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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 25, 2015
 
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from  __________ to __________ 

Commission File Number: 001-36051
 JASON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
46-2888322
(State or other jurisdiction of
 incorporation or organization)
 
(I.R.S. Employer
 Identification Number)
 
411 East Wisconsin Avenue
Suite 2100
Milwaukee, Wisconsin
 
53202
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code:  (414) 277-9300
 
Not Applicable
(Former name or former address, if changed since last report)
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes ý No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨
 
Accelerated filer ý
Non-accelerated filer ¨
 
Smaller reporting company ¨
(Do not check if a smaller reporting company) 
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ¨  No ý

As of October 28, 2015, there were 22,189,336 shares of common stock of the Company issued and outstanding. 




JASON INDUSTRIES, INC.
TABLE OF CONTENTS

1




PART I – FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
Jason Industries, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts) (Unaudited)
 
Successor
 
 
Predecessor
 
Three Months Ended September 25, 2015
 
Nine Months Ended September 25, 2015
 
June 30, 2014 Through September 26, 2014
 
 
June 28, 2014 Through June 29, 2014
 
January 1, 2014 Through June 29, 2014
 
 
 
 
 
 
Net sales
$
171,174

 
$
534,588

 
$
161,168

 
 
$

 
$
377,151

Cost of goods sold
135,733

 
418,576

 
137,763

 
 
690

 
294,175

Gross profit
35,441

 
116,012

 
23,405

 
 
(690
)
 
82,976

Selling and administrative expenses
31,704

 
95,718

 
30,081

 
 
(201
)
 
54,974

(Gain) loss on disposals of property, plant and equipment - net
(8
)
 
14

 

 
 

 
338

Restructuring
923

 
3,637

 
103

 
 

 
2,554

Transaction-related expenses

 
886

 
1,404

 
 
23,009

 
27,783

Operating income
2,822

 
15,757

 
(8,183
)
 
 
(23,498
)
 
(2,673
)
Interest expense
(7,996
)
 
(23,420
)
 
(7,809
)
 
 
(82
)
 
(7,301
)
Equity income
136

 
678

 
170

 
 

 
831

Gain from sale of joint ventures

 

 

 
 

 
3,508

Other income - net
48

 
133

 
57

 
 

 
107

(Loss) income before income taxes
(4,990
)
 
(6,852
)
 
(15,765
)
 
 
(23,580
)
 
(5,528
)
Tax provision (benefit)
(1,814
)
 
(1,917
)
 
(5,976
)
 
 
(5,652
)
 
(573
)
Net (loss) income
$
(3,176
)
 
$
(4,935
)
 
$
(9,789
)
 
 
$
(17,928
)
 
$
(4,955
)
Less net loss attributable to noncontrolling interests
(537
)
 
(834
)
 
(1,654
)
 
 

 

Net (loss) income attributable to Jason Industries
$
(2,639
)
 
$
(4,101
)
 
$
(8,135
)
 
 
$
(17,928
)
 
$
(4,955
)
Accretion of preferred stock dividends
900

 
2,700

 
910

 
 

 

Net (loss) income available to common shareholders of Jason Industries
$
(3,539
)
 
$
(6,801
)
 
$
(9,045
)
 
 
$
(17,928
)
 
$
(4,955
)

 
 
 
 
 
 
 
 
 
 
Net (loss) income per share available to common shareholders of Jason Industries:
 
 
 
 
 
 
 
 
 
 
Basic and diluted
$
(0.16
)
 
$
(0.31
)
 
$
(0.41
)
 
 
$
(17,928
)
 
$
(4,955
)
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
 
 
 
Basic and diluted
22,161

 
22,056

 
21,991

 
 
1

 
1

The accompanying notes are an integral part of these condensed consolidated financial statements.


2




Jason Industries, Inc.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(In thousands) (Unaudited)
 
Successor
 
 
Predecessor
 
Three Months Ended September 25, 2015
 
Nine Months Ended September 25, 2015
 
June 30, 2014 Through September 26, 2014
 
 
June 28, 2014 Through June 29, 2014
 
January 1, 2014 Through June 29, 2014
 
 
 
 
 
 
Net (loss) income
$
(3,176
)
 
$
(4,935
)
 
$
(9,789
)
 
 
$
(17,928
)
 
$
(4,955
)
Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
 
 
Employee retirement plan adjustments, net of tax

 

 

 
 
(792
)
 
(687
)
Cumulative foreign currency translation adjustments associated with joint ventures sold

 

 

 
 

 
(591
)
Foreign currency translation adjustments
(869
)
 
(8,911
)
 
(6,926
)
 
 
(2
)
 
(465
)
Total other comprehensive (loss) income
(869
)
 
(8,911
)
 
(6,926
)
 
 
(794
)
 
(1,743
)
Comprehensive (loss) income
(4,045
)
 
(13,846
)
 
(16,715
)
 
 
(18,722
)
 
(6,698
)
Less: Comprehensive (loss) income attributable to noncontrolling interests
(684
)
 
(2,340
)
 
(2,824
)
 
 

 

Comprehensive (loss) income attributable to Jason Industries
$
(3,361
)
 
$
(11,506
)
 
$
(13,891
)
 
 
$
(18,722
)
 
$
(6,698
)
The accompanying notes are an integral part of these condensed consolidated financial statements.


3





Jason Industries, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts) (Unaudited)
 
Successor
 
September 25, 2015
 
December 31, 2014
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
44,438

 
$
62,279

Accounts receivable - net of allowances for doubtful accounts of $2,206 at September 25, 2015 and $2,415 at December 31, 2014
92,354

 
80,080

Inventories - net
83,876

 
80,546

Deferred income taxes
8,948

 
11,105

Other current assets
28,076

 
23,087

Total current assets
257,692

 
257,097

Property, plant and equipment - net of accumulated depreciation of $36,225 at September 25, 2015 and $12,920 at December 31, 2014
197,622

 
176,478

Goodwill
165,429

 
156,106

Other intangible assets - net
196,987

 
198,683

Other assets - net
20,486

 
21,040

Total assets
$
838,216

 
$
809,404

 
 
 
 
Liabilities and Equity
 
 
 
Current liabilities
 
 
 
Current portion of long-term debt
$
6,460

 
$
5,375

Accounts payable
58,246

 
57,704

Accrued compensation and employee benefits
22,365

 
14,035

Accrued interest
6,712

 
199

Other current liabilities
27,166

 
21,759

Total current liabilities
120,949

 
99,072

Long-term debt
438,451

 
415,306

Deferred income taxes
88,271

 
91,205

Other long-term liabilities
18,683

 
21,146

Total liabilities
666,354

 
626,729

 
 
 
 
Commitments and contingencies (Note 15)

 

 
 
 
 
Equity
 
 
 
Preferred stock, $0.0001 par value (5,000,000 shares authorized,
45,000 shares issued and outstanding at September 25, 2015 and December 31, 2014)
45,000

 
45,000

Jason Industries common stock, $0.0001 par value (120,000,000 shares authorized; issued and outstanding: 22,189,336 shares at September 25, 2015 and 21,990,666 shares at December 31, 2014)
2

 
2

Additional paid-in capital
143,345

 
140,312

Retained deficit
(25,640
)
 
(21,539
)
Accumulated other comprehensive loss
(19,470
)
 
(12,065
)
Shareholders' equity attributable to Jason Industries
143,237

 
151,710

Noncontrolling interests
28,625

 
30,965

Total equity
171,862

 
182,675

Total liabilities and equity
$
838,216

 
$
809,404

The accompanying notes are an integral part of these condensed consolidated financial statements.

4




Jason Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
 
Successor
 
 
Predecessor
 
Nine Months Ended September 25, 2015
 
June 30, 2014 Through September 26, 2014
 
 
January 1, 2014 Through June 29, 2014
 
 
 
 
Cash flows from operating activities
 
 
 
 
 
 
Net (loss) income
$
(4,935
)
 
$
(9,789
)
 
 
$
(4,955
)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
 
 
 
 
 
 
Depreciation
22,585

 
6,460

 
 
10,125

Amortization of intangible assets
10,993

 
3,917

 
 
2,727

Amortization of deferred financing costs and debt discount
2,256

 
750

 
 
426

Equity income
(678
)
 
(170
)
 
 
(831
)
Deferred income taxes
(6,255
)
 
(4,432
)
 
 
(5,156
)
Loss on disposals of property, plant and equipment - net
14

 

 
 
338

Gain from sale of joint ventures

 

 
 
(3,508
)
Non-cash stock compensation
6,463

 
2,063

 
 
7,661

Net increase (decrease) in cash due to changes in:
 
 
 
 
 
 
Accounts receivable
(10,600
)
 
4,654

 
 
(20,632
)
Inventories
2,275

 
1,384

 
 
(5,602
)
Other current assets
(5,945
)
 
(812
)
 
 
(1,860
)
Accounts payable
(44
)
 
(5,036
)
 
 
7,266

Accrued compensation and employee benefits
7,378

 
(496
)
 
 
5,535

Accrued interest
6,514

 
6,761

 
 
(2,634
)
Accrued income taxes
369

 
(3,661
)
 
 
(706
)
Accrued transaction costs
(177
)
 
(9,821
)
 
 
16,807

Other - net
2,091

 
1,354

 
 
(760
)
Total adjustments
37,239

 
2,915

 
 
9,196

Net cash provided by (used in) operating activities
32,304

 
(6,874
)
 
 
4,241

Cash flows from investing activities
 
 
 
 
 
 
Proceeds from disposals of property, plant and equipment and other assets
116

 
32

 
 
159

Proceeds from sale of joint ventures

 

 
 
11,500

Payments for property, plant and equipment
(23,864
)
 
(6,598
)
 
 
(10,998
)
Acquisitions of business, net of cash acquired
(34,763
)
 
(489,169
)
 
 

Acquisitions of patents
(146
)
 
(33
)
 
 
(33
)
Other investing activities

 
(444
)
 
 
(490
)
Net cash (used in) provided by investing activities
(58,657
)
 
(496,212
)
 
 
138

Cash flows from financing activities
 
 
 
 
 
 
Payment of capitalized debt issuance costs

 
(12,977
)
 
 
(444
)
Payments of deferred underwriters fees

 
(5,175
)
 
 

Redemption of redeemable common stock

 
(26,101
)
 
 

Proceeds on issuance of preferred stock

 
45,000

 
 

Payments of preferred stock issuance costs

 
(2,500
)
 
 

Warrant tender offer

 
(6,609
)
 
 

Payments of 2013 U.S. term loan

 

 
 
(1,175
)
Proceeds from First Lien and Second Lien term loans

 
412,477

 
 

Payments of First Lien term loan
(1,550
)
 

 
 

Proceeds from U.S. revolving loans

 

 
 
64,725

Payments of U.S. revolving loans

 

 
 
(53,725
)
Proceeds from other long-term debt
18,538

 
2,255

 
 
1,383

Payments of other long-term debt
(4,078
)
 
(1,913
)
 
 
(3,868
)
Payments of preferred stock dividends
(2,700
)
 

 
 

Net cash provided by financing activities
10,210

 
404,457

 
 
6,896

Effect of exchange rate changes on cash and cash equivalents
(1,698
)
 
(1,020
)
 
 
(122
)
Net (decrease) increase in cash and cash equivalents
(17,841
)
 
(99,649
)
 
 
11,153

Cash and cash equivalents, beginning of period
62,279

 
177,077

 
 
16,318

Cash and cash equivalents, end of period
$
44,438

 
$
77,428

 
 
$
27,471

Supplemental disclosure of cash flow information
 
 
 
 
 
 
Non-cash financing activities:

 
 
 
 
 
Accretion of preferred stock dividends and redemption of premium
$
900

 
$
910

 
 
$

Noncontrolling interest contribution of Jason Partners Holdings, Inc. to JPHI Holdings, Inc.
$

 
$
35,780

 
 
$

The accompanying notes are an integral part of these condensed consolidated financial statements.


5



Jason Industries, Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(In thousands) (Unaudited)

 
Preferred Stock
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Shareholders' Equity
Attributable to Jason
Industries, Inc.
 
Noncontrolling
Interests
 
Total Equity
Balance at December 31, 2014, Successor
$
45,000

 
$
2

 
$
140,312

 
$
(21,539
)
 
$
(12,065
)
 
$
151,710

 
$
30,965

 
$
182,675

Dividends declared

 

 
(2,700
)
 

 

 
(2,700
)
 

 
(2,700
)
Stock compensation expense

 

 
6,463

 

 

 
6,463

 

 
6,463

Tax withholding related to vesting of restricted stock units

 

 
(730
)
 

 

 
(730
)
 

 
(730
)
Net (loss)

 

 

 
(4,101
)
 

 
(4,101
)
 
(834
)
 
(4,935
)
Foreign currency translation adjustments

 

 

 

 
(7,405
)
 
(7,405
)
 
(1,506
)
 
(8,911
)
Balance at September 25, 2015, Successor
$
45,000

 
$
2

 
$
143,345

 
$
(25,640
)
 
$
(19,470
)
 
$
143,237

 
$
28,625

 
$
171,862


 
Preferred Stock
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Shareholders' Equity
Attributable to Jason
Industries, Inc.
 
Noncontrolling
Interests
 
Total Equity
Balance at December 31, 2013, Predecessor
$

 
$

 
$
25,358

 
$
4,640

 
$
474

 
30,472

 
$

 
$
30,472

Stock compensation expense

 

 
7,661

 

 

 
7,661

 

 
7,661

Net income

 

 

 
(4,955
)
 

 
(4,955
)
 

 
(4,955
)
Employee retirement plan adjustments, net of tax

 

 

 

 
(687
)
 
(687
)
 

 
(687
)
Foreign currency translation adjustments

 

 

 

 
(1,056
)
 
(1,056
)
 

 
(1,056
)
Balance at June 29, 2014, Predecessor

 

 
33,019

 
(315
)
 
(1,269
)
 
31,435

 

 
31,435

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Elimination of predecessor common stock, additional paid-in-capital, retained (deficit), and accumulated other comprehensive (loss)

 

 
(33,019
)
 
315

 
1,269

 
(31,435
)
 

 
(31,435
)
Adjustment to reflect Jason Industries common stock, additional paid-in-capital, and retained (deficit) (1)

 
2

 
147,102

 
(9,921
)
 

 
137,183

 

 
137,183

Noncontrolling interests in JPHI Holdings, Inc.

 

 

 

 

 

 
35,780

 
35,780

Issuance of series A convertible perpetual preferred stock
45,000

 

 
(2,500
)
 

 

 
42,500

 

 
42,500

Balance at June 30, 2014, Successor
45,000

 
2

 
144,602

 
(9,921
)
 

 
179,683

 
35,780

 
215,463

Warrant tender

 

 
(6,609
)
 

 

 
(6,609
)
 

 
(6,609
)
Dividends declared

 

 
(910
)
 

 

 
(910
)
 

 
(910
)
Stock compensation expense

 

 
2,063

 

 

 
2,063

 

 
2,063

Net (loss)

 

 

 
(8,135
)
 

 
(8,135
)
 
(1,654
)
 
(9,789
)
Foreign currency translation adjustments

 

 

 

 
(5,756
)
 
(5,756
)
 
(1,170
)
 
(6,926
)
Balance at September 26, 2014, Successor
$
45,000

 
$
2

 
$
139,146

 
$
(18,056
)
 
$
(5,756
)
 
$
160,336

 
$
32,956

 
$
193,292

(1) Adjustment to reflect Jason Industries common stock, additional paid-in capital, and retained deficit is net of common stock redeemed on June 30, 2014, which reduced additional paid in capital by $26,101.

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


Jason Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts) (Unaudited)



1.
Description of Business and Basis of Presentation
Description of Business
Jason Industries, Inc. (“Jason Industries”), including its subsidiaries (collectively, the “Company”), is a diversified industrial manufacturing company with four reportable segments: seating, finishing, acoustics, and components. The segments have separate management teams and have operations within the United States and 14 foreign countries. The Company is a producer of seating for the motorcycle and off-road vehicle sectors, and a supplier of static seats to the commercial and residential lawn/turf sector. The Company is also a producer of non-woven acoustical fiber insulation for the automotive sector and a global manufacturer of industrial consumables (brushes, buffing wheels, buffing compounds, and abrasives). The Company also manufactures precision components, expanded and perforated metal, and slip-resistant walking surfaces.
The Company was originally incorporated in Delaware on May 31, 2013 as a blank check company, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination. On June 30, 2014 (the “Closing Date”), the Company consummated its business combination with Jason Partners Holdings Inc. (“Jason”) pursuant to the stock purchase agreement, dated as of March 16, 2014, which provided for the acquisition of all of the capital stock of Jason by the Company (the “Business Combination”). In connection with the closing of the Business Combination, the Company changed its name from Quinpario Acquisition Corp. to Jason Industries, Inc. and commenced trading of its common stock and warrants under the symbols, “JASN” and “JASNW”, respectively, on NASDAQ. See Note 2 for a further discussion of the Business Combination.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial reporting and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. For additional information, including the Company’s significant accounting policies, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.
As a result of the Business Combination, the Company was identified as the acquirer for accounting purposes, and Jason is the acquiree and accounting predecessor. The Company’s financial statement presentation distinguishes a “Predecessor” for Jason for periods prior to the Closing Date.  The Company was subsequently re-established as Jason Industries, Inc. and is the “Successor” for periods after the Closing Date, which includes the consolidation of Jason subsequent to the Business Combination on June 30, 2014.  The acquisition was accounted for as a business combination using the acquisition method of accounting, and the Successor financial statements reflect a new basis of accounting that is based on the fair value of net assets acquired.  See Note 2 for further discussion of the Business Combination.  As a result of the application of the acquisition method of accounting as of the effective date of the acquisition, the financial statements for the Predecessor period and for the Successor period are presented on a different basis and, therefore, are not comparable.
The Company’s fiscal year ends on December 31. Throughout the year, the Company reports its results using a fiscal calendar whereby each three month quarterly reporting period is approximately thirteen weeks in length, ending on a Friday. The exceptions are the first quarter, which begins on January 1, and the fourth quarter, which ends on December 31. For 2015, the Company’s fiscal quarters are comprised of the three months ending March 27June 26September 25 and December 31. In 2014, the Company’s fiscal quarters were comprised of the three months ended March 28, June 27, September 26 and December 31.
In the opinion of management, all adjustments considered necessary for a fair statement of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Interim results are not necessarily indicative of the results that may be expected for the entire fiscal year.

7


Jason Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts) (Unaudited)


Recently issued accounting standards
In September 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2015-16, “Simplifying the Accounting for Measurement Period Adjustments” (“ASU 2015-16”). ASU 2015-16 requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. ASU 2015-16 is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted and should be applied prospectively.
In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Association with Line of Credit Arrangements” (“ASU 2015-15”). ASU 2015-15 indicates that previously issued guidance did not address presentation or subsequent measurement of debt issuance costs related to line of credit arrangements. Given the absence of authoritative guidance, the SEC staff has indicated that they would not object to an entity deferring and presenting debt issuance costs as assets and amortizing the deferred costs ratably over the term of the line of credit arrangement, regardless of whether there are any outstanding borrowings on the line of credit arrangement. The guidance is effective for annual reporting periods beginning after December 15, 2015, but early adoption is permitted. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU 2015-15 will have on the Company’s financial position or results of operations.
In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). Under ASU 2015-11, inventory will be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. ASU 2015-11 defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” No other changes were made to the current guidance on inventory measurement. ASU 2015-11 is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted and should be applied prospectively. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU 2015-11 will have on the Company's financial position or results of operations.
2.
Consummation of Business Combination
On June 30, 2014, the Company and Jason completed the Business Combination in which JPHI Holdings Inc. (“JPHI”), a majority owned subsidiary of the Company, acquired 100 percent of the capital stock of Jason. The purchase price of $536.0 million was funded by the cash proceeds from the Company’s initial public offering, new debt, the issuance of 45,000 shares of 8% Series A Convertible Perpetual Preferred Stock (the “Series A Preferred Stock”) and rollover equity invested by Jason’s former owners and management of Jason (collectively the “Rollover Participants”). The purchase price includes the payment of $9.2 million for current assets that are in excess of normalized working capital requirements. For the period January 1, 2014 through June 29, 2014 and the period June 30, 2014 through September 26, 2014, the Company incurred approximately $27.8 million and $1.2 million, respectively, of transaction expenses directly related to the Business Combination.
Following the consummation of the Business Combination, Jason became an indirect majority-owned subsidiary of the Company, with the Company owning approximately 83.1 percent of JPHI and the Rollover Participants owning a noncontrolling interest of approximately 16.9 percent of JPHI. The Rollover Participants held 3,485,623 shares of JPHI exchangeable on a one-for-one basis for shares of common stock of the Company.
The following unaudited pro forma combined financial information presents the Company’s results as though Jason and the Company had combined at January 1, 2013. Pro forma net earnings attributable to common shareholders were adjusted to exclude $5.6 million and $38.4 million, respectively, of transaction-related expenses incurred in the three and nine months ended September 26, 2014. The unaudited pro forma condensed consolidated financial information has been prepared using the acquisition method of accounting in accordance with GAAP.
 
(unaudited pro forma)
 
Three Months Ended
September 26, 2014
Nine Months Ended
September 26, 2014
 
Net sales
$
161,168

$
538,319

Net income attributable to common shareholders of Jason Industries
$
(6,286
)
$
(5,655
)
    

8


Jason Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts) (Unaudited)


The Company recorded an allocation of the purchase price to Jason’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the June 30, 2014 acquisition date. The calculation of the purchase price allocation is as follows:
 
Purchase
Price Allocation
Cash and cash equivalents
$
11,049

Accounts receivable
97,693

Inventories - net
83,538

Deferred income taxes - current (net)
8,095

Other current assets
18,973

Property, plant and equipment
179,871

Goodwill
158,483

Other intangible assets
208,450

Other assets - net
8,469

Current liabilities
(111,151
)
Deferred income taxes (net)
(97,266
)
Debt
(11,277
)
Other long-term liabilities
(18,929
)
Total purchase price
$
535,998

3.
Acquisitions
DRONCO GmbH (“DRONCO”)
On May 29, 2015, the Company acquired all of the outstanding shares of DRONCO. DRONCO is a European manufacturer of bonded abrasives. These abrasives are being manufactured and distributed by the finishing segment. The Company paid cash consideration of $34.4 million, net of cash acquired, and, pursuant to the transaction, assumed certain liabilities. The related purchase agreement includes customary representations, warranties and covenants between the named parties.
The acquisition was accounted for using the acquisition method. The operating results and cash flows of DRONCO are included in the Company’s condensed consolidated financial statements from May 29, 2015, the date the Company entered into the purchase agreement.

9


Jason Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts) (Unaudited)


The Company has recorded a preliminary allocation of the purchase price for tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the May 29, 2015 acquisition date. The preliminary consideration and preliminary purchase price allocation is as follows:
 
Calculation of Purchase Price
Cash
$
34,938

Debt
11,031

Purchase consideration
$
45,969

 
Preliminary Purchase Price Allocation
Cash and cash equivalents
$
524

Accounts receivable
3,430

Inventories - net
7,156

Deferred income taxes - current (net)
62

Other current assets
1,495

Property, plant and equipment
23,931

Goodwill
10,458

Other intangible assets
9,285

Other assets - net
42

Current liabilities
(4,497
)
Deferred income taxes (net)
(5,765
)
Other long-term liabilities
(152
)
Total purchase price
$
45,969

The preliminary purchase price allocation resulted in goodwill of $10.5 million in the finishing segment, of which none is deductible for tax purposes. Goodwill generated from DRONCO is primarily attributable to expected synergies from leveraging the finishing segment’s global distribution and sales network and cross-selling of DRONCO’s product portfolio to the finishing segment’s customer base. During the third quarter of 2015, the Company adjusted its preliminary purchase price allocation and recorded adjustments to decrease the customer relationships intangible asset by $2.4 million and to increase goodwill, net of taxes, by $1.7 million.
The preliminary values allocated to other intangible assets and the weighted average useful lives are as follows:
 
Gross Carrying Amount
 
Weighted Average Useful Life (years)
Customer relationships
$
6,130

 
15
Tradenames
3,155

 
15
 
$
9,285

 
 
The preliminary allocation of the purchase price is based on the preliminary valuations performed to determine the fair value of the net assets as of the acquisition date. The amounts allocated to goodwill and intangible assets are based on preliminary valuations and are subject to final adjustments to reflect the final valuations.
The Company recognized $0.9 million of acquisition-related costs that were expensed in the nine months ended September 25, 2015. These costs are included in the condensed consolidated statements of operations as “Transaction-related expenses”. During the three and nine months ended September 25, 2015, $11.3 million and $14.8 million of net sales from DRONCO were included in the Company’s condensed consolidated statements of operations.
Pro forma historical results of operations related to the acquisition of DRONCO have not been presented as they are not material to the Company’s condensed consolidated statements of operations.

10


Jason Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts) (Unaudited)


Herold Partco    
On March 25, 2015, the Company acquired Herold Partco Manufacturing, Inc. for $0.4 million. Herold Partco Manufacturing, Inc. is a Cleveland-based manufacturer of industrial brushes. These brushes are now manufactured and distributed by the finishing segment and sold under the Osborn brand name. The purchase price allocation for this transaction resulted in goodwill of $0.1 million, other intangible assets of $0.2 million and inventory of $0.1 million.
The acquisition of Herold Partco Manufacturing, Inc. was not material to the Company’s condensed consolidated financial statements.
4.
Sale of Joint Ventures
During the first quarter of 2014, Jason completed the sale of its 50% equity interest in two of its joint ventures for a total of $11.5 million. The sale of one of the joint ventures in the amount of $7.5 million was completed in January 2014 and the sale of the second joint venture in the amount of $4.0 million was completed in March 2014. The Company recorded a $3.5 million gain on the sale of the joint ventures, which is reported separately on the condensed consolidated statements of operations. The gain includes the recognition of $0.6 million of cumulative translation adjustments which had been recorded in accumulated other comprehensive income. The $0.6 million is reported separately in the condensed consolidated statements of comprehensive income. Terms of the sale include a supply agreement which allows Jason to purchase product at established prices over the agreement’s three-year term.
5.
Restructuring Costs
The Company has continued to make changes to its worldwide manufacturing footprint. These actions resulted in charges relating to employee severance and other related charges, such as exit costs for the consolidation and closure of plant facilities, employee relocation and lease termination costs. During the three and nine months ended September 25, 2015, the Company incurred $0.9 million and $3.6 million of restructuring charges, respectively. During the period January 1, 2014 through June 29, 2014, the Company incurred $2.6 million of restructuring charges. During the period from June 30, 2014 through September 26, 2014, the Company incurred $0.1 million of restructuring charges. These restructuring costs are presented separately on the condensed consolidated statements of operations.
The following table presents the restructuring liability:
 
Severance
costs
 
Lease
termination
costs
 
Other costs
 
Total
Balance - December 31, 2014, Successor
$
88

 
$
1,056

 
$
97

 
$
1,241

Current period restructuring charges
1,498

 
1,089

 
1,050

 
3,637

Cash payments
(904
)
 
(957
)
 
(954
)
 
(2,815
)
Non-cash charges and other
269

 

 
(193
)
 
76

Balance - September 25, 2015, Successor
$
951

 
$
1,188

 
$

 
$
2,139

 
 
 
 
 
 
 
 
 
Severance
costs
 
Lease
termination
costs
 
Other costs
 
Total
Balance - December 31, 2013, Predecessor
$
1,112

 
$
818

 
$
65

 
$
1,995

Current period restructuring charges
629

 
631

 
1,294

 
2,554

Cash payments
(1,088
)
 
(104
)
 
(899
)
 
(2,091
)
Balance - June 29, 2014, Predecessor
$
653

 
$
1,345

 
$
460

 
$
2,458

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current period restructuring charges
246

 

 
(143
)
 
103

Cash payments
(261
)
 
(209
)
 
(147
)
 
(617
)
Balance - September 26, 2014, Predecessor
$
638

 
$
1,136

 
$
170

 
$
1,944

The accruals for severance presented above relate to costs incurred in the finishing segment as of the period ended September 25, 2015. These accruals are expected to be utilized during the next twelve months and are recorded within other current liabilities on the condensed consolidated balance sheets. During the nine months ended September 25, 2015, the accrual for lease termination costs of $1.2 million relates to restructuring costs within the acoustics segment due to the closure of the

11


Jason Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts) (Unaudited)


Norwalk facility. At September 25, 2015 and December 31, 2014, $0.4 million and $0.6 million, respectively, are recorded within other long-term liabilities and $0.8 million and $0.5 million, respectively, are recorded within other current liabilities on the condensed consolidated balance sheets.
6.
Inventories
Inventories consisted of the following:
 
Successor
 
September 25, 2015
 
December 31, 2014
Raw material
$
43,357

 
$
42,803

Work-in-process
5,427

 
5,572

Finished goods
35,092

 
32,171

Total Inventories
$
83,876

 
$
80,546

7.
Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill are as follows:
 
Seating
 
Finishing
 
Acoustics
 
Components
 
Total
Balance as of December 31, 2014 (Successor)
$
58,139

 
$
34,608

 
$
30,176

 
$
33,183

 
$
156,106

Acquisition of businesses

 
10,506

 

 

 
10,506

Foreign currency impact

 
(867
)
 
(316
)
 

 
(1,183
)
Balance as of September 25, 2015 (Successor)
$
58,139

 
$
44,247

 
$
29,860

 
$
33,183

 
$
165,429

The Company’s other intangible assets consisted of the following:
 
Successor
 
September 25, 2015
 
December 31, 2014
 
Gross
Carrying
Amount    
 
Accumulated
Amortization
 
Net        
 
Gross
Carrying    
Amount
 
Accumulated
Amortization
 
Net        
Patents
$
3,003

 
$
(507
)
 
$
2,496

 
$
2,841

 
$
(200
)
 
$
2,641

Customer relationships
144,373

 
(12,206
)
 
132,167

 
138,864

 
(4,846
)
 
134,018

Trademarks and other intangibles
67,904

 
(5,580
)
 
62,324

 
64,162

 
(2,138
)
 
62,024

Total amortized other intangible assets
$
215,280

 
$
(18,293
)
 
$
196,987

 
$
205,867

 
$
(7,184
)
 
$
198,683

8.
Debt
The Company’s debt consisted of the following:
 
Successor
 
September 25, 2015
 
December 31, 2014
First Lien Term Loans
$
307,675

 
$
309,225

Debt discount on First Lien Term Loans
(3,130
)
 
(3,538
)
Second Lien Term Loans
110,000

 
110,000

Debt discount on Second Lien Term Loans
(3,132
)
 
(3,480
)
Foreign debt
31,830

 
6,515

Capital lease obligations
1,668

 
1,959

Total debt
444,911

 
420,681

Less: Current portion
(6,460
)
 
(5,375
)
Total long-term debt
$
438,451

 
$
415,306

    

12


Jason Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts) (Unaudited)


Senior Secured Credit Facilities
As of September 25, 2015, the Company’s U.S. credit facility (the “Senior Secured Credit Facilities”) includes (i) term loans in an aggregate principal amount of $307.7 million (“First Lien Term Loans”) maturing in 2021, (ii) term loans in an aggregate principal amount of $110.0 million (“Second Lien Term Loans”) maturing in 2022, and (iii) a revolving loan of up to $40.0 million (“Revolving Credit Facility”) maturing in 2019.
The principal amount of the First Lien Term Loans amortizes in quarterly installments equal to $0.8 million, with the balance payable at maturity. At the Company’s election, the interest rate per annum applicable to the loans under the Senior Secured Credit Facilities is based on a fluctuating rate of interest determined by reference to either (i) a base rate determined by reference to the higher of (a) the “prime rate” of Deutsche Bank AG New York Branch, (b) the federal funds effective rate plus 0.50% and (c) the Eurocurrency rate applicable for an interest period of one month plus 1.00%, plus an applicable margin equal to (x) 3.50% in the case of the First Lien Term Loans, (y) 2.25% in the case of the Revolving Credit Facility or (z) 7.00% in the case of the Second Lien Term Loans or (ii) a Eurocurrency rate determined by reference to LIBOR, adjusted for statutory reserve requirements, plus an applicable margin equal to (x) 4.50% in the case of the First Lien Term Loans, (y) 3.25% in the case of the Revolving Credit Facility or (z) 8.00% in the case of the Second Lien Term Loans. Borrowings under the First Lien Term Facility and Second Lien Term Facility are subject to a floor of 1.00% in the case of Eurocurrency loans. The applicable margin for loans under the Revolving Credit Facility may be subject to adjustment based upon Jason Incorporated’s consolidated first lien net leverage ratio.
Under the Revolving Credit Facility, if the aggregate outstanding amount of all Revolving Loans, swingline loans and certain letter of credit obligations exceeds 25 percent of the revolving credit commitments at the end of any fiscal quarter, Jason Incorporated and its restricted subsidiaries will be required to not exceed a consolidated first lien net leverage ratio, initially specified at 5.50 to 1.00, with periodic decreases beginning on July 1, 2016 to 5.25 to 1.00, and decreasing to 4.50 to 1.00 on December 31, 2017 and remaining at that level thereafter. If such outstanding amounts do not exceed 25 percent of the revolving credit commitments at the end of any fiscal quarter, no financial covenants are applicable.
At September 25, 2015, the interest rates on the outstanding balances of the First Lien Term Loans and Second Lien Term Loans were 5.5% and 9.0%, respectively. At September 25, 2015, the Company had a total of $36.2 million of availability for additional borrowings under the Revolving Credit Facility since the Company had no outstanding borrowings and letters of credit outstanding of $3.8 million, which reduce availability under the facility.
Foreign debt
At September 25, 2015 and December 31, 2014, the Company had $31.8 million and $6.5 million, respectively, in foreign debt obligations, including various overdraft facilities and term loans. The largest foreign debt balances are held by the Company’s subsidiaries in Germany (approximately $29.7 million and $5.2 million as of September 25, 2015 and December 31, 2014, respectively), Mexico (approximately $1.7 million and $0.0 million as of September 25, 2015 and December 31, 2014, respectively), and Brazil (approximately $0.4 million and $1.1 million as of September 25, 2015 and December 31, 2014, respectively). These various foreign loans are comprised of individual outstanding obligations ranging from approximately $0.1 million to $13.5 million and $0.1 million to $2.6 million as of September 25, 2015 and December 31, 2014, respectively.
In connection with the acquisition of DRONCO, the Company assumed $11.0 million of debt comprised of term loan borrowings totaling $8.5 million and revolving line of credit borrowings totaling $2.5 million. Borrowings bear interest at fixed and variable rates ranging from 2.3% to 4.6% and are subject to repayment in varying amounts through 2030. During the third quarter of 2015, the Company entered into a new $13.5 million term loan in Germany. Borrowings bear interest at a fixed rate of 2.25% and are subject to repayment in equal quarterly amounts of approximately $0.4 million beginning September 30, 2017 through June 30, 2025.

13


Jason Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts) (Unaudited)


9.
Share Based Compensation
Upon completion of the Business Combination, the Compensation Committee of the Company’s Board of Directors approved an initial grant under the 2014 Omnibus Incentive Plan (the “2014 Plan”) to certain executive officers, senior management employees, and members of the Board of Directors. The Company recognizes compensation expense based on estimated grant date fair values for all share-based awards issued to employees and directors, including restricted stock units and performance share units, which are restricted stock units with vesting conditions contingent upon achieving certain performance goals. Share based compensation expense is reported in selling and administrative expenses in the Company’s condensed consolidated statements of operations.
There were 3,473,435 shares of common stock reserved and authorized for issuance under the 2014 Plan. At September 25, 2015, 560,787 shares of common stock remain authorized and available for future grant under the 2014 Plan.
The Company recognized the following share-based compensation expense:
 
Successor
 
Three Months Ended
September 25, 2015
 
 Nine Months Ended
September 25, 2015
 
June 30, 2014 Through September 26, 2014
Compensation Expense:
 
 
 
 
 
Restricted Stock Units
$
776

 
$
2,356

 
$
785

Adjusted EBITDA Vesting Awards
551

 
1,984

 
708

Stock Price Vesting Awards
184

 
1,247

 
570

 
1,511

 
5,587

 
2,063

Impact of accelerated vesting (1)

 
876

 

Total share-based compensation expense
$
1,511

 
$
6,463

 
$
2,063

 
 
 
 
 
 
Total income tax benefit recognized
$
404

 
$
2,121

 
$
800

(1) Represents the impact of the acceleration of certain vesting schedules for restricted stock units and stock price vesting awards related to the transition of the Company’s CFO.
As of September 25, 2015, total unrecognized compensation cost related to share-based compensation awards was approximately $9.1 million, net of estimated forfeitures, which the Company expects to recognize over a weighted average period of approximately 1.6 years.    
The following table sets forth the restricted and performance share unit activity:
 
Restricted Stock Units
 
Adjusted EBITDA Vesting Awards
 
Stock Price Vesting Awards
 
Units
 
Weighted-Average Grant-Date Fair Value
 
Units
 
Weighted-Average Grant-Date Fair Value
 
Units
 
Weighted-Average Grant-Date Fair Value
Nonvested at December 31, 2014
762,075

 
$
10.50

 
1,215,704

 
$
10.49

 
810,469

 
$
3.54

Granted
186,827

 
6.79

 
91,178

 
7.70

 
60,785

 
1.08

Vested
(306,820
)
 
10.49

 

 

 

 

Forfeited
(17,367
)
 
10.49

 
(166,620
)
 
10.49

 
(20,262
)
 
3.54

Nonvested at September 25, 2015
624,715

 
$
9.39

 
1,140,262

 
$
10.27

 
850,992

 
$
3.36

Restricted Stock Units    
As of September 25, 2015, there was $4.4 million of unrecognized share-based compensation expense, which is expected to be recognized over a weighted-average period of 1.6 years.
In connection with the vesting of RSUs previously issued by the Company, a number of shares sufficient to fund statutory minimum tax withholding requirements was withheld from the total shares issued or released to the award holder (under the terms of the 2014 Plan, the shares are considered to have been issued and are not added back to the pool of shares available for grant). During the three and nine months ended September 25, 2015, 71,684 shares and 108,155 shares,

14


Jason Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts) (Unaudited)


respectively, with an aggregate value of $0.4 million and $0.7 million, respectively, were withheld to satisfy the requirement. The withholding is treated as a reduction in additional paid-in capital in the accompanying condensed consolidated statements of shareholders’ equity.
Performance Share Units
Adjusted EBITDA Vesting Awards
Compensation expense for cumulative Adjusted EBITDA based performance share unit awards is currently being recognized based on an estimated payout of 100% of target or 753,421 shares. As of September 25, 2015, there was $4.3 million of unrecognized compensation expense related to cumulative Adjusted EBITDA based vesting performance share unit awards, which is expected to be recognized over a weighted average period of 1.8 years.
Stock Price Vesting Awards
As of September 25, 2015, there was $0.4 million of unrecognized compensation expense related to stock price based performance share unit awards, which is expected to be recognized over a weighted average period of 0.7 years.
The following summarizes the assumptions used in the Monte Carlo option pricing model to value stock price vesting awards granted during the nine months ended September 25, 2015:
Risk-free interest rate
0.24% - 1.33%

Weighted average volatility
27.0
%
Dividend yield

Share Based Compensation (Predecessor)
Prior to the consummation of the Business Combination, Jason Partners Holdings LLC (Jason LLC), the former parent company of Jason, had granted various classes of its common units to certain executives and directors of Jason. In accordance with ASC 718, Compensation - Stock Compensation, compensation cost related to the units granted was recognized in Jason’s financial statements over the vesting period. Upon consummation of the Business Combination, all unvested units became fully vested and Jason recognized $7.6 million of compensation expense during the predecessor period from June 28, 2014 to June 29, 2014. During the predecessor period from January 1, 2014 through June 29, 2014, Jason recognized $7.7 million of stock-based compensation expense, and the related income tax benefit was $2.5 million.
10.
Earnings per Share
Basic income (loss) per share is calculated by dividing net income (loss) attributable to Jason Industries’ common shareholders by the weighted average number of common shares outstanding for the period. In computing dilutive income (loss) per share, basic income (loss) per share is adjusted for the assumed issuance of all potentially dilutive share-based awards, including warrants, restricted stock units, performance share units, convertible preferred stock, and Rollover Shares of JPHI convertible into shares of Jason Industries.

15


Jason Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts) (Unaudited)


The reconciliation of the numerator and denominator of the basic and diluted income (loss) per share calculation and the anti-dilutive shares is as follows:
 
Successor
 
 
Predecessor
 
Three Months Ended September 25, 2015
 
Nine Months Ended September 25, 2015
 
June 30, 2014 Through September 26, 2014
 
 
June 28, 2014 Through June 29, 2014
 
January 1, 2014 Through June 29, 2014
 
 
 
 
 
 
Net (loss) income per share attributable to Jason Industries common shareholders
 
 
 
 
 
 
 
 
 
 
Basic and diluted income (loss) per share
$
(0.16
)
 
$
(0.31
)
 
$
(0.41
)
 
 
$
(17,928
)
 
$
(4,955
)
 
 
 
 
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
 
 
 
Net (loss) income available to common shareholders of Jason Industries
$
(3,539
)
 
$
(6,801
)
 
$
(9,045
)
 
 
$
(17,928
)
 
$
(4,955
)
Denominator:
 
 
 
 
 
 
 
 
 
 
Basic and diluted weighted-average shares outstanding
22,161

 
22,056

 
21,991

 
 
1

 
1

 
 
 
 
 
 
 
 
 
 
 
Weighted average number of anti-dilutive shares excluded from denominator:
 
 
 
 
 
 
 
 
 
 
Warrants to purchase Jason Industries common stock
13,994

 
13,994

 
13,994

 
 

 

Conversion of Series A 8% Perpetual Convertible Preferred
3,653

 
3,653

 
3,653

 
 

 

Conversion of JPHI Rollover Shares convertible to Jason Industries common stock
3,486

 
3,486

 
3,486

 
 

 

Restricted stock units
734

 
611

 
762

 
 

 

Performance share units
1,604

 
1,555

 
2,026

 
 

 

Total
23,471

 
23,299

 
23,921

 
 

 

Warrants are considered anti-dilutive and excluded when the exercise price exceeds the average market value of the Company’s common stock price during the applicable period. Performance share units are considered anti-dilutive if the performance targets upon which the issuance of the shares are contingent have not been achieved and the respective performance period has not been completed as of the end of the current period. Due to losses available to the Company’s common shareholders for each of the periods presented, potentially dilutive shares are excluded from the diluted net loss per share calculation because they were anti-dilutive under the treasury stock method, in accordance with ASC Topic 260.
11.
Income Taxes
At the end of each three month period, the Company estimates a base effective tax rate expected for the full year based on the most recent forecast of its pre-tax income, permanent book and tax differences, and global tax planning strategies. The Company uses this base rate to provide for income taxes on a year-to-date basis, excluding the effect of significant, unusual, discrete or extraordinary items, and items that are reported net of their related tax effects. The Company records the tax effect of significant, unusual, discrete or extraordinary items, and items that are reported net of their tax effects in the period in which they occur.
The effective income tax rate was 36.4%, and 37.9% for the three months ended September 25, 2015, and the successor period June 30, 2014 through September 26, 2014, respectively. The effective income tax rate was 28.0% for the nine months ended September 25, 2015. The effective income tax rate for 2015 reflects the benefits of tax losses at the higher U.S. Federal statutory rate and taxable earnings derived in foreign jurisdictions with tax rates that are lower than the U.S. Federal statutory rate, and discrete items. Net discrete tax expense was immaterial for the three months ended September 25, 2015 and the period June 30, 2014 through September 26, 2014. Net discrete tax expense for the nine months ended September 25, 2015 was impacted by $0.3 million due to the vesting of restricted stock units for which no tax benefit will be realized and $0.3 million due to non-deductible transaction costs in foreign subsidiaries for which no tax benefit was recognized.

16


Jason Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts) (Unaudited)


The amount of gross unrecognized tax benefits was $3.1 million and $2.7 million at September 25, 2015 and December 31, 2014, respectively. Of the $3.1 million of unrecognized tax benefits, $1.4 million would reduce the Company’s effective tax rate if recognized.
During the next twelve months, the Company does not expect any significant changes in its unrecognized tax benefits. The Company recognizes interest and penalties related to tax matters in tax expense. The Company did not have any interest or penalties that were recognized as a component of the income tax provision at September 25, 2015 and December 31, 2014.
12.
Equity
The changes in the components of accumulated other comprehensive income (loss), net of taxes, for the nine months ended September 25, 2015 and September 26, 2014 are as follows:
 
Employee
retirement plan
adjustments
 
Foreign currency
translation
adjustments
 
Total    
Balance at December 31, 2014, Successor
$
(1,434
)
 
$
(10,631
)
 
$
(12,065
)
Other comprehensive (loss) before reclassifications

 
(7,405
)
 
(7,405
)
Balance at September 25, 2015, Successor
$
(1,434
)
 
$
(18,036
)
 
$
(19,470
)
 
 
 
 
 
 
 
Employee
retirement plan
adjustments
 
Foreign currency
translation
adjustments
 
Total
Balance at December 31, 2013, Predecessor
$
(156
)
 
$
630

 
$
474

Other comprehensive (loss) before reclassifications
(844
)
 

 
(844
)
Amount reclassified from accumulated other comprehensive income
157

 

 
157

Cumulative foreign currency translation adjustments associated with joint ventures sold

 
(591
)
 
(591
)
Foreign currency translation adjustments

 
(465
)
 
(465
)
Balance at June 29, 2014, Predecessor
(843
)
 
(426
)
 
(1,269
)
 
 
 
 
 
 
 
 
 
 
 
 
Elimination of predecessor accumulated other comprehensive income
843

 
426

 
1,269

Foreign currency translation adjustments

 
(5,756
)
 
(5,756
)
Balance at September 26, 2014, Successor
$

 
$
(5,756
)
 
$
(5,756
)
Series A Preferred Stock Dividends
On January 1, 2015 the Company paid a dividend on the Series A Preferred Stock of $20.00 per share to holders of record on November 15, 2014, totaling $0.9 million. On April 1, 2015, the Company paid a dividend on the Series A Preferred Stock of $20.00 per share to holders of record on February 15, 2015, totaling $0.9 million. On July 1, 2015, the Company paid a dividend on the Series A Preferred Stock of $20.00 per share to holders of record on May 15, 2015, totaling $0.9 million. On October 1, 2015, the Company paid a dividend on the Series A Preferred Stock of $20.00 per share to holders of record on August 15, 2015, totaling $0.9 million.

17


Jason Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts) (Unaudited)


13.
Business Segments, Geographic and Customer Information
The Company identifies its segments using the “management approach,” which designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company’s reportable segments. The Company has four reportable segments: seating, finishing, acoustics and components.
Net sales information relating to the Company’s reportable segments is as follows:
 
Successor
 
 
Predecessor
 
Three Months Ended September 25, 2015
 
Nine Months Ended September 25, 2015
 
June 30, 2014 Through September 26, 2014
 
 
June 28, 2014 Through June 29, 2014
 
January 1, 2014 Through June 29, 2014
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
 
 
Seating
$
37,198

 
$
140,067

 
$
32,385

 
 
$

 
$
104,878

Finishing
52,339

 
141,835

 
45,181

 
 

 
96,692

Acoustics
51,755

 
158,728

 
54,033

 
 

 
109,930

Components
29,882

 
93,958

 
29,569

 
 

 
65,651

 
$
171,174

 
$
534,588

 
$
161,168

 
 
$

 
$
377,151

The Company uses “Adjusted EBITDA” as the primary measure of profit or loss for the purposes of assessing the operating performance of its segments. The Company defines EBITDA as net income (loss) before interest expense, provision (benefit) for income taxes, depreciation and amortization and (gain)/loss on disposal of property, plant and equipment. The Company defines Adjusted EBITDA as EBITDA, excluding the impact of non-cash or non-operational losses or gains, including long-lived asset impairment charges, integration and other operational restructuring charges, transactional legal fees, other professional fees and special employee bonuses, purchase accounting adjustments, sponsor fees and expenses, and non-cash share based compensation expense.
Management believes that Adjusted EBITDA provides a clear picture of the Company’s operating results by eliminating expenses and income that are not reflective of the underlying business performance. Certain corporate-level administrative expenses such as payroll and benefits, incentive compensation, travel, marketing, accounting, auditing and legal fees and certain other expenses are kept within its corporate results and not allocated to its business segments. Adjusted EBITDA is used to facilitate a comparison of the Company’s 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. In addition, this measure is used to evaluate its operating performance and segment operating performance and to determine the level of incentive compensation paid to its employees.
As the Company uses Adjusted EBITDA as its primary measure of segment performance, generally accepted accounting principles in the United States of America (“US GAAP”) on segment reporting require the Company to include this measure in its discussion of segment operating results. The Company must also reconcile Adjusted EBITDA to operating results presented on a US GAAP basis.

18


Jason Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts) (Unaudited)


Adjusted EBITDA information relating to the Company’s reportable segments is presented below followed by a reconciliation of total segment Adjusted EBITDA to consolidated income before taxes:
 
Successor
 
 
Predecessor
 
Three Months Ended September 25, 2015
 
Nine Months Ended September 25, 2015
 
June 30, 2014 Through September 26, 2014
 
 
June 28, 2014 Through June 29, 2014
 
January 1, 2014 Through June 29, 2014
 
 
 
 
 
 
Segment Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
Seating
$
2,904

 
$
20,175

 
$
3,568

 
 
$

 
$
17,668

Finishing
7,223

 
20,261

 
5,496

 
 
201

 
13,732

Acoustics
7,014

 
19,206

 
4,287

 
 

 
9,676

Components
5,211

 
15,913

 
1,716

 
 
(690
)
 
10,324

 
$
22,352

 
$
75,555

 
$
15,067

 
 
$
(489
)
 
$
51,400

Interest expense
(587
)
 
(1,376
)
 
(528
)
 
 

 
(1,269
)
Depreciation and amortization of intangible assets
(11,594
)
 
(33,361
)
 
(10,341
)
 
 

 
(12,796
)
(Loss) gain on disposal of property, plant and equipment - net
(8
)
 
14

 

 
 

 
(336
)
Restructuring
(923
)
 
(3,637
)
 
(103
)
 
 

 
(2,554
)
Transaction-related expenses

 
(789
)
 
(18
)
 
 

 
(242
)
Integration and other restructuring costs
(1,421
)
 
(1,625
)
 
(7,587
)
 
 

 
(2,575
)
Gain from sale of joint ventures

 

 

 
 

 
3,508

Total segment income (loss) before income taxes
7,819

 
34,781

 
(3,510
)
 
 
(489
)
 
35,136

Corporate general and administrative expenses
(3,791
)
 
(12,812
)
 
(1,491
)
 
 

 
(7,032
)
Corporate interest expense
(7,409
)
 
(22,044
)
 
(7,280
)
 
 
(82
)
 
(6,032
)
Corporate depreciation
(98
)