The following tables presenting our quarterly results of operations should be read in conjunction with the consolidated financial statements and related notes included in Item 8 of this Annual Report on Form 10-K. We have prepared the unaudited information on the same basis as our audited consolidated financial statements. Our operating results for any quarter are not necessarily indicative of results for any future quarters or for a full year.
The following table presents our unaudited quarterly results of operations for the eight quarters in fiscal 20172019 and fiscal 2016.2018. This table includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary for fair statement of our consolidated financial position and operating results for the quarters presented.
|
| | | | Index to Consolidated Financial Statements | | | As of December 31, 2017 and 2016, for the years ended December 31, 2017, December 31, 2016, and December 31, 2015 | | Page | | | | | | | | | | | | | | | | | | | | | | | | | Index to Financial Statement Schedules | | | | | |
Report of Independent Registered Public Accounting Firm
To the shareholders and the Board of Directors and Shareholders of Jason Industries, Inc.
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheetssheet of Jason Industries, Inc. and its subsidiaries (the “Company”) as of December 31, 2017 and 2016,2019, and the related consolidated statements of operations, comprehensive (loss) income, (loss), shareholders’ (deficit) equity and cash flows for the year ended December 31, 2019, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Companyas of December 31, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019in conformity with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 10 to the financial statements, the Company changed its method of accounting for leases in the year ended December 31, 2019 due to the adoption of Accounting Standard Update No. 2016-02, Leases (Topic 842) under the modified retrospective adoption method. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Milwaukee, Wisconsin March 2, 2020
We have served as the Company’s auditor since 2019.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Jason Industries, Inc.
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Jason Industries, Inc. and its subsidiaries (the “Company”) as of December 31, 2018, and the related consolidated statements of operations, comprehensive (loss) income, shareholders’ (deficit) equity and cash flows for each of the threetwo years in the period ended December 31, 2017,2018, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Companyas of December 31, 2017and 2016,2018, and the results of theirits operations and theirits cash flows for each of the threetwo years in the period ended December 31, 20172018in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidatedfinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP Milwaukee, WIWisconsin March 1,5, 2019, except for the effects of the restatement discussed in Note 2 (not presented herein) to the consolidated financial statements appearing under Item 8 of the Company’s 2018 annual report on Form 10-K/A and Note 2 (not presented herein) to the financial statement schedule appearing under Schedule II of the Company’s 2018 annual report on Form 10-K/A, as to which the date is May 13, 2019, and except for the effects of discontinued operations discussed in Note 2 and the change in composition of reportable segments discussed in Note 16 to the consolidated financial statements, as to which the date is March 2, 2020
We have served as the CompanyCompany’s or its predecessors’ auditor since 1985.from 1985 to 2019.
Jason Industries, Inc.
Consolidated Statements of Operations Jason Industries, Inc. Consolidated Statements of Operations (In thousands, except per share amounts)
| | | | | | | | | | | | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | | | Net sales | $ | 648,616 |
| | $ | 705,519 |
| | $ | 708,366 |
| Cost of goods sold | 517,764 |
| | 574,412 |
| | 561,076 |
| Gross profit | 130,852 |
| | 131,107 |
| | 147,290 |
| Selling and administrative expenses | 103,855 |
| | 113,797 |
| | 129,371 |
| Impairment charges | — |
| | 63,285 |
| | 94,126 |
| (Gain) loss on disposals of property, plant and equipment - net | (759 | ) | | 880 |
| | 109 |
| Restructuring | 4,266 |
| | 7,232 |
| | 3,800 |
| Transaction-related expenses | — |
| | — |
| | 886 |
| Operating income (loss) | 23,490 |
| | (54,087 | ) | | (81,002 | ) | Interest expense | (33,089 | ) | | (31,843 | ) | | (31,835 | ) | Gain on extinguishment of debt | 2,201 |
| | — |
| | — |
| Equity income | 952 |
| | 681 |
| | 884 |
| Loss on divestiture | (8,730 | ) | | — |
| | — |
| Other income - net | 319 |
| | 900 |
| | 97 |
| Loss before income taxes | (14,857 | ) | | (84,349 | ) | | (111,856 | ) | Tax benefit | (10,384 | ) | | (6,296 | ) | | (22,255 | ) | Net loss | $ | (4,473 | ) | | $ | (78,053 | ) | | $ | (89,601 | ) | Less net gain (loss) attributable to noncontrolling interests | 5 |
| | (10,818 | ) | | (15,143 | ) | Net loss attributable to Jason Industries | $ | (4,478 | ) | | $ | (67,235 | ) | | $ | (74,458 | ) | Accretion of preferred stock dividends and redemption premium | 3,783 |
| | 3,600 |
| | 3,600 |
| Net loss available to common shareholders of Jason Industries | $ | (8,261 | ) | | $ | (70,835 | ) | | $ | (78,058 | ) | | | | | | | Net loss per share available to common shareholders of Jason Industries: | | | | | | Basic and diluted | $ | (0.32 | ) | | $ | (3.15 | ) | | $ | (3.53 | ) | Weighted average number of common shares outstanding: | | | | | | Basic and diluted | 26,082 |
| | 22,507 |
| | 22,145 |
|
(In thousands, except per share amounts)
| | | | | | | | | | | | | | | | | | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | | | | | | | Net sales | $ | 337,897 | | | $ | 367,959 | | | $ | 382,096 | | Cost of goods sold | 263,291 | | | 277,852 | | | 295,076 | | Gross profit | 74,606 | | | 90,107 | | | 87,020 | | Selling and administrative expenses | 78,200 | | | 78,752 | | | 77,611 | | | | | | | | Loss (gain) on disposals of property, plant and equipment-net | 303 | | | (1,318) | | | (320) | | Restructuring | | 3,954 | | | 877 | | | 2,475 | | Operating (loss) income | (7,851) | | | 11,796 | | | 7,254 | | Interest expense-net | (32,978) | | | (33,277) | | | (32,951) | | Gain on extinguishment of debt | — | | | — | | | 2,201 | | Equity income | 316 | | | 1,024 | | | 952 | | Loss on divestiture | | — | | | — | | | (8,730) | | Other income-net | 1,098 | | | 758 | | | 258 | | Loss from continuing operations before income taxes | (39,415) | | | (19,699) | | | (31,016) | | Tax provision (benefit) | 4,016 | | | (5,046) | | | (15,614) | | Net loss from continuing operations | $ | (43,431) | | | $ | (14,653) | | | $ | (15,402) | | Net (loss) income from discontinued operations, net of tax | (38,177) | | | 1,493 | | | 10,929 | | Net loss | (81,608) | | | (13,160) | | | (4,473) | | Less net gain (loss) attributable to noncontrolling interests | — | | | — | | | 5 | | Net loss attributable to Jason Industries | $ | (81,608) | | | $ | (13,160) | | | $ | (4,478) | | Accretion of preferred stock dividends and redemption premium | 3,347 | | | 4,070 | | | 3,783 | | Net loss allocable to common shareholders of Jason Industries | $ | (84,955) | | | $ | (17,230) | | | $ | (8,261) | | | | | | | | Basic and diluted net (loss) income per share allocable to common shareholders of Jason Industries: | | | | | | Net loss per share from continuing operations | $ | (1.64) | | | $ | (0.68) | | | $ | (0.74) | | Net (loss) income per share from discontinued operations | (1.34) | | | | 0.06 | | | | 0.42 | | Basic and diluted net loss per share | $ | (2.98) | | | | $ | (0.62) | | | | $ | (0.32) | | | | | | | | Weighted average number of common shares outstanding: | | | | | | Basic and diluted | 28,484 | | | 27,595 | | | 26,082 | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
Jason Industries, Inc.
Consolidated Statements of Comprehensive (Loss) Income Jason Industries, Inc. Consolidated Statements of Comprehensive Income (Loss) (In thousands)
| | | | | | | | | | | | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | | | Net loss | $ | (4,473 | ) | | $ | (78,053 | ) | | $ | (89,601 | ) | Other comprehensive income (loss): | | | | | | Employee retirement plan adjustments, net of tax expense (benefit) of $73, ($95), and $18, respectively | 373 |
| | (624 | ) | | 461 |
| Foreign currency translation adjustments | 10,542 |
| | (4,787 | ) | | (11,560 | ) | Net change in unrealized gains (losses) on cash flow hedges, net of tax expense (benefit) of $814, ($659), and ($126), respectively | 1,317 |
| | (1,064 | ) | | (202 | ) | Total other comprehensive income (loss) | 12,232 |
| | (6,475 | ) | | (11,301 | ) | Comprehensive income (loss) | 7,759 |
| | (84,528 | ) | | (100,902 | ) | Less: Comprehensive income (loss) attributable to noncontrolling interests | 43 |
| | (11,870 | ) | | (17,053 | ) | Comprehensive income (loss) attributable to Jason Industries | $ | 7,716 |
| | $ | (72,658 | ) | | $ | (83,849 | ) |
(In thousands)
| | | | | | | | | | | | | | | | | | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | | | | | | | Net loss | $ | (81,608) | | | $ | (13,160) | | | $ | (4,473) | | Other comprehensive (loss) income: | | | | | | Employee retirement plan adjustments, net of tax (benefit) expense of ($230), ($66), and $73, respectively | (401) | | | (177) | | | 373 | | | | | | | | Foreign currency translation adjustments | (3,062) | | | (4,555) | | | 10,542 | | Net change in unrealized (losses) gains on cash flow hedges, net of tax (benefit) expense of ($518), $436, and $814, respectively | (1,609) | | | 1,349 | | | 1,317 | | Total other comprehensive (loss) income | (5,072) | | | (3,383) | | | 12,232 | | Comprehensive (loss) income | (86,680) | | | (16,543) | | | 7,759 | | Less: Comprehensive income attributable to noncontrolling interests | — | | | — | | | 43 | | Comprehensive (loss) income attributable to Jason Industries | $ | (86,680) | | | $ | (16,543) | | | $ | 7,716 | |
The accompanying notes are an integral part of these consolidated financial statements.
Jason Industries, Inc.
Consolidated Balance Sheets Jason Industries, Inc. Consolidated Balance Sheets (In thousands, except share and per share amounts)
| | | | | | | | | | December 31, 2017 | | December 31, 2016 | Assets | | | | Current assets | | | | Cash and cash equivalents | $ | 48,887 |
| | $ | 40,861 |
| Accounts receivable - net of allowances for doubtful accounts of $2,959 and $3,392 at 2017 and 2016, respectively | 68,626 |
| | 77,837 |
| Inventories - net | 70,819 |
| | 73,601 |
| Other current assets | 15,655 |
| | 17,866 |
| Total current assets | 203,987 |
| | 210,165 |
| Property, plant and equipment - net | 154,196 |
| | 177,823 |
| Goodwill | 45,142 |
| | 42,157 |
| Other intangible assets - net | 131,499 |
| | 144,258 |
| Other assets - net | 11,499 |
| | 9,433 |
| Total assets | $ | 546,323 |
| | $ | 583,836 |
| Liabilities and Shareholders' Equity (Deficit) | | | | Current liabilities | | | | Current portion of long-term debt | $ | 9,704 |
| | $ | 8,179 |
| Accounts payable | 53,668 |
| | 61,160 |
| Accrued compensation and employee benefits | 17,433 |
| | 13,207 |
| Accrued interest | 276 |
| | 191 |
| Other current liabilities | 19,806 |
| | 24,807 |
| Total current liabilities | 100,887 |
| | 107,544 |
| Long-term debt | 391,768 |
| | 416,945 |
| Deferred income taxes | 25,699 |
| | 42,608 |
| Other long-term liabilities | 22,285 |
| | 19,881 |
| Total liabilities | 540,639 |
| | 586,978 |
| Commitments and Contingencies (Note 17) |
| |
| Shareholders' Equity (Deficit) | | | | Preferred stock, $0.0001 par value (5,000,000 shares authorized, 49,665 shares issued and outstanding at December 31, 2017, including 968 shares declared on November 28, 2017 and issued on January 1, 2018, 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) | $ | 49,665 |
| | $ | 45,899 |
| Jason Industries common stock, $0.0001 par value (120,000,000 shares authorized, 25,966,381 shares issued and outstanding at December 31, 2017 and 24,802,196 shares issued and outstanding at December 31, 2016) | 3 |
| | 2 |
| Additional paid-in capital | 143,788 |
| | 144,666 |
| Retained deficit | (167,710 | ) | | (163,232 | ) | Accumulated other comprehensive loss | (20,062 | ) | | (30,372 | ) | Shareholders' equity (deficit) attributable to Jason Industries | 5,684 |
| | (3,037 | ) | Noncontrolling interests | — |
| | (105 | ) | Total shareholders' equity (deficit) | 5,684 |
| | (3,142 | ) | Total liabilities and shareholders' equity (deficit) | $ | 546,323 |
| | $ | 583,836 |
|
(In thousands, except share and per share amounts)
| | | | | | | | | | | | | December 31, 2019 | | December 31, 2018 | Assets | | | | Current assets | | | | Cash and cash equivalents | $ | 84,526 | | | $ | 46,698 | | Accounts receivable - net of allowances for doubtful accounts of $1,106 and $1,073 at 2019 and 2018, respectively | 33,085 | | | 36,213 | | Inventories - net | | 49,943 | | | 49,475 | | | | | | | | | | Other current assets | 7,433 | | | 5,582 | | Current assets held for sale | — | | | 58,171 | | Total current assets | 174,987 | | | 196,139 | | Property, plant and equipment - net | | 70,276 | | | 75,166 | | Right-of-use operating lease assets | 20,910 | | | — | | Goodwill | 45,684 | | | 44,065 | | Other intangible assets - net | 64,590 | | | 69,700 | | Other assets - net | 10,654 | | | 11,287 | | Noncurrent assets held for sale | — | | | 107,240 | | Total assets | $ | 387,101 | | | $ | 503,597 | | Liabilities and Shareholders’ (Deficit) Equity | | | | Current liabilities | | | | Current portion of long-term debt | $ | 5,800 | | | $ | 5,687 | | Current portion of operating lease liabilities | 4,275 | | | — | | Accounts payable | 22,914 | | | 30,421 | | Accrued compensation and employee benefits | 8,551 | | | 11,954 | | Accrued interest | 79 | | | 89 | | Other current liabilities | 13,783 | | | 13,161 | | Current liabilities held for sale | — | | | 24,551 | | Total current liabilities | 55,402 | | | 85,863 | | Long-term debt | 378,950 | | | 386,101 | | Long-term operating lease liabilities | 19,136 | | | — | | Deferred income taxes | 7,534 | | | 17,613 | | Other long-term liabilities | 16,938 | | | 18,436 | | Noncurrent liabilities held for sale | — | | | 3,367 | | Total liabilities | 477,960 | | | 511,380 | | Commitments and Contingencies (Note 17) | | | | Shareholders’ (Deficit) Equity | | | | Preferred stock, $0.0001 par value (5,000,000 shares authorized, 43,950 shares issued and outstanding at December 31, 2019, including 860 shares declared on November 3, 2019 and issued on January 1, 2020, and 40,612 shares issued and outstanding at December 31, 2018, including 794 shares declared on November 1, 2018 and issued on January 1, 2019) | $ | 43,950 | | | $ | 40,612 | | Common stock, $0.0001 par value (120,000,000 shares authorized, 28,508,977 shares issued and outstanding at December 31, 2019 and 27,394,978 shares issued and outstanding at December 31, 2018) | 3 | | | 3 | | Additional paid-in capital | 155,023 | | | 155,533 | | Retained deficit | (261,192) | | | (180,360) | | Accumulated other comprehensive loss | (28,643) | | | (23,571) | | | | | | | | | | Total shareholders’ (deficit) equity | (90,859) | | | (7,783) | | Total liabilities and shareholders’ (deficit) equity | $ | 387,101 | | | $ | 503,597 | |
The accompanying notes are an integral part of these consolidated financial statements.
Jason Industries, Inc.
Consolidated Statements of Shareholders’ (Deficit) Equity Jason Industries, Inc. Consolidated Statements of Shareholders’ Equity (Deficit) (In thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Preferred Stock | | Common Stock | | Additional Paid-In Capital | | Retained Deficit | | Accumulated Other Comprehensive Loss | | Shareholders' Equity (Deficit) Attributable to Jason Industries, Inc. | | Noncontrolling Interests | | Total Shareholders’ Equity (Deficit) | | Shares | | Amount | | Shares | | Amount | | | | | | | Balance at December 31, 2014 | 45 |
| | $ | 45,000 |
| | 21,991 |
| | $ | 2 |
| | $ | 140,312 |
| | $ | (21,539 | ) | | $ | (12,065 | ) | | $ | 151,710 |
| | $ | 30,965 |
| | $ | 182,675 |
| Dividends declared | — |
| | — |
| | — |
| | — |
| | (3,600 | ) | | — |
| | — |
| | (3,600 | ) | | — |
| | (3,600 | ) | Share-based compensation | — |
| | — |
| | 515 |
| | — |
| | 7,969 |
| | — |
| | — |
| | 7,969 |
| | — |
| | 7,969 |
| Tax withholding related to vesting of restricted stock units | — |
| | — |
| | (211 | ) | | — |
| | (1,148 | ) | | — |
| | — |
| | (1,148 | ) | | — |
| | (1,148 | ) | Net loss | — |
| | — |
| | — |
| | — |
| | — |
| | (74,458 | ) | | — |
| | (74,458 | ) | | (15,143 | ) | | (89,601 | ) | Employee retirement plan adjustments, net of tax | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 383 |
| | 383 |
| | 78 |
| | 461 |
| Foreign currency translation adjustments | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (9,606 | ) | | (9,606 | ) | | (1,954 | ) | | (11,560 | ) | Net changes in unrealized losses on cash flow hedges | | | | | | | | | | | | | (168 | ) | | (168 | ) | | (34 | ) | | (202 | ) | Balance at December 31, 2015 | 45 |
| | 45,000 |
| | 22,295 |
| | 2 |
| | 143,533 |
| | (95,997 | ) | | (21,456 | ) | | 71,082 |
| | 13,912 |
| | 84,994 |
| Dividends declared | 1 |
| | 899 |
| | — |
| | — |
| | (3,600 | ) | | — |
| | — |
| | (2,701 | ) | | — |
| | (2,701 | ) | Share-based compensation | — |
| | — |
| | 149 |
| | — |
| | (752 | ) | | — |
| | — |
| | (752 | ) | | — |
| | (752 | ) | Tax withholding related to vesting of restricted stock units | — |
| | — |
| | (44 | ) | | — |
| | (155 | ) | | — |
| | — |
| | (155 | ) | | — |
| | (155 | ) | Net loss | — |
| | — |
| | — |
| | — |
| | — |
| | (67,235 | ) | | | | (67,235 | ) | | (10,818 | ) | | (78,053 | ) | Employee retirement plan adjustments, net of tax | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (540 | ) | | (540 | ) | | (84 | ) | | (624 | ) | Foreign currency translation adjustments | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (4,013 | ) | | (4,013 | ) | | (774 | ) | | (4,787 | ) | Net changes in unrealized losses on cash flow hedges, net of tax | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (870 | ) | | (870 | ) | | (194 | ) | | (1,064 | ) | Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc. | | | | | 2,402 |
| | | | 5,640 |
| | | | (3,493 | ) | | 2,147 |
| | (2,147 | ) | | — |
| Balance at December 31, 2016 | 46 |
| | 45,899 |
| | 24,802 |
| | 2 |
| | 144,666 |
| | (163,232 | ) | | (30,372 | ) | | (3,037 | ) | | (105 | ) | — |
| (3,142 | ) | Dividends declared | 4 |
| | 3,766 |
| | — |
| | — |
| | (3,783 | ) | | — |
| | — |
| | (17 | ) | | — |
| | (17 | ) | Share-based compensation | — |
| | — |
| | 106 |
| | — |
| | 1,119 |
| | — |
| | — |
| | 1,119 |
| | — |
| | 1,119 |
| Tax withholding related to vesting of restricted stock units | — |
| | — |
| | (26 | ) | | — |
| | (35 | ) | | — |
| | — |
| | (35 | ) | | — |
| | (35 | ) | Net loss | — |
| | — |
| | — |
| | — |
| | — |
| | (4,478 | ) | | — |
| | (4,478 | ) | | 5 |
| | (4,473 | ) | Employee retirement plan adjustments, net of tax | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 373 |
| | 373 |
| | — |
| | 373 |
| Foreign currency translation adjustments | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 10,506 |
| | 10,506 |
| | 36 |
| | 10,542 |
| Net changes in unrealized gains on cash flow hedges, net of tax | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1,315 |
| | 1,315 |
| | 2 |
| | 1,317 |
| Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc. | — |
| | — |
| | 1,084 |
| | 1 |
| | 1,821 |
| | — |
| | (1,884 | ) | | (62 | ) | | 62 |
| | — |
| Balance at December 31, 2017 | 50 |
| | $ | 49,665 |
| | 25,966 |
| | $ | 3 |
| | $ | 143,788 |
| | $ | (167,710 | ) | | $ | (20,062 | ) | | $ | 5,684 |
| | $ | — |
| | $ | 5,684 |
|
(In thousands,except per share amounts) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Preferred Stock | | | | | Common Stock | | | | | Additional Paid-In Capital | | | Retained Deficit | | | Accumulated Other Comprehensive Loss | | | Shareholders’ (Deficit) Equity Attributable to Jason Industries, Inc. | | | Noncontrolling Interests | | | Total Shareholders’ (Deficit) Equity | | | Shares | | | Amount | | | Shares | | | Amount | | | | | | | | | | | | | | Balance at December 31, 2016 | 46 | | | $ | 45,899 | | | 24,802 | | | $ | 2 | | | $ | 144,666 | | | $ | (163,232) | | | $ | (30,372) | | | $ | (3,037) | | | $ | (105) | | | $ | (3,142) | | Dividends declared | 4 | | | 3,766 | | | — | | | — | | | (3,783) | | | — | | | — | | | (17) | | | — | | | (17) | | Share-based compensation | — | | | — | | | 106 | | | — | | | 1,119 | | | — | | | — | | | 1,119 | | | — | | | 1,119 | | Tax withholding related to vesting of restricted stock units | — | | | — | | | (26) | | | — | | | (35) | | | — | | | — | | | (35) | | | — | | | (35) | | Net loss | — | | | — | | | — | | | — | | | — | | | (4,478) | | | — | | | (4,478) | | | 5 | | | (4,473) | | Employee retirement plan adjustments, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | 373 | | | 373 | | | — | | | 373 | | Foreign currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | 10,506 | | | 10,506 | | | 36 | | | 10,542 | | Net changes in unrealized gain on cash flow hedges, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | 1,315 | | | 1,315 | | | 2 | | | 1,317 | | Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc. | — | | | — | | | 1,084 | | | 1 | | | 1,821 | | | — | | | (1,884) | | | (62) | | | 62 | | | — | | Balance at December 31, 2017 | 50 | | | 49,665 | | | 25,966 | | | 3 | | | 143,788 | | | (167,710) | | | (20,062) | | | 5,684 | | | — | | | 5,684 | | Cumulative impact of accounting changes | — | | | — | | | — | | | — | | | — | | | 510 | | | (126) | | | 384 | | | — | | | 384 | | Dividends declared | 3 | | | 3,083 | | | — | | | — | | | (3,093) | | | — | | | — | | | (10) | | | — | | | (10) | | Share-based compensation | — | | | — | | | 36 | | | — | | | 2,709 | | | — | | | — | | | 2,709 | | | — | | | 2,709 | | Tax withholding related to vesting of restricted stock units | — | | | — | | | (3) | | | — | | | (7) | | | — | | | — | | | (7) | | | — | | | (7) | | Net loss | — | | | — | | | — | | | — | | | — | | | (13,160) | | | | | (13,160) | | | — | | | (13,160) | | Employee retirement plan adjustments, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | (177) | | | (177) | | | — | | | (177) | | Foreign currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | (4,555) | | | (4,555) | | | — | | | (4,555) | | Net changes in unrealized gains on cash flow hedges, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | 1,349 | | | 1,349 | | | — | | | 1,349 | | Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc. | (12) | | | (12,136) | | | 1,396 | | | — | | | 12,136 | | | — | | | — | | | — | | | — | | | — | | Balance at December 31, 2018 | 41 | | | 40,612 | | | 27,395 | | | 3 | | | 155,533 | | | (180,360) | | | (23,571) | | | (7,783) | | | — | | | | (7,783) | | Cumulative impact of accounting changes | — | | | — | | | — | | | — | | | — | | | 776 | | | — | | | 776 | | | — | | | 776 | | Dividends declared | 3 | | | 3,338 | | | — | | | — | | | (3,347) | | | — | | | — | | | (9) | | | — | | | (9) | | Share-based compensation | — | | | — | | | 1,530 | | | — | | | 3,354 | | | — | | | — | | | 3,354 | | | — | | | 3,354 | | Tax withholding related to vesting of restricted stock units | — | | | — | | | (416) | | | — | | | (517) | | | — | | | — | | | (517) | | | — | | | (517) | | Net loss | — | | | — | | | — | | | — | | | — | | | (81,608) | | | — | | | (81,608) | | | — | | | (81,608) | | Employee retirement plan adjustments, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | (401) | | | (401) | | | — | | | (401) | | Foreign currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | (3,062) | | | (3,062) | | | — | | | (3,062) | | Net changes in unrealized losses on cash flow hedges, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | (1,609) | | | (1,609) | | | — | | | (1,609) | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2019 | 44 | | | $ | 43,950 | | | 28,509 | | | $ | 3 | | | $ | 155,023 | | | $ | (261,192) | | | $ | (28,643) | | | $ | (90,859) | | | $ | — | | | $ | (90,859) | |
The accompanying notes are an integral part of these consolidated financial statements.
| | | | | | | | | | | | | | | | | | Jason Industries, Inc. Consolidated Statements of Cash Flows (In thousands, except share and per share amounts) | | | | | | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | Includes cash flow activities from both continuing and discontinued operations | | | | | | Cash flows from operating activities | | | | | | Net loss | $ | (81,608) | | | $ | (13,160) | | | $ | (4,473) | | Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | | | | | | Depreciation | 24,606 | | | 28,356 | | | 26,260 | | Amortization of intangible assets | 10,855 | | | 14,248 | | | 12,674 | | Amortization of deferred financing costs and debt discount | 2,994 | | | 2,937 | | | 2,943 | | Non-cash operating lease expense | 8,024 | | | — | | | — | | Non-cash impairment charges | 20,597 | | | — | | | — | | Equity income | (316) | | | (1,024) | | | (952) | | Deferred income taxes | (9,013) | | | (7,995) | | | (17,345) | | Loss (gain) on disposals of property, plant and equipment - net | 448 | | | (1,142) | | | (759) | | Gain on extinguishment of debt | | — | | | — | | | (2,201) | | Non-cash impact of business divestitures and dissolutions | 12,858 | | | — | | | 7,798 | | | | | | | | Dividends from joint ventures | 728 | | | 833 | | | — | | Share-based compensation | 3,354 | | | 2,709 | | | 1,119 | | Net increase (decrease) in cash, net of acquisitions and dispositions, due to changes in: | | | | | | Accounts receivable | 7,239 | | | 7,454 | | | 6,997 | | Inventories | 4,109 | | | 5,750 | | | 3,804 | | Other current assets | (648) | | | 2,819 | | | 1,464 | | Accounts payable | (11,375) | | | (6,015) | | | (7,897) | | Accrued compensation and employee benefits | (4,409) | | | (2,710) | | | 5,946 | | Accrued interest | (9) | | | (187) | | | 98 | | Accrued income taxes | 312 | | | (1,221) | | | 473 | | | | | | | | Operating lease liabilities, net | (7,221) | | | — | | | — | | Other - net | (2,325) | | | (1,895) | | | (5,858) | | Total adjustments | 60,808 | | | 42,917 | | | 34,564 | | Net cash (used in) provided by operating activities | (20,800) | | | 29,757 | | | 30,091 | | | | | | | | Cash flows from investing activities | | | | | | | | | | | | Proceeds from disposals of property, plant and equipment | 2,117 | | | 3,531 | | | 8,809 | | | | | | | | Payments for property, plant and equipment | (11,785) | | | (13,753) | | | (15,873) | | Proceeds from divestitures, net of cash divested and liabilities assumed by buyer | 79,796 | | | — | | | 7,883 | | Acquisitions of business, net of cash acquired | (11,000) | | | — | | | — | | Acquisitions of patents | (42) | | | (152) | | | (104) | | | | | | | | Net cash provided by (used in) investing activities | 59,086 | | | (10,374) | | | 715 | | Cash flows from financing activities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Payments of deferred financing costs | (331) | | | (649) | | | — | | | | | | | | Payments of First and Second Lien term loans | (8,100) | | | (5,600) | | | (21,826) | | | | | | | | | | | | | | Proceeds from other long-term debt | 4,645 | | | 3,387 | | | 8,596 | | Payments of other long-term debt | (6,362) | | | (7,076) | | | (10,816) | | Payments of finance lease obligation | | (340) | | | — | | | — | | Value added tax (paid from) collected on building sale | | (707) | | | 694 | | | — | | | | | | | | Other financing activities - net | (627) | | | (22) | | | (232) | | Net cash used in financing activities | (11,822) | | | (9,266) | | | (24,278) | | Effect of exchange rate changes on cash and cash equivalents | (107) | | | (835) | | | 1,498 | | Net increase in cash and cash equivalents | 26,357 | | | 9,282 | | | 8,026 | | | | | | | | Cash and cash equivalents, beginning of period | 58,169 | | | 48,887 | | | 40,861 | | Cash and cash equivalents, end of period | $ | 84,526 | | | $ | 58,169 | | | $ | 48,887 | | Supplemental disclosure of cash flow information | | | | | | Cash paid during the year for: | | | | | | Interest | $ | 30,121 | | | $ | 30,687 | | | $ | 30,242 | | Income taxes, net of refunds | $ | 3,440 | | | $ | 6,480 | | | $ | 6,843 | | Acquisition-related transaction costs used in operating activities | $ | 384 | | | $ | — | | | $ | — | | Divestiture-related transaction costs used in operating activities | $ | 4,091 | | | $ | — | | | $ | 932 | | Non-cash lease activities: | | | | | | Right-of-use operating assets obtained in exchange for operating lease obligations | $ | 3,341 | | | $ | — | | | $ | — | | Right-of-use finance assets obtained in exchange for finance lease obligations | $ | 536 | | | $ | — | | | $ | — | | Non-cash investing activities | | | | | | Property, plant and equipment acquired through additional liabilities | $ | 618 | | | $ | 1,451 | | | $ | 1,179 | | Non-cash financing activities: | | | | | | Accretion of preferred stock dividends | $ | 2 | | | $ | 2 | | | $ | 6 | | Non-cash preferred stock created from dividends declared | $ | 3 | | | $ | 3 | | | $ | 4 | | Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc. | $ | — | | | $ | — | | | $ | 62 | | Exchange of preferred stock for common stock of Jason Industries, Inc. | $ | — | | | $ | 12,136 | | | $ | — | | Debt and pension liability assumed by buyer with divestitures | $ | 2,206 | | | $ | — | | | $ | 2,950 | |
Jason Industries, Inc. Consolidated Statements of Cash Flows (In thousands)
| | | | | | | | | | | | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | | | Cash flows from operating activities | | | | | | Net loss | $ | (4,473 | ) | | $ | (78,053 | ) | | $ | (89,601 | ) | Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | Depreciation | 26,260 |
| | 31,120 |
| | 31,160 |
| Amortization of intangible assets | 12,674 |
| | 12,921 |
| | 14,088 |
| Amortization of deferred financing costs and debt discount | 2,943 |
| | 3,008 |
| | 3,008 |
| Impairment charges | — |
| | 63,285 |
| | 94,126 |
| Equity income | (952 | ) | | (681 | ) | | (884 | ) | Deferred income taxes | (17,345 | ) | | (14,112 | ) | | (28,223 | ) | (Gain) loss on disposals of property, plant and equipment - net | (759 | ) | | 880 |
| | 109 |
| Gain on extinguishment of debt | (2,201 | ) | | — |
| | — |
| Loss on divestiture | 8,730 |
| | — |
| | — |
| Transaction fees on divestiture | (932 | ) | | — |
| | — |
| Dividends from joint ventures | — |
| | 2,068 |
| | — |
| Share-based compensation | 1,119 |
| | (752 | ) | | 7,969 |
| Net increase (decrease) in cash due to changes in: | | | | | | Accounts receivable | 6,997 |
| | (85 | ) | | 1,954 |
| Inventories | 3,804 |
| | 5,862 |
| | 5,034 |
| Other current assets | 1,464 |
| | 7,346 |
| | (3,820 | ) | Accounts payable | (7,897 | ) | | 5,886 |
| | (1,473 | ) | Accrued compensation and employee benefits | 5,946 |
| | (5,449 | ) | | 4,169 |
| Accrued interest | 98 |
| | 117 |
| | (121 | ) | Accrued income taxes | 473 |
| | 2,263 |
| | 487 |
| Other - net | (5,858 | ) | | (507 | ) | | 1,052 |
| Total adjustments | 34,564 |
| | 113,170 |
| | 128,635 |
| Net cash provided by operating activities | 30,091 |
| | 35,117 |
| | 39,034 |
| | | | | | | Cash flows from investing activities | | | | | | Proceeds from disposals of property, plant and equipment | 8,809 |
| | 3,413 |
| | 232 |
| Payments for property, plant and equipment | (15,873 | ) | | (19,780 | ) | | (32,786 | ) | Proceeds from divestitures, net of cash divested and debt assumed by buyer | 7,883 |
| | — |
| | — |
| Acquisitions of business, net of cash acquired | — |
| | — |
| | (34,763 | ) | Acquisitions of patents | (104 | ) | | (86 | ) | | (247 | ) | Net cash provided by (used in) investing activities | 715 |
| | (16,453 | ) | | (67,564 | ) | | | | | | | Cash flows from financing activities | | | | | | Payments of First and Second Lien term loans | (21,826 | ) | | (3,100 | ) | | (3,100 | ) | Proceeds from other long-term debt | 8,596 |
| | 10,150 |
| | 19,282 |
| Payments of other long-term debt | (10,816 | ) | | (16,138 | ) | | (6,228 | ) | Payments of preferred stock dividends | (12 | ) | | (3,600 | ) | | (3,600 | ) | Other financing activities - net | (220 | ) | | (155 | ) | | (1,148 | ) | Net cash (used in) provided by financing activities | (24,278 | ) | | (12,843 | ) | | 5,206 |
| Effect of exchange rate changes on cash and cash equivalents | 1,498 |
| | (904 | ) | | (3,011 | ) | Net increase (decrease) in cash and cash equivalents | 8,026 |
| | 4,917 |
| | (26,335 | ) | | | | | | | Cash and cash equivalents, beginning of period | 40,861 |
| | 35,944 |
| | 62,279 |
| Cash and cash equivalents, end of period | $ | 48,887 |
| | $ | 40,861 |
| | $ | 35,944 |
| Supplemental disclosure of cash flow information | | | | | | Cash paid during the year for: | | | | | | Interest | $ | 30,242 |
| | $ | 28,717 |
| | $ | 28,969 |
| Income taxes, net of refunds | $ | 6,843 |
| | $ | 7,163 |
| | $ | 4,349 |
| Non-cash investing activities | | | | | | Property, plant and equipment acquired through additional liabilities | $ | 1,179 |
| | $ | 1,891 |
| | $ | 1,765 |
| Non-cash financing activities: | | | | | | Accretion of preferred stock dividends | $ | 6 |
| | $ | 1 |
| | $ | 900 |
| Non-cash preferred stock created from dividends declared | $ | 3,766 |
| | $ | 899 |
| | $ | — |
| Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc. | $ | 62 |
| | $ | (2,147 | ) | | $ | — |
| Buyer assumption of debt from divestiture | $ | 2,950 |
| | $ | — |
| | $ | — |
|
The accompanying notes are an integral part of these consolidated financial statements.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts)
| | | | | | 1. | Summary of Significant Accounting Policies |
Description of business:Jason Industries, Inc. and its subsidiaries (collectively, the “Company”) is a global industrial manufacturing company with four reportablesignificant market share positions in each of its 2 segments: finishing,industrial and engineered components. The Company provides critical components seating and acoustics. The segments have operations withinmanufacturing solutions to customers across a wide range of end markets, industries and geographies through its global network of 23 manufacturing facilities and 9 sales, administrative and/or warehouse facilities throughout the United States and 13 foreign countries. In the first quarter of 2019, as part of a review of the Company’s organizational structure, the Company made certain strategic leadership changes which required a reassessment of reportable segments. Based on this evaluation, the Company changed how it makes operating decisions, assesses performance of the business, and allocates resources. As a result of the evaluation, the Company reduced the number of operating and reportable segments from 4 to 3: industrial, engineered components and fiber solutions. The prior year segment disclosures have been updated to conform with current year presentation. On August 12, 2019, we announced that our Board of Directors had engaged financial advisors to advise us as we conduct a process to evaluate strategic alternatives. This evaluation includes, but is not limited to, a potential sale, strategic merger, consolidation or business combination, acquisition, recapitalization, financing consisting of equity and/or debt securities, and/or a restructuring of the Company’s finishing segment focusesdebt, focused on maximizing the productionvalue of industrial brushes, polishing buffs and compounds, and abrasives that are used in a broad range of industrial and infrastructure applications. the Company for its stakeholders. Discontinued operations: The components segmentCompany presents discontinued operations when there is a diversified manufacturerdisposal 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. The Company was originally incorporated in Delaware on May 31, 2013 and 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 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 Jasoncomponent group that is considered by the Company (the “Business Combination”).to be a strategic shift that has a major effect on operations and financial results. The results of operations for discontinued operations are aggregated into a single line in the consolidated statements of operations for all periods presented.
During 2019, the Company determined that both the North American fiber solutions business and the Metalex business within the engineered components segment met the criteria to be classified as discontinued operations. As a result, the Company’s prior period results of operations, financial position and notes to the financial statements have been recast to be presented on a continuing operations basis, except where noted. The assets and liabilities of the North American fiber solutions business and the Metalex business have been presented as held for sale for the periods prior to the sale. On August 30, 2019 and on December 13, 2019, the Company completed the divestitures of our North American fiber solutions business and our Metalex business, respectively. Previously, on August 30, 2017, the Company completed the sale of the European fiber solutions business, which did not meet the criteria for discontinued operations presentation at the time of the divestiture. As such, the results of the European fiber solutions business are presented within continuing operations through the date of the sale. Basis of presentation: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 endsending on a Friday. The exceptions are the first quarter, which begins on January 1, and the fourth quarter, which ends on December 31. For 2017,2019, the Company’s fiscal quarters were comprised of the three months ended March 31,29, June 30,28, September 29,27, and December 31. In 2016,2018, the Company’s fiscal quarters were comprised of the three months ended April 1, July 1,March 30, June 29, September 30,28, and December 31. Principles of consolidation:The consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission.Commission (“SEC”). The consolidated financial statements include the accounts of all wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. Investments in partially owned affiliates are accounted for using the equity method when the Company’s interest is between 20% and 50% and the Company does not have a controlling interest, yet maintains significant influence. Cash and cash equivalents: The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. At December 31, 2017 and 2016, book overdrafts of approximately $4.7 million and $5.5 million, respectively, are included in accounts payable within the accompanying consolidated balance sheets. These amounts are held in accounts in which the Company has no right of offset with other cash balances. Accounts receivable: The Company evaluates collectability of its receivables and establishes the allowance for doubtful accounts based on a combination of specific customer circumstances and historical write-off experience. Credit is extended to customers based upon an evaluation of their financial position. Generally, advance payment is not required. Credit losses are provided for in the consolidated financial statements and consistently have been within management’s expectations. Inventories:Inventories are comprised of material, direct labor and manufacturing overhead, and are valued at the lower of cost or net realizable value and adjusted for the value of inventory that is estimated to be excess, obsolete or otherwise
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) unmarketable. The estimation of excess, obsolete and unmarketable inventory is based on a variety of factors, including material or product age, estimated usage and estimated market demand. The first-in, first-out (“FIFO”) method is used to determine cost for all of the Company’s inventories. Property, plant and equipment: Property, plant and equipment are stated at cost. Depreciation generally occurs using the straight-line method over 2 to 40 years for buildings and improvements and 2 to 10 years for machinery and equipment. Leasehold improvements are amortized over the lesser of the term of the respective leases and the useful life of the related improvement using the straight-line method. The Company uses accelerated depreciation methods for income tax purposes. Expenditures which substantially increase value or extend useful lives are capitalized. Expenditures for maintenance and repairs are charged to operations as incurred. The Company records gains and losses on the disposition or retirement of property, plant and equipment based on the net book value and any proceeds received. Long-lived assets:Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable based upon an estimate of the related future
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
undiscounted cash flows. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset as compared to its carrying value. Long-lived assets to be disposed of by sale are reported at the lower of carrying amount or fair value less cost to sell. The Company conducts its long-lived asset impairment reviews at the lowest level in which identifiable cash flows are largely independent of cash flows of other assets and liabilities. Amortization is recorded for other intangible assets with determinable lives. Patents, customer relationships, and trademarks and other intangible assets are amortized on a straight-line basis over their estimated useful lives of 7 years, 10 to 15 years, and 51 to 18 years, respectively. Goodwill:Goodwill reflects the cost of an acquisition in excess of the aggregate fair value assigned to identifiable net assets acquired. Goodwill is assessed for impairment at least annually and as triggering events or indicators of potential impairment occur. The Company performs its annual impairment test in the fourth quarter of its fiscal year. Goodwill has been assigned to reporting units for purposes of impairment testing based upon the relative fair value of the asset to each reporting unit. Impairment of goodwill is measured by comparing the fair value of a reporting unit to the carrying value of the reporting unit, including goodwill. The estimated fair value represents the amount at which a reporting unit could be bought or sold in a current transaction between willing parties on an arms-length basis. In estimating the fair value, the Company uses a discounted cash flow model, which is dependent on a number of assumptions including estimated future revenues and expenses, weighted average cost of capital, capital expenditures and other variables. The Company also uses a market approach, in which the fair values of comparable public companies and fair values based on recent comparable transactions (when available) are used in determining an estimated fair value for each reporting unit. If the carrying amount of the reporting unit exceeds the estimated fair value of the reporting unit, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of the goodwill. The Company is subject to financial statement risk in the event that goodwill becomes impaired. See Note 8, “Goodwill and Other Intangible Assets” for further discussion regarding the results of the Company’s goodwill impairment testing. Investments in partially-owned affiliates: The Company has investments in joint ventures located in Asia. These joint ventures are part of the finishingindustrial segment and are accounted for using the equity method of accounting. As of December 31, 20172019 and 2016,2018, the Company’s investment in these joint ventures was $6.1$5.8 million and $4.8$6.3 million, respectively, and is included in other assets-net in the consolidated balance sheets. Equity income is presented separately on the consolidated statements of operations. Income taxes: The provision for income taxes includes federal, state, local and foreign taxes on income. Deferred taxes are recorded for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities, and net operating loss and credit carryforwards available to offset future taxable income. Future tax benefits are recognized to the extent that realization of those benefits is considered to be more likely than not. A valuation allowance is provided for net deferred tax assets when it is more likely than not that the Company will not realize the benefit of such net assets. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. Share-based payments: The Company recognizes expense related to share-based payment transactions in which it receives employee services in exchange for equity instruments of the Company that may be settled by the issuance of such equity instruments. Share-based compensation cost for restricted stock units (“RSUs”) is measured based on the closing fair market value of the Company’s common stock on the date of grant. The Company recognizes share-based compensation cost over the award’s requisite service period on a straight-line basis for time-based RSUs and on a graded basis for RSUs that are
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) contingent on the achievement of performance conditions. Forfeitures are recognized within compensation expense in the period the forfeitures are incurred. The Company recognizes a tax (provision)/benefit from share-based compensation (income)/expense in the consolidated statements of operations in the period the share-based compensation (income)/expense is incurred. See Note 12,, “Share Based “Share-Based Compensation” for further information regarding share-based compensation. 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.
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
•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 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 $398.4$297.3 million and $365.8$387.4 million as of December 31, 20172019 and 2016,2018, respectively. 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. See Note 9, “Debt“Debt and Hedging Instruments”Instruments” for further information regarding derivatives held by the Company. Employee Benefit Plans: The Company recognizes pension and post-retirement benefit income and expense and assets and obligations that are based on actuarial valuations using a December 31 measurement date and that include key assumptions regarding discount rates, expected returns on plan assets, retirement and mortality rates, future compensation increases, and health care cost trend rates. The Company reviews actuarial assumptions on an annual basis and makes modifications based on current rates and trends when appropriate. As required by GAAP, the effects of the modifications are recorded currently oras a component of other comprehensive income and are amortized over future periods. Derivative financial instruments:The Company recognizes all derivative financial instruments in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. Changes in the fair value of derivative financial instruments are either recognized periodically in income or in equity as a component of comprehensive income (loss) depending on whether the derivative financial instrument qualifies for hedge accounting, and if so, whether it qualifies as a fair value hedge or cash flow hedge. Generally, changes in fair values of derivatives accounted for as fair value hedges are recorded in income along with the portions of the changes in the fair values of the hedged items that relate to the hedged risks. Changes in fair values of derivatives accounted for as cash flow hedges, to the extent they are effective as hedges, are recorded in other comprehensive (loss) income, (loss), net of deferred income taxes. Changes in fair value of derivatives not qualifying as hedges are reported in income. Cash flows from derivatives that are accounted for as cash flow or fair value hedges are included in the consolidated statements of cash flows in the same category as the item being hedged. The Company’s policy is to enter into derivatives with creditworthy institutions and not to enter into such derivatives for speculative purposes. See Note 9, “Debt“Debt and Hedging Instruments”Instruments” for further information regarding derivatives held by the Company. Foreign currency translation: Assets and liabilities of the Company’s foreign subsidiaries, whose respective functional currencies are other than the U.S. dollar, are translated at year-end exchange rates while revenues and expenses are
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) translated at average exchange rates. Resultant gains and losses are reflected within accumulated other comprehensive loss within the accompanying consolidated statements of shareholders’ equity (deficit). equity. Other comprehensive income (loss): income: Other comprehensive (loss) income (loss) includes disclosure of financial information that historically has not been recognized in the calculation of net (loss) income. The Company’s other comprehensive (loss) income (loss) includes the change in unrecognized prior service costs on pension and other postretirement obligations, foreign currency translation, and fair value adjustments related to derivative instruments. Pre-production costs related to long-term supply arrangements: The Company’s policy for engineering, research and development, and other design and development costs related to products that will be sold under long-term supply arrangements requires such costs to be expensed as incurred. Costs for molds, dies, and other tools used to manufacture products that will be sold under long-term supply arrangements are capitalized if the Company has title to the assets or when customer reimbursement is assured. Revenue recognition:Net sales are recognized when control of a performance obligation is transferred to the customer in an amount that reflects the consideration expected to be received in exchange for the transferred good or service. The Company typically satisfies its performance obligations in contracts with customers upon shipment of the goods or delivery of the services. Amounts invoiced to customers related to shipping and handling are classified as net sales, while expenses for transportation of products to customers are recorded as a component of cost of goods sold on the consolidated statement of operations. Sales, value add, and other taxes collected concurrent with revenue-producing activities are excluded from net sales. As of the contract inception date, the expected time between the completion of the performance obligation and the payment from the customer is less than a year, and as such there are no significant financing components in the consideration recognized and disclosures around unsatisfied performance obligations have been omitted.
The Company estimates whether it will be subject to variable consideration under the terms of the contract and includes its estimate of variable consideration in the transaction price based on the expected value method when it is deemed probable of being realized based on historical experience and trends. Types of variable consideration may include rebates, discounts, and product returns, among others, which are recorded as a deduction to net sales at the time when control of a performance obligation is transferred to the customer. The majority of the Company’s contracts are for the sale of goods that qualify as separate performance obligations that are distinct from other goods or services provided in the same contract. Transaction price inclusive of estimated variable consideration is allocated to separate performance obligations based on their relative standalone selling prices using observable inputs. When observable inputs are not available, the Company estimates standalone selling price using cost plus a reasonable margin approach. Contracts entered into with the same customer at or near the same time are combined into a single contract if they represent a single commercial objective, if payment of consideration in one contract is dependent on performance of the other contract, or if promises in different contracts constitute a single performance obligation. For the limited contracts with multiple performance obligations, the contract’s transaction price is allocated to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract. Performance obligations are satisfied at a point in time or over time as work progresses. Revenue from products transferred to customers at a point in time accounted for more than 99% of net sales for the year ended December 31, 2019. The Company recognizes revenue over time for certain production parts in the industrial business that are highly customized with no alternative use and for which the Company has an enforceable right to payment with a reasonable margin under the terms of the contract based on the output method of goods produced. Revenue from products transferred to customers over time accounted for less than 1% of net sales for the year ended December 31, 2019. The Company provides industry standard assurance-type warranties which ensure that the manufactured products comply with agreed upon specifications with the customers and do not represent a separate performance obligation with the customer. Warranty based accruals are established under Accounting Standards Codification (“ASC”) 460, “Guarantees”, based on an evaluation of historical warranty experience and management’s estimate of the level of future claims. Insurance proceeds: The Company maintains property and business interruption insurance coverage to mitigate the risk of incremental costs and/or lost revenues or profit margins resulting from disruption of business activities, whether at our own facility or that of a supplier. The Company records the incremental costs associated with such events as incurred and the related insurance recovery proceeds when deemed probable and collectible in the case of claims for direct cost recovery and when earned and realizable in the case of claims for business interruption related to lost revenues or profit margins. The incremental costs incurred as well as any associated insurance recoveries for covered events are recorded within operating income in the consolidated statements of operations.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts)
Product warranties: TheDuring 2018, the Company offers warranties onexperienced a force majeure incident at a supplier in the salesengineered components segment that resulted in incremental costs to maintain production and lost revenues during the disruption period. As a result of certainthis event, the Company received $2.2 million of its products and records accruals for estimated future claims. Such accruals are established based on an evaluation of historical warranty experience and management’s estimate of the level of future claims.
Revenue recognition:Revenue is recognized from product sales at the time that title and risks and rewards of ownership are transferred to the customer, generally upon shipment. The Company records allowances for discounts, rebates, and product returns at the time of sale as a reduction of revenue as such allowances can be reliably estimated based on historical experience and known trends.
Shipping and handling fees and costs: The Company classifies all amounts invoiced to customers related to shipping and handling as sales. Expenses for transportation of products to customers areinsurance claims proceeds which were recorded as a component of cost of goods sold.sold within the consolidated statement of operations.
Finance and operating lease obligations: The Company’s lease portfolio includes both real estate and non-real estate type leases which are accounted for as either finance or operating leases. Real estate leases generally include office, warehouse and manufacturing facilities and non-real estate leases generally include office equipment, manufacturing machinery, vehicles and other transportation equipment. The Company’s leases have remaining lease terms of less than one year to ten years. Many of the leases include provisions that enable the Company to renew the lease, and a number of leases are subject to various escalation clauses. Renewal options that are deemed reasonably certain are included as part of the lease term for purposes of calculating the right-of-use (“ROU”) asset and lease liability. Operating lease ROU assets and lease liabilities are recorded on the balance sheet on the date the Company takes possession of the leased assets with expense recognized on a straight-line basis over the lease term. Leases with an estimated total term of 12 months or less are not recorded on the balance sheet and the lease expense is recognized on a straight-line basis over the lease term. The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants. The Company determines if an arrangement is a lease at inception. The Company will only reassess the lease classification when modifications or changes to key terms are made to a lease agreement. Generally, the Company’s real estate type leases contain both lease components and non-lease components. Non-lease components of real estate type leases are excluded from the calculation of the ROU asset and lease liability and are excluded from lease expense. For the Company’s non-real estate type leases, non-lease components are included in the calculation of the ROU asset and lease liability and included in lease expense over the term of the lease. The Company uses a discount rate to calculate the ROU asset and lease liability. When the implicit rate is known or provided in the lease documents, the Company is required to use this rate as the discount rate. In cases in which the implicit rate is not known, the Company uses an estimated incremental borrowing rate based upon the sovereign treasury rate for the currency in which the lease liability is denominated on the date the Company takes possession of the leased asset adjusted for various factors, such as term and an internal credit spread. Research and development costs:Research and development costs consist of engineering and development resources and are expensed as incurred. Such costs incurred in the development of new products or significant improvements to existing products were $3.6$4.8 million in the year ended December 31, 2017, $4.22019, $2.4 million in the year ended December 31, 2016,2018, and $5.0$3.3 million in the year ended December 31, 2015.2017. Advertising costs: Advertising costs are charged to selling and administrative expenses as incurred and were $1.8$1.1 million in the year ended December 31, 2017, $1.92019, $1.4 million in the year ended December 31, 2016,2018, and $2.7$1.6 million in the year ended December 31, 2015.2017. Transaction-related expenses: The Company recognized no transaction-related expenses in the years ended December 31, 2017 and 2016 and $0.9 million in the year ended December 31, 2015 related to the acquisition of DRONCO. The transaction-related expenses were recognized as incurred in accordance with the applicable accounting guidance.
Use of estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentration risks: The Company’s operations are geographically dispersed and it has a diverse customer base. Management believes bad debt losses resulting from default by a single customer, or defaults by customers in any depressed region or business sector, would not have a material effect on the Company’s financial position, results of operations or cash flows. During the years ended December 31, 2017, 2016,2019, 2018, and 20152017 the Company had no individual customers at or above 10% of consolidated net sales. At December 31, 2017, one2019 and 2018, no single customer accounted for greater than 10% of the Company’s consolidated accounts receivable balance; this customer accounted for 13% of the consolidated balance and is served by the acoustics segment. At December 31, 2016, two customers accounted for greater than 10% of the Company’s consolidated accounts receivable balance; these customers each accounted for 12% of the consolidated balance and both customers are served by the acoustics segment. Revision of previously reported financial information: Certain prior period amounts within the consolidated statements of operations, consolidated statements of comprehensive income (loss), consolidated balance sheets, consolidated statements of shareholders’ equity (deficit) and operating activities in the consolidated statements of cash flows have been revised for an error identified in the third quarter of 2017. See Note 2, “Revision of Previously Reported Financial Information” for further information regarding the revision of previously reported financial information.balance.
Recently issued accounting standards Accounting standards adopted in the current fiscal year In July 2015,February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11,2016-02, “Simplifying the Measurement of InventoryLeases (Topic 842)” (“ASU 2015-11”2016-02”). Under ASU 2015-11, inventory is measured at2016-02 establishes new accounting and disclosure requirements for leases. See above for discussion of the “lowerCompany’s finance and operating lease obligation policy and Note 10, “Leases” for further discussion regarding the adoption 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 2015-11this standard effective January 1, 2017 on a prospective basis. There was an insignificant impact to the reported consolidated financial statements for the year ended December 31, 2017 as a result of adoption of this standard.2019. In August 2016,2017, the FASB issued ASU 2016-15,2017-12, “Statement of Cash FlowsDerivatives and Hedging (Topic 230), Classification of Certain Cash Receipts and Cash Payments815): Targeted Improvements to Accounting for Hedging Activities” (“ASU 2016-15”2017-12”), which provides guidance on eight specific cash flow classification issues.. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted. The 2017-12 broadens the scope of financial and nonfinancial
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts)
Company has adopted this standard for the year ended December 31, 2017 and has determined that there was no impact to the consolidated statement of cash flows related to any previously reported period as a result of this adoption.
In November 2016, the FASB issued ASU 2016-18 "Statement of Cash Flows (Topic 320): Restricted Cash" ("ASU 2016-18"), which clarifies guidance on the classification and presentation of restricted cash in the statement of cash flows. The guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. This new guidance requires a retrospective adoption approach. For comparative purposes in the third quarter of 2018, ASU 2016-18 will require the inclusion of $2.4 million of restricted cash recorded within other assets-net on the consolidated balances sheets at September 29, 2017 to be included as part of total cash and cash equivalents within the consolidated statements of cash flows instead of recording the restricted cash as an investing cash outflow. The Company has adopted this standard effective for the year ended December 31, 2017 and other than the third quarter of 2017, has determined that this standard will have no impact on its consolidated financial statements.
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 consolidated financial statements for the year ended December 31, 2017, as no interim triggering events or indicators of potential impairment were identified. The Company performed its annual goodwill impairment test as of September 30, 2017 and concluded that there was no impairment.
In May 2017, the FASB issued ASU 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). This standard clarifies when to account for a change in the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of a change in terms or conditions. No other changes were made to the current guidance on stock compensation. ASU 2017-09 is required to be applied on a prospective basis. The Company adopted ASU 2017-09 effective April 1, 2017. The adoption of this standard did not impact the Company’s consolidated financial statements for the year ended December 31, 2017.
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 Company will adopt this standard using modified retrospective transition method effective January 1, 2018, and does not expect the adoption to have a material impact on the financial statements. The Company has assessed the impact of the guidance across all of our revenue streams by reviewing the Company’s contract portfolio, comparing its historical accounting policies and practices to the requirements of the new guidance, and identifying potential differences from applying the requirements of the new guidance to its contracts. There were two key focus areas during the assessment process. There are certain production parts in our finishing and seating segments that are highly customized with no alternative use and for which the Company has an enforceable right to payment with a reasonable margin under the terms of the contractfor which we will recognize revenue over time as parts are manufactured. Additionally, the Company has concluded that contracts that provide for future product discounts do not represent a material right under the new guidance as the agreed upon price is representative of the stand-alone market price, and thus will not impact revenue recognition upon adoption of the standard. The Company will recognize the cumulative effect of adoption as an adjustment to opening retained earnings at the date of initial application and does not anticipate the cumulative adjustment will be material.
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. 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 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 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 in the process of analyzing the impact of the guidance on our inventory of 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 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 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 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 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. 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 consolidated financial statements.
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements for Hedging Activities” (“ASU 2017-12”). ASU 2017-12 broadens the scope of financial and nonfinancial strategies eligible for hedge accounting and makes certain targeted improvements to simplify the application of hedge accounting guidance. In addition, the standard amends the presentation and disclosure requirements for hedges and is intended to more closely align the hedge accounting guidance with a company’s risk management strategies. The Company adopted ASU 2017-12 effective January 1, 2019. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements or the related disclosures within the accompanying notes.
Accounting standards to be adopted in future fiscal periods In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 requires the use of an "expected loss" model on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. For trade receivables, loans, and held-to-maturity debt securities, entities will be required to estimate lifetime expected credit losses. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction to the carrying value of the asset. The standard is effective for interim and annual reporting periods beginning after December 15, 2018; however,2022, with early adoption permitted. The Company is currently assessing the impact that ASU 2016-13 will have on the consolidated financial statements and related disclosures, as well as the planned timing of adoption. In August 2018, the FASB issued ASU 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans” (“ASU 2018-14”). ASU 2018-14 modifies certain disclosure requirements for pension and other postretirement plans, such as eliminating requirements to disclose the amounts in accumulated other comprehensive loss expected to be recognized as a component of net periodic benefit cost over the next fiscal year and the impact that a 1% increase or decrease in the medical trend rate would have on the accumulated postretirement benefit obligation. The standard is effective for interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted. As the scope of ASU 2018-14 is limited to only financial disclosure requirements, the standard will not have an impact on the Company’s consolidated financial statements. The Company is currently assessing the impact that this standard will have on itsthe employee benefit plan disclosures within the notes to the consolidated financial statements, as well as the planned timing of adoption. | | | 2. | Revision of Previously Reported Financial Information |
DuringIn December 2019, the third quarterFASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and improves application of 2017, theand simplifies other areas of Topic 740 by clarifying and amending existing guidance. The amendment is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company identified an error in the cost of goods sold presented in the consolidated financial statements impacting the year ended December 31, 2016. The error resulted in the understatement of recorded depreciation expense of $0.5 million in the year ended December 31, 2016.
Whileis currently assessing the impact of the error is not material to the previously reported financial statements, the Company has revised its previously issued consolidated financial statements. Amounts throughoutthat these amendments will have on the consolidated financial statements and notes thereto have been adjustedrelated disclosures, as well as the planned timing of adoption.
| | | | | | 2. | Discontinued Operations and Divestitures |
North American Fiber Solutions Sale On August 30, 2019, the Company completed the sale of its North American fiber solutions business to incorporateACR II Motus Integrated Technologies Cooperatief U.A., Motus Pivot MX Holding B.V, Motus Pivot Holding B.V. and Motus Pivot Inc. (collectively, the revised amounts, where applicable. “Motus Group”), pursuant to an agreement dated as of August 11, 2019, by and between 2 subsidiaries of the Company and the Motus Group (the “Fiber Sale Agreement”), for a purchase price of $85.0 million, subject to certain adjustments as set forth in the Fiber Sale Agreement. The purchase price was reduced by $5.0 million due to the outcome of certain commercial activities for which the measurement period ended on October 31, 2019. The purchase price is also subject to a net working capital adjustment as defined by the Sale Agreement, which is currently in dispute between the Company and the Motus Group. The Motus Group has proposed a working capital adjustment that results in a further purchase price reduction of $5.2 million. The Company believes this claim lacks merit and a loss for the amount subject to dispute is not probable as of December 31, 2019.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts)
The impactfollowing table summarizes the cash received from the sale of the required correctionNorth American fiber solutions business before transaction costs, income taxes and certain retained liabilities: | | | | | | Base purchase price | $ | 85,000 | | Less: contingent purchase price not earned | (5,000) | Less: debt and pension liabilities assumed by the Motus Group | (2,206) | Less: income tax allocation due to buyer | (560) | Plus: preliminary working capital surplus | 5 | Plus: excess cash at closing | 1,394 | Adjusted purchase price | 78,633 | Less: cash divested | (3,894) | Less: consideration held in escrow and closing balance sheet adjustments | 282 | Sale proceeds from divestiture, net of cash divested and liabilities assumed by buyer | $ | 75,021 | |
Total divestiture-related costs for the consolidated statements of operations and comprehensive income (loss) were as follows: | | | | | | | | | | | | | | For the Year Ended December 31, 2016 | | As Reported | | Adjustments | | As Revised | Cost of goods sold | $ | 573,917 |
| | $ | 495 |
| | $ | 574,412 |
| Gross profit | 131,602 |
| | (495 | ) | | 131,107 |
| Operating loss | (53,592 | ) | | (495 | ) | | (54,087 | ) | Loss before income taxes | (83,854 | ) | | (495 | ) | | (84,349 | ) | Tax benefit | (6,157 | ) | | (139 | ) | | (6,296 | ) | Net loss | (77,697 | ) | | (356 | ) | | (78,053 | ) | Net loss attributable to Jason Industries | (66,879 | ) | | (356 | ) | | (67,235 | ) | Net loss available to common shareholders of Jason Industries | (70,479 | ) | | (356 | ) | | (70,835 | ) | | | | | | | Net loss per share available to common shareholders of Jason Industries: | Basic and diluted | (3.13 | ) | | (0.02 | ) | | (3.15 | ) | | | | | | | Comprehensive loss | (84,172 | ) | | (356 | ) | | (84,528 | ) | Comprehensive loss attributable to Jason Industries | (72,302 | ) | | (356 | ) | | (72,658 | ) |
The impactsale of the required correctionNorth American fiber solutions business were $5.3 million, of which $0.5 million is non-cash share-based compensation expense. Of the remaining cash transaction expenses, $3.9 million had been paid as of December 31, 2019. Of the divestiture-related costs, $3.0 million were deemed to be direct costs of the consolidated balance sheet wassale and were included as follows:a component of the loss on divestiture within net loss from discontinued operations. The remaining costs related to retention agreements with key personnel and other professional services related costs which are included within selling and administrative expenses and termination benefits with the former general manager of the business which are included within restructuring, both within net loss from discontinued operations.
| | | | | | | | | | | | | | December 31, 2016 | | As Reported | | Adjustments | | As Revised | Property, plant and equipment - net | $ | 178,318 |
| | $ | (495 | ) | | $ | 177,823 |
| Total assets | 584,331 |
| | (495 | ) | | 583,836 |
| Deferred income taxes | 42,747 |
| | (139 | ) | | 42,608 |
| Total liabilities | 587,117 |
| | (139 | ) | | 586,978 |
| Retained deficit | (162,876 | ) | | (356 | ) | | (163,232 | ) | Shareholders' deficit attributable to Jason Industries | (2,681 | ) | | (356 | ) | | (3,037 | ) | Total shareholders' deficit | (2,786 | ) | | (356 | ) | | (3,142 | ) | Total liabilities and shareholders' deficit | 584,331 |
| | (495 | ) | | 583,836 |
|
On December 13, 2019, the Company completed the sale of its Metalex business to Morton Global, LLC and MHIG LLC (collectively, “Morton Global”), pursuant to an agreement dated as of December 13, 2019, by and between 2 subsidiaries of the Company and Morton Global (the “Metalex Sale Agreement”), for a purchase price of $5.0 million, subject to certain adjustments as set forth in the Metalex Sale Agreement. The above revisions did not impact totalfinal purchase price is subject to a net cash provided by (used in) operating, investing or financing activitiesworking capital adjustment to be settled within 90 days of the consolidated statements of cash flows for any previous period. Other thanclosing date, which is currently in dispute between the adjustments to netCompany and Morton Global. The Company believes this claim lacks merit and a loss for the year ended endedamount subject to dispute is not probable as of December 31, 2016, which impacted recorded retained deficit, shareholders' deficit attributable to Jason Industries and total shareholders' deficit, there were no other impacts2019. Pursuant to the consolidated statementsMetalex Sale Agreement, Morton Global is also required to cause the Company to be released from certain real property leases for which the Company is a guarantor within 90 days following the sale closing, which has not yet occurred. The following table summarizes the cash received from the sale of shareholders' equity (deficit). There was no impact to the Company's previously reported “segment” Adjusted EBITDA for the year ended December 31, 2016. Metalex business before transaction costs, income taxes and certain retained liabilities: | | | | | | 3.Base purchase price | Acquisitions$ | 5,000 | | Plus: preliminary working capital surplus | 570 | Plus: cash at closing | 229 | Plus: income tax allocation due from buyer | 139 | Adjusted purchase price | 5,938 | Less: cash divested | (229) | | Less: consideration held in escrow and closing balance sheet adjustments | (934) | | Proceeds from divestiture, net of cash divested | $ | 4,775 | |
DRONCO GmbH (“DRONCO”)
On May 29, 2015,Total divestiture-related costs for the Company acquired allsale of the outstanding sharesMetalex business were $0.8 million, of DRONCO. DRONCO is a European manufacturerwhich $0.1 million was non-cash share-based compensation expense. Of the remaining cash transaction expenses, $0.2 million had been paid as 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.
For the year ended December 31, 2015,2019. Of the Company recognized $0.9divestiture-related costs, $0.5 million were deemed to be direct costs of acquisition-relatedthe sale and were included as a component of the loss on divestiture within net loss from discontinued operations. The remaining costs related to DRONCO and theseother professional services related costs which are included within selling and administrative expenses within net loss from discontinued operations.
The divestitures reduced the Company’s automotive and rail market exposures, increased its liquidity and simplified its portfolio of businesses. In addition, the simplified portfolio will allow the Company to invest in and focus on margin expansion and growth in the industrial and engineered components segments. The Company determined that both the North American fiber solutions and Metalex businesses met the criteria to be classified as discontinued operations. As a result, the historical results of the North American fiber solutions and Metalex
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) businesses are reflected in the Company’s consolidated financial statements as discontinued operations and assets and liabilities of the North American Fiber Solutions and Metalex businesses have been retrospectively reclassified as assets and liabilities held for sale. The following table summarizes the results of the North American fiber solutions business and the Metalex business and other costs associated with the divestitures reclassified as discontinued operations as “Transaction-related expenses”. Forfor the years ended December 31, 20162019, 2018 and 2015, $38.5 million2017. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | North American Fiber Solutions | | | | | | Metalex | | | | | | For the Years Ended | | | | | | For the Years Ended | | | | | | December 31, 2019 | | December 31, 2018 | | December 31, 2017 | | December 31, 2019 | | December 31, 2018 | | December 31, 2017 | Net sales | $ | 90,516 | | | $ | 161,961 | | | $ | 183,900 | | | $ | 42,801 | | | $ | 83,028 | | | | $ | 82,621 | | Cost of goods sold | 77,495 | | | 136,461 | | | 151,596 | | | 44,945 | | | 72,355 | | | | 71,096 | | Gross profit (loss) | 13,021 | | | 25,500 | | | 32,304 | | | (2,144) | | | 10,673 | | | | 11,525 | | Selling and administrative expenses | 10,934 | | | 16,640 | | | 16,717 | | | 7,731 | | | 11,078 | | | | 9,526 | | Impairment charges | — | | | — | | | — | | | 20,597 | | | — | | | | — | | (Gain) loss on disposals of property, plant and equipment - net | (4) | | | 72 | | | 17 | | | 150 | | | 104 | | | | (455) | | Restructuring | 1,002 | | | 2,659 | | | 457 | | | 445 | | | 922 | | | | 1,334 | | Operating income (loss) | 1,089 | | | 6,129 | | | 15,113 | | | (31,067) | | | (1,431) | | | | 1,120 | | Interest expense-net | (47) | | | (94) | | | (76) | | | (78) | | | (66) | | | | (61) | | Loss on divestiture | (3,060) | | | — | | | — | | | (13,783) | | | — | | | | — | | Other income (loss) - net | (10) | | | (40) | | | — | | | (108) | | | (64) | | | | 63 | | (Loss) income before income taxes | (2,028) | | | 5,995 | | | 15,037 | | | (45,036) | | | (1,561) | | | | 1,122 | | Tax provision (benefit) | 1,337 | | | 3,453 | | | 4,927 | | | (10,224) | | | (512) | | | | 303 | | Net (loss) income from discontinued operations | $ | (3,365) | | | $ | 2,542 | | | $ | 10,110 | | | $ | (34,812) | | | $ | (1,049) | | | | $ | 819 | |
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and $24.1 million, respectively,per share amounts) The following table summarizes the major classes of net sales from DRONCOassets and liabilities of the North American fiber solutions business and the Metalex business classified as held for sale as of December 31, 2018. | | | | | | | | | | | | | | | | | | | North American Fiber Solutions | | Metalex | | Total | Assets | | | | | | Current assets | | | | | | Cash and cash equivalents | $ | 11,712 | | | $ | (241) | | | $ | 11,471 | | Accounts receivable - net | 19,234 | | | 5,112 | | | 24,346 | | Inventories - net | 8,120 | | | 6,152 | | | 14,272 | | Other current assets | 6,615 | | | 1,467 | | | 8,082 | | Total current assets held for sale | 45,681 | | | 12,490 | | | 58,171 | | Property, plant and equipment - net | 43,960 | | | 15,743 | | | 59,703 | | Other intangible assets - net | 20,083 | | | 26,746 | | | 46,829 | | Other assets - net | 316 | | | 392 | | | 708 | | Total noncurrent assets held for sale | 64,359 | | | 42,881 | | | 107,240 | | Total assets held for sale | $ | 110,040 | | | $ | 55,371 | | | $ | 165,411 | | | | | | | | Liabilities | | | | | | Current liabilities | | | | | | Current portion of long-term debt | $ | 857 | | | $ | — | | | $ | 857 | | Accounts payable | 12,199 | | | 4,877 | | | 17,076 | | Accrued compensation and employee benefits | 2,087 | | | 411 | | | 2,498 | | Other current liabilities | 3,358 | | | 762 | | | 4,120 | | Total current liabilities held for sale | 18,501 | | | 6,050 | | | 24,551 | | Long-term debt | 1,143 | | | — | | | 1,143 | | Deferred income taxes | 112 | | | — | | | 112 | | Other long-term liabilities | 1,022 | | | 1,090 | | | 2,112 | | Total noncurrent liabilities held for sale | 2,277 | | | 1,090 | | | 3,367 | | Total liabilities held for sale | $ | 20,778 | | | $ | 7,140 | | | $ | 27,918 | |
The current portion of long-term debt and long-term debt which were includedassumed by the Motus Group with the North American fiber solutions business divestiture relates to foreign debt previously held in Mexico. The following table summarizes significant cash flow disclosures for the Company’s consolidated statements of operations.North American fiber solutions business and the Metalex business for the years ended December 31, 2019, 2018 and 2017. 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 consolidated statements of operations. | | | | | | | | | | | | | | | | | | | For the Years Ended | | | | | | December 31, 2019 | | December 31, 2018 | | December 31, 2017 | Depreciation | $ | 9,798 | | | | $ | 14,035 | | | $ | 11,721 | | Amortization of intangible assets | $ | 3,428 | | | | $ | 7,432 | | | $ | 5,627 | | Non-cash operating lease expense | $ | 2,964 | | | | $ | — | | | $ | — | | Non-cash impairment charges | $ | 20,597 | | | | $ | — | | | | $ | — | | Share-based compensation | $ | 986 | | | | $ | 414 | | | $ | 140 | | Payments for property, plant and equipment | $ | (2,190) | | | | $ | (5,346) | | | $ | (7,512) | | Non-cash impact of business divestitures and dissolutions | $ | 13,716 | | | | $ | — | | | | $ | — | | Debt and pension liability assumed by buyer with divestiture | $ | 2,206 | | | | $ | — | | | | $ | — | |
| | | 4. | Acoustics Europe Divestiture |
On August 30, 2017, the Company completed the divestiture of its European operations within the acousticsfiber solutions segment located in Germany (“Acoustics Europe”) for a net purchase price of $8.1 million, which included cash of $0.2 million, long-term debt assumed by the buyer of $3.0 million and other purchase price adjustments. The divestiture resulted in an 8.7$8.7 million pre-tax loss.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) Acoustics Europe had net sales of $32.9 million for the year ended December 31, 2016 and $22.9 million for the eight months ended August 30, 2017, the date of closing. The divestiture reducedCompany determined at the Company’s non-core revenue withintime of the European automotive market and has allowed it to focus on margin expansion and growth in the core North American automotive market. The Company determinedsale that the divestiture did not represent a strategic shift that willwould have a major effect on the Company’s operations and financial results and as such, has continued to report the results of Acoustics Europe within continuing operations in the consolidated statements of operations. On April 1, 2019, the Company acquired all of the outstanding shares of Schaffner Manufacturing Company, Inc. (“Schaffner”). Schaffner is a North American manufacturer of high-quality polishing and finishing products. These products are now being manufactured and distributed by the industrial segment. Through the acquisition of Schaffner, the Company expanded its polishing product line offerings within North America. Upon finalization of working capital adjustments and other settlement items, the purchase price was $11.0 million, net of $0.2 million of cash acquired, all of which had been paid as of December 31, 2019. The related purchase agreement includes customary representations, warranties and covenants between the named parties. The acquisition was accounted for as a business combination. The operating results and cash flows of Schaffner are included in the Company’s consolidated financial statements from April 1, 2019, the date of the acquisition. The Company has recorded the allocation of the purchase price for tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the April 1, 2019 acquisition date. The purchase price allocation is as follows: | | | | | | | Purchase Price Allocation | | | | 5.Accounts receivable | $ | 2,415 | | Inventories | 3,334 | | Other current assets | 18 | | Property, plant and equipment | 2,299 | | Right-of-use operating lease assets | 222 | | Goodwill | 2,078 | | Other intangible assets | 2,670 | | | | Current liabilities | (1,911) | | | | Other long-term liabilities | (125) | | Total purchase price | $ | 11,000 | |
The purchase price allocation resulted in goodwill of $2.1 million in the industrial segment, all of which is deductible for tax purposes. Goodwill generated from Schaffner is primarily attributable to expected synergies from leveraging the industrial segment’s global distribution and sales network and cross-selling of Schaffner’s product portfolio to the industrial segment’s customer base. The allocation of the purchase price is based on the valuations performed to determine the fair value of the net assets as of the acquisition date. The amounts allocated to goodwill and intangible assets reflect the final valuations. The values allocated to other intangible assets - net and the weighted average useful lives are as follows: | | | | | | | | | | | | | Gross Carrying Amount | | Weighted Average Useful Life (years) | Customer relationships | $ | 1,750 | | | 10 | Trademarks | 400 | | | 1 | Non-compete agreements | 520 | | | 5 | | $ | 2,670 | | | |
The Company recognized $0.4 million of acquisition-related costs that were expensed in the year ended December 31, 2019. These costs are included as selling and administrative expenses in the consolidated statements of operations. During the year ended December 31, 2019, $14.4 million of net sales from Schaffner were included in the Company’s consolidated statements of operations. Pro forma historical results of operations related to the acquisition of Schaffner have not been presented as they are not material to the Company’s consolidated statements of operations.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) Adoption of ASU 2014-09, “Revenue From Contracts With Customers” On January 1, 2018, the Company adopted ASU 2014-09, “Revenue From Contracts with Customers” and all related amendments using the modified retrospective method. Subsequent to the date of adoption, the Company recognizes revenue in accordance with ASC 606, “Revenue From Contracts With Customers.” Prior to January 1, 2018, the Company recognized revenue in accordance with ASC 605, “Revenue Recognition” and prior period results continue to be reported under the accounting standards in effect for those periods. The cumulative impact of adopting the new standard on the consolidated financial statements was recorded as a decrease to the opening retained deficit of $0.1 million as of January 1, 2018. Refer to Note 1, “Summary of Significant Accounting Policies” for a description of the Company’s revenue recognition accounting policy. Revenue Disaggregation The industrial segment operates principally as a provider of industrial brushes, polishing buffs and compounds, abrasives and roller technology products that are used in a broad range of industrial and infrastructure applications. The Company typically sells products within this business under purchase orders through both direct to customer and distribution sales channels. The Company generally transfers control and recognizes net sales when the product is shipped to the customer. Within the industrial segment, there are certain custom products for customers for which the Company recognizes net sales over time. For these sales, the Company has an enforceable right to payment with a reasonable margin under the terms of the agreement. Revenue from products transferred to customers over time accounted for approximately 1% of industrial net sales for the years ended December 31, 2019 and 2018. The engineered components segment operates principally as a supplier to Original Equipment Manufacturers (“OEM”) within the lawn and turf care, agriculture, construction, material handling, power sports, rail and general industrial markets. The Company sells products within this business under both purchase orders and contracts for custom products primarily through the direct to customer sales channel. The Company transfers control and recognizes net sales at a point in time upon shipment to the customer for these contracts. The Company disaggregates net sales by geography based on the country of origin of the final sale with the external customer. In certain cases the products may be manufactured in other countries at facilities within the Company’s global network. The following table summarizes net sales disaggregated by geography and reportable segment: | | | | | | | | | | | | | | | | | | | | | For the Year Ended December 31, 2019 | | | | | | | | Industrial | | Engineered Components | | | | Total | United States | $ | 77,529 | | | $ | 136,072 | | | | | $ | 213,601 | | Germany | 76,273 | | | — | | | | | 76,273 | | Rest of Europe | 34,535 | | | — | | | | | 34,535 | | Mexico | 9,074 | | | 11 | | | | | 9,085 | | Other | 4,106 | | | 297 | | | | | 4,403 | | Total | $ | 201,517 | | | $ | 136,380 | | | | | $ | 337,897 | | | | | | | | | | | For the Year Ended December 31, 2018 | | | | | | | | Industrial | | Engineered Components | | | | Total | United States | $ | 68,384 | | | $ | 154,223 | | | | | $ | 222,607 | | Germany | 89,247 | | | — | | | | | 89,247 | | Rest of Europe | 37,317 | | | 6,099 | | | | | 43,416 | | Mexico | 8,762 | | | — | | | | | 8,762 | | Other | 3,927 | | | — | | | | | 3,927 | | Total | $ | 207,637 | | | $ | 160,322 | | | | | $ | 367,959 | |
The Company disaggregates net sales by sales channel as either direct or distribution net sales. Direct net sales are defined as net sales ordered by and sold directly to the end customer without the involvement of a third party. For our OEM customers, direct sales include certain spare parts and accessories which are intended for resale to end consumers. Distribution
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) net sales are defined as net sales ordered by and sold to a third party that intends to resell the products to the end consumer. The following table summarizes net sales disaggregated by sales channel and reportable segment: | | | | | | | | | | | | | | | | | | | | | For the Year Ended December 31, 2019 | | | | | | | | Industrial | | Engineered Components | | | | Total | Direct | $ | 108,918 | | | $ | 131,802 | | | | | $ | 240,720 | | Distribution | 92,599 | | | 4,578 | | | | | 97,177 | | Total | $ | 201,517 | | | $ | 136,380 | | | | | $ | 337,897 | | | | | | | | | | | For the Year Ended December 31, 2018 | | | | | | | | Industrial | | Engineered Components | | | | Total | Direct | $ | 112,047 | | | $ | 156,311 | | | | | $ | 268,358 | | Distribution | 95,590 | | | 4,011 | | | | | 99,601 | | Total | $ | 207,637 | | | $ | 160,322 | | | | | $ | 367,959 | |
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 the years ended December 31, 2017, 2018 and the six months ended June 28, 2019 and were considered substantially complete as of June 28, 2019. As the 2016 and 2017 and are expectedprogram was deemed to be completed by the endcomplete for identification of 2018. For the year endednew actions as of December 31, 2015,2018, all costs incurred during 2019 under the Company incurred certainprogram related to completion of actions previously identified prior to closure of the program.
In 2019, restructuring costs relatedprimarily include activities which align with our strategic initiatives of continued footprint rationalization and margin expansion. Such activities are typically identified by management as part of the annual strategic planning process, with priority assigned to those that maximize the financial return for the Company. In the first quarter of 2019, additional restructuring activities resulting in one-time employee termination benefits were identified upon a review of the Company’s organizational structure resulting in certain strategic leadership changes as well as in response to its worldwide manufacturing footprint. Theseend market decline in the industrial segment. Additionally, with the acquisition of Schaffner Manufacturing Company, Inc. on April 1, 2019, further footprint rationalization activities were identified during the due diligence process which were executed upon throughout the remainder of 2019. The Company anticipates continuing to identify future actions resulted in charges relating to employeeincluding entering into severance and other related charges, such astermination agreements with employees and footprint rationalization activities, including exit and relocation costs for the consolidation and closure of plant facilities, employee relocation and lease termination costs. These costs related to decisions that precededfacilities. As these are not part of the 2016 program, such costs are presented separately below in “Other Restructuring Actions.” Restructuring costs are presented separately on the consolidated statements of operations.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and are therefore not considered to be part of such plan. Forper share amounts) 2016 Program The following table presents the restructuring costs recognized by the Company under the 2016 program by reportable segment. The other costs incurred under the 2016 program for the year ended December 31, 2015, the Company incurred $1.6 million in severance costs, $1.2 million in lease termination costs and $1.0 million in other costs. The Company did not incur any material2019 primarily include charges related to 2015 restructuring activitiesthe closure of a U.K. plant within the engineered components segment. The other costs incurred under the 2016 program for the year ended December 31, 2018 primarily include charges related to the closure of the U.K. plant within the engineered components segment, partially offset by a reduction in expense as a result of the statute of limitations expiring on unasserted employment matter claims in Brazil within the industrial segment. The other costs incurred under the 2016 program for the year ended December 31, 2017 primarily include charges related to the exit costs for the wind down of the industrial segment’s facility in Brazil and the consolidation of 2 U.S. plants within the industrial segment. The 2016 Program is considered complete and no additional costs are expected for such restructuring activities.to be incurred as part of the program. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2016 Program | | Industrial | | Engineered Components | | | | Corporate | | Total | Restructuring charges - year ended December 31, 2019: | | | | | | | | | | | Severance costs | | $ | (35) | | | $ | 31 | | | | | $ | 164 | | | $ | 160 | | Lease termination costs (1) | | — | | | — | | | | | — | | | — | | Other costs | | 40 | | | 1,356 | | | | | — | | | 1,396 | | Total | | $ | 5 | | | $ | 1,387 | | | | | $ | 164 | | | $ | 1,556 | | | | | | | | | | | | | Restructuring charges - year ended December 31, 2018: | | | | | | | | | | | Severance costs | | $ | 314 | | | $ | 235 | | | | | $ | — | | | $ | 549 | | Lease termination costs (1) | | (4) | | | — | | | | | — | | | (4) | | Other costs | | 165 | | | 167 | | | | | — | | | 332 | | Total | | $ | 475 | | | $ | 402 | | | | | $ | — | | | $ | 877 | | | | | | | | | | | | | Restructuring charges - year ended December 31, 2017: | | | | | | | | | | | Severance costs | | $ | 1,178 | | | $ | (17) | | | | | $ | (9) | | | $ | 1,152 | | Lease termination costs (1) | | 88 | | | — | | | | | — | | | 88 | | Other costs | | 1,235 | | | — | | | | | — | | | 1,235 | | Total | | $ | 2,501 | | | $ | (17) | | | | | $ | (9) | | | $ | 2,475 | |
The following table presents the cumulative 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 the year ended December 31, 2017. The other costs incurred under the 2016 program for the year ended December 31, 2017 primarily includes charges related to the consolidation of two U.S. plants within the components segment, exit costs related to the wind down of the finishing segment’s facilitycompletion in Brazil and the consolidation of two U.S. plants within the finishing segment and for the year ended December 31, 2016 primarily includes charges related to the closure of a facility within the components segment and a loss contingency for certain employment matters claims associated with the wind down of the finishing segment’s Brazil facility. Based on the announced restructuring actions to date, the Company expects to incur a total of approximately $14.1 million under the 2016 program. Restructuring costs are presented separately on the consolidated statements of operations.June 2019. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Industrial | | Engineered Components | | | | Corporate | | Total | Cumulative restructuring charges - 2016 Program: | | | | | | | | | | | Severance costs | | $ | 4,744 | | | $ | 325 | | | | | $ | 752 | | | $ | 5,821 | | Lease termination costs (1) | | 428 | | | — | | | | | — | | | 428 | | Other costs | | 2,443 | | | 1,523 | | | | | — | | | 3,966 | | Total | | $ | 7,615 | | | $ | 1,848 | | | | | $ | 752 | | | $ | 10,215 | |
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | 2016 Program | | Finishing | | Components | | Seating | | Acoustics | | Corporate | | Total | Restructuring charges - year ended December 31, 2017: | | | | | | | | | | | | | Severance costs | | $ | 1,178 |
| | $ | 58 |
| | $ | (17 | ) | | $ | (38 | ) | | $ | (9 | ) | | $ | 1,172 |
| Lease termination costs | | 88 |
| | — |
| | — |
| | 172 |
| | — |
| | 260 |
| Other costs | | 1,235 |
| | 1,276 |
| | — |
| | 323 |
| | — |
| | 2,834 |
| Total | | $ | 2,501 |
| | $ | 1,334 |
| | $ | (17 | ) | | $ | 457 |
| | $ | (9 | ) | | $ | 4,266 |
| | | | | | | | | | | | | | Restructuring charges - year ended December 31, 2016: | | | | | | | | | | | | | Severance costs | | $ | 3,287 |
| | $ | 378 |
| | $ | 76 |
| | $ | 977 |
| | $ | 597 |
| | $ | 5,315 |
| Lease termination costs | | 344 |
| | — |
| | — |
| | — |
| | — |
| | 344 |
| Other costs | | 1,003 |
| | 514 |
| | — |
| | 56 |
| | — |
| | 1,573 |
| Total | | $ | 4,634 |
| | $ | 892 |
| | $ | 76 |
| | $ | 1,033 |
| | $ | 597 |
| | $ | 7,232 |
| | | | | | | | | | | | | | Cumulative restructuring charges - year ended December 31, 2017: | | | | | | | | | | | | | Severance costs | | $ | 4,465 |
| | $ | 436 |
| | $ | 59 |
| | $ | 939 |
| | $ | 588 |
| | $ | 6,487 |
| Lease termination costs | | 432 |
| | — |
| | — |
| | 172 |
| | — |
| | 604 |
| Other costs | | 2,238 |
| | 1,790 |
| | — |
| | 379 |
| | — |
| | 4,407 |
| Total | | $ | 7,135 |
| | $ | 2,226 |
| | $ | 59 |
| | $ | 1,490 |
| | $ | 588 |
| | $ | 11,498 |
|
In addition to the restructuring costs described above, the Company incurred for the year ended December 31, 2016, approximately $1.4 million of additional charges related to the wind down of the finishing segment’s Brazil location, which included $0.7 million of accelerated depreciation of property, plant and equipment - net and $0.7 million of charges to reduce inventory balances, respectively, to decrease such balances to their estimated net realizable values. These costs were presented within cost of goods sold within the consolidated statements of operations.
The following table represents the restructuring liabilities including bothfor the 2016 programprogram: | | | | | | | | | | | | | | | | | | | | | | | | | Severance costs | | Lease termination costs (1) | | Other costs | | Total | Balance - December 31, 2017 | $ | 901 | | | $ | 76 | | | $ | 763 | | | $ | 1,740 | | Current period restructuring charges | 549 | | | (4) | | | 332 | | | 877 | | Cash payments | (954) | | | (70) | | | (1,031) | | | (2,055) | | Foreign currency impact | (39) | | | (2) | | | (40) | | | (81) | | Balance - December 31, 2018 | $ | 457 | | | $ | — | | | $ | 24 | | | $ | 481 | | Current period restructuring charges | 160 | | | — | | | 1,396 | | | 1,556 | | Cash payments | (615) | | | — | | | (1,416) | | | (2,031) | | Foreign currency impact | (2) | | | — | | | (4) | | | (6) | | Balance - December 31, 2019 | $ | — | | | $ | — | | | $ | — | | | $ | — | |
(1) Commencing on January 1, 2019, the Company recognizes lease termination costs in accordance with ASC 842 which addresses termination costs related to both finance 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 | 1,172 |
| | 260 |
| | 2,834 |
| | 4,266 |
| Cash payments | (1,589 | ) | | (528 | ) | | (2,830 | ) | | (4,947 | ) | Foreign currency impact | 43 |
| | 11 |
| | (10 | ) | | 44 |
| Balance - December 31, 2017 | $ | 907 |
| | $ | 76 |
| | $ | 1,079 |
| | $ | 2,062 |
|
| | | | | | | | | | | | | | | | | | Severance costs | | Lease termination costs | | Other costs | | Total | Balance - December 31, 2015 | $ | 594 |
| | $ | 1,038 |
| | $ | — |
| | $ | 1,632 |
| Current period restructuring charges | 5,315 |
| | 344 |
| | 1,573 |
| | 7,232 |
| Cash payments | (4,621 | ) | | (1,035 | ) | | (514 | ) | | (6,170 | ) | Foreign currency impact | (7 | ) | | (14 | ) | | 26 |
| | 5 |
| Balance - December 31, 2016 | $ | 1,281 |
| | $ | 333 |
| | $ | 1,085 |
| | $ | 2,699 |
|
operating lease obligations. Prior to January 1, 2019, the Company recognized such costs in accordance with ASC 420, “Exit and Disposal Cost Obligations” related to operating leases. Prior period results continue to be reported under the accounting standards in effect for those periods.At December 31, 2017 and December 31, 2016,2018, the restructuring liabilities related to the 2016 program severance costs were classified as accrued compensation and employee benefits and the other costs were classified as other current liabilities on the consolidated balance sheets. Other Restructuring Actions The following table presents the restructuring costs recognized by the Company for other restructuring actions by reportable segment. Based on the actions identified to date, the Company expects to incur other restructuring costs of approximately $1.4 million in the future. During the year ended December 31, 2019, other costs included costs to consolidate a Schaffner facility in the industrial segment and costs to vacate a facility in the engineered components segment. | | | | | | | | | | | | | | | | | | | | | | | | | | | Other Restructuring Actions | | Industrial | | Engineered Components | | Corporate | | Total | Restructuring charges - year ended December 31, 2019: | | | | | | | | | | Severance costs | | $ | 1,550 | | | $ | 31 | | | $ | (2) | | | $ | 1,579 | | Other costs | | 446 | | | 373 | | | — | | | 819 | | Total | | $ | 1,996 | | | $ | 404 | | | $ | (2) | | | $ | 2,398 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table represents the restructuring liabilities for other restructuring actions: | | | | | | | | | | | | | | | | | | | | | | | Severance costs | | Other costs | | Total | Balance - December 31, 2018 | | | $ | — | | | $ | — | | | $ | — | | Current period restructuring charges | | | 1,579 | | | 819 | | | 2,398 | | Cash payments | | | (858) | | | (775) | | | (1,633) | | Foreign currency translation adjustments | | | (4) | | | — | | | (4) | | Balance - December 31, 2019 | | | $ | 717 | | | $ | 44 | | | $ | 761 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 20172019, the restructuring liabilities related to other restructuring severance costs were classified as accrued compensation and December 31, 2016,employee benefits and the accrual for lease termination costs primarily relates to restructuring costs associated with a 2016 lease termination in the finishing segment. At December 31, 2017 and December 31, 2016, the accrual for other costs primarily relates to a loss contingency for certain employment matter claims withinwere classified as other current liabilities on the finishing segment due to the closure of a facility in Brazil.consolidated balance sheets.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts)
Inventories at December 31, 20172019 and December 31, 20162018 consisted of the following: | | | | | | | | | | | | | December 31, 2019 | | December 31, 2018 | Raw material | $ | 23,533 | | | $ | 24,315 | | Work-in-process | 1,864 | | | 1,918 | | Finished goods | 24,546 | | | 23,242 | | Total inventories | $ | 49,943 | | | $ | 49,475 | |
| | | | | | | | | | December 31, 2017 | | December 31, 2016 | Raw material | $ | 35,925 |
| | $ | 37,222 |
| Work-in-process | 4,375 |
| | 4,175 |
| Finished goods | 30,519 |
| | 32,204 |
| Total inventories | $ | 70,819 |
| | $ | 73,601 |
|
| | | | | | 7. | Property, Plant and Equipment |
Property, plant and equipment at December 31, 20172019 and December 31, 20162018 consisted of the following: | | | | | | | | | | | | | December 31, 2019 | | December 31, 2018 | Right-of-use finance lease assets (1) | $ | 506 | | | $ | — | | Land and improvements | 5,407 | | | 5,457 | | Buildings and improvements | 27,600 | | | 26,254 | | Machinery and equipment | 108,474 | | | 101,492 | | Construction-in-progress | 4,214 | | | 3,802 | | | 146,201 | | | 137,005 | | Less: Accumulated depreciation | (75,925) | | | (61,839) | | Property, plant and equipment, net | $ | 70,276 | | | $ | 75,166 | |
(1) Commencing on January 1, 2019, the Company recognizes right-of-use finance lease assets in accordance with ASC 842. Prior to January 1, 2019, the Company recognized such assets in accordance with ASC 840. As such, the assets were recorded in buildings and improvements and machinery and equipment based on the asset’s classification. Prior period results continue to be reported under the accounting standards in effect for those periods. For the year ended December 31, 2018, the Company recorded a $1.3 million gain on disposal of property, plant and equipment - net for the sale of a building related to the closure of the engineered components segment’s U.K. facility. In connection with the sale, the Company collected $0.7 million of value-added tax which was remitted to the relevant tax authorities in the first quarter of 2019 and is included within cash flows used in financing activities within the consolidated statement of cash flows. Property, plant and equipment, net are evaluated for potential impairment whenever events or circumstances indicate that the carrying value may not be recoverable. There were no impairment charges recorded in continuing operations related to property, plant and equipment, net during the years ended December 31, 2019, 2018 and 2017. Depreciation of property, plant and equipment, net from continuing operations was $14.8 million, $14.3 million, and $14.5 million for the years ended December 31, 2019, 2018 and 2017, respectively. | | | | | | | | | | December 31, 2017 | | December 31, 2016 | Land and improvements | $ | 6,556 |
| | $ | 9,631 |
| Buildings and improvements | 33,161 |
| | 41,928 |
| Machinery and equipment | 191,903 |
| | 191,770 |
| Construction-in-progress | 10,710 |
| | 5,473 |
| | 242,330 |
| | 248,802 |
| Less: Accumulated depreciation | (88,134 | ) | | (70,979 | ) | Property, plant and equipment, net | $ | 154,196 |
| | $ | 177,823 |
|
| | | | | | 8. | Goodwill and Other Intangible Assets |
Goodwill Changes in the carrying amount of goodwill, by reportingall of which is within the Company’s industrial segment, waswere as follows: | | | | | | Balance as of December 31, 2017 | $ | 45,142 | | | | | | Foreign currency impact | (1,077) | | Balance as of December 31, 2018 | $ | 44,065 | | Acquisitions (1) | 2,078 | | | | Foreign currency impact | (459) | | Balance as of December 31, 2019 | $ | 45,684 | |
(1) Refer to Note 3, “Acquisition” for further discussion on the acquisition completed in the second quarter of 2019.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) | | | | | | | | | | | | | | | | | | | | | | Finishing | | Components | | Seating | | Acoustics | | Total | Balance as of December 31, 2015 | $ | 43,229 |
| | $ | 33,183 |
| | $ | — |
| | $ | 29,758 |
| | $ | 106,170 |
| Goodwill impairment | (253 | ) | | (33,183 | ) | | — |
| | (29,849 | ) | | (63,285 | ) | Foreign currency impact | (819 | ) | | — |
| | — |
| | 91 |
| | (728 | ) | Balance as of December 31, 2016 | $ | 42,157 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 42,157 |
| Foreign currency impact | 2,985 |
| | — |
| | — |
| | — |
| | 2,985 |
| Balance as of December 31, 2017 | $ | 45,142 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 45,142 |
|
At December 31, 20172019 and December 31, 2016,2018, accumulated goodwill impairment losses from continuing operations were $122.1$59.1 million, primarily due to $58.8 million related to the seatingMilsco reporting unit, $29.8 million related to the acoustics reporting unit, and $33.2 million related to the components reporting unit. Fiscal 2019, 2018 and 2017 Impairment AssessmentAssessments The Company performed its annual goodwill impairment testtests in the fourth quarterquarters of 2019, 2018 and 2017 and determined that the fair value of the finishingindustrial reporting unit, the only reporting unit with a recorded goodwill balance, exceeded the carrying value of the reporting unit by over 15%. in each year. In connection with the goodwill impairment test, the Company engaged a third-party valuation firm to assist management with determining the fair value estimate for the reporting unit. The fair value of the reporting unit is determined using a weighted average of an income approach primarily based on the Company’s three year strategic plan, and a market approach based on implied valuation multiples of public company peer groups for the reporting unit. Both approaches areunit and a market approach based on recent comparable transactions (when available). Each approach was generally deemed equally relevant in determining reporting unit enterprise value, and as a result, weightings of 5035 percent, 30 percent and 35 percent, respectively, were used for each. This fair value determination was categorized as Level 3 in the fair value hierarchy. In connection with obtaining an independent third-party valuation, management provided certain information and assumptions that were utilized in the fair value calculation. Significant assumptions used in determining reporting unit fair value include forecasted cash flows, revenue growth rates, adjusted EBITDA margins, weighted average cost of capital (discount rate), assumed tax treatment of a future sale of the reporting unit, terminal growth rates, capital expenditures, sales and EBITDA multiples used in the market approach, and the weighting of the income and market approaches. A change in any of these assumptions, individually or in the aggregate, or future financial performance that is below management expectations
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
may result in the carrying value of this reporting unit exceeding its fair value, and goodwill and amortizable intangible assets could be impaired. Fiscal 2016 and 2015 Impairment Assessments
In performing the first step of the annual goodwill impairment test in the fourth quarter of 2016, the Company determined that the estimated fair values of the acoustics and components reporting units were lower than the carrying values of the respective reporting units, requiring further analysis under the second step of the impairment test. The decline in the estimated fair value of the acoustics reporting unit was primarily due to lower long-term revenue growth expectations resulting from this strategic review of capital allocation and investment priorities as compared to the Company’s prior growth plan for the business. The fair value of the acoustics reporting unit was also negatively impacted by a projected cyclical decline in the North American automotive industry end-market. The decline in the estimated fair value of the components reporting unit was primarily due to lower long-term revenue expectations resulting from the annual budgeting and strategic planning process as compared to the Company’s prior plan for the business, primarily due to projected longer-term weakness in the rail end-market.
In performing the second step of the impairment testing, the Company performed a theoretical purchase price allocation for the acoustics and components reporting units to determine the implied fair values of goodwill which were compared to the recorded amounts of goodwill for each reporting unit. Upon completion of the second step of the goodwill impairment test, the Company recorded non-cash goodwill impairment charges of $63.0 million, representing full goodwill impairments of $29.8 million and $33.2 million in the acoustics and components reporting units, respectively. The goodwill impairment charges are recorded as impairment charges in the consolidated statements of operations
In the fourth quarter of 2015, the Company determined that the estimated fair value of the seating reporting unit was lower than the carrying value of the reporting unit, requiring further analysis under the second step of the impairment test. The decline in the estimated fair value of the seating reporting unit was primarily due to lower long-term growth expectations resulting from projected long-term weakness in agriculture and heavy industry end-markets, and a strategic shift in capital allocation and investment priorities.
The Company performed a theoretical purchase price allocation for the seating reporting unit to determine the implied fair value of goodwill which was compared to the recorded amount of goodwill. Upon completion of the second step of the goodwill impairment test the Company recorded a non-cash goodwill impairment charge of $58.8 million, representing a complete impairment of goodwill in the seating reporting unit. The goodwill impairment charge is recorded as impairment charges in the consolidated statements of operations.
In connection with the goodwill impairment tests in 2016 and 2015, the Company engaged a third-party valuation firm to assist management with determining fair value estimates for the reporting units in the goodwill impairment test. In 2016 and 2015, the third-party valuation firm was also involved in assisting management in estimating fair values of tangible and intangible assets used in the second step of the goodwill impairment test. In connection with obtaining an independent third-party valuation, management provided certain information and assumptions that were utilized in the fair value calculation. Significant assumptions used in determining reporting unit fair value include forecasted cash flows, revenue growth rates, adjusted EBITDA margins, weighted average cost of capital (discount rate), assumed tax treatment of a future sale of the reporting unit, terminal growth rates, capital expenditures, sales and EBITDA multiples used in the market approach, and the weighting of the income and market approaches. The fair value of the reporting units was determined using a weighted average of an income approach primarily based on the Company’s three year strategic plan and a market approach based on implied valuation multiples of public company peer groups for each reporting unit. Both approaches were deemed equally relevant in determining reporting unit enterprise value, and as a result, weightings of 50 percent were used for each. This fair value determination was categorized as Level 3 in the fair value hierarchy.
Other Intangible Assets The Company’s other amortizable intangible assets - net consisted of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2017 | | December 31, 2016 | | Gross Carrying Amount | | Accumulated Amortization | | Net | | Gross Carrying Amount | | Accumulated Amortization | | Net | Patents | $ | 1,985 |
| | $ | (671 | ) | | $ | 1,314 |
| | $ | 1,880 |
| | $ | (366 | ) | | $ | 1,514 |
| Customer relationships | 110,210 |
| | (24,775 | ) | | 85,435 |
| | 110,090 |
| | (16,630 | ) | | 93,460 |
| Trademarks and other intangibles | 57,373 |
| | (12,623 | ) | | 44,750 |
| | 57,744 |
| | (8,460 | ) | | 49,284 |
| Total amortized other intangible assets | $ | 169,568 |
| | $ | (38,069 | ) | | $ | 131,499 |
| | $ | 169,714 |
| | $ | (25,456 | ) | | $ | 144,258 |
|
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2019 | | | | | | December 31, 2018 | | | | | | Gross Carrying Amount | | Accumulated Amortization | | Net | | Gross Carrying Amount | | Accumulated Amortization | | Net | Patents | $ | 2,075 | | | $ | (1,368) | | | $ | 707 | | | $ | 2,038 | | | $ | (1,018) | | | $ | 1,020 | | Customer relationships | 62,490 | | | (20,205) | | | 42,285 | | | 61,075 | | | (15,922) | | | 45,153 | | Trademarks and other intangibles | 32,833 | | | (11,235) | | | 21,598 | | | 32,124 | | | (8,597) | | | 23,527 | | Total amortized other intangible assets | $ | 97,398 | | | $ | (32,808) | | | $ | 64,590 | | | $ | 95,237 | | | $ | (25,537) | | | $ | 69,700 | |
Other amortizable intangible assets are evaluated for potential impairment whenever events or circumstances indicate that the carrying value may not be recoverable. There were no0 impairment charges recorded in continuing operations related to tangible or intangible assets during 2019, 2018 and 2017. In connection with the evaluation of the goodwill impairment in the acoustics and components reporting units in 2016, the Company assessed tangible and intangible assets for impairment prior to performing the second step of the goodwill impairment test. As a result of this analysis, it was determined that there were no impairment charges to record related to these assets.
In connection with the evaluation of the goodwill impairment in the seating reporting unit in 2015, the Company assessed tangible and intangible assets for impairment prior to performing the second step of the goodwill impairment test. As a result of this analysis, non-cash impairment charges of $27.7 million, $6.8 million, and $0.8 million were recorded for customer relationship, trademarks, and patents intangible assets, respectively, in the seating reporting unit during the fourth quarter of 2015. These intangible asset impairment charges are recorded as impairment charges in the consolidated statements of operations.
The approximate weighted average remaining useful lives of the Company’s intangible assets at December 31, 20172019 are as follows: patents - 3.15.9 years; customer relationships - 10.79.2 years; and trademarks and other intangibles - 11.68.8 years. Amortization of intangible assets approximated $12.7from continuing operations was $7.4 million, $12.96.8 million, and $14.17.0 million for the years ended December 31, 2017, 20162019, 2018 and 20152017, respectively. Excluding the impact of any future acquisitions, theThe Company anticipates the annual amortization for each of the next five years and in aggregate thereafter to be the following: | | | | | | 2020 | $ | 7,765 | | 2021 | 7,523 | | 2022 | 7,350 | | 2023 | 7,341 | | 2024 | 6,779 | | Thereafter | 27,832 | | | $ | 64,590 | |
| | | | | 2018 | $ | 14,360 |
| 2019 | 11,800 |
| 2020 | 11,800 |
| 2021 | 11,631 |
| 2022 | 11,458 |
| Thereafter | 70,450 |
| | $ | 131,499 |
|
84 | | | 9. | Debt and Hedging Instruments |
The Company’s debt consisted of the following: | | | | | | | | | | December 31, 2017 | | December 31, 2016 | First Lien Term Loans | $ | 298,018 |
| | $ | 303,025 |
| Second Lien Term Loans | 90,007 |
| | 110,000 |
| Debt discount on Term Loans | (3,602 | ) | | (5,002 | ) | Deferred issuance costs on Term Loans | (5,586 | ) | | (7,503 | ) | Foreign debt | 21,795 |
| | 23,303 |
| Capital lease obligations | 840 |
| | 1,301 |
| Total debt | 401,472 |
| | 425,124 |
| Less: Current portion | (9,704 | ) | | (8,179 | ) | Total long-term debt | $ | 391,768 |
| | $ | 416,945 |
|
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) | | | | | | 9. | Debt and Hedging Instruments |
The Company’s debt consisted of the following: | | | | | | | | | | | | | December 31, 2019 | | December 31, 2018 | First Lien Term Loans | $ | 284,440 | | | $ | 292,540 | | Second Lien Term Loans | 89,887 | | | 89,887 | | Foreign debt | 13,929 | | | 15,469 | | Finance lease obligations and other debt (1) | 755 | | | 613 | | Total gross debt | 389,011 | | | 398,509 | | Debt discount on Term Loans | (1,739) | | | (2,669) | | Deferred issuance costs on Term Loans | (2,522) | | | (4,052) | | Total debt | 384,750 | | | 391,788 | | Less: Current portion | (5,800) | | | (5,687) | | Total long-term debt | $ | 378,950 | | | $ | 386,101 | |
(1) Subsequent to January 1, 2019, the Company recognizes and measures new or modified leases in accordance with ASC 842. Prior to January 1, 2019, the Company recognized and measured leases in accordance with ASC 840, “Leases” and prior period results continue to be reported under the accounting standards in effect for those periods. See Note 10, “Leases” for further information. Future annual maturities of long-term debt outstanding at December 31, 20172019 are as follows: | | 2018 | | $ | 9,704 |
| | 2019 | | 6,950 |
| | 2020 | | 7,006 |
| 2020 | | $ | 5,800 | | 2021 | | 289,378 |
| 2021 | | 284,051 | | 2022 | | 92,708 |
| 2022 | | 92,175 | | 2023 | | 2023 | | 2,270 | | 2024 | | 2024 | | 4,013 | | Thereafter | | 4,914 |
| Thereafter | | 702 | | Total future annual maturities of long term debt outstanding | | 410,660 |
| Total future annual maturities of long term debt outstanding | | 389,011 | | Less: Debt discounts on Term Loans | | (3,602 | ) | Less: Debt discounts on Term Loans | | (1,739) | | Less: Deferred issuance costs on Term Loans | | (5,586 | ) | Less: Deferred issuance costs on Term Loans | | (2,522) | | Total debt | | $ | 401,472 |
| Total debt | | $ | 384,750 | |
Senior Secured Credit Facilities On June 30, 2014, all indebtedness under Jason’s formerAs of December 31, 2019, the Company’s U.S. credit facility was repaid in full and Jason Incorporated (“Jason Inc.”), an indirect majority-owned subsidiary of the Company, as the borrower, replaced Jason’s former credit agreement with a new $460.0 million U.S. credit facility as subsequently amendedfacilities (the “Senior Secured Credit Facilities”). The new facility included (i) term loans in an aggregate principal amount of $310.0 million (“First Lien Term Loans”) maturing inJune 30, 2021, of which $298.0$284.4 million is outstanding, as of December 31, 2017, (ii) term loans in an aggregate principal amount of $110.0 million (“Second Lien Term Loans”) maturing inJune 30, 2022, of which $90.0$89.9 million is outstanding, as of December 31, 2017, and (iii) a revolving loan of up to $40.0$25.5 million (“Revolving Credit Facility”) maturing in 2019.December 31, 2020. During 2019, the Company amended its Revolving Credit Facility to extend the maturity date to December 31, 2020. The Company capitalized debt issuance costs of $13.5amendment reduced the borrowing capacity from $30.0 million into $25.5 million. In connection with the refinancing.amendment, the Company paid deferred financing costs of $0.3 million which have been recorded within other assets - net within the consolidated balance sheets. The unamortized amount of debt issuance costs as of December 31, 20172019 were $5.6$2.5 million related to the First Lien Term Loans and Second Lien Term Loans and $0.6$0.5 million related to the Revolving Credit Facility. Debt issuance costs related to the First Lien Term Loans and Second Lien Term Loans are recorded in total long-term debt, and debt issuance costs related to the Revolving Credit Facility are recorded in other long-term assets.assets - net. These costs are amortized into interest expense over the life of the respective borrowings on a straight-line basis.
The principal amount of the First Lien Term Loans amortizes in quarterly installments ofequal 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,administrative agent’s prime rate, (b) the federal funds effective rate plus 0.50% andor (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 London Interbank Offered Rate (“LIBOR”),
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) 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 aJason Incorporated’s (an indirect wholly-owned subsidiary of the Company) consolidated first lien net leverage ratio. At December 31, 2017,2019, the interest rates on the outstanding balances of the First Lien Term Loans and Second Lien Term Loans were 6.2%6.4% and 9.7%9.9%, respectively. At December 31, 2017, the Company had a total of $33.9 million of availability for additional borrowings under the Revolving Credit Facility as the Company had no outstanding borrowings and letters of credit outstanding of $6.1 million, which reduce availability under the facility. Under the Revolving Credit Facility, if the aggregate outstanding amount of all revolving loans,Revolving Loans, swingline loans and certain letter of credit obligations (letters of credit in excess of $5.0 million) exceeds 25 percent, or $10.0 million of the revolving credit commitments at the end of any fiscal quarter, Jason Incorporated and its restricted subsidiariesRestricted Subsidiaries (as defined in the Senior Secured Credit Facilities) will be required to not exceed a consolidated first lien net leverage ratio of 4.504.25 to 1.00.1.00 as of December 31, 2019 (which will decrease to 4.00 to 1.00 on June 26, 2020 and thereafter). If such outstanding amounts do not exceed 25 percent of the revolving credit commitments$10.0 million at the end of any fiscal quarter, no financial covenants are applicable. The consolidated first lien net leverage ratio at December 31, 2019 was 7.52 to 1.00; therefore, borrowings under the Revolving Credit Facility are limited to a total of $10.0 million, which includes letters of credit in excess of $5.0 million. At December 31, 2019, the Company did not draw on its revolver during 2017.had letters of credit outstanding of $3.6 million and had 0 outstanding borrowings under the Revolving Credit Facility. Under the Senior Secured Credit Facilities, the Company is subject to mandatory excess cash flow prepayments if certain requirements are met. At December 31, 20172019 and 2016,December 31, 2018, there was 0 required mandatory prepayments of $2.5 million and $1.9 million, respectively,excess cash flow prepayment required under the Senior Secured Credit Facilities. Additionally, the Company is required to make mandatory prepayments resulting from non-ordinary course sales or other dispositions of assets, subject to certain exceptions and subject to customary reinvestment provisions. In connection with the August 30, 2019 sale of the North American fiber solutions business, the Company received net cash proceeds, as defined by the Senior Secured Credit Facilities, were includedof $62.6 million, of which $57.6 million was remaining after permitted reinvestments as of December 31, 2019. The Company intends to continue to reinvest these net proceeds as permitted under the terms of the Senior Secured Credit Facilities. Permitted reinvestments include capital expenditures, repairs and maintenance and permitted acquisitions, if such reinvestments occur within twelve months following receipt of such net cash proceeds or within 180 days of a contractual commitment if such a commitment is made during the twelve month period. To the extent there are net cash proceeds that are not reinvested during the aforementioned period, a mandatory prepayment of debt is required. In December 2019, the Company made a voluntary prepayment of $5.0 million on the First Lien Term Loans, utilizing the proceeds from the sale of the Metalex business and from the sale of a facility within the current portionindustrial segment. In connection with the payment, the Company wrote off immaterial amounts of long-termpreviously unamortized debt in the consolidated balance sheets. The mandatory prepayment is in excess of regular current installments due.discount and deferred financing costs, which were recorded as additional interest expense. During 2017, the Company repurchased $20.0 million of Second Lien Term Loans for $16.8 million. In connection with the repurchase, the Company wrote off $0.4 million of previously unamortized debt discount and $0.4 million of
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
previously unamortized deferred financing costs, which were recorded as a reduction to the gain on extinguishment of debt. The transactions resulted in a net gain of $2.4 million, which has been recorded within the consolidated statements of operations. The Senior Secured Credit Facilities contain a number of customary affirmative and negative covenants that, among other things, limit or restrict the ability of Jason Incorporated and its Restricted Subsidiaries to: incur additional indebtedness (including guarantee obligations); incur liens; engage in mergers, consolidations, liquidations and dissolutions; sell assets; pay dividends and make other payments in respect of capital stock; make acquisitions, investments, loans and advances; pay and modify the terms of certain indebtedness; engage in certain transactions with affiliates; enter into negative pledge clauses and clauses restricting subsidiary distributions; and change its line of business, in each case, subject to certain limited exceptions. To comply with these covenants, Jason Incorporated and its Restricted Subsidiaries are limited in the amount of cash that can be distributed to Jason Industries, Inc. in the form of dividends, loans or other distributions. These restrictions are triggered if Jason Incorporated and its Restricted Subsidiaries do not achieve a consolidated net leverage ratio that is equal to or less than 5.25 to 1.00 on a trailing twelve-month basis calculated in accordance with the provisions of the Credit Agreements. As of December 31, 2019, the consolidated net leverage ratio for Jason Incorporated and its Restricted Subsidiaries exceeded 5.25 to 1.00; therefore, it is not currently able to distribute cash to Jason Industries, Inc.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) Foreign debtDebt The Company has the following foreign debt obligations, including various overdraft facilities and term loans: | | | December 31, 2017 | | December 31, 2016 | | December 31, 2019 | | December 31, 2018 | Germany | $ | 18,003 |
| | $ | 21,469 |
| Germany | $ | 13,413 | | | $ | 15,002 | | Mexico | 3,179 |
| | 850 |
| | India | 599 |
| | 834 |
| India | 516 | | | 467 | | Other | 14 |
| | 150 |
| | Total foreign debt | $ | 21,795 |
| | $ | 23,303 |
| Total foreign debt | $ | 13,929 | | | $ | 15,469 | |
These various foreign loans are comprised of individual outstanding obligations ranging from approximately $0.1$0.2 million to $11.2$7.7 million and $0.1 million to $12.6$9.3 million as of December 31, 20172019 and December 31, 2016,2018, respectively. Certain of the Company’s foreign borrowings contain financial covenants requiring maintenance of a minimum equity ratio andand/or maximum leverage ratio, among others. The Company was in compliance with these covenants as of December 31, 2017.2019. The foreign debt obligations in Germany primarily relate to term loans within our finishing segment of $18.0$12.5 million at December 31, 20172019 and $19.3$15.0 million at December 31, 2016.2018. The German borrowings bear interest at fixed and variable rates ranging from 2.1%1.8% to 4.7% and are subject to repayment in varying amounts through 2025. In the fourth quarter of 2017, the Company utilized $2.4 million of cash received duringfrom the third quarter sale of Acoustics Europe to retire foreign debt in Germany and incurred and paid a $0.2 million prepayment fee, which was recorded as an offset to the gain on extinguishment of debt. 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 oftotaling $210.0 million at both December 31, 20172019 and December 31, 2016.2018. The Swaps have been designated by the Company as cash flow hedges, in accordance with Accounting Standards Codification 815, 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 yearyears ended December 31, 2019, 2018, and 2017 the Company recognized $0.9 million of interest income, $0.2 million of interest income, and $1.9 million of interest expense, respectively, related to the Swaps. There was no interest expense recognized in 2016. Based on current interest rates, the Company expects to recognize interest expense of $0.8$0.3 million related to the Swaps in 2018.2020. The fair values of the Company’s Swaps are recorded on the consolidated balance sheets with the corresponding offset recorded as a component of accumulated other comprehensive loss. The net fair value of the Swaps was a net assetliability of $0.1$0.3 million at December 31, 20172019 and a net liabilityasset of $2.0$1.9 million at December 31, 2016, respectively.2018. See the amounts recorded on the consolidated balance sheets within the table below: | | | | | | | | | | | | | December 31, 2019 | | December 31, 2018 | Interest rate swaps: | | | | Recorded in other current assets | $ | — | | | $ | 1,325 | | Recorded in other assets - net | — | | | 542 | | Recorded in other current liabilities | (260) | | | — | | | | | | Total net asset derivatives designated as hedging instruments | $ | (260) | | | $ | 1,867 | |
Adoption of ASU 2016-02, “Leases (Topic 842)” On January 1, 2019, the Company adopted ASU 2016-02, “Leases (Topic 842)” and all related amendments using the modified retrospective method with no adjustments to comparative prior periods. The Company also elected certain practical expedients that allowed the Company to (1) recognize a cumulative-effect adjustment to the opening balance of retained earnings; (2) forgo reassessment of its prior conclusions on (a) whether an expired or existing contract contains a lease, (b) the lease classification of expired or existing leases, and (c) whether any costs incurred for expired or existing leases qualified as initial direct costs; and (3) use an accounting policy election by class of underlying asset to choose whether or not to separate non-lease components from lease components. Subsequent to the date of adoption, the Company recognizes and measures new
| | | | | | | | | | December 31, 2017 | | December 31, 2016 | Interest rate swaps: | | | | Recorded in other assets - net | $ | 537 |
| | $ | — |
| Recorded in other current liabilities | $ | (458 | ) | | $ | (1,916 | ) | Recorded in other long-term liabilities | — |
| | (133 | ) | Total net asset (liability) derivatives designated as hedging instruments | $ | 79 |
| | $ | (2,049 | ) |
87
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) or modified leases in accordance with ASC 842. Prior to January 1, 2019, the Company recognized and measured leases in accordance with ASC 840, “Leases”and prior period results continue to be reported under the accounting standards in effect for those periods.
Under the modified retrospective approach for the adoption of ASC 842, the adoption resulted in the recording of a ROU asset of $20.9 million and a lease liability of $23.2 million within the consolidated balance sheet on January 1, 2019. The difference between the ROU asset and lease liability on the date of adoption relates to the reclassification of $2.1 million of certain previously recorded deferred rent balances to the ROU asset. In addition, in accordance with the implementation guidance of ASU 2016-02, on January 1, 2019 the Company recorded the cumulative impact of adopting the new standard on the consolidated financial statements in which the Company reclassified a deferred gain from other long-term liabilities of $1.0 million, $0.8 million net of tax, to retained deficit related to a previous sale leaseback of the former Metalex Libertyville, Illinois facility. Finance and Operating Lease Obligations The Company’s components of lease expense was as follows: | | | | | | | | | | | For the Year Ended December 31, 2019 | | | | | | | | | | | 10.Finance lease expense: | Leases | | | | | Depreciation of right-of-use assets | $ | 145 | | | | | | Interest on lease liabilities | 42 | | | | | | Operating lease expense (1) | 6,586 | | | | | | | | | | | | Other lease expense | (32) | | | | | | Total | $ | 6,741 | | | | | |
Lease Obligations(1) Operating lease expense includes $0.6 million of accelerated lease expense related to the planned vacating of certain facilities in the industrial and engineered components segments.
The Company leases machinery, transportation equipment and office, warehouse and manufacturing facilities under agreements which are accounted for as operating leases. ManyBased on the nature of the ROU asset, depreciation of finance right-of-use assets, operating lease expense, and other lease expense are recorded within either cost of goods sold or selling and administrative expenses and interest on finance lease liabilities is recorded within interest expense on the consolidated statements of operations. Other lease expense includes lease expense for leases include provisions that enable the Companywith an estimated total term of 12 months or less and variable lease expense related to renewvariations in lease payments as a result of a change in factors or circumstances occurring after the lease possession date.
The Company’s balance sheet information related to leases was as follows: | | | | | | | | | December 31, 2019 | | | Finance Leases | | | | Property, plant and equipment - net | $ | 506 | | | | | | | | Current portion of long-term debt | $ | 417 | | | | Long-term debt | 325 | | | | Total finance lease liabilities | $ | 742 | | | | | | | | Operating Leases | | | | Right-of-use operating lease assets | $ | 20,910 | | | | | | | | Current portion of operating lease liabilities | $ | 4,275 | | | | Long-term operating lease liabilities | 19,136 | | | | Total operating lease liabilities | $ | 23,411 | | | |
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and certainper share amounts) Other information related to the Company’s leases was as follows: | | | | | | | | | December 31, 2019 | | | Weighted-average remaining lease term (in years) | | | | Finance leases | 2.59 | | | Operating leases | 7.19 | | | Weighted-average discount rate | | | | Finance leases | 6.7 | % | | | Operating leases | 6.9 | % | | |
Cash paid for amounts included in the measurement of lease liabilities for the year ended December 31, 2019 are as follows: | | | | | | | | | | | | | | | | | | | Continuing Operations | | Discontinued Operations | | Total | Operating cash flows from finance leases | $ | 47 | | | | $ | 3 | | | | $ | 50 | | Operating cash flows from operating leases | $ | 6,262 | | | | $ | 4,023 | | | | $ | 10,285 | | Financing cash flows from finance leases | $ | 332 | | | | $ | 8 | | | | $ | 340 | |
Future minimum lease payments required under finance and operating leases for each of the next five years and thereafter are as follows: | | | | | | | | | | | | | Finance Leases | | Operating Leases | 2020 | $ | 450 | | | $ | 5,730 | | 2021 | 136 | | | 4,790 | | 2022 | 107 | | | 3,528 | | 2023 | 79 | | | 2,946 | | 2024 | 31 | | | 2,530 | | Thereafter | — | | | 10,654 | | Total future undiscounted lease payments | 803 | | | 30,178 | | Less: imputed interest | (61) | | | (6,767) | | Total lease obligations | $ | 742 | | | $ | 23,411 | |
As of December 31, 2019, the company had additional operating leases for vehicles that were signed and had not yet commenced with future minimum lease payments of $0.3 million. These operating leases are subjectexpected to various escalation clauses.commence in 2020 with lease terms between two to four years. Future minimum lease payments required under long-term operating leases in effect at December 31, 2017 are2018 were as follows: | | 2018 | | $ | 10,243 |
| | 2019 | | 9,034 |
| 2019 | | $ | 5,768 | | 2020 | | 8,413 |
| 2020 | | 4,418 | | 2021 | | 7,033 |
| 2021 | | 3,823 | | 2022 | | 8,154 |
| 2022 | | 2,877 | | 2023 | | 2023 | | 2,362 | | Thereafter | | 17,826 |
| Thereafter | | 10,307 | | | | $ | 60,703 |
| | $ | 29,555 | |
Total rental expense under operating leases was $12.2$6.5 million, and$13.1 million, $9.86.1 million for the years end December 31, 2017, December 31, 2016,2018 and December 31, 2015,2017, respectively. Sale Leaseback
In April 2017, the Company completed a sale leaseback of its Libertyville, Illinois facility consisting of land and production facilities utilized by its components segment. In connection with the sale, the Company received proceeds, net of fees and closing costs, of $5.6 million and recorded a deferred gain of $1.1 million which will be recognized over the term of the lease as a reduction of rent expense. 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.
| | | | | | 11. | Shareholders'Shareholders’ (Deficit) Equity (Deficit) |
At December 31, 2017,2019, the Company hashad authorized for issuance 120,000,000 shares of $0.0001 par value common stock, of which 25,966,38128,508,977 shares were issued and outstanding, and hashad authorized for issuance 5,000,000 shares of $0.0001 par value preferred stock, of which 49,66543,950 shares were issued and outstanding, including 968860 shares declared as a dividend on November 28, 20173, 2019 and issued on January 1, 2018.2020.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) Series A Preferred Stock On June 30, 2014, the Company issued 45,000 shares of Series A Preferred Stock with offering proceeds of $45.0 million and offering costs of $2.5 million. Holders of the Series A Preferred Stock are entitled to cumulative dividends at an 8.0% dividend rate per annum payable quarterly on January 1, April 1, July 1, and October 1 of each year in cash or by delivery of Series A Preferred Stock shares. Holders of the Series A Preferred Stock have the option to convert each share of Series A Preferred Stock into approximately 81.18 shares of the Company’s common stock, subject to certain adjustments in the conversion rate.
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
The Company paid the following dividends on the Series A Preferred Stock in additional shares of Series A Preferred Stock during the years ended December 31, 2017, 20162019, 2018 and 2015.2017. | | | | | | | | | | Payment Date | | Record Date | | Amount Per Share | | Total Dividends Paid | | Preferred Shares Issued | January 1, 2015 | | November 15, 2014 | | $20.00 | | $900 | | — | April 1, 2015 | | February 15, 2015 | | $20.00 | | $900 | | — | July 1, 2015 | | May 15, 2015 | | $20.00 | | $900 | | — | October 1, 2015 | | August 15, 2015 | | $20.00 | | $900 | | — | January 1, 2016 | | November 15, 2015 | | $20.00 | | $900 | | — | April 1, 2016 | | February 15, 2016 | | $20.00 | | $900 | | — | July 1, 2016 | | May 15, 2016 | | $20.00 | | $900 | | — | October 1, 2016 | | August 15, 2016 | | $20.00 | | $900 | | — | January 1, 2017 | | November 15, 2016 | | $20.00 | | $900 | | 899 | April 1, 2017 | | February 15, 2017 | | $20.00 | | $918 | | 915 | July 1, 2017 | | May 15, 2017 | | $20.00 | | $936 | | 931 | October 1, 2017 | | August 15, 2017 | | $20.00 | | $955 | | 952 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Payment Date | | Record Date | | Amount Per Share | | Total Dividends Paid | | Preferred Shares Issued | January 1, 2017 | | November 15, 2016 | | $20.00 | | | $900 | | | 899 | | April 1, 2017 | | February 15, 2017 | | $20.00 | | | $918 | | | 915 | | July 1, 2017 | | May 15, 2017 | | $20.00 | | | $936 | | | 931 | | October 1, 2017 | | August 15, 2017 | | $20.00 | | | $955 | | | 952 | | January 1, 2018 | | November 15, 2017 | | $20.00 | | | $974 | | | 968 | | April 1, 2018 | | February 15, 2018 | | $20.00 | | | $751 | | | 748 | | July 1, 2018 | | May 15, 2018 | | $20.00 | | | $766 | | | 763 | | October 1, 2018 | | August 15, 2018 | | $20.00 | | | $781 | | | 778 | | January 1, 2019 | | November 15, 2018 | | $20.00 | | | $796 | | | 794 | | April 1, 2019 | | February 15, 2019 | | $20.00 | | | $812 | | | 809 | | July 1, 2019 | | May 15, 2019 | | $20.00 | | | $828 | | | 826 | | October 1, 2019 | | August 15, 2019 | | $20.00 | | | $845 | | | 843 | |
On November 28, 2017,3, 2019, the Company announceddeclared a $20.00 per share dividend on its Series A Preferred Stock to be paid in additional shares of Series A Preferred Stock on January 1, 20182020 to holders of record on November 15, 2017.2019. As of December 31, 2017,2019, the Company has recorded the 968860 additional Series A Preferred Stock shares declared for the dividend of $1.0$0.9 million within preferred stock in the consolidated balance sheets. Exchange of Preferred Stock for Common Stock of Jason Industries, Inc. On January 22, 2018, certain holders of the Company’s Series A Preferred Stock exchanged 12,136 shares of Series A Preferred Stock for 1,395,640 shares of the Company’s common stock, a conversion rate of 115 shares of common stock for each share of Series A Preferred Stock. Under the terms of the Series A Preferred Stock agreements, holders of the Series A Preferred Stock have the option to convert each share of Series A Preferred Stock into approximately 81.18 shares of the Company’s common stock, subject to certain adjustments in the conversion rate. The excess of the book value of the Series A Preferred Stock over the par value of the Company’s common stock issued in the exchange was recorded as an increase to additional paid-in capital on the consolidated balance sheets. The fair value of the redemption premium, represented by the excess of the exchange conversion rate over the agreement conversion rate, was recorded as a reduction to net loss available to common shareholders of Jason Industries within the consolidated statements of operations. Shareholder Rights Agreement On September 12, 2016,1, 2019, the Company’s Board of Directors adopted a Shareholder Rights Agreement (the “Rights Agreement”) between the Company and Continental Stock Transfer & Trust Company, as rights agent. Pursuant to the Rights Agreement, the Company declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock, payable to the shareholders of record on September 16, 2016. New6, 2019. The Rights will also accompany any new shares of common stock issued after September 16, 2016.6, 2019. The Rights trade with and are inseparable from ourthe Company’s common stock and will not be evidenced by separate certificates unless they become exercisable. The Rights will expire on March 12, 2018.1, 2021. In general terms the Rights Agreement works by imposing a significant penalty upon any person or group which acquires 30% or more of the Company’s outstanding common stock without the approval of the Company’s Board of Directors. Each Rightright will allow its holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock for $10.00,$5.00, subject to adjustment as set forth in the Rights Agreement, once the Rights become exercisable. Per the Rights
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) Agreement, the Rights will not be exercisable until the earlier of (1) 10 days after the public announcement that a person or group has become an Acquiring Person (as defined in the Rights Agreement) by obtaining beneficial ownership of 30% or more of the Company’s outstanding common stock or (2) 10 business days (or such later date as the Company’s Board of Directors shall determine) following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person. Warrants AsThe Company’s warrants expired on June 30, 2019 and as of December 31, 2017,2019, the Company had 13,993,7730 warrants outstanding. Each outstanding warrant entitlesentitled the registered holder to purchase one1 share of the Company’s common stock at a price of $12.00 per share, subject to adjustment, at any time. The warrants will expire on June 30, 2019, or earlier upon redemption.
In February 2015, the Company’s Board of Directors authorized the purchase of up to $5.0 million of the Company’s outstanding warrants. Management is authorized to make purchases from time to time in the open market or through privately negotiated transactions. There is no expiration date to this authority. No warrants were repurchased during the years ended December 31, 2017, 2016 and 2015.share.
Exchange of common stockCommon Stock of JPHI Holdings, Inc. for common stockCommon Stock of Jason Industries, Inc. Following the consummation of the Business Combination,June 30, 2014 go public business combination, Jason became an indirect majority-owned subsidiary of the Company, with the Company then owning approximately 83.1 percent83.1% of JPHI Holdings Inc. (“JPHI”) and the rollover participants then owning a
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
noncontrolling interest of approximately 16.9 percent16.9% of JPHI. The rollover participants received 3,485,623 shares of JPHI, which were exchangeable on a one-for-one1-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. 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%, and no0 shares of JPHI stock remain outstanding as of December 31, 2017.2019. The decreases to the noncontrolling interest as a result of the exchange resulted in an increase in both accumulated other comprehensive loss and additional paid-in capital to reflect the Company’s increased ownership in JPHI. Accumulated Other Comprehensive Loss The changes in the components of accumulated other comprehensive loss, net of taxes, were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | Employee retirement plan adjustments | | Foreign currency translation adjustments (1) | | 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 before reclassifications | 365 | | | 11,394 | | | 156 | | | 11,915 | | Amounts reclassified from accumulated other comprehensive loss | 8 | | | (888) | | | 1,159 | | | 279 | | Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc. | (113) | | | (1,698) | | | (73) | | | (1,884) | | Balance at December 31, 2017 | (1,517) | | | (18,596) | | | 51 | | | (20,062) | | Cumulative impact of accounting changes | (137) | | | — | | | 11 | | | (126) | | Other comprehensive (loss) income before reclassifications | (223) | | | (4,555) | | | 1,467 | | | (3,311) | | Amounts reclassified from accumulated other comprehensive loss | 46 | | | — | | | (118) | | | (72) | | Balance at December 31, 2018 | (1,831) | | | (23,151) | | | 1,411 | | | (23,571) | | | | | | | | | | Other comprehensive loss before reclassifications | (526) | | | (1,950) | | | (947) | | | (3,423) | | Amounts reclassified from accumulated other comprehensive loss | 125 | | | (1,112) | | | (662) | | | (1,649) | | Balance at December 31, 2019 | $ | (2,232) | | | $ | (26,213) | | | $ | (198) | | | $ | (28,643) | |
(1) Amounts reclassified from accumulated other comprehensive loss and included in loss on divestiture in the consolidated statement of operations for the year ended December 31, 2017 includes the reclassification to earnings of a foreign currency translation gain of $0.9 million from the sale of the European fiber solutions business. Amounts reclassified from accumulated other comprehensive loss and included in other income - net in the consolidated statement of operations for the year ended December 31, 2019 includes the reclassification to earnings of a foreign currency translation gain of $0.8 million for the wind down and substantial dissolution of certain U.K. entities. Amounts reclassified from accumulated other comprehensive loss and included in net loss (income) from discontinued operations, net of tax for the year ended December 31, 2019 includes the reclassification to earnings of a foreign currency translation gain of $0.3 million from the sale of the North American fiber solutions business. | | | | | | | | | | | | | | | | | | Employee retirement plan adjustments | | Foreign currency translation adjustments | | Net unrealized gains (losses) on cash flow hedges | | Total | Balance at December 31, 2014 | $ | (1,434 | ) | | $ | (10,631 | ) | | $ | — |
| | $ | (12,065 | ) | Other comprehensive loss before reclassifications | 398 |
| | (9,606 | ) | | (273 | ) | | (9,481 | ) | Amount reclassified from accumulated other comprehensive income | (15 | ) | | — |
| | 105 |
| | 90 |
| Balance at December 31, 2015 | (1,051 | ) | | (20,237 | ) | | (168 | ) | | (21,456 | ) | Other comprehensive loss before reclassifications | (545 | ) | | (4,013 | ) | | (870 | ) | | (5,428 | ) | Amount reclassified from accumulated other comprehensive income | 5 |
| | — |
| | — |
| | 5 |
| Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc. | (186 | ) | | (3,154 | ) | | (153 | ) | | (3,493 | ) | Balance at December 31, 2016 | (1,777 | ) | | (27,404 | ) | | (1,191 | ) | | (30,372 | ) | Other comprehensive income before reclassifications | 365 |
| | 11,394 |
| | 156 |
| | 11,915 |
| Amount reclassified from accumulated other comprehensive income | 8 |
| | (888 | ) | | 1,159 |
| | 279 |
| Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc. | (113 | ) | | (1,698 | ) | | (73 | ) | | (1,884 | ) | Balance at December 31, 2017 | $ | (1,517 | ) | | $ | (18,596 | ) | | $ | 51 |
| | $ | (20,062 | ) |
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) | | | | | | 12. | Share BasedShare-Based Compensation |
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 unitsRSUs and performance share units, which are restricted stock units with vesting conditions contingent upon achieving certain performance goals. The Company estimates the fair value of share-based awards based on assumptions as of the grant date. The Company recognizes these compensation costs for only those awards expected to vest, on a straight-line basis over the requisite service period of the award, which is generally the vesting term of three years for restricted stock awards and the performance period for performance share units. Forfeitures are recognized within compensation expense in the period the forfeitures are incurred. Share based compensation expense is reported in selling and administrative expenses in the Company’s consolidated statements of operations. 2014 Omnibus Incentive Plan On June 30,In 2014, the Company’s Board of Directors and shareholders approved 3,473,435 shares of common stock to be reserved and authorized for issuance under the 2014 Omnibus Incentive Plan (the “2014 Plan”) was approved by shareholders to provide incentives to keycertain executive officers, senior management employees, and members of the Company and its subsidiaries.Board of Directors. On February 27, 2018, the Company’s Board of Directors unanimously approved an amendment to the 2014 Plan to increase the number of authorized shares of common stock by 4,000,000 shares, which the Company’s shareholders approved on May 16, 2018. Awards under the 2014 Plan are generally not restricted to any specific form or structure and could include, without limitation, stock options, stock appreciation rights, restricted stock awards and RSUs, performance awards, other stock-based awards, and other cash-based awards. ThereAt December 31, 2019, there were 3,473,4351,252,915 shares of common stock reserved and authorized for issuance under the 2014 Plan. At December 31, 2017, there were 352,587 shares of common stockthat remained authorized and available for future grants under the 2014 Plan.grants.
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
Share BasedShare-Based Compensation Expense
The Company recognized the following share basedshare-based compensation expense: | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | | | | | | | Restricted stock units | $ | 2,171 | | | $ | 1,896 | | | $ | 792 | | Adjusted EBITDA vesting awards | 197 | | | 399 | | | 178 | | Stock Price vesting awards | — | | | — | | | 9 | | | | | | | | Share-based compensation expense from continuing operations | 2,368 | | | 2,295 | | | 979 | | Share-based compensation expense from discontinued operations | 986 | | | 414 | | | 140 | | Total share-based compensation expense | $ | 3,354 | | | $ | 2,709 | | | $ | 1,119 | | | | | | | | Total income tax benefit recognized from continuing and discontinued operations | $ | 633 | | | $ | 667 | | | $ | 276 | |
Share-based compensation expense (income):from discontinued operations during the year ended December 31, 2019 includes $0.5 million of accelerated expense for 303,030 restricted and performance share units that vested upon the sale of the North American fiber solutions business, and $0.1 million of accelerated expense for 60,018 restricted and performance share units that vested upon the sale of the Metalex business. | | | | | | | | | | | | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | | | Restricted Stock Units | $ | 913 |
| | $ | 1,300 |
| | $ | 2,689 |
| Adjusted EBITDA Vesting Awards | 197 |
| | (2,399 | ) | | 899 |
| Stock Price Vesting Awards | 9 |
| | 101 |
| | 1,319 |
| ROIC Vesting Awards | — |
| | — |
| | — |
| Subtotal | 1,119 |
| | (998 | ) | | 4,907 |
| Impact of accelerated vesting (1) | — |
| | 246 |
| | 3,062 |
| Total share-based compensation expense (income) | $ | 1,119 |
| | $ | (752 | ) | | $ | 7,969 |
| | | | | | | Total income tax benefit (provision) | $ | 276 |
| | $ | (294 | ) | | $ | 3,041 |
|
| | (1)
| For the year ended December 31, 2015, primarily represents the impact of the acceleration of certain vesting schedules for RSUs and stock price vesting awards related to the transition of the Company’s former CEO and CFO. |
As of December 31, 2017, $2.02019, $2.7 million of total unrecognized compensation expense related to share-based compensation plans is expected to be recognized over a weighted-average period of 2.21.4 years. The total unrecognized share-based compensation expense to be recognized in future periods as of December 31, 20172019 does not consider the effect of share-based awards that may be issued in subsequent periods. General Terms of Awards The Compensation Committee of the Board of Directors has discretion to establish the terms and conditions for grants, including the number of shares, vesting and required service or other performance criteria. RSU and performance share unit awards are subject to forfeiture upon termination of employment prior to vesting, subject in some cases to early vesting, or continued eligibility for vesting, upon specified events, including death or permanent disability of the grantee, termination of the grantee’s employment under certain circumstances or a change in control of the Company. Dividend equivalents on common stock, if any, are accrued for RSUs and performance share units granted to employees and paid in the form of cash or stock depending on the form of the dividend, at the same time that the shares of common stock underlying the unit are delivered to the employee. All RSUs and performance share units granted to employees are payable in shares of common stock and are classified as equity awards.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) The rights granted to the recipient of employee RSU awards generally vest annually in equal installments on the anniversary of the grant date or in two equal installments over the restriction or vesting period, which is generally three years. Vested RSUs are payable in common stock within a thirty day period following the vesting date. The Company records compensation expense of RSU awards based on the fair value of the awards at the date of grant ratably over the period during which the restrictions lapse. Performance share unit awards based on cumulative and average performance metrics (i.e. average return on invested capital (“ROIC”) and Adjusted EBITDA) are payable at the end of their respective performance period in common stock. The number of share units awarded can range from zero0 to 150% for those awards granted from 2014 through 2016 and from zero0 to 100% for those awards granted in 2017 and 2019, depending on achievement of a targeted performance metric, and are payable in common stock within a thirty day period following the end of the performance period. The Company expenses the cost of the performance-based share unit awards based on the fair value of the awards at the date of grant and the estimated achievement of the performance metric, ratably over the performance period of three years. Performance share unit awards based on achievement of certain established stock price targets are payable in common stock if the last sales price of the Company’s common stock equals or exceeds established stock price targets in any twenty20 trading days within a thirty trading day period during the performance period. The Company expenses the cost of the stock price-based performance share unit awards based on the fair value of the awards at the date of grant ratably over the derived service period of the award. The Company also issues RSUs as share-based compensation for members of the Board of Directors. Director RSUs vest one year from the date of grant. In the event of termination of a member’s service on the Board of Directors prior to a vesting date, all unvested RSUs of such holder will be forfeited. Vested RSUs are deferred and then delivered to members of the
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
Board of Directors within six months following the termination of their directorship. All awards granted are payable in shares of common stock or cash payment equal to the fair market value of the shares at the discretion of our Compensation Committee, and are classified as equity awards due to their expected settlement in common stock. Compensation expense for these awards is measured based upon the fair value of the awards at the date of grant. Dividend equivalents on common stock are accrued for RSUs awarded to the Board of Directors and paid in the form of cash or stock depending on the form of the dividend, at the same time that the shares of common stock underlying the RSU are delivered to a member of the Board of Directors following the termination of their directorship. Restricted Stock Units The following table summarizes RSUthe restricted stock unit activity: | | | For the Year Ended December 31, 2017 | | For the Year Ended December 31, 2016 | | For the Year Ended December 31, 2015 | | For the Year Ended December 31, 2019 | | | For the Year Ended December 31, 2018 | | | For the Year Ended December 31, 2017 | | | Shares (thousands) | | Weighted-Average Grant Date Fair Value | | Shares (thousands) | | Weighted-Average Grant Date Fair Value | | Shares (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 beginning of period | 554 |
| | $ | 5.22 |
| | 401 |
| | $ | 8.70 |
| | 762 |
| | $ | 10.50 |
| Outstanding at beginning of period | 3,150 | | | $ | 2.89 | | | 1,033 | | | $ | 2.84 | | | 554 | | | $ | 5.22 | | Granted | 745 |
| | 1.32 |
| | 375 |
| | 3.75 |
| | 216 |
| | 6.39 |
| Granted | 985 | | | 1.36 | | | 2,166 | | | 2.94 | | | 745 | | | 1.32 | | Issued | (265 | ) | | 4.84 |
| | (211 | ) | | 7.62 |
| | (582 | ) | | 10.50 |
| Issued | (1,543) | | | 2.60 | | | (36) | | | 3.72 | | | (265) | | | 4.84 | | Deferred | 159 |
| | 3.69 |
| | 62 |
| | 4.24 |
| | 67 |
| | 10.55 |
| Deferred | 75 | | | 1.30 | | | — | | | — | | | 159 | | | 3.69 | | Forfeited | (160 | ) | | 1.53 |
| | (73 | ) | | 9.04 |
| | (62 | ) | | 7.84 |
| Forfeited | (255) | | | 2.77 | | | (13) | | | 3.02 | | | (160) | | | 1.53 | | Outstanding at end of period | 1,033 |
| | $ | 2.84 |
| | 554 |
| | $ | 5.22 |
| | 401 |
| | $ | 8.70 |
| Outstanding at end of period | 2,412 | | | $ | 2.34 | | | 3,150 | | | $ | 2.89 | | | 1,033 | | | $ | 2.84 | |
As of December 31, 2017,2019, there was $1.0$2.6 million of unrecognized share-based compensation expense related to 744,2322,047,594 RSU awards, with a weighted-average grant date fair value of $1.84,$2.04, that are expected to vest over a weighted-average period of 2.11.5 years. Included within the total 1,032,6862,411,502 RSU awards outstanding as of December 31, 20172019 are 288,454363,908 RSU awards for members of ourthe Company’s Board of Directors which have vested and issuance of the shares has been deferred, with a weighted-average grant date fair value of $5.41.$4.02. The total fair values of shares vested during the years ended December 31, 2019, 2018 and 2017 2016 and 2015 were $0.3$4.2 million, $0.7$0.1 million and $3.4$0.3 million, respectively. The fair values of these awards were determined based on the Company’s stock price on the grant date. 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 years ended December 31, 2019, 2018 and 2017, 2016the Company withheld 415,723 shares, 2,837
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and 2015,per share amounts) shares and 25,532 43,806 and 210,869 shares, respectively, were withheld to satisfy the requirement. The withholding is treated as a reduction in additional paid-in capital in the accompanying consolidated statements of shareholders’ equity (deficit). equity. Performance Share Units Adjusted EBITDA Vesting Awards The following table summarizes Adjusted EBITDA vesting award activity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Year Ended December 31, 2019 | | | | For the Year Ended December 31, 2018 | | | | For the Year Ended December 31, 2017 | | | | 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 beginning of period | 908 | | | $ | 1.30 | | | 908 | | | $ | 1.30 | | | 723 | | | $ | 9.67 | | Granted | 705 | | | 1.64 | | | — | | | — | | | 1,058 | | | 1.30 | | Adjustment for performance results achieved (1) | — | | | — | | | — | | | — | | | (708) | | | 9.65 | | Vested | (62) | | | 1.64 | | | — | | | — | | | — | | | — | | Forfeited | (78) | | | 1.52 | | | — | | | — | | | (165) | | | 2.11 | | Outstanding at end of period | 1,473 | | | $ | 1.44 | | | 908 | | | $ | 1.30 | | | 908 | | | $ | 1.30 | |
(1) Adjustment for Adjusted EBITDA awards activity: | | | | | | | | | | | | | | | | | | | | | | | For the Year Ended December 31, 2017 | | For the Year Ended December 31, 2016 | | For the Year Ended December 31, 2015 | | Shares (thousands) | | Weighted-Average Grant Date Fair Value | | Shares (thousands) | | Weighted-Average Grant Date Fair Value | | Shares (thousands) | | Weighted-Average Grant Date Fair Value | Outstanding at beginning of period | 723 |
| | $ | 9.67 |
| | 871 |
| | $ | 9.81 |
| | 1,216 |
| | $ | 10.49 |
| Granted | 1,058 |
| | 1.30 |
| | — |
| | — |
| | 142 |
| | 6.33 |
| Adjustment for performance results achieved (1) | (708 | ) | | 9.65 |
| | — |
| | — |
| | — |
| | — |
| Vested | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Forfeited | (165 | ) | | 2.11 |
| | (148 | ) | | 10.49 |
| | (487 | ) | | 10.49 |
| Outstanding at end of period | 908 |
| | $ | 1.30 |
| | 723 |
| | $ | 9.67 |
| | 871 |
| | $ | 9.81 |
|
| | (1)
| Adjustment for Adjusted EBITDA awards originally granted in 2014 and 2015 was due to the number of shares vested at the end of the three-year performance period ended June 30, 2017 being lower than the maximum achievement of the targeted Adjusted EBITDA performance metric. |
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
the number of shares vested at the end of the three-year performance period ended June 30, 2017 being lower than the maximum achievement of the targeted Adjusted EBITDA performance metric.
Adjusted EBITDA Vesting Awards - 2014 and 20152019 Grant During the period June 30, 2014 throughyear ended December 31, 2014, 1,215,7042019, the Company granted 704,500 performance share unit awards were granted to certain executive officers and senior management employees. Duringemployees, which are payable based on achievement of a cumulative Adjusted EBITDA performance target over a three year performance period ending on December 31, 2021. Distributions under these awards are payable at the end of the performance period in common stock. As of December 31, 2019, the total potential payouts for awards granted during the year ended December 31, 2015, 142,238 performance share unit awards were granted2019 ranged from 0 to 601,000 shares, should certain executive officers. The awards were payable upon the achievement of certain established cumulative Adjusted EBITDA performance targets over a three year performance period of July 1, 2014 through June 30, 2017. These awards were subject to forfeiture upon termination of employment prior to vesting, subject in some cases to early vesting or continued eligibility for vesting upon specified events, including death, permanent disability or retirement of the grantee or a change in control of the Company.be achieved. During the second quarter of 2016,2019, the Company lowered its estimated vesting of the 2014 and 2015 performance share unit awards from 62.5%100% of target, or 301,382601,000 shares, to an estimated vesting payout of 0%, or 0 shares, resulting in $2.4$0.1 million of share-based compensation income due to declines in projected profitability. As of December 31, 2017,2019, there was no0 unrecognized share-based compensation expense related to the 2014 and 2015 granted cumulative Adjusted EBITDA based vesting performance share unit awards expected to be recognized in subsequent periods, and the awards are no longer outstanding as the award period expired on June 30, 2017 with no awards vesting.periods. Adjusted EBITDA Vesting Awards - 2017 Grant During the year ended December 31, 2017, the Company granted 1,057,505 performance share unit awards to certain executive officers and senior management employees, which are payable based on achievement of a cumulative Adjusted EBITDA performance target over a three year performance period ending on March 30, 2020. Distributions under these awards are payable at the end of the performance period in common stock. The total potential payouts for awards granted during the year ended December 31, 2017 ranged from zero0 to 907,505872,180 shares, should certain performance targets be achieved. These awards are subject to forfeiture upon termination During 2019, the Company lowered its estimated vesting of employment prior to vesting, subject in some cases to early vesting or continued eligibility for vesting upon specified events, including death, permanent disability or retirement of the grantee or a change in control of the Company. Compensation expense of the Adjusted EBITDA based performance share unit awards is currently being recognized based onfrom 100% of target, or 872,180 shares, to an estimated payout of 100%80%, or 697,744 shares, resulting in $0.1 million of target, or 907,505 shares.share-based compensation income due to declines in profitability. As of December 31, 2017,2019, there was $1.0$0.1 million of unrecognized share-based compensation expense related to Adjusted EBITDA based vesting performance share unit awards, which is expected to be recognized over a weighted average period of 2.20.3 years.
Stock PriceAdjusted EBITDA Vesting Awards - 2014 and 2015 Grant
The following table summarizes stock price vesting awards activity: | | | | | | | | | | | | | | | | | | | | | | | For the Year Ended December 31, 2017 | | For the Year Ended December 31, 2016 | | For the Year Ended December 31, 2015 | | Shares (thousands) | | Weighted-Average Grant Date Fair Value | | Shares (thousands) | | Weighted-Average Grant Date Fair Value | | Shares (thousands) | | Weighted-Average Grant Date Fair Value | Outstanding at beginning of period | 341 |
| | $ | 2.85 |
| | 878 |
| | $ | 3.27 |
| | 810 |
| | $ | 3.54 |
| Granted | — |
| | — |
| | — |
| | — |
| | 95 |
| | 1.08 |
| Adjustment for performance results achieved (1) | (189 | ) | | 2.30 |
| | — |
| | — |
| | — |
| | — |
| Vested | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Forfeited | (152 | ) | | 3.54 |
| | (537 | ) | | 3.54 |
| | (27 | ) | | 3.54 |
| Outstanding at end of period | — |
| | $ | — |
| | 341 |
| | $ | 2.85 |
| | 878 |
| | $ | 3.27 |
|
| | (1)
| Adjustment for Stock Price Vesting Awards was due to the sales price of the Company’s common stock at the end of the three-year performance period ended June 30, 2017 being lower than the established stock price targets of the Stock Price Vesting Awards. |
There were no stock price vesting performance share unit awards granted during the years ended December 31, 2017During 2014 and 2016. During the year ended December 31, 2015, 94,8251,357,942 performance share unit awards were granted to certain executive officers.officers and senior management employees. The awards hadwere payable upon the achievement of certain established cumulative Adjusted EBITDA performance targets over a three year performance period fromof July 1, 2014 through June 30, 2017. Distributions under theseThe award period expired on June 30, 2017 with 0 awards were payable in common stock when the last sales price of the Company’s common stock equaled or exceeded established stock price targets in any twenty trading days within a thirty trading day period during the performance period.
vesting.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) Stock Price Vesting Awards
As of December 31, 2017, there was no unrecognized compensation expense related to2019, the stock price based performance share unit awards expected to be recognized in subsequent periods, and thevesting awards are no0 longer outstanding as the award period expired on June 30, 2017 with no0 awards vesting. ROIC Vesting Awards The following table summarizes ROIC vesting awards activity: | | | | | | | | | | | | | | | | For the Year Ended December 31, 2017 | | For the Year Ended December 31, 2016 | | Shares (thousands) | | Weighted-Average Grant Date Fair Value | | Shares (thousands) | | Weighted-Average Grant Date Fair Value | Outstanding at beginning of period | 513 |
| | $ | 3.65 |
| | — |
| | $ | — |
| Granted | — |
| | — |
| | 599 |
| | 3.62 |
| Vested | — |
| | — |
| | — |
| | — |
| Forfeited | (103 | ) | | 3.46 |
| | (86 | ) | | 3.46 |
| Outstanding at end of period | 410 |
| | $ | 3.70 |
| | 513 |
| | $ | 3.65 |
|
During the year ended December 31, 2016, 599,336 performance share unit awards were granted to certain executive officers and senior management employees, payable upon the achievement of an ROIC performance target during a three year measurement period ending on December 31, 2018. There were no ROIC performance awards granted during the year ended December 31, 2017. Performance share unit awards based on ROIC performance metrics are payable at the end of their respective performance period in common stock. The total potential payouts for awards granted during the year ended December 31, 2016 range from zero to 410,336 shares, should certain performance targets be achieved. These awards are subject to forfeiture upon termination of employment prior to vesting, subject in some cases to early vesting or continued eligibility for vesting upon specified events, including death, permanent disability or retirement of the grantee or a change in control of the Company.
Compensation expense for ROIC based performance share unit awards outstanding during the year ended December 31, 2017 is currently being recognized based on an estimated payout of 0% of target, or 0 shares. During the fourth quarter of 2016, the Company lowered its estimated vesting of the performance share unit awards from 100% of target, or 273,557 shares, to an estimated vesting payout of 0%. As of December 31, 2017, there was no unrecognized compensation expense related to ROIC based2019, the Average Return on Invested Capital vesting performance share unit awards expected to be recognized in subsequent periods.are 0 longer outstanding as the award period expired on December 31, 2018 with 0 awards vesting.
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
Basic income (loss) per share is calculated by dividing net income (loss) available 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”rollover shares of JPHI 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.” The reconciliation of the numerator and denominator of the basic and diluted loss per share calculation and the anti-dilutive shares is as follows: | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | (share amounts in thousands) | | | | | | Basic and diluted net (loss) income per share | | | | | | Net loss per share from continuing operations | $ | (1.64) | | | $ | (0.68) | | | $ | (0.74) | | Net (loss) income per share from discontinued operations | (1.34) | | | 0.06 | | | 0.42 | | Basic and diluted net loss per share | $ | (2.98) | | | $ | (0.62) | | | $ | (0.32) | | | | | | | | Numerator: | | | | | | Net loss from continuing operations | $ | (43,431) | | | | $ | (14,653) | | | | $ | (15,402) | | Less: net gain attributable to noncontrolling interests | — | | — | | 5 | Less: Accretion of dividends on preferred stock and redemption premium | 3,347 | | | | 4,070 | | | | 3,783 | | Total net loss from continuing operations less accretion of dividends on preferred stock and redemption premium | (46,778) | | | | (18,723) | | | | (19,190) | | Net (loss) income from discontinued operations, net of tax | (38,177) | | | | 1,493 | | | | 10,929 | | Net loss allocable to common shareholders of Jason Industries | $ | (84,955) | | | | $ | (17,230) | | | | $ | (8,261) | | | | | | | | Denominator: | | | | | | Basic and diluted weighted-average shares outstanding | 28,484 | | | 27,595 | | | 26,082 | | | | | | | | Weighted average number of anti-dilutive shares excluded from denominator: | | | | | | Warrants to purchase Jason Industries common stock (1) | 6,901 | | | 13,994 | | | 13,994 | | Conversion of Series A 8% Perpetual Convertible Preferred (2) | 3,442 | | | 3,235 | | | 3,858 | | Conversion of JPHI rollover shares convertible to Jason Industries common stock (3) | — | | | — | | | 59 | | Restricted stock units | 2,702 | | | 2,331 | | | 796 | | Performance share units | 1,402 | | | 1,307 | | | 1,379 | | Total | 14,447 | | | 20,867 | | | 20,086 | |
(1) Public warrants (“warrants”) consisted of warrants to purchase shares of Jason Industries common stock which were previously quoted on Nasdaq under the symbol “JASNW” until their expiration on June 30, 2019. Each outstanding warrant entitled the holder to purchase one share of the Company’s common stock at a price of $12.00 per share. (2)Includes the impact of 860 additional Series A Preferred Stock shares from a stock dividend declared on November 3, 2019 to be paid in additional shares of Series A Preferred Stock on January 1, 2020. The Company included the preferred stock within the consolidated balance sheets as of the declaration date. Conversion is presented at the voluntary conversion ratio of approximately 81.18 common shares for each one preferred share.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) | | | | | | | | | | | | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | | | Net loss per share available to Jason Industries common shareholders | | | | | | Basic and diluted loss per share | $ | (0.32 | ) | | $ | (3.15 | ) | | $ | (3.53 | ) | | | | | | | Numerator: | | | | | | Net loss available to common shareholders of Jason Industries | $ | (8,261 | ) | | $ | (70,835 | ) | | $ | (78,058 | ) | | | | | | | Denominator: | | | | | | Basic and diluted weighted-average shares outstanding | 26,082 |
| | 22,507 |
| | 22,145 |
| | | | | | | 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 (1) | 3,858 |
| | 3,656 |
| | 3,653 |
| Conversion of JPHI rollover shares convertible to Jason Industries common stock (2) | 59 |
| | 3,427 |
| | 3,486 |
| Restricted stock units | 796 |
| | 503 |
| | 589 |
| Performance share units | 1,379 |
| | 1,917 |
| | 1,540 |
| Total | 20,086 |
| | 23,497 |
| | 23,262 |
|
(3) Includes the impact of the exchange by certain rollover participants of their JPHI stock for Company common stock in the first quarter of 2017. Such rollover shares were contributed by former owners and management of Jason Partners Holdings Inc. prior to the Company’s acquisition of JPHI. | | (1)
| Includes the impact of 968 additional Series A Preferred Stock shares from a stock dividend declared on November 28, 2017 paid in additional shares of Series A Preferred Stock on January 1, 2018. The Company included the preferred stock within the consolidated balance sheets as of the declaration date. Anti-dilutive shares assumes preferred stock is converted at the voluntary conversion ratio of 81.18 common shares per one preferred share. |
| | (2)
| Includes the impact of the exchange by certain Rollover Participants of their JPHI stock for Company common stock in the fourth quarter of 2016 and 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 is 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 availableallocable 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 TopicASC 260.
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
On December 22, 2017, the President of the United States signed into law comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”).Act. The legislation significantly changeschanged U.S. tax law by lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries, among others. The Tax Reform Act also addsadded many new provisions including changes to bonus depreciation and the deductions for executive compensation and interest expense. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act, the Company revalued its ending net deferred tax liabilities at December 31, 2017 and recognized a provisional $11.1 million tax benefit in the Company’s consolidated statements of operations for the year ended December 31, 2017. The Tax Reform Act provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits through the year ended December 31, 2017. The Tax Reform Act imposes a tax on these earnings and profits at either a 15.5% rate or an 8.0% rate. The higher rate applies to the extent the Company's foreign subsidiaries have cash and cash equivalents at certain measurement dates, whereas the lower rate applies to any earnings that are in excess of the cash and cash equivalents balance. The Company had an estimated $54.5 million of undistributed foreign earnings and profits subject to the deemed mandatory repatriation and recognized a provisional $5.3 million of income tax expense in the Company’s consolidated statements of operations for the year ended December 31, 2017. After the utilization of existing net operating loss carryforwards, the Company willdid not incur any U.S. federal cash taxes resulting from the deemed mandatory repatriation. While the Tax Reform Act provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions. The GILTI provisionsthat require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company is still evaluating the potential impact of the GILTI provisions and accordingly has not recorded a provisional estimate for the year ended December 31, 2017. DueGAAP allows companies to the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the Tax Reform Act and the application of Accounting Standards Codification 740, and are considering availablemake an accounting policy alternativeselection to either adopt or record the U.S. income tax effect oftreat taxes due on future GILTI inclusions in U.S. taxable income as current period expense when incurred (“period cost method”) or factor such amounts into the measurement of its deferred taxes (“deferred method”). The Company has elected to use the period in which they arise or establish deferred taxes with respect to the expected future tax liabilities associated with future GILTI inclusions. Our accounting policies depend, in part, on analyzing our global income to determine whether we expect a tax liability resulting from the application of this provision, and, if so, whether and when to record related current and deferred income taxes. Whether we intend to recognize deferred tax liabilities related to the GILTI provisions is dependent, in part, on our assessment of the Company's future operating structure. In addition, we are awaiting further interpretive guidance in connection with the computation of the GILTI tax. For these reasons, we are not yet able to reasonably estimate the effect of this provision of the Tax Reform Act. Therefore, we have not made any adjustments relating to potential GILTI tax in our consolidated financial statements and have not made a policy decision regarding our accounting for GILTI.
We are also currently analyzing certain additional provisions of the Tax Reform Act that come into effect for tax years starting January 1, 2018 and will determine if these items would impact the effective tax rate in the year the income or expense occurs. These provisions include the BEAT provisions, eliminating U.S. federal income taxes on dividends from foreign subsidiaries, the new provision that could limit the amount of deductible interest expense, and the limitations on the deductibility of certain executive compensation.cost method.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. The Company has made a reasonable estimate of the financial statement impact as of January 31, 2018 and has recognized the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets and liabilities and included thesethose estimated amounts in its consolidated financial statements for the year ended December 31, 2017. During the year ended December 31, 2018, the Company finalized the accounting for these items and recorded an adjustment to reduce the amount of income tax expense attributable to the deemed mandatory repatriation of foreign subsidiary earnings and profits by $0.5 million. The ultimate impact may differfinal adjustment required to revalue net deferred tax liabilities was immaterial. The consolidated loss from these provisional amounts, possibly materially, due to, among other things, additional analysis,continuing operations before income taxes consisted of the following: | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | | | | | | | Domestic | $ | (40,169) | | | $ | (28,793) | | | $ | (31,880) | | Foreign | 754 | | | 9,094 | | | 864 | | Loss from continuing operations before income taxes | $ | (39,415) | | | $ | (19,699) | | | $ | (31,016) | |
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts)
changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Reform Act. The accounting is expected to be completed within the one year measurement period as allowed by SAB 118.
The consolidated loss before income taxes consisted of the following: | | | | | | | | | | | | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | | | Domestic | $ | (27,919 | ) | | $ | (93,639 | ) | | $ | (126,334 | ) | Foreign | 13,062 |
| | 9,290 |
| | 14,478 |
| Loss before income taxes | $ | (14,857 | ) | | $ | (84,349 | ) | | $ | (111,856 | ) |
The consolidated benefit for income taxestax provision (benefit) from continuing operations included within the consolidated statements of operations consisted of the following: | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | | | | | | | | | Current | | | | | | Current | | | | | | Federal | $ | 208 |
| | $ | — |
| | $ | 161 |
| Federal | $ | 106 | | | $ | 53 | | | $ | 208 | | State | (125 | ) | | 57 |
| | 104 |
| State | 75 | | | 53 | | | (125) | | Foreign | 6,878 |
| | 7,759 |
| | 5,703 |
| Foreign | 2,008 | | | 2,527 | | | 3,405 | | Total current income tax provision | 6,961 |
| | 7,816 |
| | 5,968 |
| Total current income tax provision | 2,189 | | | 2,633 | | | 3,488 | | | | | | | | | | | | | | Deferred | | | | | | Deferred | | Federal | (14,864 | ) | | (9,059 | ) | | (24,548 | ) | Federal | 581 | | | (6,112) | | | (16,916) | | State | (1,281 | ) | | (1,781 | ) | | (3,196 | ) | State | 2,428 | | | (597) | | | (1,142) | | Foreign | (1,200 | ) | | (3,272 | ) | | (479 | ) | Foreign | (1,182) | | | (970) | | | (1,044) | | Total deferred income tax benefit | (17,345 | ) | | (14,112 | ) | | (28,223 | ) | | Total income tax benefit | $ | (10,384 | ) | | $ | (6,296 | ) | | $ | (22,255 | ) | | Total deferred income tax provision (benefit) | | Total deferred income tax provision (benefit) | 1,827 | | | (7,679) | | | (19,102) | | Total income tax provision (benefit) | | Total income tax provision (benefit) | $ | 4,016 | | | $ | (5,046) | | | $ | (15,614) | |
The income tax benefit recognized inprovision (benefit) from continuing operations included within the accompanying consolidated statements of operations differs from the amounts computed by applying the Federal income tax rate to loss before income tax benefit.taxes. A reconciliation of income taxes at the Federal statutory rate to the effective tax rate is summarized as follows: | | | | | | | | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | | | | | | | | | Tax at Federal statutory rate of 35% | 35.0 | % | | 35.0 | % | | 35.0 | % | | Tax at Federal statutory rate | | Tax at Federal statutory rate | 21.0 | % | | 21.0 | % | | 35.0 | % | State taxes - net of Federal benefit | 7.7 |
| | 1.5 |
| | 2.7 |
| State taxes - net of Federal benefit | 1.8 | | | 6.5 | | | 3.3 | | Research and development incentives | 1.7 |
| | 0.5 |
| | 0.4 |
| Research and development incentives | 1.2 | | | 2.1 | | | 0.6 | | Foreign rate differential | 5.2 |
| | 1.3 |
| | 0.8 |
| Foreign rate differential | 0.8 | | | (1.7) | | | 0.6 | | | Valuation allowances(1) | 5.0 |
| | (1.8 | ) | | 0.2 |
| (33.7) | | | (1.8) | | | 1.5 | | Change in foreign tax rates | (1.2 | ) | | 0.6 |
| | (1.0 | ) | Change in foreign tax rates | — | | | — | | | (0.6) | | Decrease (increase) in tax reserves | (0.4 | ) | | 1.0 |
| | (0.2 | ) | | Increase in tax reserves | | Increase in tax reserves | (0.8) | | | (1.3) | | | (0.2) | | Stock compensation expense | (6.7 | ) | | (0.6 | ) | | (0.7 | ) | Stock compensation expense | 0.2 | | | (1.7) | | | (1.7) | | U.S. taxation of foreign earnings(1)(2) | (10.2 | ) | | (3.6 | ) | | (0.5 | ) | 0.4 | | | (2.4) | | | (4.4) | | Non-deductible meals and entertainment | (0.3 | ) | | (0.1 | ) | | (0.1 | ) | Non-deductible meals and entertainment | (0.2) | | | (0.1) | | | (0.1) | | Non-deductible impairment charges(2) | — |
| | (25.7 | ) | | (16.2 | ) | | | Change in U.S. tax rate(3) | 72.5 |
| | — |
| | — |
| Change in U.S. tax rate(3) | — | | | — | | | 34.8 | | Transition tax on unremitted foreign earnings(4) | (35.7 | ) | | — |
| | — |
| Transition tax on unremitted foreign earnings(4) | — | | | 2.6 | | | (17.1) | | Other | (2.7 | ) | | (0.6 | ) | | (0.5 | ) | Other | (0.9) | | | 2.4 | | | (1.4) | | Effective tax rate | 69.9 | % | | 7.5 | % | | 19.9 | % | Effective tax rate | (10.2) | % | | 25.6 | % | | 50.3 | % |
| | (1)
| During the year ended December 31, 2017, the U.S. taxation of foreign earnings includes the recognition of a deferred tax liability for foreign earnings of the Company’s wholly-owned U.S. subsidiaries that are no longer considered permanently reinvested. During the year ended December 31, 2016, the amount includes the recognition of a deferred tax liability for the foreign earnings of the Company’s non-majority owned joint venture holding that are no longer considered permanently reinvested. |
(1)During the year ended December 31, 2019, the Company recorded a valuation allowance of $13.3 million for federal and state deferred tax assets primarily related to the U.S. interest deduction limitation carryforward.
(2)During the year ended December 31, 2018, the U.S. taxation of foreign earnings includes the recognition of GILTI and the U.S. taxation of other foreign income. During the year ended December 31, 2017, the amount includes the recording of a deferred tax liability for foreign earnings of the Company’s wholly-owned U.S. subsidiaries that are no longer considered indefinitely reinvested. (3) During the year ended December 31, 2017, the change in U.S. tax rate represents the impact of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act. (4) During the years ended December 31, 2018 and 2017, the transition tax on unremitted foreign earnings represents the impact of the deemed mandatory repatriation provisions under the Tax Reform Act.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts)
| | (2)
| During the years ended December 31, 2016 and 2015, the non-deductible impairment charges are related to the impairment of goodwill and other intangible assets. |
| | (3)
| During the year ended December 31, 2017, the change in U.S. tax rate represents the impact of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act. |
| | (4)
| During the year ended December 31, 2017, the transition tax on unremitted foreign earnings represents the impact of the deemed mandatory repatriation provisions under the Tax Reform Act. |
The Company’s temporary differences which gave rise to deferred tax assets and liabilities were as follows: | | | December 31, 2017 | | December 31, 2016 | | December 31, 2019 | | December 31, 2018 | Deferred tax assets | | | | Deferred tax assets | | | | Accrued expenses and reserves | $ | 2,685 |
| | $ | 3,832 |
| Accrued expenses and reserves | $ | 1,475 | | | $ | 2,035 | | Postretirement and postemployment benefits | 1,702 |
| | 2,662 |
| Postretirement and postemployment benefits | 800 | | | 924 | | Employee benefits | 3,476 |
| | 2,844 |
| Employee benefits | 2,691 | | | 2,838 | | Operating lease liabilities | | Operating lease liabilities | 5,269 | | | — | | Inventories | 1,392 |
| | 2,710 |
| Inventories | 1,410 | | | 1,261 | | Other assets | 1,868 |
| | 3,310 |
| Other assets | 1,128 | | | 1,285 | | Interest disallowance | | Interest disallowance | 11,686 | | | 6,157 | | Operating loss and credit carryforwards | 15,257 |
| | 22,510 |
| Operating loss and credit carryforwards | 12,806 | | | 14,782 | | Gross deferred tax assets | 26,380 |
| | 37,868 |
| Gross deferred tax assets | 37,265 | | | 29,282 | | Less valuation allowance | (4,220 | ) | | (4,879 | ) | Less valuation allowance | (16,553) | | | (3,828) | | Deferred tax assets | 22,160 |
| | 32,989 |
| Deferred tax assets | 20,712 | | | 25,454 | | | | | | | Deferred tax liabilities | | | | Deferred tax liabilities | | Property, plant and equipment | (15,670 | ) | | (25,854 | ) | Property, plant and equipment | (6,530) | | | (14,941) | | Right-of-use operating lease assets | | Right-of-use operating lease assets | (4,619) | | | — | | Intangible assets and other liabilities | (28,912 | ) | | (46,376 | ) | Intangible assets and other liabilities | (14,790) | | | (25,801) | | Foreign investments | (1,688 | ) | | (2,109 | ) | Foreign investments | (1,026) | | | (1,261) | | Deferred tax liabilities | (46,270 | ) | | (74,339 | ) | Deferred tax liabilities | (26,965) | | | (42,003) | | Net deferred tax liability | $ | (24,110 | ) | | $ | (41,350 | ) | Net deferred tax liability | $ | (6,253) | | | $ | (16,549) | | | | | | | | | | Amounts recognized in the statement of financial position consist of: |
| |
| Amounts recognized in the statement of financial position consist of: | | Other assets - net | $ | 1,589 |
| | $ | 1,258 |
| Other assets - net | $ | 1,281 | | | $ | 1,064 | | Deferred income taxes | (25,699 | ) | | (42,608 | ) | Deferred income taxes | (7,534) | | | (17,613) | | Net amount recognized | $ | (24,110 | ) | | $ | (41,350 | ) | Net amount recognized | $ | (6,253) | | | $ | (16,549) | |
At December 31, 2017,2019, the Company has U.S. federal and state net operating loss carryforwards, which expire at various dates through 2036,2039, approximating $27.6$12.8 million and $102.9$110.3 million, respectively. In addition, the Company has U.S. federal research and development credit carryforwards of $2.4 million which expire between 2034 and 2039 and state tax credit carryforwards and other tax attributes of $1.0$1.1 million which expire between 20172019 and 2031.2034. The Company’s foreign net operating loss carryforwards total approximately $16.9$15.0 million (at December 31, 20172019 exchange rates). The majority of these foreign net operating loss carryforwards are available for an indefinite period. Valuation allowances totaling $4.2$16.6 million and $4.9$3.8 million as of December 31, 20172019 and 2016,2018, respectively, have been established for deferred income tax assets primarily related to U.S. interest expense carryforwards, state net operating loss and credit carryforwards and certain foreign subsidiary net operating loss carryforwards that may not be realized. Realization of the net deferred income tax assets is dependent on generating sufficient taxable income prior to their expiration. Although realization is not assured, management believes it is more-likely-than-not that the net deferred income tax assets will be realized. The amount of the net deferred income tax assets considered realizable, however, could change in the near term if future taxable income during the carryforward period fluctuates.
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, are as follows for the years ended December 31, 20172019, 20162018 and 2015:2017: | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | | | | | | | | | Balance at beginning of period | $ | 1,881 |
| | $ | 2,928 |
| | $ | 2,743 |
| Balance at beginning of period | $ | 2,084 | | | $ | 1,916 | | | $ | 1,881 | | Additions (reductions) based on tax positions related to current year | 267 |
| | 126 |
| | (28 | ) | Additions (reductions) based on tax positions related to current year | 209 | | | 168 | | | 267 | | Additions based on tax positions related to prior years | — |
| | — |
| | 55 |
| | Additions recognized in acquisition accounting | — |
| | — |
| | 323 |
| | Reductions in tax positions - settlements | — |
| | — |
| | (111 | ) | | | Reductions related to lapses of statute of limitations | (232 | ) | | (1,173 | ) | | (54 | ) | Reductions related to lapses of statute of limitations | — | | | — | | | (232) | | Balance at end of period | $ | 1,916 |
| | $ | 1,881 |
| | $ | 2,928 |
| Balance at end of period | $ | 2,293 | | | $ | 2,084 | | | $ | 1,916 | |
Of the $1.9$2.3 million, $1.9$2.1 million, and $2.9$1.9 million of unrecognized tax benefits as of December 31, 20172019, 20162018 and 2015,2017, respectively, approximately $1.9$2.3 million, $1.62.1 million, and $1.9 million, respectively, would impact the effective income tax rate if recognized. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as part of its
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) income tax provision. During the years ended December 31, 2017, 20162019, 2018 and 2015,2017, the Company had an immaterial amount of interest and penalties that were recognized as a component of the income tax provision. At December 31, 20172019 and 2016,2018, the Company has an immaterial amount of accrued interest and penalties related to taxes included within the consolidated balance sheet. During the next twelve months, as a result of the completion of tax audits that are currently in process and anticipated changes in the status of certain foreign subsidiaries, the Company believes it is reasonably possible the total amount of unrecognized tax benefits will stay the same.change. The Company, along with its subsidiaries, files returns in the U.S. Federal and various state and foreign jurisdictions. With certain exceptions, the Company is subject to examination by U.S. Federal and state taxing authorities for the taxable years in the following table. The Company does not expect the results of these examinations to have a material impact on the Company. | | | | | | | | | Tax Jurisdiction | | Open Tax Years | | | | Tax JurisdictionFrance | | Open Tax Years2017 - 2019 | | BrazilGermany | | 20132012 - 20172019 | | FranceMexico | | 20132015 - 20172019 | | GermanyPortugal | | 20122016 - 20172019 | | MexicoSpain | | 20122016 - 20172019 | | Sweden | | 20122014 - 20172019 | | United Kingdom | | 20162017 - 20172019 | | United States (federal) | | 2014 - 20172019 | | United States (state and local) | | 20132014 - 20172019 | |
As a result of the deemed mandatory repatriation provisions in the Tax Reform Act, the Company included an estimated $54.5 million of undistributed earnings in income subject to U.S. tax at reduced tax rates. During the fourth quarter of 2017, the Company changed its assertion regarding the permanentindefinite reinvestment of earnings of its wholly-owned non U.S. subsidiaries. This change in assertion was triggered by the anticipated future impact of changes arising from the enactment of the Tax Reform Act, including the interest expense deduction limitation and significant reduction in the U.S. taxation of earnings repatriated from the Company’s foreign subsidiaries.subsidiaries. As a result, during the year ended December 31, 2017, the Company has recognized a deferred tax liability of $1.7 million on the undistributed earnings of its wholly-owned foreign subsidiaries. The $1.7 million is considered a provisional amount pursuant to SAB 118.
DuringAs of the second quarter of 2016,years ended December 31, 2019 and 2018, the Company changed its assertion regardinghas recognized deferred tax liabilities on the permanent reinvestment ofundistributed earnings of its non-majority owned joint venture holding. Such change in assertion was driven by several factors. Prior to the second quarterwholly-owned foreign subsidiaries of 2016, the Company had the ability$1.0 million and intent to block the payment of distributions; the Company changed its stance in the second quarter of 2016 to be open to joint venture distributions. This change coincided with the a re-evaluation of the joint venture partners during that quarter of the willingness and ability of the entity to distribute excess cash balances given the maturity, stability and revised growth expectations of the joint venture operations. The impact of this change in assertion was to reduce the income tax benefit for the year ended December 31, 2016 by $2.9 million.$1.3 million, respectively.
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
| | | | | | 15. | Employee Benefit Plans |
Defined contribution plansContribution Plans The Company maintains a 401(k) Plan for substantially all full time U.S. employees (the “401(k) Plan”). Company contributions are allocated to accounts set aside for each employee’s retirement. Employees generally may contribute up to 50% of their compensation to individual accounts within the 401(k) Plan subject to Internal Revenue Service limitations. Employer contributions are equal to 50% of the first 6% of employee’s eligible annual cash compensation, also subject to Internal Revenue Service limitations. Expense recognized related to the 401(k) Plan totaled approximately $2.1$1.0 million, $2.4$1.0 million and $1.7$0.9 million, for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, respectively. Defined benefit pension plansBenefit Pension Plans The Company maintains defined benefit pension plans covering union and certain other employees. These plans are frozen to new participation.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) The table that follows contains the accumulated benefit obligation and reconciliations of the changes in projected benefit obligation, the changes in plan assets and funded status: | | | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | | Non-U.S. Plans | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | Accumulated benefit obligation | $ | 10,605 |
| | $ | 10,626 |
| | $ | 15,054 |
| | $ | 13,162 |
| Accumulated benefit obligation | $ | 10,093 | | | $ | 9,661 | | | $ | 13,761 | | | $ | 12,240 | | | | | | | | | | | | | | | | | | Change in projected benefit obligation | | | | | | | | Change in projected benefit obligation | | Projected benefit obligation at beginning of year | $ | 10,626 |
| | $ | 10,824 |
| | $ | 13,532 |
| | $ | 12,988 |
| Projected benefit obligation at beginning of year | $ | 9,661 | | | $ | 10,605 | | | $ | 12,617 | | | $ | 14,904 | | Service cost | — |
| | — |
| | 177 |
| | 155 |
| Service cost | — | | | — | | | 92 | | | 92 | | Interest cost | 393 |
| | 425 |
| | 312 |
| | 391 |
| Interest cost | 376 | | | 350 | | | 291 | | | 293 | | Actuarial loss | 292 |
| | 70 |
| | 388 |
| | 1,842 |
| | Actuarial (gain) loss | | Actuarial (gain) loss | 728 | | | (602) | | | 1,635 | | | (386) | | Benefits paid | (706 | ) | | (693 | ) | | (502 | ) | | (506 | ) | Benefits paid | (672) | | | (692) | | | (525) | | | (1,621) | | Other | — |
| | — |
| | 8 |
| | 7 |
| Other | — | | | — | | | (51) | | | 17 | | Currency translation adjustment | — |
| | — |
| | 1,553 |
| | (1,345 | ) | Currency translation adjustment | — | | | — | | | 97 | | | (682) | | Projected benefit obligation at end of year | $ | 10,605 |
| | $ | 10,626 |
| | $ | 15,468 |
| | $ | 13,532 |
| Projected benefit obligation at end of year | $ | 10,093 | | | $ | 9,661 | | | $ | 14,156 | | | $ | 12,617 | | | | | | | | | | | | | | | | | | Change in plan assets | | | | | | | | Change in plan assets | | Fair value of plan assets at beginning of year | $ | 9,282 |
| | $ | 8,985 |
| | $ | 6,316 |
| | $ | 6,393 |
| Fair value of plan assets at beginning of year | $ | 9,179 | | | $ | 10,055 | | | $ | 5,671 | | | $ | 7,322 | | Actual return on plan assets | 1,110 |
| | 906 |
| | 536 |
| | 940 |
| Actual return on plan assets | 1,370 | | | (452) | | | 831 | | | (207) | | Employer and employee contributions | 410 |
| | 145 |
| | 485 |
| | 497 |
| Employer and employee contributions | 323 | | | 307 | | | 521 | | | 525 | | Benefits paid | (706 | ) | | (693 | ) | | (506 | ) | | (510 | ) | Benefits paid | (672) | | | (692) | | | (525) | | | (1,621) | | Other | (41 | ) | | (61 | ) | | — |
| | — |
| Other | — | | | (39) | | | — | | | — | | Currency translation adjustment | — |
| | — |
| | 615 |
| | (1,004 | ) | Currency translation adjustment | — | | | — | | | 214 | | | (348) | | Fair value of plan assets at end of year | $ | 10,055 |
| | $ | 9,282 |
| | $ | 7,446 |
| | $ | 6,316 |
| Fair value of plan assets at end of year | $ | 10,200 | | | $ | 9,179 | | | $ | 6,712 | | | $ | 5,671 | | Funded Status | $ | (550 | ) | | $ | (1,344 | ) | | $ | (8,022 | ) | | $ | (7,216 | ) | | Funded status | | Funded status | $ | 107 | | | $ | (482) | | | $ | (7,444) | | | $ | (6,946) | | | | | | | | | | | | | | | | | | Weighted-average assumptions | | | | | | | | Weighted-average assumptions | | Discount rates | 3.33%-3.45% | | 3.71%-3.90% | | 1.80%-2.40% | | 1.70%-2.60% | Discount rates | 3.25%-3.35% | | 4.02%-4.08% | | 0.90%-1.95% | | 2.00%-2.80% | Rate of compensation increase | N/A | | N/A | | 2.00%-3.70% | | 2.00%-3.90% | Rate of compensation increase | N/A | | N/A | | 2.00%-3.50% | | 2.00%-3.70% | Amounts recognized in the statement of financial position consist of: | | | | | | | | Amounts recognized in the statement of financial position consist of: | | Non-current assets | $ | 1,935 |
| | $ | 1,409 |
| | $ | — |
| | $ | — |
| Non-current assets | $ | 2,420 | | | $ | 1,830 | | | $ | — | | | $ | — | | Other current liabilities | — |
| | — |
| | (78 | ) | | (65 | ) | Other current liabilities | — | | | — | | | (77) | | | (83) | | Other long-term liabilities | (2,485 | ) | | (2,753 | ) | | (7,944 | ) | | (7,151 | ) | Other long-term liabilities | (2,313) | | | (2,312) | | | (7,367) | | | (6,863) | | Net amount recognized | $ | (550 | ) | | $ | (1,344 | ) | | $ | (8,022 | ) | | $ | (7,216 | ) | Net amount recognized | $ | 107 | | | $ | (482) | | | $ | (7,444) | | | $ | (6,946) | |
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts)
The following table contains the components of net periodic benefit cost: | | | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | | Non-U.S. Plans | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | | | | | | | | | | | | | Components of Net Periodic Benefit Cost | | | | | | | | | | | | Components of Net Periodic Benefit Cost | | | | | | | | | | | | Service cost | $ | — |
| | $ | — |
| | $ | — |
| | $ | 177 |
| | $ | 155 |
| | $ | 125 |
| Service cost | $ | — | | | $ | — | | | $ | — | | | $ | 92 | | | $ | 92 | | | $ | 98 | | Interest cost | 393 |
| | 425 |
| | 410 |
| | 312 |
| | 391 |
| | 384 |
| Interest cost | 376 | | | 350 | | | 393 | | | 291 | | | 293 | | | 286 | | Expected return on plan assets | (467 | ) | | (513 | ) | | (580 | ) | | (226 | ) | | (253 | ) | | (255 | ) | Expected return on plan assets | (412) | | | (477) | | | (467) | | | (199) | | | (222) | | | (226) | | Amortization of actuarial loss | 14 |
| | 27 |
| | — |
| | 41 |
| | 7 |
| | — |
| Amortization of actuarial loss | 29 | | | 14 | | | 14 | | | 178 | | | 77 | | | 35 | | | Net periodic (benefit) cost | $ | (60 | ) | | $ | (61 | ) | | $ | (170 | ) | | $ | 304 |
| | $ | 300 |
| | $ | 254 |
| Net periodic (benefit) cost | $ | (7) | | | $ | (113) | | | $ | (60) | | | $ | 362 | | | $ | 240 | | | $ | 193 | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted-average assumptions | | | | | | | | | | | | Weighted-average assumptions | | Discount rates | 3.71%-3.90% | | 3.87%-4.15% | | 3.52%-3.75% | | 1.70%-2.60% | | 2.20%-3.70% | | 2.10%-3.50% | Discount rates | 4.02%-4.08% | | 3.33%-3.45% | | 3.71%-3.90% | | 2.00%-2.80% | | 1.80%-2.40% | | 1.70%-2.60% | Rate of compensation increase | N/A | | N/A | | N/A | | 2.00%-3.90% | | 2.00%-3.60% | | 2.00%-3.70% | Rate of compensation increase | N/A | | N/A | | N/A | | 2.00%-3.70% | | 2.00%-3.70% | | 2.00%-3.90% | Expected long-term rates or return | 4.75%-6.50% | | 5.50%-7.00% | | 5.00%-8.00% | | 3.50%-4.00% | | 4.00%-4.20% | | 3.90%-4.50% | Expected long-term rates or return | 5.00%-6.00% | | 4.75%-6.50% | | 4.75%-6.50% | | 3.50%-4.00% | | 3.30%-4.00% | | 3.50%-4.00% |
The expected return on plan assets is based on the Company’s expectation of the long-term average rate of return of the capital markets in which the plans invest. The expected return reflects the target asset allocations and considers the historical returns earned for each asset category. The Company determines the discount rate assumptions by referencing high-quality long-term bond rates that are matched to the duration of our benefit obligations, with appropriate consideration of local market factors, participant demographics and benefit payment terms. The net amounts recognized in accumulated other comprehensive loss related to the Company’s defined benefit pension plans consisted of the following: | | | | | | | | | | | | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | | | Unrecognized loss | $ | 2,099 |
| | $ | 1,994 |
| | $ | 1,364 |
|
| | | | | | | | | | | | | | | | | | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | | | | | | | Unrecognized loss | $ | 2,719 | | | $ | 2,371 | | | $ | 2,052 | |
In the next fiscal year, $0.1$0.4 million of unrecognized loss within accumulated other comprehensive loss is expected to be recognized as a component of net periodic benefit cost. The Company’s investment policies employ an approach whereby a mix of equities and fixed income investments are used to maximize the long-term return on plan assets for a prudent level of risk. The investment portfolio primarily contains a diversified blend of equity and fixed income investments. Equity investments are diversified across domestic and non-domestic stocks, and investment and market risk are measured and monitored on an ongoing basis. The Company’s actual asset allocations are in line with target allocations and the Company does not have concentration within individual or similar investments that would pose a significant concentration risk to the Company. The Company’s pension plan asset allocations by asset category at December 31, 20172019 and 20162018 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | U.S. Plans | | | | Non-U.S. Plans | | | | 2019 | | 2018 | | 2019 | | 2018 | Equity securities | 52.7 | % | | 47.6 | % | | 39.3 | % | | 37.8 | % | Debt securities | 36.2 | % | | 42.3 | % | | 56.6 | % | | 57.9 | % | Other | 11.1 | % | | 10.1 | % | | 4.1 | % | | 4.3 | % |
| | | | | | | | | | | | | | U.S. Plans | | Non-U.S. Plans | | 2017 | | 2016 | | 2017 | | 2016 | Equity securities | 58.7 | % | | 56.0 | % | | 47.1 | % | | 45.5 | % | Debt securities | 29.4 | % | | 35.1 | % | | 49.3 | % | | 50.7 | % | Other | 11.9 | % | | 8.9 | % | | 3.6 | % | | 3.8 | % |
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts)
The fair values of pension plan assets by asset category at December 31, 20172019 and 20162018 are as follows: | | | Total as of December 31, 2017 | | Level 1 | | Level 2 | | Level 3 | | Total as of December 31, 2019 | | Level 1 | | Level 2 | | Level 3 | Cash and cash equivalents | $ | 1,202 |
| | $ | 1,202 |
| | $ | — |
| | $ | — |
| Cash and cash equivalents | $ | 1,163 | | | $ | 1,163 | | | $ | — | | | $ | — | | Accrued dividends | 3 |
| | 3 |
| | — |
| | — |
| Accrued dividends | 5 | | | 5 | | | — | | | — | | Global equities | 9,413 |
| | 9,413 |
| | — |
| | — |
| Global equities | 8,017 | | | 8,017 | | | — | | | — | | Fixed income securities | 6,630 |
| | — |
| | 6,630 |
| | — |
| Fixed income securities | 7,494 | | | — | | | 7,494 | | | — | | Group annuity/insurance contracts | 253 |
| | — |
| | — |
| | 253 |
| Group annuity/insurance contracts | 233 | | | — | | | — | | | 233 | | Total | $ | 17,501 |
| | $ | 10,618 |
| | $ | 6,630 |
| | $ | 253 |
| Total | $ | 16,912 | | | $ | 9,185 | | | $ | 7,494 | | | $ | 233 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total as of December 31, 2018 | | Level 1 | | Level 2 | | Level 3 | | Total as of December 31, 2016 | | Level 1 | | Level 2 | | Level 3 | | Cash and cash equivalents | $ | 842 |
| | $ | 842 |
| | $ | — |
| | $ | — |
| Cash and cash equivalents | $ | 923 | | | $ | 923 | | | $ | — | | | $ | — | | Accrued dividends | 3 |
| | 3 |
| | — |
| | — |
| Accrued dividends | 4 | | | 4 | | | — | | | — | | Global equities | 8,066 |
| | 8,066 |
| | — |
| | — |
| Global equities | 6,515 | | | 6,515 | | | — | | | — | | Fixed income securities | 6,461 |
| | — |
| | 6,461 |
| | — |
| Fixed income securities | 7,169 | | | — | | | 7,169 | | | — | | Group annuity/insurance contracts | 226 |
| | — |
| | — |
| | 226 |
| Group annuity/insurance contracts | 239 | | | — | | | — | | | 239 | | Total | $ | 15,598 |
| | $ | 8,911 |
| | $ | 6,461 |
| | $ | 226 |
| Total | $ | 14,850 | | | $ | 7,442 | | | $ | 7,169 | | | $ | 239 | |
The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed during 20172019 due to the following: | | | | | Beginning balance, December 31, 2016 | $ | 226 |
| Actual return on assets related to assets still held | 7 |
| Purchases, sales and settlements | 20 |
| Ending balance, December 31, 2017 | $ | 253 |
|
| | | | | | Beginning balance, December 31, 2018 | $ | 239 | | Actual return on assets related to assets still held | 9 | | Purchases, sales and settlements | (15) | | Ending balance, December 31, 2019 | $ | 233 | |
No assets were transferred between levels of the fair value hierarchy during the years ended December 31, 20172019 and December 31, 2016.2018. Quoted market prices are used to value investments when available. Investments in securities traded on exchanges are valued at the last reported sale prices on the last business day of the year or, if not available, the last reported bid prices. The Company’s cash contributions to its defined benefit pension plans in 20182020 are estimated to be approximately $0.8$0.7 million. Estimated projected benefit payments from the plans as of December 31, 20172019 are as follows: | | 2018 | $ | 1,219 |
| | 2019 | 1,218 |
| | 2020 | 1,362 |
| 2020 | $ | 1,194 | | 2021 | 1,315 |
| 2021 | 1,219 | | 2022 | 1,281 |
| 2022 | 1,178 | | 2023-2027 | 6,821 |
| | 2023 | | 2023 | 1,243 | | 2024 | | 2024 | 1,216 | | 2025 and thereafter | | 2025 and thereafter | 6,131 | |
Multiemployer planPlan Morton hourlyHourly union employees of the Morton business within the former Metalex business were covered under the National Shopmen Pension Fund (EIN 52-6122274, plan number 001), a union-sponsored and trusteed multiemployer plan which required the Company to contribute a negotiated amount per hour worked by the employees covered by the plan. The Company made the decision to withdraw from this plan in August 2012. The withdrawal amount was finalized during 2013. The Company retained the withdrawal liability related to the mutliemployer plan following the sale of Metalex. As of December 31, 2017,2019, a liability of $1.5$1.1 million is recorded within other long-term liabilities and a liability of $0.2 million is recorded within other current liabilities on the consolidated balance sheets. As of December 31, 2016, $1.72018, $1.3 million is recorded within other long-term liabilities and $0.2 million is recorded within other current liabilities on the consolidated balance sheets. The total liability will be paid in equal monthly installments through April 2026, and interest expense will be incurred associated with the discounting of this liability through that date.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts)
Postretirement health careHealth Care and life insurance plansLife Insurance Plans The Company also provides postretirement health care benefits and life insurance coverage to certain eligible former employees at one of its segments. The costs of retiree health care benefits and life insurance coverage are accrued over the employee benefit period. The table that follows contains the accumulated benefit obligation and reconciliations of the changes in projected benefit obligation, the changes in plan assets and funded status: | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | Accumulated benefit obligation | $ | 1,423 |
| | $ | 1,972 |
| Accumulated benefit obligation | $ | 1,287 | | | $ | 1,344 | | | | | | | | | | Change in projected benefit obligation | | | | Change in projected benefit obligation | | Projected benefit obligation at beginning of year | $ | 1,972 |
| | $ | 2,094 |
| Projected benefit obligation at beginning of year | $ | 1,344 | | | $ | 1,423 | | Interest cost | 68 |
| | 76 |
| Interest cost | 50 | | | 44 | | Actuarial gain | (483 | ) | | (37 | ) | | Actuarial loss | | Actuarial loss | 11 | | | 37 | | Benefits paid | (134 | ) | | (161 | ) | Benefits paid | (118) | | | (160) | | | Projected benefit obligation at end of year | $ | 1,423 |
| | $ | 1,972 |
| Projected benefit obligation at end of year | $ | 1,287 | | | $ | 1,344 | | | | | | | | | | Change in plan assets | | | | Change in plan assets | | Employer contributions | $ | 134 |
| | $ | 161 |
| Employer contributions | $ | 118 | | | $ | 160 | | Benefits paid | (134 | ) | | (161 | ) | Benefits paid | (118) | | | (160) | | Fair value of plan assets at end of year | $ | — |
| | $ | — |
| Fair value of plan assets at end of year | $ | — | | | $ | — | | Funded Status | $ | (1,423 | ) | | $ | (1,972 | ) | | Funded status | | Funded status | $ | (1,287) | | | $ | (1,344) | | | | | | | | | | Weighted-average assumptions | | | | Weighted-average assumptions | | Discount rates | 3.26 | % | | 3.64 | % | Discount rates | 3.20 | % | | 3.96 | % | Amounts recognized in the statement of financial position consist of: | | | | Amounts recognized in the statement of financial position consist of: | | Other current liabilities | $ | (142 | ) | | $ | (208 | ) | Other current liabilities | $ | (132) | | | $ | (147) | | Other long-term liabilities | (1,281 | ) | | (1,764 | ) | Other long-term liabilities | (1,155) | | | (1,197) | | Net amount recognized | $ | (1,423 | ) | | $ | (1,972 | ) | Net amount recognized | $ | (1,287) | | | $ | (1,344) | |
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was a blended rate of 8.40%6.00% and 5.50%6.40% at December 31, 20172019 and December 31, 2016,2018, respectively. It was assumed that these rates will decline by 1% to 3% every 5 years for1.5% over the next 15seven years. An increase or decrease in the medical trend rate of 1% would increase or decrease the accumulated postretirement benefit obligation by approximately $0.1 million and $0.1 million, respectively.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts)
The table that follows contains the components of net periodic benefit costs: | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | | | | | | | | | Components of net periodic benefit cost | | | | | | Components of net periodic benefit cost | | | | | | Interest cost | $ | 68 |
| | $ | 76 |
| | $ | 92 |
| Interest cost | $ | 50 | | | $ | 44 | | | $ | 68 | | Amortization of the net (gain) loss from earlier periods | (18 | ) | | (13 | ) | | 1 |
| | Net periodic benefit cost | $ | 50 |
| | $ | 63 |
| | $ | 93 |
| | Amortization of the net gain from earlier periods | | Amortization of the net gain from earlier periods | (68) | | | (77) | | | (18) | | Net periodic (benefit) cost | | Net periodic (benefit) cost | $ | (18) | | | $ | (33) | | | $ | 50 | | | | | | | | | | | | | | Weighted-average assumptions | | | | | | Weighted-average assumptions | | Discount rates | 3.64 | % | | 3.82 | % | | 3.82 | % | Discount rates | 3.96 | % | | 3.26 | % | | 3.64 | % |
The net amounts recognized in accumulated other comprehensive loss related to the Company’s other postretirement healthcare and life insurance plans consisted of the following: | | | | | | | | | | | | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | | | Unrecognized gain | $ | (582 | ) | | $ | (217 | ) | | $ | (214 | ) |
| | | | | | | | | | | | | | | | | | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | | | | | | | Unrecognized gain | $ | (490) | | | $ | (548) | | | $ | (582) | |
In the next fiscal year, $0.1 million of unrecognized gain within accumulated other comprehensive loss is expected to be recognized as a component of net periodic benefit cost.
The Company’s cash contributions to its postretirement benefit plan in 20182020 are not yet determined but are expected to equal the projected benefits from the plan. Estimated projected benefit payments from the plan at December 31, 20172019 are as follows: | | | | | | 2020 | $ | 133 | | 2021 | 129 | | 2022 | 121 | | 2023 | 113 | | 2024 | 106 | | 2025-2029 | 436 | |
| | | | | 2018 | $ | 144 |
| 2019 | 139 |
| 2020 | 132 |
| 2021 | 123 |
| 2022 | 116 |
| 2023-2027 | 475 |
|
| | | | | | 16. | Business Segments, Geographic and Customer Information |
TheIn the first quarter of 2019, as part of a review of the Company’s organizational structure, the Company made certain strategic leadership changes which required a reassessment of reportable segments. Based on this evaluation, the Company changed how it makes operating decisions, assesses performance of the business, activities are organized intoand allocates resources. As a result of the evaluation, the Company reduced the number of operating and reportable segments based on their similar economic characteristics, products, production processes, types of customers and distribution methods. The Company is a global manufacturer of a broad range offrom 4 to 3. Reportable segments include the former finishing segment renamed as the industrial products and is organized into four reportable segments: finishing, components,segment, the former seating and acoustics. The Company’s 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. Thecomponents segments combined into one engineered components segment, is a diversified manufacturer of expanded and perforated metal components, slip-resistant walking 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. Theformer acoustics segment manufactures engineered non-woven, fiber-based acoustical products forrenamed as the automotive industry.fiber solutions segment.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) Net sales from continuing operations relating to the Company’s reportable segments are as follows: | | | | | | | | | | | | | | Year Ended | | December 31, 2017 | | December 31, 2016 | | December 31, 2015 | Finishing | $ | 200,284 |
| | $ | 196,883 |
| | $ | 191,394 |
| Components | 82,621 |
| | 97,667 |
| | 122,133 |
| Seating | 159,129 |
| | 161,050 |
| | 176,792 |
| Acoustics | 206,582 |
| | 249,919 |
| | 218,047 |
| Net sales | $ | 648,616 |
| | $ | 705,519 |
| | $ | 708,366 |
|
| | | | | | | | | | | | | | | | | | | Year Ended | | | | | | December 31, 2019 | | December 31, 2018 | | December 31, 2017 | Industrial | $ | 201,517 | | | $ | 207,637 | | | $ | 200,284 | | Engineered Components | 136,380 | | | 160,322 | | | 159,129 | | Fiber Solutions | — | | | — | | | 22,683 | | Net sales | $ | 337,897 | | | $ | 367,959 | | | $ | 382,096 | |
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) from continuing operations before interest expense, income tax provision (benefit), for income taxes, depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA, excluding the impact of operational restructuring charges and non-cash or non-operational losses or gains, including goodwill and long-lived asset impairment charges, gains or losses on disposal of property, plant and equipment, divestitures and extinguishment of debt, integration and other operational restructuring charges, transactional legal fees,transaction-related expenses, other professional fees, purchase accounting adjustments, lease expense associated with vacated facilities 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 itsthe corporate results and are not allocated to itsthe 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 segment Adjusted EBITDA to operating results presented on a GAAP basis.
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) Adjusted EBITDA information relating to the Company’s reportable segments is presented below followed by a reconciliation of total segment Adjusted EBITDA to consolidated incomeloss before taxes: | | | Year Ended | | Year Ended | | | December 31, 2017 | | December 31, 2016 | | December 31, 2015 | | December 31, 2019 | | December 31, 2018 | | December 31, 2017 | Segment Adjusted EBITDA | | | | | | Segment Adjusted EBITDA | | | | | | Finishing | $ | 27,661 |
| | $ | 24,200 |
| | $ | 25,799 |
| | Components | 9,888 |
| | 14,249 |
| | 20,943 |
| | Seating | 16,348 |
| | 16,122 |
| | 19,766 |
| | Acoustics | 27,341 |
| | 27,202 |
| | 27,515 |
| | Industrial | | Industrial | $ | 20,945 | | | $ | 28,979 | | | $ | 27,661 | | Engineered Components | | Engineered Components | 15,098 | | | 19,747 | | | 16,348 | | Fiber Solutions | | Fiber Solutions | — | | | — | | | 2,059 | | | $ | 81,238 |
| | $ | 81,773 |
| | $ | 94,023 |
| | $ | 36,043 | | | $ | 48,726 | | | $ | 46,068 | | | | | | | | | Interest expense | (1,370 | ) | | (1,561 | ) | | (1,870 | ) | | Interest expense-net | | Interest expense-net | (769) | | | (793) | | | (1,232) | | Loss on debt extinguishment | (182 | ) | | — |
| | — |
| Loss on debt extinguishment | — | | | — | | | (182) | | Depreciation and amortization | (38,577 | ) | | (43,697 | ) | | (44,938 | ) | Depreciation and amortization | (21,615) | | | (20,684) | | | (21,229) | | Impairment charges | — |
| | (63,285 | ) | | (94,126 | ) | | Gain (loss) on disposal of property, plant and equipment - net | 759 |
| | (869 | ) | | (109 | ) | | | Loss (gain) on disposal of property, plant and equipment - net | | Loss (gain) on disposal of property, plant and equipment - net | (303) | | | 1,318 | | | 320 | | Loss on divestiture | (8,730 | ) | | — |
| | — |
| Loss on divestiture | — | | | — | | | (8,730) | | Restructuring | (4,275 | ) | | (6,634 | ) | | (3,800 | ) | Restructuring | (3,791) | | | (877) | | | (2,484) | | Transaction-related expenses | — |
| | — |
| | (789 | ) | | | Integration and other restructuring costs | — |
| | (1,621 | ) | | (2,713 | ) | Integration and other restructuring costs | (1,259) | | | (128) | | | — | | | Total segment income (loss) before income taxes | 28,863 |
| | (35,894 | ) | | (54,322 | ) | Total segment income (loss) before income taxes | 8,306 | | | 27,562 | | | 12,531 | | Corporate general and administrative expenses | (13,486 | ) | | (17,613 | ) | | (12,860 | ) | Corporate general and administrative expenses | (11,225) | | | (12,065) | | | (13,453) | | Corporate interest expense | (31,719 | ) | | (30,282 | ) | | (29,965 | ) | | Corporate interest expense-net | | Corporate interest expense-net | (32,209) | | | (32,484) | | | (31,719) | | Corporate gain on debt extinguishment | 2,383 |
| | — |
| | — |
| Corporate gain on debt extinguishment | — | | | — | | | 2,383 | | Corporate depreciation | (357 | ) | | (344 | ) | | (310 | ) | Corporate depreciation | (620) | | | (453) | | | (357) | | Corporate restructuring | 9 |
| | (598 | ) | | — |
| Corporate restructuring | (163) | | | — | | | 9 | | Corporate transaction-related expenses | — |
| | — |
| | (97 | ) | Corporate transaction-related expenses | (1,005) | | | — | | | — | | Corporate integration and other restructuring | 569 |
| | (359 | ) | | (6,333 | ) | Corporate integration and other restructuring | (131) | | | 36 | | | 569 | | Corporate loss on disposal of property, plant and equipment | — |
| | (11 | ) | | — |
| Corporate loss on disposal of property, plant and equipment | — | | | — | | | — | | Corporate share based compensation (expense) income | (1,119 | ) | | 752 |
| | (7,969 | ) | | Loss before income taxes | $ | (14,857 | ) | | $ | (84,349 | ) | | $ | (111,856 | ) | | Corporate share based compensation | | Corporate share based compensation | (2,368) | | | (2,295) | | | (979) | | Loss from continuing operations before income taxes | | Loss from continuing operations before income taxes | $ | (39,415) | | | $ | (19,699) | | | $ | (31,016) | |
Other financial information from continuing operations relating to the Company’s reportable segments is as follows at December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017:
| | | | | | | | | | | | | | | | | | | Year Ended | | | | | | December 31, 2019 | | December 31, 2018 | | December 31, 2017 | Depreciation and amortization | | | | | | Industrial | $ | 12,952 | | | $ | 12,196 | | | $ | 12,198 | | Engineered Components | 8,663 | | | 8,488 | | | 8,435 | | Fiber Solutions | — | | | — | | | 596 | | Corporate | 620 | | | 453 | | | 357 | | | $ | 22,235 | | | $ | 21,137 | | | $ | 21,586 | |
| | | | | | | | | | | | | | | | | | | Year Ended | | | | | | December 31, 2019 | | December 31, 2018 | | December 31, 2017 | Capital expenditures | | | | | | Industrial | $ | 6,650 | | | $ | 4,365 | | | $ | 5,247 | | Engineered Components | 2,448 | | | 3,207 | | | 2,709 | | Fiber Solutions | — | | | — | | | 534 | | Corporate | 490 | | | 823 | | | 557 | | | $ | 9,588 | | | $ | 8,395 | | | $ | 9,047 | |
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) | | | | | | | | | | | | | December 31, 2019 | | December 31, 2018 | Assets | | | | Industrial | $ | 235,726 | | | $ | 230,185 | | Engineered Components | 82,197 | | | 90,175 | | Assets Held for Sale | — | | | 165,411 | | Total segments | 317,923 | | | 485,771 | | Corporate and eliminations | 69,178 | | | 17,826 | | Consolidated | $ | 387,101 | | | $ | 503,597 | |
Other financial information relating to the Company’s reportable segments is as follows at December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015: | | | | | | | | | | | | | | Year Ended | | December 31, 2017 | | December 31, 2016 | | December 31, 2015 | Depreciation and amortization | | | | | | Finishing | $ | 12,198 |
| | $ | 13,693 |
| | $ | 11,407 |
| Components | 7,821 |
| | 9,827 |
| | 8,587 |
| Seating | 8,435 |
| | 8,894 |
| | 13,693 |
| Acoustics | 10,123 |
| | 11,283 |
| | 11,251 |
| Corporate | 357 |
| | 344 |
| | 310 |
| | $ | 38,934 |
| | $ | 44,041 |
| | $ | 45,248 |
|
| | | | | | | | | | | | | | Year Ended | | December 31, 2017 | | December 31, 2016 | | December 31, 2015 | Capital expenditures | | | | | | Finishing | $ | 5,247 |
| | $ | 5,943 |
| | $ | 9,090 |
| Components | 3,797 |
| | 2,950 |
| | 4,875 |
| Seating | 2,709 |
| | 3,602 |
| | 3,804 |
| Acoustics | 3,563 |
| | 6,058 |
| | 14,881 |
| Corporate | 557 |
| | 1,227 |
| | 136 |
| | $ | 15,873 |
| | $ | 19,780 |
| | $ | 32,786 |
|
| | | | | | | | | | December 31, 2017 | | December 31, 2016 | Assets | | | | Finishing | $ | 241,776 |
| | $ | 232,550 |
| Components | 72,724 |
| | 81,450 |
| Seating | 99,155 |
| | 105,184 |
| Acoustics | 145,490 |
| | 172,769 |
| Total segments | 559,145 |
| | 591,953 |
| Corporate and eliminations | (12,822 | ) | | (8,117 | ) | Consolidated | $ | 546,323 |
| | $ | 583,836 |
|
Net sales and long-lived asset information by geographic area from continuing operations are as follows at December 31, 20172019 and 20162018 and for the years ended December 31, 2017, 20162019, 2018 and 2015: | | | | | | | | | | | | | | Year Ended | | December 31, 2017 | | December 31, 2016 | | December 31, 2015 | Net sales by region | | | | | | United States | $ | 441,691 |
| | $ | 492,667 |
| | $ | 510,526 |
| Europe | 151,628 |
| | 154,307 |
| | 138,578 |
| Mexico | 50,080 |
| | 49,594 |
| | 48,242 |
| Other | 5,217 |
| | 8,951 |
| | 11,020 |
| | $ | 648,616 |
| | $ | 705,519 |
| | $ | 708,366 |
|
2017: | | | | | | | | Year Ended | | | December 31, 2017 | | December 31, 2016 | | December 31, 2019 | | December 31, 2018 | | December 31, 2017 | Long-lived assets | | | | | Net sales by region | | Net sales by region | | | | | | United States | $ | 197,174 |
| | $ | 219,591 |
| United States | $ | 213,601 | | | $ | 222,607 | | | $ | 216,886 | | Europe | 70,797 |
| | 84,638 |
| | Germany | | Germany | 76,273 | | | 89,247 | | | 107,137 | | Rest of Europe | | Rest of Europe | 34,535 | | | 43,416 | | | 44,491 | | Mexico | 13,484 |
| | 13,734 |
| Mexico | 9,085 | | | 8,762 | | | 8,365 | | Other | 4,240 |
| | 4,118 |
| Other | 4,403 | | | 3,927 | | | 5,217 | | | $ | 285,695 |
| | $ | 322,081 |
| | $ | 337,897 | | | $ | 367,959 | | | $ | 382,096 | |
| | | | | | | | | | | | | December 31, 2019 | | December 31, 2018 | Long-lived assets | | | | United States | $ | 91,144 | | | $ | 79,410 | | Germany | 48,492 | | | 52,264 | | Rest of Europe | 9,378 | | | 7,876 | | Mexico | 3,435 | | | 1,830 | | Other | 3,327 | | | 3,486 | | | $ | 155,776 | | | $ | 144,866 | |
Net sales attributed to geographic locations are based on the locations producingcountry of origin of the final sale with the external sales.customer, which in certain cases may be manufactured in other countries at facilities within the Company’s global network. Long-lived assets by geographic location consist of the net book values of property, plant and equipment, ROU lease assets and amortizable intangible assets.
Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
| | | | | | 17. | 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 named the Company and Jeffry N. Quinn as defendants (“Defendants”) and asserted 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 arose 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 sought 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. On September 14, 2017, the New York Supreme Court dismissed, with prejudice, all claims asserted by the Plaintiff. The Plaintiff had the right to appeal the New York Supreme Court’s dismissal within 30 days of having been served written notice that the judgment or order has been entered, along with a copy of the judgment order. As of December 31, 2017, the Plaintiff’s 30 day appeal period has expired without an appeal being filed.
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. Theindustrial segment. As of December 31, 2019, the Company is actively investigatinghas successfully investigated and defending suchdefended all filed claims and has gathered additional information to assess the total potential exposure related to this matter, including the potential of additional claims.for future losses is deemed remote. In the opinion of management, the resolution of this contingency willdid not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows. In addition to the casesmatters 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 and can be reasonably estimated and is not covered by insurance.estimated. 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 December 31, 20172019 and December 31, 2016,2018, the Company held reserves of $1.0 million for environmental matters at one1 location. The ultimate cost of any remediation required will depend on the results of future investigation. Based upon
Jason Industries, Inc. Notes to Consolidated Financial Statements (In thousands, except share and per share amounts) 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. In connection with the sale of the North American fiber solutions business on August 30, 2019, the purchase price (subject to a net working capital adjustment as defined by the Sale Agreement), is currently in dispute between the Company and the Motus Group. The Motus Group has proposed a working capital adjustment that results in a purchase price reduction of $5.2 million. The Company believes this claim lacks merit and a loss for the amount subject to dispute is not probable as of December 31, 2019. See Note 2, “Discontinued Operations and Divestitures” for additional information relating to the Transaction.
ExchangeOn February 27, 2020, the Company acquired selected assets of Series A Preferred StockMatchless Metal Polishing (“Matchless”), a North American manufacturer of high-quality polishing buffs, compounds, and chemicals with annual sales of approximately $8 million, for common stocka preliminary cash purchase price of Jason Industries, Inc.
On January 22, 2018,$5 million which was funded with cash on hand. The purchase price includes $1 million that is contingent upon certain holdersperformance conditions. Through the acquisition of Matchless, the Company expanded its product line offerings within North America. The business will be integrated into the Company’s industrial segment. The acquisition includes the purchase of product lines, customers and selected assets and does not include manufacturing operations, with Matchless production transitioning to existing industrial facilities The preliminary purchase price allocation is not disclosed as the initial accounting is incomplete as of the Company’s Series A Preferred Stock exchanged 12,136 shares of Series A Preferred Stock for 1,395,640 shares of Company common stock, a conversion rate of 115 shares of Company common stock for each share of Series A Preferred Stock. Under the terms of the Series A Preferred Stock agreements, holders of the Series A Preferred Stock have the option to convert each share of Series A Preferred Stock into approximately 81.18 shares of the Company’s common stock, subject to certain adjustments in the conversion rate. The excess of the book value of the Series A Preferred Stock over the fair value of the Company common stock issued in the exchange and the fair value of the inducement offer, represented by the exchange conversion rate over the agreement conversion rate, will be recorded as a net increase to additional paid-in capital on the consolidated balance sheets. Subsequent to the exchange, the Company had 37,529 shares of Series A Preferred Stock outstanding.filing date.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures DisclosureWe maintain disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed(as defined in our reports filed or submittedRule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange(“Exchange Act”)), that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controlsforms, and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.
As required by Rules 13a-15 and 15d-15 underOur management, with the Exchange Act,participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation ofevaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2017.2019. Based upon theiron that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2019, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective at a reasonable assurance level due to the material weakness in our internal control over financial reporting discussed below.of assurance.
Management’s Report on Internal Control Over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial statements in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this Annual Report on Form 10-K. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). Based on management'smanagement’s assessment and those criteria, management concluded that our internal control over financial reporting was not effective at a reasonable assurance level due to the material weakness in our internal control as of December 31, 2017.2019. Remediation of Previously Identified Material Weakness in Internal Control over Financial Reporting InDuring the the thirdfirst quarter of 2017, our management2019, it was identified deficiencies that when aggregated, resulted in a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Our management has identified a material weakness in the design and operation of control activities. Specifically, we did not design and maintain effective internal controls necessaryover the accounting for the recoverability of deferred tax assets. Specifically, the internal controls to allowassess the recoverability of a deferred tax asset for a detailed review over non-routine transactions on a timely basis and diddisallowed interest expense were not haveperformed at the appropriate complementlevel of resources at certain of our facilities in place for a sufficient period of time. As a result of this material weakness, we inappropriately accounted for the divestiture of Acoustics Europeprecision. This control deficiency resulted in the threeoverstatement of the tax provision and six month periods ended June 30, 2017 and for depreciation expense in 2016 and the first six months of 2017. While the impact of these errors is not material to the previously reported financial statements, as discussed in Note 2 to the financial statements, we revised our previously issued annual financial statementsnet deferred tax liabilities as of and for the year ended December 31, 2016. See Note 2 to the consolidated2018. As a result of this error, we restated our previously reported annual financial statements included in Part 2, Item 8 offor the year and quarter ended December 31, 2018 on Form 10-K/A. Additionally, this report for further information regarding this revision. These control deficienciesdeficiency could result in additional misstatements of the misstatement of accountaforementioned balances or disclosures that would result in a material misstatement of theto our annual or
interim consolidated financial statements that would not be prevented or detected. Accordingly, our management has determined that these control deficiencies aggregated to a material weakness. Remediation Plan
During the second, third and fourth quarterquarters of 2017, we2019, in conjunction with the preparation of the interim and year-end tax provisions, the Company has enhanced the design of controls around certain control activities specifically,related to the analysis of the recoverability of our deferred tax assets. The enhancements include (1) expanded consultation with third party specialists on complex income tax accounting matters, (2) enhanced documentation regarding the considerations and accounting guidance evaluated as part of the analysis supporting the recoverability of our deferred tax assets to allow for a more precise review process, and (3) enhanced monitoring of the review process for analyzing non-routine accounting transactions and also added additional accounting resources in several businesses to improve the effectiveness of internal control over financial reporting.process. We believe that these enhanced resources and processes willhave effectively remediateremediated the material weakness, but the material weakness will not be considered remediated untiland the revised controls operatehave operated for a sufficient period of time andin order for management has concluded,to conclude, through testing, that these controls
are designed and operating effectively. As of December 31, 2017, additional time is needed to demonstrate sustainability as it relates to the revised controls and enhanced resources.2019, we have remediated our previously reported material weakness in our internal control over financial reporting. Changes in Internal Control overOver Financial Reporting The remediation efforts related toDuring the material weakness disclosed in Management’s Report on Internal Control over Financial Reporting are considered amost recent completed fiscal quarter, there has been no change in the Company’sour internal control over financial reporting during the quarter ended December 31, 2017, that has materially affected, or is reasonably likely to materially affect, the Company’sour internal control over financial reporting.
ITEM 9B. OTHER INFORMATION None.
PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information regarding our executive officers is included in Part I of this Annual Report on Form 10-K as permitted by SEC rules. The information required by this Item is set forth under the headings “Questions and Answers about the Company,” “Proposals to be Voted On–Proposal 1: Election of Directors,” “Corporate Governance Principles and Board Matters–Audit Committee,” “Corporate GovernanceBoard Committees” and Nominating Committee,” and “Section“Delinquent Section 16(a) Beneficial Ownership Reporting Compliance”Reports” in the Company’s 20182020 Proxy Statement to be filed with the SEC within 120 days after December 31, 20172019 in connection with the solicitation of proxies for the Company’s 20182020 annual meeting of shareholders (“Proxy Statement”) and is incorporated herein by reference. The Company has adopted a code of ethics that applies to its senior executive team, including but not limited to, the Company’s Chief Executive Officer, Chief Financial Officer, General Counsel, Vice President of Finance and Treasurer, Corporate Controller, and the Senior Vice Presidents and General Managers, Vice Presidents of Finance, and Controllers of the Company’s business units, and other persons holdings positions with similar responsibilities at business units. The code of ethics is posted on the Company’s website and is available free of charge at www.jasoninc.com. The Company intends to satisfy the requirements under Item 5.05 of Form 8-K regarding disclosure of amendments to, or waivers from, previsions of its code of ethics that apply to senior executives by posting such information on the Company’s website. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is set forth under the headings “Corporate Governance Principles and Board Matters–Board Committees–Compensation Committee Interlocks and Insider Participation,” “Executive Compensation,”Compensation” and “Compensation Committee Report” in the Proxy Statement and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item is set forth under the heading “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement and is incorporated herein by reference. Equity Compensation Plan Information The following table gives information about the Company’s common stock authorized for issuance under the Company’s equity compensation plans as of December 31, 2017.2019. | | | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | | Weighted-average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | | Weighted-average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | | Plan category | | (a) | | (b) | | (c) | | Plan category | | (a) | | (b) | | (c) | | Equity compensation plans approved by security holders | | 2,350,527 |
| | $ | — |
| | 352,587 |
| (2) | Equity compensation plans approved by security holders | | 3,884,682 | | | $ | — | | | 1,252,915 | | (2) | | | | | | | | | | | Equity compensation plans not approved by security holders | | — |
| | $ | — |
| | — |
| | Equity compensation plans not approved by security holders | | — | | | $ | — | | | — | | | Total | | 2,350,527 |
| | — |
| | 352,587 |
| | Total | | 3,884,682 | | | — | | | 1,252,915 | | |
(1) Column (a) of the table above includes 2,350,5273,884,682 unvested restricted stock units outstanding under the Jason Industries, Inc. 2014 Omnibus Incentive Plan. (2) Represents shares available for future issuance under the Jason Industries, Inc. 2014 Omnibus Incentive Plan. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item is set forth under the headings “Questions and Answers about the Company,” “Proposals to be Voted On–Proposal 1: Election of Directors,” “Corporate Governance Principles and Board Matters-Independent Directors” and “Certain Relationships and Related Transactions” in the Proxy Statement and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this Item is set forth under the heading “Proposals to be Voted On–Proposal 3: Ratification of Selection of Independent Registered Public Accounting Firm–Principal Accountant Fees and Services” in the Proxy Statement and is incorporated herein by reference.
PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
(a) Documents filed as part of this report
(1) All financial statements | | | | | | | | | Index to Consolidated Financial Statements | | | As of December 31, 20172019 and 2016,2018, for the years ended December 31, 2017,2019, December 31, 20162018 and December 31, 20152017 | | Page | | | | | | | | | | | | | | | | | | | | | |
(2) Financial Statement schedules | | | | | | | | | Index to Financial Statement schedules | | | For the years ended December 31, 2017,2019, December 31, 20162018 and December 31, 20152017 | | Page | | | |
All other financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto included in this Form 10-K. (3) Exhibits required by Item 601 of Regulation S-K The information required by this Section (a)(3) of Item 15 is set forth on the exhibit index that precedes the Signaturessignature page of this Form 10-K.
ITEM 16. FORM 10-K SUMMARY None.
SCHEDULE II. CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS (in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | Balance at beginning of year | | Charge to Costs and Expenses | | Utilization of Reserves | | Other (1) | | Balance at end of year | Year Ended December 31, 2019 | | | | | | | | | | | Allowance for doubtful accounts | | $ | 1,073 | | | $ | 161 | | | $ | (115) | | | $ | (13) | | | $ | 1,106 | | Deferred tax valuation allowances | | $ | 3,828 | | | $ | 13,338 | | | $ | (10) | | | $ | (603) | | | $ | 16,553 | | | | | | | | | | | | | Year Ended December 31, 2018 | | | | | | | | | | | Allowance for doubtful accounts | | $ | 1,508 | | | $ | 32 | | | $ | (417) | | | $ | (50) | | | $ | 1,073 | | Deferred tax valuation allowances | | $ | 4,220 | | | $ | 561 | | | $ | (602) | | | $ | (351) | | | $ | 3,828 | | | | | | | | | | | | | Year Ended December 31, 2017 | | | | | | | | | | | Allowance for doubtful accounts | | $ | 1,749 | | | $ | (60) | | | $ | (300) | | | $ | 119 | | | $ | 1,508 | | Deferred tax valuation allowances | | $ | 4,879 | | | $ | 283 | | | $ | (1,164) | | | $ | 222 | | | $ | 4,220 | |
| | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of year | | Charge to Costs and Expenses | | Utilization of Reserves | | Other (1) | | Balance at end of year | Year Ended December 31, 2017 | | | | | | | | | | | Allowance for doubtful accounts | | $ | 3,392 |
| | $ | 82 |
| | $ | (634 | ) | | $ | 119 |
| | $ | 2,959 |
| Deferred tax valuation allowances | | $ | 4,879 |
| | $ | 283 |
| | $ | (1,164 | ) | | $ | 222 |
| | $ | 4,220 |
| | | | | | | | | | | | Year Ended December 31, 2016 | | | | | | | | | | | Allowance for doubtful accounts | | $ | 2,524 |
| | $ | 1,696 |
| | $ | (783 | ) | | $ | (45 | ) | | $ | 3,392 |
| Deferred tax valuation allowances | | $ | 3,703 |
| | $ | 1,469 |
| | $ | — |
| | $ | (293 | ) | | $ | 4,879 |
| | | | | | | | | | | | Year Ended December 31, 2015 | | | | | | | | | | | Allowance for doubtful accounts | | $ | 2,415 |
| | $ | 590 |
| | $ | (374 | ) | | $ | (107 | ) | | $ | 2,524 |
| Deferred tax valuation allowances | | $ | 3,898 |
| | $ | (243 | ) | | $ | — |
| | $ | 48 |
| | $ | 3,703 |
|
(1)(1)The amounts included in the “other” column primarily relate to the impact of foreign currency exchange rates.
EXHIBIT INDEX | | | | | | | | | Exhibit Number | | Description | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Exhibit Number | | Description | | | | | | | | | | | | | | | | | | | | | | | | | | | First Lien Credit Agreement as amended, dated as of June 30, 2014, by and among Jason Incorporated, Jason Partners Holdings Inc., Jason Holdings Inc. I, Deutsche1, The Bank AGof New York Branch, as administrative agent, the subsidiary guarantors party thereto and the several banks and other financial institutions or entities from time to time party thereto (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed with the Commission on July 7, 2014 (File No. 1-36051)). | | | | | | Second Lien Credit Agreement, dated as of June 30, 2014, by and among Jason Incorporated, Jason Partners Holdings Inc., Jason Holdings, Inc. I, Deutsche Bank AG New York Branch,Mellon, as administrative agent, the subsidiary guarantors party thereto and the several banks and other financial institutions or entities from time to time party thereto (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 8-K,10-Q, filed with the Commission on July 7, 2014August 2, 2018 (File No. 1-36051)). |
| | | | | | | | | Exhibit Number | | Description | | | | | | | | | | | | | | | Second Lien Credit Agreement as amended, dated as of June 30, 2014, by and among Jason Incorporated, Jason Partners Holdings Inc., Jason Holdings, Inc. I, The Bank of New York Mellon, as administrative agent, the subsidiary guarantors party thereto and the several banks and other financial institutions or entities from to time to time party thereto (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Form 10-Q, filed with the Commission on May 3, 2018 (File No. 1-36051)). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Exhibit Number | | Description | | | | | | | | | | | | | | | | | | | 11 | | Computation of per share earnings (contained in Note 13 of “Notes to Consolidated Financial Statements” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017). | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Exhibit Number | | Description | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 101.INS | | XBRL Instance Document | | | | 101.SCH | | XBRL Taxonomy Extension Schema Document | | | | 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document | | | | 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document | | | | 101.LAB | | XBRL Taxonomy Extension Labels Linkbase Document | | | | 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
| | | | | | | | * | The disclosure schedules and exhibits to this agreement are not being filed herewith. Jason Industries, Inc. agrees to furnish supplementally a copy of any such schedules and exhibits to the Securities and Exchange Commission upon request. | ** | | ** | Represents a management contract or compensatory plan, contract or arrangement. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. | | | | | | | JASON INDUSTRIES, INC. | | | Dated: March 1, 2018February 28, 2020 | /s/ Brian K. Kobylinski | | Brian K. Kobylinski President, Chief Executive Officer and Director
Chairman of the Board of Directors (Principal Executive Officer) |
| | | | | | Dated: February 28, 2020 | Dated: March 1, 2018 | /s/ Chad M. Paris | | | Chad M. Paris Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: | | | | | | | | | | | | | | | Signature | | Title | | Date | | | | | | /s/ Brian K. Kobylinski | | President, Chief Executive Officer and Chairman of the Board of Directors | | Dated: February 28, 2020 | Brian K. Kobylinski | | (Principal Executive Officer) | | | | | | | | Signature | | Title | | Date | | | | | | /s/ Brian K. Kobylinski | | President, Chief Executive Officer and Director | | Dated: March 1, 2018 | Brian K. Kobylinski | | (Principal Executive Officer) | | | | | | | | /s/ Chad M. Paris | | Senior Vice President and Chief Financial Officer | | Dated: March 1, 2018February 28, 2020 | Chad M. Paris | | (Principal Financial and Accounting Officer) | | | | | | | | /s/ Jeffry N. Quinn | | Chairman of the Board of DirectorsDirector | | Dated: March 1, 2018February 28, 2020 | Jeffry N. Quinn | | | | | | | | | | /s/ James P. Heffernan | | Director | | Dated: March 1, 2018February 28, 2020 | James P. Heffernan | | | | | | | | | | /s/ Edgar G. Hotard | | Director | | Dated: March 1, 2018 | Edgar G. Hotard | | | | | | | | | | /s/ James E. Hyman | | Director | | Dated: March 1, 2018February 28, 2020 | James E. Hyman | | | | | | | | | | /s/ Mitchell I. Quain | | Director | | Dated: March 1, 2018February 28, 2020 | Mitchell I. Quain | | | | | | | | | | /s/ Dr. John Rutledge | | Director | | Dated: March 1, 2018 | Dr. John Rutledge | | | | | | | | | | /s/ James M. Sullivan | | Director | | Dated: March 1, 2018February 28, 2020 | James M. Sullivan | | | | | | | | | | /s/ Nelson Obus | | Director | | Dated: February 28, 2020 | Nelson Obus | | | | | | | | | | /s/ Andrew G. Lampereur | | Director | | Dated: February 28, 2020 | Andrew G. Lampereur | | | | |
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