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EX-31.1 - EXHIBIT 31.1 - Jason Industries, Inc.ex-31103312017.htm
EX-32.2 - EXHIBIT 32.2 - Jason Industries, Inc.ex-32203312017.htm
EX-32.1 - EXHIBIT 32.1 - Jason Industries, Inc.ex-32103312017.htm
EX-31.2 - EXHIBIT 31.2 - Jason Industries, Inc.ex-31203312017.htm


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 March 31, 2017
 
¨ 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
jasonlogoa32.jpg
 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)
 
833 East Michigan Street
Suite 900
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, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ¨
 
Accelerated filer ý
Non-accelerated filer ¨
 
Smaller reporting company ¨
(Do not check if a smaller reporting company) 
 
Emerging growth company ý
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý

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 April 30, 2017, there were 25,918,051 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)
 
 
 
 
 
Three Months Ended
 
March 31, 2017
 
April 1, 2016
Net sales
$
175,193

 
$
190,974

Cost of goods sold
140,429

 
153,083

Gross profit
34,764

 
37,891

Selling and administrative expenses
26,656

 
32,301

(Gain) loss on disposals of property, plant and equipment - net
(330
)
 
703

Restructuring
681

 
2,717

Operating income
7,757

 
2,170

Interest expense
(8,366
)
 
(8,024
)
Equity income
143

 
169

Other income - net
113

 
118

Loss before income taxes
(353
)
 
(5,567
)
Tax provision (benefit)
28

 
(2,551
)
Net loss
(381
)
 
(3,016
)
Less net gain (loss) attributable to noncontrolling interests
5

 
(510
)
Net loss attributable to Jason Industries
(386
)
 
(2,506
)
Accretion of preferred stock dividends
918

 
900

Net loss available to common shareholders of Jason Industries
$
(1,304
)
 
$
(3,406
)
 
 
 
 
Net loss per share available to common shareholders of Jason Industries:
 
 
 
Basic and diluted
$
(0.05
)
 
$
(0.15
)
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
Basic and diluted
25,784

 
22,388

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


2




Jason Industries, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands) (Unaudited)
 
Three Months Ended
 
March 31, 2017
 
April 1, 2016
Net loss
$
(381
)
 
$
(3,016
)
Other comprehensive income:
 
 
 
Foreign currency translation adjustments
1,172

 
3,276

Net change in unrealized gains (losses) on cash flow hedges, net of tax provision (benefit) of $194 and ($1,284), respectively
313

 
(2,099
)
Total other comprehensive income
1,485

 
1,177

Comprehensive income (loss)
1,104

 
(1,839
)
Less: Comprehensive income (loss) attributable to noncontrolling interests
43

 
(311
)
Comprehensive income (loss) attributable to Jason Industries
$
1,061

 
$
(1,528
)
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)
 
 
 
March 31, 2017
 
December 31, 2016
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
41,476

 
$
40,861

Accounts receivable - net of allowances for doubtful accounts of $3,185 at March 31, 2017 and $3,392 at December 31, 2016
88,156

 
77,837

Inventories - net
71,396

 
73,601

Other current assets
17,512

 
17,866

Total current assets
218,540

 
210,165

Property, plant and equipment - net of accumulated depreciation of $75,748 at March 31, 2017 and $70,484 at December 31, 2016
175,111

 
178,318

Goodwill
42,388

 
42,157

Other intangible assets - net
141,468

 
144,258

Other assets - net
9,695

 
9,433

Total assets
$
587,202

 
$
584,331

 
 
 
 
Liabilities and Shareholders' Deficit
 
 
 
Current liabilities
 
 
 
Current portion of long-term debt
$
8,523

 
$
8,179

Accounts payable
60,208

 
61,160

Accrued compensation and employee benefits
16,529

 
13,207

Accrued interest
137

 
191

Other current liabilities
25,247

 
24,807

Total current liabilities
110,644

 
107,544

Long-term debt
417,734

 
416,945

Deferred income taxes
40,237

 
42,747

Other long-term liabilities
19,930

 
19,881

Total liabilities
588,545

 
587,117

 
 
 
 
Commitments and contingencies (Note 12)

 

 
 
 
 
Shareholders' Deficit
 
 
 
Preferred stock, $0.0001 par value (5,000,000 shares authorized, 46,814 shares issued and outstanding at March 31, 2017, including 915 shares declared on March 14, 2017 and issued on April 1, 2017, and 45,899 shares issued and outstanding at December 31, 2016, including 899 shares declared on December 15, 2016 and issued on January 1, 2017)
46,814

 
45,899

Jason Industries common stock, $0.0001 par value (120,000,000 shares authorized; issued and outstanding: 25,898,257 shares at March 31, 2017 and 24,802,196 shares at December 31, 2016)
3

 
2

Additional paid-in capital
145,911

 
144,666

Retained deficit
(163,262
)
 
(162,876
)
Accumulated other comprehensive loss
(30,809
)
 
(30,372
)
Shareholders’ deficit attributable to Jason Industries
(1,343
)
 
(2,681
)
Noncontrolling interests

 
(105
)
Total shareholders' deficit
(1,343
)
 
(2,786
)
Total liabilities and shareholders' deficit
$
587,202

 
$
584,331

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)
 
Three Months Ended
 
March 31, 2017
 
April 1, 2016
Cash flows from operating activities
 
 
 
Net loss
$
(381
)
 
$
(3,016
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation
6,788

 
7,218

Amortization of intangible assets
3,060

 
3,079

Amortization of deferred financing costs and debt discount
752

 
752

Equity income
(143
)
 
(169
)
Deferred income taxes
(2,672
)
 
(1,880
)
(Gain) loss on disposals of property, plant and equipment - net
(330
)
 
703

Share-based compensation
349

 
576

Net increase (decrease) in cash due to changes in:
 
 
 
Accounts receivable
(9,985
)
 
(18,238
)
Inventories
2,513

 
2,164

Other current assets
318

 
2,202

Accounts payable
(898
)
 
10,755

Accrued compensation and employee benefits
3,615

 
6,729

Accrued interest
(54
)
 
75

Accrued income taxes
1,336

 
(1,057
)
Other - net
(1,367
)
 
376

Total adjustments
3,282

 
13,285

Net cash provided by operating activities
2,901

 
10,269

Cash flows from investing activities
 
 
 
Proceeds from disposals of property, plant and equipment
674

 
91

Payments for property, plant and equipment
(3,396
)
 
(6,449
)
Acquisitions of patents
(33
)
 
(31
)
Net cash used in investing activities
(2,755
)
 
(6,389
)
Cash flows from financing activities
 
 
 
Payments of First Lien term loan
(775
)
 
(775
)
Proceeds from other long-term debt
2,555

 
2,874

Payments of other long-term debt
(1,520
)
 
(2,630
)
Payments of preferred stock dividends
(1
)
 
(1,800
)
Other financing activities - net
(7
)
 
(35
)
Net cash provided by (used in) financing activities
252

 
(2,366
)
Effect of exchange rate changes on cash and cash equivalents
217

 
(76
)
Net increase in cash and cash equivalents
615

 
1,438

Cash and cash equivalents, beginning of period
40,861

 
35,944

Cash and cash equivalents, end of period
$
41,476

 
$
37,382

Supplemental disclosure of cash flow information
 
 
 
Non-cash investing activities:
 
 
 
Property, plant and equipment acquired through additional liabilities
$
479

 
$
709

Non-cash financing activities:

 
 
Accretion of preferred stock dividends
$
3

 
$

Non-cash preferred stock created from dividends declared
$
915

 
$

Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc.
$
62

 
$

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

5



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

 
Preferred Stock
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Shareholders’
Deficit
Attributable to Jason
Industries, Inc.
 
Noncontrolling
Interests
 
Total
Shareholders'
Deficit
Balance at December 31, 2016
$
45,899

 
$
2

 
$
144,666

 
$
(162,876
)
 
$
(30,372
)
 
$
(2,681
)
 
$
(105
)
 
$
(2,786
)
Dividends declared
915

 

 
(918
)
 

 

 
(3
)
 

 
(3
)
Share-based compensation

 

 
349

 

 

 
349

 

 
349

Tax withholding related to vesting of restricted stock units

 

 
(7
)
 

 

 
(7
)
 

 
(7
)
Net loss

 

 

 
(386
)
 

 
(386
)
 
5

 
(381
)
Foreign currency translation adjustments

 

 

 

 
1,136

 
1,136

 
36

 
1,172

Net changes in unrealized losses on cash flow hedges, net of tax

 

 

 

 
311

 
311

 
2

 
313

Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc.

 
1

 
1,821

 

 
(1,884
)
 
(62
)
 
62

 

Balance at March 31, 2017
$
46,814

 
$
3

 
$
145,911

 
$
(163,262
)
 
$
(30,809
)
 
$
(1,343
)
 
$

 
$
(1,343
)

 
Preferred Stock
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Shareholders’ Equity
Attributable to Jason
Industries
 
Noncontrolling
Interests
 
Total
Shareholders’
Equity
Balance at December 31, 2015
$
45,000

 
$
2

 
$
143,533

 
$
(95,997
)
 
$
(21,456
)
 
$
71,082

 
$
13,912

 
$
84,994

Dividends declared

 

 
(900
)
 

 

 
(900
)
 

 
(900
)
Share-based compensation

 

 
576

 

 

 
576

 

 
576

Tax withholding related to vesting of restricted stock units

 

 
(35
)
 

 

 
(35
)
 

 
(35
)
Net loss

 

 

 
(2,506
)
 

 
(2,506
)
 
(510
)
 
(3,016
)
Foreign currency translation adjustments

 

 

 

 
2,723

 
2,723

 
553

 
3,276

Net changes in unrealized losses on cash flow hedges, net of tax

 

 

 

 
(1,745
)
 
(1,745
)
 
(354
)
 
(2,099
)
Balance at April 1, 2016
$
45,000

 
$
2

 
$
143,174

 
$
(98,503
)
 
$
(20,478
)
 
$
69,195

 
$
13,601

 
$
82,796

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 global industrial manufacturing company with four reportable segments: finishing, components, seating, and acoustics. The segments have operations within the United States and 13 foreign countries. The finishing segment focuses on the production of industrial brushes, buffing wheels, buffing compounds and abrasives that are used in a broad range of industrial and infrastructure applications. The components segment is a diversified manufacturer of expanded and perforated metal components, slip resistant surfaces and subassemblies for smart utility meters. The seating segment supplies seating solutions to equipment manufacturers in the motorcycle, lawn and turf care, industrial, agricultural, construction and power sports end markets. The acoustics segment manufactures engineered non-woven, fiber-based acoustical products for the automotive industry.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) 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 GAAP 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, 2016.
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 2017, the Company’s fiscal quarters are comprised of the three months ending March 31June 30September 29 and December 31. In 2016, the Company’s fiscal quarters were comprised of the three months ended April 1, July 1, September 30 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.
Recently issued accounting standards
Accounting standards adopted in the current fiscal period
In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). Under ASU 2015-11, inventory is measured at the “lower of cost and net realizable value” and options that formerly existed for “market value” were 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. The Company adopted ASU 2015-11 effective January 1, 2017 on a prospective basis. There was an insignificant impact to the reported condensed consolidated financial statements for the period ended March 31, 2017.
In January 2017, the FASB issued ASU 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”).  This standard simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test, which required a hypothetical purchase price allocation to measure goodwill impairment.  Under the new guidance, the amount of goodwill impairment will be determined by the amount the carrying value of the reporting unit exceeds its fair value.  ASU 2017-04 is required to be applied on a prospective basis.  The Company adopted ASU 2017-04 effective January 1, 2017.  The adoption of this standard did not impact the Company’s condensed consolidated financial statements, as no triggering events or indicators of potential impairment were identified during the three months ended March 31, 2017 and the Company performs its annual goodwill impairment test in the fourth quarter of each fiscal year.

7



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



Accounting standards to be adopted in future fiscal periods
In May 2014, the FASB issued ASU 2014-09, “Revenue From Contracts With Customers” (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The standard is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The ASU becomes effective for the Company at the beginning of its 2018 fiscal year. In 2016 and 2017, the FASB issued several ASU’s related to ASU 2014-09, which simplify and provide additional guidance to companies for implementation of the standard. The Company is evaluating the recently issued guidance on practical expedients in order to select a transition method. The Company is also assessing the impact that ASU 2014-09 will have on its consolidated financial statements and disclosures. This evaluation includes completing an inventory of revenue streams by like contracts to allow for ease of implementation, monitoring developments for the manufacturing industry, and evaluating potential changes to our business processes, systems, and controls to support the recognition and disclosure under the new standard.
In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The amendment to the standard is effective for interim and annual periods beginning after December 15, 2017. The Company is currently assessing the impact that this standard will have on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 establishes new accounting and disclosure requirements for leases. This standard requires lessees to classify most leases as either finance or operating leases and to initially recognize a lease liability and right-of-use asset. Entities may elect to account for certain short-term leases (with a term of 12 months or less) using a method similar to the current operating lease model. The statements of operations will include, for finance leases, separate recognition of interest on the lease liability and amortization of the right-of use asset and for operating leases, a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a straight-line basis. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual reporting periods, with early adoption permitted. This standard must be applied using a modified retrospective approach, which requires recognition and measurement of leases at the beginning of the earliest period presented, with certain practical expedients available. The Company is currently working to complete an inventory of all of its lease contracts and currently intends to adopt the standard in the first quarter of fiscal 2019.  The Company expects this ASU to have a material impact on its consolidated financial statements upon recognition of the lease liability and right-of-use asset for lease contracts which are currently accounted for as operating leases.
In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory” (“ASU 2016-16”). ASU 2016-16 will require companies to recognize the income tax effects of intercompany sales and transfers of assets other than inventory in the period in which the transfer occurs. The guidance is effective for annual periods beginning after December 15, 2017 and requires companies to apply a modified retrospective approach with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. Early adoption is permitted. The Company is currently assessing the impact that this standard will have on its consolidated financial statements.
In March 2017, the FASB issued ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”).  This standard requires the presentation of the service cost component of net periodic pension and postretirement benefit costs (“Pension Costs”) within operations and all other components of Pension Costs outside of income from operations within the Company’s condensed consolidated statements of operations.  In addition, only the service cost component of Pension Costs will be allowed for capitalization as an asset within the Company’s condensed consolidated balance sheets.  ASU 2017-07 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods, with early adoption permitted as of the beginning of an annual reporting period.  The standard is required to be applied on a retrospective basis for the presentation of the service cost component and the other components of Pension Costs and on a prospective basis for the capitalization of the service cost component of Pension Costs.  The Company intends to adopt this standard at the beginning of its 2018 fiscal year and has determined that this standard will not have a significant impact on its condensed consolidated financial statements. 

8



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



2.
Restructuring Costs
On March 1, 2016, as part of a strategic review of organizational structure and operations, the Company announced a global cost reduction and restructuring program (the “2016 program”). The 2016 program, as used herein, refers to costs related to various restructuring activities across business segments. This includes entering into severance and termination agreements with employees and footprint rationalization activities, including exit and relocation costs for the consolidation and closure of plant facilities and lease termination costs. These activities were ongoing throughout 2016 and the first quarter of 2017 and are expected to be completed by the end of 2017.
The following table presents the restructuring costs recognized by the Company under the 2016 program by reportable segment. The 2016 program began in the first quarter of 2016 and as such, the cumulative restructuring charges represent the cumulative charges incurred since the inception of the 2016 program through March 31, 2017. The other costs incurred under the 2016 program in the first quarter of 2017 primarily include charges related to the consolidation of two U.S. plants within the components segment and exit costs related to the wind down of the finishing segment’s facility in São Bernardo do Campo, Brazil. Based on the announced restructuring actions to date, the Company expects to incur a total of approximately $10 million under the 2016 program. These restructuring costs are presented separately on the condensed consolidated statements of operations.
2016 Program
 
Finishing
 
Components
 
Seating
 
Acoustics
 
Corporate
 
Total
Restructuring charges - three months ended March 31, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
Severance costs
 
$
7

 
$

 
$
(17
)
 
$
25

 
$

 
$
15

Lease termination costs
 
20

 

 

 
63

 

 
83

Other costs
 
102

 
364

 

 
117

 

 
583

Total
 
$
129

 
$
364

 
$
(17
)
 
$
205

 
$

 
$
681

 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges - three months ended April 1, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
Severance costs
 
$
1,247

 
$
557

 
$

 
$
741

 
$
68

 
$
2,613

Lease termination costs
 
104

 

 

 

 

 
104

Other costs
 

 

 

 

 

 

Total
 
$
1,351

 
$
557

 
$

 
$
741

 
$
68

 
$
2,717

 
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative restructuring charges - period ended March 31, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
Severance costs
 
$
3,294

 
$
378

 
$
59

 
$
1,002

 
$
597

 
$
5,330

Lease termination costs
 
364

 

 

 
63

 

 
427

Other costs
 
1,105

 
878

 

 
173

 

 
2,156

Total
 
$
4,763

 
$
1,256

 
$
59

 
$
1,238

 
$
597

 
$
7,913

 
 
 
 
 
 
 
 
 
 
 
 
 

9



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



The following table represents the restructuring liabilities, including both the 2016 program and previous activities:
 
Severance
costs
 
Lease
termination
costs
 
Other costs
 
Total
Balance - December 31, 2016
$
1,281

 
$
333

 
$
1,085

 
$
2,699

Current period restructuring charges
15

 
83

 
583

 
681

Cash payments
(621
)
 
(194
)
 
(582
)
 
(1,397
)
Foreign currency impact
20

 

 
35

 
55

Balance - March 31, 2017
$
695

 
$
222

 
$
1,121

 
$
2,038

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Severance
costs
 
Lease
termination
costs
 
Other costs
 
Total
Balance - December 31, 2015
$
594

 
$
1,038

 
$

 
$
1,632

Current period restructuring charges
2,613

 
104

 

 
2,717

Cash payments
(1,195
)
 
(344
)
 

 
(1,539
)
Balance - April 1, 2016
$
2,012

 
$
798

 
$

 
$
2,810

The following table presents the classification of the restructuring liabilities on the condensed consolidated balance sheets. At March 31, 2017 and December 31, 2016, the accrual for lease termination costs relates to restructuring costs associated with a 2016 lease termination in the finishing segment. At March 31, 2017 and December 31, 2016, the accrual for other costs primarily relates to a loss contingency for certain employment matter claims within the finishing segment due to the closure of a facility in São Bernardo do Campo, Brazil. See further discussion within Note 12, “Commitments and Contingencies”.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2017
 
December 31, 2016
 
Severance
costs
 
Lease
termination
costs
 
Other costs
 
Total
 
Severance
costs
 
Lease
termination
costs
 
Other costs
 
Total
Restructuring liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recorded in other current liabilities
$
695

 
$
222

 
$
1,121

 
$
2,038

 
$
1,281

 
$
333

 
$
1,085

 
$
2,699



3.
Inventories
Inventories consisted of the following:
 
March 31, 2017
 
December 31, 2016
Raw material
$
37,245

 
$
37,222

Work-in-process
4,898

 
4,175

Finished goods
29,253

 
32,204

Total inventories
$
71,396

 
$
73,601

4.
Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill, all of which is within the Company’s finishing segment, was as follows:
 
 
Balance as of December 31, 2016
$
42,157

Foreign currency impact
231

Balance as of March 31, 2017
$
42,388


10



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




The Company’s other intangible assets - net consisted of the following:
 
 
 
March 31, 2017
 
December 31, 2016
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Patents
$
1,911

 
$
(443
)
 
$
1,468

 
$
1,880

 
$
(366
)
 
$
1,514

Customer relationships
110,258

 
(18,647
)
 
91,611

 
110,090

 
(16,630
)
 
93,460

Trademarks and other intangibles
57,855

 
(9,466
)
 
48,389

 
57,744

 
(8,460
)
 
49,284

Total other intangible assets - net
$
170,024

 
$
(28,556
)
 
$
141,468

 
$
169,714

 
$
(25,456
)
 
$
144,258

5.
Debt and Hedging Instruments
The Company’s debt consisted of the following:
 
March 31, 2017
 
December 31, 2016
First Lien Term Loans
$
302,250

 
$
303,025

Second Lien Term Loans
110,000

 
110,000

Debt discount on Term Loans
(4,750
)
 
(5,002
)
Deferred financing costs on Term Loans
(7,107
)
 
(7,503
)
Foreign debt
24,665

 
23,303

Capital lease obligations
1,199

 
1,301

Total debt
426,257

 
425,124

Less: Current portion
(8,523
)
 
(8,179
)
Total long-term debt
$
417,734

 
$
416,945

    
Senior Secured Credit Facilities
As of March 31, 2017, the Company’s U.S. credit facility (the “Senior Secured Credit Facilities”) included (i) term loans in an aggregate principal amount of $310.0 million (“First Lien Term Loans”) maturing in 2021, of which $302.3 million is outstanding, (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% or (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 the London Interbank Offered Rate (“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 (an indirect wholly-owned subsidiary of the Company) 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, or $10.0 million, 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, currently specified at 5.25 to 1.00, with a periodic decrease 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.

11



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



At March 31, 2017, the interest rates on the outstanding balances of the First Lien Term Loans and Second Lien Term Loans were 5.6% and 9.1%, respectively. At March 31, 2017, the Company had a total of $34.9 million of availability for additional borrowings under the Revolving Credit Facility since the Company had no outstanding borrowings and letters of credit outstanding of $5.1 million, which reduce availability under the facility.
Under the Senior Secured Credit Facilities, the Company is subject to mandatory prepayments if certain requirements are met. The mandatory prepayment is in excess of regular current installments due. At March 31, 2017 and December 31, 2016, a mandatory prepayment of $1.9 million under the Senior Secured Credit Facilities was included within the current portion of long-term debt in the condensed consolidated balance sheets. The mandatory prepayment of $1.9 million was paid on April 10, 2017.
Foreign debt
The Company has the following foreign debt obligations, including various overdraft facilities and term loans:
 
March 31, 2017
 
December 31, 2016
Germany
$
23,270

 
$
21,469

Mexico
700

 
850

India
683

 
834

Other
12

 
150

Total foreign debt
$
24,665

 
$
23,303

These various foreign loans are comprised of individual outstanding obligations ranging from approximately $0.1 million to $12.8 million and $0.1 million to $12.6 million as of March 31, 2017 and December 31, 2016, respectively. Certain of the Company’s foreign borrowings contain financial covenants requiring maintenance of a minimum equity ratio and/or maximum leverage ratio, among others. The Company was in compliance with these covenants as of March 31, 2017.
The foreign debt obligations in Germany primarily relate to term loans within our finishing segment of $19.3 million at March 31, 2017 and $19.3 million at December 31, 2016. The 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.
Interest Rate Hedge Contracts
The Company is exposed to certain financial risks relating to fluctuations in interest rates. To manage exposure to such fluctuations, the Company entered into forward starting interest rate swap agreements (“Swaps”) in 2015 with notional values totaling $210.0 million at March 31, 2017 and December 31, 2016. The Swaps have been designated by the Company as cash flow hedges, and effectively fix the variable portion of interest rates on variable rate term loan borrowings at a rate of approximately 2.08% prior to financing spreads and related fees. The Swaps had a forward start date of December 30, 2016 and have an expiration date of June 30, 2020. As such, the Company began recognizing interest expense related to the interest rate hedge contracts in the first quarter of 2017. For the three months ended March 31, 2017, the Company recognized $0.6 million of interest expense related to the Swaps. There was no interest expense recognized in 2016. The Company expects to recognize interest expense of $1.5 million related to the Swaps in the next 12 months.
The fair values of the Company’s Swaps are recorded on the condensed consolidated balance sheets with the corresponding offset recorded as a component of accumulated other comprehensive loss. The fair value of the Swaps was $1.5 million at March 31, 2017 and $2.0 million at December 31, 2016, respectively. See the amounts recorded on the condensed consolidated balance sheets within the table below:
 
March 31, 2017
 
December 31, 2016
Interest rate swaps:
 
 
 
Recorded in other current liabilities
$
1,503

 
$
1,916

Recorded in other long-term liabilities
40

 
133

Total derivatives designated as hedging instruments
$
1,543

 
$
2,049


12



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



6.
Share-Based Compensation
In 2014, 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 (“RSUs”) 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 March 31, 2017, there were 802,763 shares of common stock that remained authorized and available for future grants.
The Company recognized the following share-based compensation expense:
 
Three Months Ended
 
March 31, 2017
 
April 1, 2016
Restricted stock units
$
343

 
$
254

Adjusted EBITDA vesting awards

 
20

Stock price vesting awards
6

 
29

ROIC vesting awards

 
45

Subtotal
349

 
348

Impact of accelerated vesting

 
228

Total share-based compensation expense (income)
$
349

 
$
576

 
 
 
 
Total income tax benefit recognized
$
133

 
$
214

As of March 31, 2017, total unrecognized compensation cost related to share-based compensation awards was approximately $0.8 million, which the Company expects to recognize over a weighted average period of approximately 1.4 years.
The following table sets forth the restricted and performance share unit activity:
 
 
 
 
 
Performance Share Units
 
Restricted Stock Units
 
Adjusted EBITDA Vesting Awards
 
Stock Price Vesting Awards
 
ROIC Vesting Awards
 
Units
(thousands)
 
Weighted-Average Grant-Date Fair Value
 
Units
(thousands)
 
Weighted-Average Grant-Date Fair Value
 
Units
(thousands)
 
Weighted-Average Grant-Date Fair Value
 
Units
(thousands)
 
Weighted-Average Grant-Date Fair Value
Outstanding at December 31, 2016
554

 
$
5.22

 
723

 
$
9.67

 
341

 
$
2.85

 
513

 
$
3.65

Granted
30

 
1.45

 

 

 

 

 

 

Issued
(17
)
 
3.43

 

 

 

 

 

 

Deferred

 

 

 

 

 

 

 

Forfeited
(3
)
 
3.46

 

 

 
(141
)
 
3.54

 
(10
)
 
3.46

Outstanding at March 31, 2017
564

 
$
5.08

 
723

 
$
9.67

 
200

 
$
2.37

 
503

 
$
3.66

Restricted Stock Units
As of March 31, 2017, there was $0.8 million of unrecognized share-based compensation expense related to 435,200 RSU awards, with a weighted-average grant date fair value of $4.35, that are expected to vest over a weighted-average period of 1.4 years. Included within the 564,312 RSU awards outstanding as of March 31, 2017 are 129,112 RSU awards for members

13



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



of our Board of Directors which have vested and issuance of the shares has been deferred, with a weighted-average grant date fair value of $7.53.
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 months ended March 31, 2017 and April 1, 2016, there were 4,279 and 8,545 shares, respectively, 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
During the second quarter of 2016, the Company lowered its estimated vesting of Adjusted EBITDA based performance share unit awards with a three year measurement period ending June 30, 2017 from 62.5% of target, or 301,382 shares, to an estimated vesting of 0% of target, or 0 shares. As of March 31, 2017, there was no unrecognized compensation expense related to cumulative Adjusted EBITDA based vesting performance share unit awards expected to be recognized in subsequent periods.
Stock Price Vesting Awards
As of March 31, 2017, there was an immaterial amount 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 0.2 years.
ROIC Vesting Awards
During the fourth quarter of 2016, the Company lowered its estimated vesting of ROIC (return on invested capital) based performance share unit awards with a three year measurement period ending on December 31, 2018 from 100% of target, or 335,057 shares, to an estimated payout of 0% of target or 0 shares. As of March 31, 2017, there was no unrecognized compensation expense related to ROIC based vesting performance share unit awards expected to be recognized in subsequent periods.
7.
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 public warrants, RSUs, performance share units, convertible preferred stock, and certain “Rollover Shares” of JPHI Holdings Inc. (“JPHI”), a majority owned subsidiary of the Company, convertible into shares of Jason Industries. Such Rollover Shares were contributed by former owners and management of Jason Partners Holdings Inc. prior to the Company’s acquisition of JPHI. Public warrants (“warrants”) consist of warrants to purchase shares of Jason Industries common stock which are quoted on Nasdaq under the symbol “JASNW.”

14



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 loss per share calculation and the anti-dilutive shares was as follows:
 
Three Months Ended
 
March 31, 2017
 
April 1, 2016
Net loss per share attributable to Jason Industries common shareholders
 
 
 
Basic and diluted loss per share
$
(0.05
)
 
$
(0.15
)
 
 
 
 
Numerator:
 
 
 
Net loss available to common shareholders of Jason Industries
$
(1,304
)
 
$
(3,406
)
Denominator:
 
 
 
Basic and diluted weighted-average shares outstanding
25,784

 
22,388

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

 
13,994

Conversion of Series A 8% Perpetual Convertible Preferred (1)
3,728

 
3,653

Conversion of JPHI rollover shares convertible to Jason Industries common stock (2)
239

 
3,486

Restricted stock units
548

 
302

Performance share units
1,463

 
1,185

Total
19,972

 
22,620

(1) 
Includes the impact of 915 additional Series A Preferred Stock shares from a stock dividend declared on March 14, 2017 paid in additional shares of Series A Preferred Stock on April 1, 2017. The Company included the preferred stock within the consolidated balance sheets as of the declaration date.

(2) 
Includes the impact of the exchange by certain Rollover Participants of their JPHI stock for Company common stock in the first quarter of 2017.
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 Accounting Standards Codification Topic 260.
8.
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 (loss), 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 tax rate was (7.9)% and 45.8% for the three months ended March 31, 2017 and April 1, 2016, respectively. The effective income tax rate for both 2017 and 2016 reflects the benefits of tax losses at the higher U.S. Federal statutory rate, taxable earnings derived in foreign jurisdictions with tax rates that are lower than the U.S. Federal statutory rate, and discrete items. The net discrete tax provision was $0.2 million for the three months ended March 31, 2017. The net discrete tax provision was a result of the vesting and forfeiture of restricted stock units for which no tax benefit will be realized. The net discrete tax provision was $0.1 million for the three months ended April 1, 2016.

15



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 $2.0 million and $1.9 million as of March 31, 2017 and December 31, 2016, respectively, of which $1.7 million and $1.6 million, respectively, would reduce the Company’s effective tax rate if recognized.
During the next twelve months, the Company believes it is reasonably possible that the amount of unrecognized tax benefits could decrease by $0.1 million. The Company recognizes interest and penalties related to tax matters in its tax provision. The Company has an immaterial amount of accrued interest and penalties that were recognized as a component of the income tax provision as of March 31, 2017 and December 31, 2016.
9.
Shareholders' (Deficit) Equity
The changes in the components of accumulated other comprehensive loss, net of taxes, for the three months ended March 31, 2017 and April 1, 2016 were as follows:
 
Employee retirement plan adjustments
 
Foreign currency translation adjustments
 
Net unrealized gains (losses) on cash flow hedges
 
Total
Balance at December 31, 2016
$
(1,777
)
 
$
(27,404
)
 
$
(1,191
)
 
$
(30,372
)
Other comprehensive income (loss) before reclassifications

 
1,136

 
(42
)
 
1,094

Amounts reclassified from accumulated other comprehensive loss

 

 
353

 
353

Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc.
(113
)
 
(1,698
)
 
(73
)
 
(1,884
)
Balance at March 31, 2017
$
(1,890
)
 
$
(27,966
)
 
$
(953
)
 
$
(30,809
)
 
 
 
 
 
 
 
 
 
Employee retirement plan adjustments
 
Foreign currency translation adjustments
 
Net unrealized gains (losses) on cash flow hedges
 
Total
Balance at December 31, 2015
$
(1,051
)
 
$
(20,237
)
 
$
(168
)
 
$
(21,456
)
Other comprehensive income (loss) before reclassifications

 
2,723

 
(1,745
)
 
978

Balance at April 1, 2016
$
(1,051
)
 
$
(17,514
)
 
$
(1,913
)
 
$
(20,478
)
The Company did not reclassify any amounts from accumulated other comprehensive loss to earnings for the three months ended April 1, 2016.
Series A Preferred Stock Dividends
The Company paid the following dividends on the Series A Preferred Stock in additional shares of Series A Preferred Stock during the three months ended March 31, 2017:
Payment Date
 
Record Date
 
Amount Per Share
 
Total Dividends Paid
 
Preferred Shares Issued
January 1, 2017
 
November 15, 2016
 
$20.00
 
$900
 
899
On March 14, 2017, the Company announced a $20.00 per share dividend on its Series A Preferred Stock to be paid in additional shares of Series A Preferred Stock on April 1, 2017 to holders of record on February 15, 2017. As of March 31, 2017, the Company has recorded the 915 additional Series A Preferred Stock shares declared for the dividend of $0.9 million within preferred stock in the condensed consolidated balance sheets.
Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc.
On June 30, 2014, the Company and Jason Partners Holdings Inc. (“Jason”) completed a transaction in which JPHI, a majority owned subsidiary of the Company, acquired all of the capital stock of Jason from its current owners (the “Business Combination”). The purchase price included the contribution of Jason common stock to JPHI by certain former owners, directors and management of Jason (collectively, the “Rollover Participants”) in exchange for JPHI stock. Following the consummation of the Business Combination, Jason became an indirect majority-owned subsidiary of the Company, with the Company then owning approximately 83.1 percent of JPHI and the Rollover Participants then owning a noncontrolling interest

16



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



of approximately 16.9 percent of JPHI. The Rollover Participants received 3,485,623 shares of JPHI, which were exchangeable on a one-for-one basis for shares of common stock of the Company.
In November and December 2016, certain Rollover Participants exchanged 2,401,616 shares of JPHI stock for Company common stock, which decreased the noncontrolling interest to 6.0 percent. As of December 31, 2016, 1,084,007 shares of JPHI stock were outstanding with the Rollover Participants. In the first quarter of 2017, certain Rollover participants exchanged the remaining 1,084,007 shares of JPHI stock for Company common stock, which decreased the noncontrolling interest to 0 percent, and no shares of JPHI stock remain outstanding as of March 31, 2017. The decreases to the noncontrolling interest as a result of the exchanges resulted in increases in both accumulated other comprehensive loss and additional paid-in capital to reflect the Company’s increased ownership in JPHI.
10.
Business Segments, Geographic and Customer Information
The Company’s business activities are organized around and aggregated into reportable segments based on their similar economic characteristics, products, production processes, types of customers and distribution methods. The Company has four reportable segments: finishing, components, seating and acoustics.
Net sales information relating to the Company’s reportable segments was as follows:
 
Three Months Ended
 
March 31, 2017
 
April 1, 2016
Finishing
$
49,476

 
$
50,276

Components
21,117

 
26,837

Seating
47,373

 
51,950

Acoustics
57,227

 
61,911

Net Sales
$
175,193

 
$
190,974

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, tax provision (benefit), 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.
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 are not allocated to its business segments. Shared expenses across the Company that directly relate to the performance of our four reportable segments are allocated to the 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, GAAP on segment reporting requires 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 GAAP basis.

17



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:
 
Three Months Ended
 
March 31, 2017
 
April 1, 2016
Segment Adjusted EBITDA
 
 
 
Finishing
$
7,067

 
$
5,229

Components
2,720

 
4,613

Seating
5,530

 
6,629

Acoustics
6,721

 
6,615

Total segment Adjusted EBITDA
$
22,038

 
$
23,086

Interest expense
(336
)
 
(422
)
Depreciation and amortization
(9,763
)
 
(10,205
)
Gain (loss) on disposal of property, plant and equipment - net
330

 
(703
)
Restructuring(1)
(681
)
 
(2,649
)
Integration and other restructuring costs (1)

 
(1,262
)
Total segment income before income taxes
11,588

 
7,845

Corporate general and administrative expenses
(3,477
)
 
(4,747
)
Corporate interest expense
(8,030
)
 
(7,602
)
Corporate depreciation
(85
)
 
(92
)
Corporate restructuring (1)

 
(68
)
Corporate integration and other restructuring costs (1)

 
(327
)
Corporate share-based compensation
(349
)
 
(576
)
Consolidated loss before income taxes
$
(353
)
 
$
(5,567
)
(1) Prior year amounts have been reclassified to conform with the current year’s presentation.
Assets held by reportable segments were as follows:
 
March 31, 2017
 
December 31, 2016
Finishing
$
236,993

 
$
233,045

Components
79,251

 
81,450

Seating
109,653

 
105,184

Acoustics
173,436

 
172,769

Total segments
599,333

 
592,448

Corporate and eliminations
(12,131
)
 
(8,117
)
Consolidated total assets
$
587,202

 
$
584,331


18



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



11.
Fair Value Measurements
Fair value of financial instruments
Current accounting guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. It also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with the guidance, fair value measurements are classified under the following hierarchy:

Level 1 — Quoted prices for identical instruments in active markets.
Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.
Level 3 — Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.
Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.
The carrying amounts within the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments. The Company assessed the amounts recorded under revolving loans, if any, and long-term debt and determined that the fair value of total debt was approximately $361.7 million as of March 31, 2017. As of December 31, 2016, the fair value of total debt was approximately $365.8 million. The Company considers the inputs related to these estimations to be Level 2 fair value measurements as they are primarily based on quoted prices for the Company’s Senior Secured Credit Facility.
The valuation of the Company’s derivative financial instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy and therefore the Company’s derivatives are classified within Level 2.
12.
Commitments and Contingencies
Litigation Matters
On December 22, 2016, JMB Capital Partners Master Fund, L.P. (“Plaintiff”), filed a complaint in the Supreme Court of the State of New York, County of New York, captioned JMB Capital Partners Master Fund, L.P. v. Jason Industries, Inc., et al., Index No. 656692/2016. The complaint names the Company and Jeffry N. Quinn as defendants (“Defendants”) and asserts claims for breach of representations and warranties, fraudulent inducement, negligent misrepresentation, conversion, unjust enrichment and breach of the implied covenant of good faith and fair dealing. The claims arise out of alleged misrepresentations made in connection with the sale of Series A Preferred Stock to Plaintiff pursuant to a Subscription Agreement executed on May 14, 2014. Plaintiff seeks compensatory damages, rescission of the Subscription Agreement, consequential and punitive damages, attorneys’ fees, pre-judgment and post-judgment interest, costs of suit, and other equitable relief. Plaintiff filed an amended complaint and Defendants have filed their motion to dismiss. The Company continues to believe that this action lacks merit and intends to defend the case vigorously. As of March 31, 2017, the Company has not recorded a loss contingency related to this case, as the risk of loss is not perceived to be probable based on facts of the case known to date. As this case is in the early stages, no range of loss can be reasonably estimated at this time, however, an unfavorable outcome in the matter could have a material adverse effect on the Company’s financial condition or cash flows. The Company will continue to evaluate the status of the case and would record a reserve for losses at the time when it is both probable that a loss has been incurred and the amount of loss is reasonably estimable.
In the third quarter of 2016, the Company received notification of certain employment matter claims filed in Brazil related to hiring practices within the Company’s finishing division. The Company is actively investigating and defending such

19



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



claims and has gathered additional information to assess the total potential exposure related to this matter, including the potential of additional claims. In the opinion of management, the resolution of this contingency will not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.
In addition to the cases noted above, the Company is a party to various legal proceedings that have arisen in the normal course of its business. These legal proceedings typically include product liability, labor, and employment claims. The Company has recorded reserves for loss contingencies based on the specific circumstances of each case. Such reserves are recorded when it is probable that a loss has been incurred as of the balance sheet date, can be reasonably estimated and is not covered by insurance. In the opinion of management, the resolution of these contingencies will not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.
Environmental Matters
At March 31, 2017 and December 31, 2016, the Company held reserves of $1.0 million for environmental matters at one location. The ultimate cost of any remediation required will depend on the results of future investigation. Based upon available information, the Company believes that it has obtained and is in substantial compliance with those material environmental permits and approvals necessary to conduct its business. Based on the facts presently known, the Company does not expect environmental costs to have a material adverse effect on its financial condition, results of operations or cash flows.
13.
Subsequent Events
Sale-leaseback of Libertyville, IL facility
In April 2017, the Company completed a sale leaseback of our Libertyville, Illinois facility consisting of land and production facilities related to our components segment and received proceeds, net of fees and closing costs, of $5.6 million in connection with the sale. The lease commences in April 2017 and expires in March 2032. The Company has classified the lease as an operating lease and will pay approximately $10.1 million in minimum lease payments over the life of the lease.



20




ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Note Regarding Forward-Looking Statements
Unless otherwise indicated, references to “Jason Industries,” the “Company,” “we,” “our” and “us” in this Quarterly Report on Form 10-Q refer to Jason Industries, Inc. and its consolidated subsidiaries.
This report contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Specifically, forward-looking statements may include statements relating to:
the Company’s future financial performance;
changes in the market for the Company’s products;
the Company’s expansion plans and opportunities; and
other statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.
These forward-looking statements are based on information available as of the date of this report and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date, and the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
As a result of a number of known and unknown risks and uncertainties, the Company’s actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include, among others:
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 indicated in this report, as well as those disclosed in the Company’s other filings with the Securities and Exchange Commission (the “SEC”), including those discussed under “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which may be amended or supplemented in Part II, Item 1A, “Risk Factors,” of the Company’s subsequently filed Quarterly Reports on Form 10-Q (including this report).
Introductory Note
The following discussion and analysis of financial condition and results of operations of the Company should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2016, and related notes thereto, along with the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s 2016 Annual Report on Form 10-K.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains certain financial measures, in particular the presentation of EBITDA and Adjusted EBITDA, which are not presented in accordance with GAAP. These non-GAAP financial measures are being presented because they provide readers of this MD&A with additional insight into the Company’s operational performance relative to comparable prior periods presented and relative to its peer group. EBITDA and Adjusted EBITDA are key measures used by the Company to evaluate its performance. The Company does not intend for these non-GAAP financial measures to be a substitute for any GAAP financial information. Readers of this MD&A should use these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures. Reconciliations of EBITDA and Adjusted EBITDA to net income, the most comparable GAAP measure, are provided in this MD&A.

21




Fiscal Year
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 and ends on a Friday. The exceptions are the first quarter, which begins on January 1, and the fourth quarter, which ends on December 31. For 2017, the Company’s fiscal quarters are comprised of the three months ended March 31, June 30, September 29, and December 31. In 2016, the Company’s fiscal quarters were comprised of the three months ending April 1, July 1, September 30, and December 31. Throughout this MD&A, we refer to the period from January 1, 2017 through March 31, 2017 as the “first quarter of 2017” or the “first quarter ended March 31, 2017”. Similarly, we refer to the period from January 1, 2016 through April 1, 2016 as the “first quarter of 2016” or the “first quarter ended April 1, 2016”.
Overview
Jason Industries is a global industrial manufacturing company with significant market share positions in each of its four segments: finishing, components, seating and acoustics. Jason Incorporated was founded in 1985 and today the Company provides critical components and manufacturing solutions to customers across a wide range of end markets, industries and geographies through its global network of 33 manufacturing facilities and 15 sales offices, warehouses and joint venture facilities throughout the United States and 13 foreign countries. The Company has embedded relationships with long standing customers, superior scale and resources, and specialized capabilities to design and manufacture specialized products on which our customers rely.
The Company focuses on markets with sustainable growth characteristics and where it is, or has the opportunity to become, the industry leader. The finishing segment focuses on the production of industrial brushes, buffing wheels, buffing compounds, and abrasives that are used in a broad range of industrial and infrastructure applications. The components segment is a diversified manufacturer of expanded and perforated metal components and subassemblies for smart utility meters. The seating segment supplies seating solutions to equipment manufacturers in the motorcycle, lawn and turf care, industrial, agricultural, construction and power sports end markets. The acoustics segment manufactures engineered non-woven, fiber-based acoustical products for the automotive industry.
During the three months ended March 31, 2017 and April 1, 2016, approximately 32% and 28%, respectively, of the Company’s sales were derived from customers outside the United States. As a diversified, global business, the Company’s operations are affected by worldwide, regional and industry-specific economic and political factors. The Company’s geographic and industry diversity, as well as the wide range of its products, help mitigate the impact of industry or economic fluctuations. Given the broad range of products manufactured and industries and geographies served, management primarily uses general economic trends to predict the overall outlook for the Company. The Company’s individual businesses monitor key competitors and customers, including to the extent possible their sales, to gauge relative performance and the outlook for the future.


22




Consolidated Results of Operations
The following table sets forth our consolidated results of operations (in thousands) (unaudited): 
 
Three Months Ended
 
March 31, 2017
 
April 1, 2016
Net sales
$
175,193

 
$
190,974

Cost of goods sold
140,429

 
153,083

Gross profit
34,764

 
37,891

Selling and administrative expenses
26,656

 
32,301

(Gain) loss on disposals of property, plant and equipment - net
(330
)
 
703

Restructuring
681

 
2,717

Operating income
7,757

 
2,170

Interest expense
(8,366
)
 
(8,024
)
Equity income
143

 
169

Other income - net
113

 
118

Loss before income taxes
(353
)
 
(5,567
)
Tax provision (benefit)
28

 
(2,551
)
Net loss
$
(381
)
 
$
(3,016
)
Less net gain (loss) attributable to noncontrolling interests
5

 
(510
)
Net loss attributable to Jason Industries
$
(386
)
 
$
(2,506
)
Accretion of preferred stock dividends
918

 
900

Net loss available to common shareholders of Jason Industries
$
(1,304
)
 
$
(3,406
)
Other financial data: (1) 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/(Decrease)
(in thousands, except percentages)
March 31, 2017
 
April 1, 2016
 
$
 
%
Consolidated
 
 
 
 
 
 
 
Net sales
$
175,193

 
$
190,974

 
$
(15,781
)
 
(8.3) %

Net loss
(381
)
 
(3,016
)
 
(2,635
)
 
(87.4
)
Net loss as a % of net sales
0.2
%
 
1.6
%
 
(140) bps
Adjusted EBITDA
18,561

 
18,339

 
222

 
1.2

Adjusted EBITDA % of net sales
10.6
%
 
9.6
%
 
100 bps
(1) 
Adjusted EBITDA and Adjusted EBITDA as a % of net sales are financial measures that are not presented in accordance with GAAP. See “Key Measures the Company Uses to Evaluate Its Performance” below for a reconciliation of Adjusted EBITDA to net loss.

23




The Three Months Ended March 31, 2017 Compared with the Three Months Ended April 1, 2016
Net sales. Net sales were $175.2 million for the three months ended March 31, 2017, a decrease of $15.8 million, or 8.3%, compared with $191.0 million for the three months ended April 1, 2016, reflecting decreased net sales in the components segment of $5.7 million, the acoustics segment of $4.7 million, the seating segment of $4.6 million and the finishing segment of $0.8 million. See further discussion of segment results below.
Changes in foreign currency exchange rates compared with the U.S. dollar had a net negative impact of $1.8 million on consolidated net sales during the three months ended March 31, 2017 compared with 2016, negatively impacting the finishing segments’ net sales by $1.2 million and both the seating and acoustics segments’ net sales by $0.3 million. This was due principally to strengthening of the U.S. dollar against the Euro in the first three months of 2017 compared to the first three months of 2016.
Cost of goods sold. Cost of goods sold was $140.4 million for the three months ended March 31, 2017, compared with $153.1 million for the three months ended April 1, 2016. The decrease in cost of goods sold was primarily due to lower net sales volumes across all segments, lower labor and material usage costs in the acoustics segment as a result of operational efficiencies and a $1.4 million favorable impact related to foreign currency exchange rates.
Gross profit. For the reasons described above, gross profit was $34.8 million for the three months ended March 31, 2017, compared with $37.9 million for the three months ended April 1, 2016.
Selling and administrative expenses. Selling and administrative expenses were $26.7 million for the three months ended March 31, 2017 compared with $32.3 million for the three months ended April 1, 2016, a decrease of $5.6 million.
The decreases are primarily due to reduced selling and administrative expenses resulting from the Company’s global cost reduction and restructuring program announced on March 1, 2016 of $2.9 million for the three months ended March 31, 2017 which includes $0.6 million related to the closure of facilities in the components and finishing segments, as well as decreased corporate expenses of $0.6 million, decreased incentive compensation of $0.4 million and a $0.4 million favorable impact related to foreign currency exchange rates.
(Gain) loss on disposals of property, plant and equipment - net. Gain on disposals of property, plant and equipment - net for the three months ended March 31, 2017 was $0.3 million compared to a loss of $0.7 million for the three months ended April 1, 2016. The gain on disposals of property, plant and equipment - net for the three months ended March 31, 2017 relates to a gain of $0.4 million on the sale of equipment related to the closure of the components segment’s Buffalo Grove, Illinois facility. The loss on disposals of property, plant and equipment - net for the three months ended April 1, 2016 includes a loss of $0.6 million on a sale of a seating segment facility. Changes in the level of fixed asset disposals are dependent upon a number of factors, including changes in the level of asset sales, operational restructuring activities, and capital expenditure levels.
Restructuring. Restructuring costs were $0.7 million for the three months ended March 31, 2017 compared with $2.7 million for the three months ended April 1, 2016. During 2017, such costs primarily related to the consolidation of two facilities in the components segment and the wind down of a facility in São Bernardo do Campo, Brazil in the finishing segment. During 2016, such costs primarily related to severance actions in all segments resulting from the global cost reduction and restructuring program announced on March 1, 2016, including costs related to the closure of the components segment’s facility in Buffalo Grove, Illinois.
Interest expense. Interest expense was $8.4 million for the three months ended March 31, 2017 compared with $8.0 million for the three months ended April 1, 2016. The increase in interest expense for the three months ended March 31, 2017 primarily relates to $0.6 million recognized in the three months ended March 31, 2017 related to the Company’s interest rate swaps which were forward starting effective December 30, 2016. See “Senior Secured Credit Facilities” in the Liquidity and Capital Resources section of this MD&A for further discussion.
Equity income. Equity income was $0.1 million for the three months ended March 31, 2017 compared with $0.2 million for the three months ended April 1, 2016.
Other income - net. Other income was $0.1 million for both the three months ended March 31, 2017 and the three months ended April 1, 2016.
Loss before income taxes. For the reasons described above, loss before income taxes was $0.4 million for the three months ended March 31, 2017 compared with $5.6 million for the three months ended April 1, 2016.
Tax provision (benefit). The tax provision was $0.0 million for the three months ended March 31, 2017 compared with a tax benefit of $2.6 million for the three months ended April 1, 2016. The effective tax rate was (7.9)% for the three months ended March 31, 2017 compared with 45.8% for the three months ended April 1, 2016. The net discrete tax provision was $0.2 million for the three months ended March 31, 2017. The net discrete tax provision was a result of the vesting and forfeiture of

24




restricted stock units for which no tax benefit will be realized. The net discrete tax provision was $0.1 million for the three months ended April 1, 2016.
The Company’s tax provision (benefit) is impacted by a number of factors, including, among others, the amount of taxable income or losses at the U.S. federal statutory rate, the amount of taxable earnings derived in foreign jurisdictions with tax rates that are lower than the U.S. federal statutory rate, permanent items, state tax rates, the ability to utilize foreign net operating loss carry forwards and adjustments to valuation allowances. The effective tax rate for the three months ended March 31, 2017, was impacted by the levels of U.S. and foreign pre-tax losses and earnings, respectively, pre-tax losses in foreign jurisdictions for which no tax benefit was recognized and the vesting and forfeiture of RSUs for which no tax benefit will be realized.
Net loss. For the reasons described above, net loss was $0.4 million for the three months ended March 31, 2017 compared with $3.0 million for the three months ended April 1, 2016.
Net gain (loss) attributable to noncontrolling interests. Net gain attributable to noncontrolling interests was $0.0 million for the three months ended March 31, 2017 compared with a net loss attributable to noncontrolling interests of $0.5 million for the three months ended April 1, 2016. Noncontrolling interests represent the Rollover Participants interest in JPHI. See Note 9 to the condensed consolidated financial statements for further discussion.
Adjusted EBITDA. Adjusted EBITDA was $18.6 million, or 10.6% of net sales for the three months ended March 31, 2017, compared with $18.3 million, or 9.6%, of net sales for the three months ended April 1, 2016, an increase of $0.2 million, or 1.2%. The increase reflects increased Adjusted EBITDA in the finishing segment of $1.8 million, the acoustics segment of $0.1 million and lower corporate expenses of $1.3 million, partially offset by decreased Adjusted EBITDA in the components segment of $1.9 million and the seating segment of $1.1 million. See further discussion of segment results below.
Changes in foreign currency exchange rates compared with the U.S. dollar had a negative impact of $0.2 million on consolidated Adjusted EBITDA during the three months ended March 31, 2017 compared to the three months ended April 1, 2016, negatively impacting the finishing segment’s Adjusted EBITDA by $0.2 million.
Other Comprehensive Income. Other comprehensive income was $1.5 million for the three months ended March 31, 2017 compared to $1.2 million for the three months ended April 1, 2016. The increase was driven by the net reduction in the unrealized loss position on cash flow hedges, partially offset by less favorable impact of foreign currency translation adjustments in 2017 compared to 2016.
The net change in unrealized gains (losses) on cash flow hedges is based on the changes in current interest rates and market expectations of the timing and amount of future interest rate changes. In the fourth quarter of 2015, the Company entered into the forward starting interest rate swap agreements discussed in Note 5, “Debt and Hedging Instruments”. In 2016, subsequent to entering into these arrangements, actual interest rate increases had been lower and had occurred later than expected, thereby, resulting in losses associated with these hedging instruments. In 2017, the hedging instruments continue to be in a net loss position, however, actual interest rate increases resulted in a reduction in previously recorded unrealized losses on the hedging instruments for the three months ended March 31, 2017.
Foreign currency translation adjustments are based on fluctuations in the value of foreign currencies (primarily the Euro) against the U.S. Dollar each period.
See “Segment Financial Data” section below for further discussion.
Key Measures the Company Uses to Evaluate Its Performance
EBITDA and Adjusted EBITDA. 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.
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 one of its key metrics 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.
The Senior Secured Credit Facilities (defined in Note 5 and below) definition of EBITDA excludes income of partially owned affiliates, unless such earnings have been received in cash.

25




Set forth below is a reconciliation of Adjusted EBITDA to net loss (in thousands) (unaudited):
 
Three Months Ended
 
March 31, 2017
 
April 1, 2016
Net loss
$
(381
)
 
$
(3,016
)
Tax provision (benefit)
28

 
(2,551
)
Interest expense
8,366

 
8,024

Depreciation and amortization
9,848

 
10,297

EBITDA
17,861

 
12,754

Adjustments:
 
 
 
Restructuring(1)
681

 
2,717

Integration and other restructuring costs(2)

 
1,589

Share-based compensation(3)
349

 
576

(Gain) loss on disposals of property, plant and equipment - net(4)
(330
)
 
703

Total adjustments
700

 
5,585

Adjusted EBITDA
$
18,561

 
$
18,339

(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. See Note 2, “Restructuring Costs” of the accompanying condensed consolidated financial statements for further information.
(2) 
During the three months ended April 1, 2016, integration and other restructuring costs includes costs associated with the start-up of new acoustics segment facilities in Warrensburg, Missouri and Richmond, Indiana. Such costs are not included in restructuring for GAAP purposes.
(3) 
Represents share-based compensation expense for awards under the Company’s 2014 Omnibus Incentive Plan. See Note 6, “Share-Based Compensation” of the accompanying condensed consolidated financial statements for further information.
(4) 
(Gain) loss on disposals of property, plant and equipment - net for the three months ended March 31, 2017 included 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 three months ended April 1, 2016 included a loss of $0.6 million on sale of a seating segment facility.
Adjusted EBITDA percentage of net sales. Adjusted EBITDA as a percentage of net sales is an important metric that the Company uses to evaluate its operational effectiveness and business segments.

26




Segment Financial Data
The table, below presents the Company’s net sales, Adjusted EBITDA and Adjusted EBITDA as a percentage of net sales for each of its reportable segments for the three months ended March 31, 2017 and April 1, 2016. The Company uses Adjusted EBITDA as the primary measure of profit or loss for purposes of assessing the operating performance of its segments. See “Key Measures the Company Uses to Evaluate Its Performance” above for a reconciliation of Adjusted EBITDA to Net Loss which is the nearest GAAP measure.
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/ (Decrease)
(in thousands, except percentages)
March 31, 2017
 
April 1, 2016
 
$
 
%
Finishing
 
 
 
 
 
 
 
Net sales
$
49,476

 
$
50,276

 
$
(800
)
 
(1.6) %

Adjusted EBITDA
7,067

 
5,229

 
1,838

 
35.2

Adjusted EBITDA % of net sales
14.3
%
 
10.4
%
 
390 bps
Components
 
 
 
 
 
 
 
Net sales
$
21,117

 
$
26,837

 
$
(5,720
)
 
(21.3) %

Adjusted EBITDA
2,720

 
4,613

 
(1,893
)
 
(41.0
)
Adjusted EBITDA % of net sales
12.9
%
 
17.2
%
 
(430) bps
Seating
 
 
 
 
 
 
 
Net sales
$
47,373

 
$
51,950

 
$
(4,577
)
 
(8.8) %

Adjusted EBITDA
5,530

 
6,629

 
(1,099
)
 
(16.6
)
Adjusted EBITDA % of net sales
11.7
%
 
12.8
%
 
(110) bps
Acoustics
 
 
 
 
 
 
 
Net sales
$
57,227

 
$
61,911

 
$
(4,684
)
 
(7.6) %

Adjusted EBITDA
6,721

 
6,615

 
106

 
1.6

Adjusted EBITDA % of net sales
11.7
%
 
10.7
%
 
100 bps
Corporate
 
 
 
 
 
 
 
Adjusted EBITDA
$
(3,477
)
 
$
(4,747
)
 
$
1,270

 
26.8 %

Consolidated
 
 
 
 
 
 
 
Net sales
$
175,193

 
$
190,974

 
$
(15,781
)
 
(8.3) %

Adjusted EBITDA
18,561

 
18,339

 
222

 
1.2

Adjusted EBITDA % of net sales
10.6
%
 
9.6
%
 
100 bps
Finishing Segment
 
Three Months Ended
 
Increase/ (Decrease)
(in thousands, except percentages)
March 31, 2017
 
April 1, 2016
 
$
 
%
Net sales
$
49,476

 
$
50,276

 
$
(800
)
 
(1.6
) %
Adjusted EBITDA
7,067

 
5,229

 
1,838

 
35.2

Adjusted EBITDA % of net sales
14.3
%
 
10.4
%
 
390 bps
Net sales in the finishing segment for the three months ended March 31, 2017 were $49.5 million, a decrease of $0.8 million or 1.6 %, compared with $50.3 million for the three months ended April 1, 2016. On a constant currency basis (net negative currency impact of $1.2 million for the three months ended March 31, 2017), revenues increased by $0.4 million for the three months ended March 31, 2017. Excluding currency impact, the increase in net sales for the three months ended March 31, 2017 was primarily due to increases in volume in industrial end markets in North America, partially offset by a $0.6 million decrease associated with the wind down of the finishing segment’s facility in São Bernardo do Campo, Brazil and decreases in volume in industrial end markets in Europe.
Adjusted EBITDA for the three months ended March 31, 2017 increased $1.8 million to $7.1 million (14.3% of net sales) from $5.2 million (10.4% of net sales) for the three months ended