in the third quarter of 2017 upon closing of the divestiture.

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)



	2017															2018
	1Q			2Q			3Q			4Q			FY			1Q			2Q			3Q			4Q			FY
GAAP Net income (loss)	$	(493	)	$	(4,737	)	$	(1,601	)	$	2,358		$	(4,473	)	$	(819	)	$	(587	)	$	(5,512	)	$	(12,399	)	$	(19,317	)
Adjustments:
Restructuring	681			543			1,772			1,270			4,266			602			1,464			1,185			1,207			4,458
Integration and other restructuring costs	—			—			—			(569		)	(569		)	356			712			—			(658		)	410
Share based compensation	349			324			231			215			1,119			231			553			944			981			2,709
(Gain) loss on disposal of fixed assets - net	(330		)	65			(639		)	145			(759		)	234			11			(91		)	(1,296		)	(1,142		)
(Gain) loss on extinguishment of debt	—			(1,564		)	(819		)	182			(2,201		)	—			—			—			—			—
Loss on divestitures	—			7,888			842			—			8,730			—			—			—			—			—
Tax effect on adjustments⁽¹⁾	(55		)	(582		)	(214		)	(122		)	(973		)	(314		)	(697		)	(445		)	(285		)	(1,741		)
Tax Benefit (provision)⁽²⁾	—			—			—			(3,787		)	(3,787		)	410			—			170			—			580
Adjusted net income (loss)	$	152		$	1,937		$	(428	)	$	(308	)	$	1,353		$	700		$	1,456		$	(3,749	)	$	(12,450	)	$	(14,043	)

Effective tax rate on adjustments⁽¹⁾	16		%	8		%	16		%	10		%	9		%	22		%	25		%	22		%	122		%	27		%

Diluted weighted average number of common shares outstanding (GAAP):	25,784			26,042			26,241			26,255			26,082			27,329			27,677			27,683			27,683			27,595
Plus: effect of dilutive share-based compensation (non-GAAP)⁽³⁾	—			—			—			530			—			—			—			—			—			—
Plus: effect of convertible preferred stock and rollover shares (non-GAAP)⁽³⁾	3,967			3,815			3,889			3,982			3,917			3,309			3,147			3,212			3,274			3,235
Diluted weighted average number of common shares outstanding (non-GAAP)⁽³⁾	29,751			29,857			30,130			30,767			29,999			30,638			30,824			30,895			30,957			30,830

Adjusted earnings (loss) per share	$	0.01		$	0.06		$	(0.01	)	$	(0.01	)	$	0.05		$	0.02		$	0.05		$	(0.12	)	$	(0.40	)	$	(0.46	)

GAAP Net (loss) income per share available to common shareholders of Jason Industries	$	(0.05	)	$	(0.22	)	$	(0.10	)	$	0.05		$	(0.32	)	$	(0.09	)	$	(0.05	)	$	(0.23	)	$	(0.48	)	$	(0.85	)
Adjustments net of income taxes:
Restructuring	0.02			0.01			0.04			0.04			0.13			0.02			0.04			0.03			0.03			0.12
Integration and other restructuring costs	—			—			—			(0.02		)	(0.02		)	0.01			0.02			—			(0.02		)	0.01
Share based compensation	0.02			0.02			0.01			0.01			0.06			0.01			0.02			0.03			0.03			0.08
(Gain) loss on disposal of fixed assets - net	(0.01		)	—			(0.01		)	—			(0.02		)	0.01			—			—			(0.05		)	(0.04		)
Gain on extinguishment of debt	—			(0.04		)	(0.02		)	0.01			(0.06		)	—			—			—			—			—
Loss on divestitures	—			0.26			0.03			—			0.29			—			—			—			—			—
Tax Benefit (provision)⁽²⁾	—			—			—			(0.12		)	(0.13		)	0.02			—			0.01			—			0.02
Redemption premium on preferred stock conversion	—			—			—			—			—			0.04			—			—			—			0.04
GAAP to non-GAAP impact per share⁽³⁾	0.03			0.03			0.04			0.02			0.12			—			0.02			0.04			0.09			0.16
Adjusted earnings (loss) per share	$	0.01		$	0.06		$	(0.01	)	$	(0.01	)	$	0.05		$	0.02		$	0.05		$	(0.12	)	$	(0.40	)	$	(0.46	)


⁽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⁾	Represents discrete income tax benefits associated with The Tax Cuts and Jobs Act enacted in December 2017.


⁽³⁾	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 at the voluntary conversion ratio.

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Jason Industries, Inc. provided additional information to their SEC Filing as exhibits

Exhibit 99.1: Additional Exhibits

Ticker: JASN
CIK: 1579252
Form Type: 8-K Corporate News
Accession Number: 0001579252-19-000026
Submitted to the SEC: Tue Mar 05 2019 8:23:42 AM EST
Accepted by the SEC: Tue Mar 05 2019
Period: Tuesday, March 5, 2019
Industry: Miscellaneous Manufacturing Industries

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Jason Industries, Inc. (JASN) SEC Filing 8-K Material Event for the period ending Tuesday, March 5, 2019

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