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Jason Industries Reports Second Quarter 2017 Results

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

Source:Jason Industries Inc.