Company Quick10K Filing
Jason Industries
Price0.43 EPS-2
Shares29 P/E-0
MCap12 P/FCF-1
Net Debt291 EBIT-31
TEV304 TEV/EBIT-10
TTM 2019-09-27, in MM, except price, ratios
10-Q 2020-03-27 Filed 2020-06-10
10-K 2019-12-31 Filed 2020-03-02
10-Q 2019-09-27 Filed 2019-11-08
10-Q 2019-06-28 Filed 2019-08-12
10-Q 2019-03-29 Filed 2019-05-13
10-K 2018-12-31 Filed 2019-03-05
10-Q 2018-09-28 Filed 2018-11-01
10-Q 2018-06-29 Filed 2018-08-02
10-Q 2018-03-30 Filed 2018-05-03
10-K 2017-12-31 Filed 2018-03-01
10-Q 2017-09-29 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-03
10-Q 2017-03-31 Filed 2017-05-04
10-K 2016-12-31 Filed 2017-03-02
10-Q 2016-09-30 Filed 2016-11-04
10-Q 2016-07-01 Filed 2016-08-04
10-Q 2016-04-01 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-03-08
10-Q 2015-09-25 Filed 2015-10-30
10-Q 2015-06-26 Filed 2015-08-03
10-Q 2015-03-27 Filed 2015-05-05
10-K 2014-12-31 Filed 2015-03-11
10-Q 2014-09-26 Filed 2014-11-07
10-Q 2014-06-27 Filed 2014-08-11
10-Q 2014-03-31 Filed 2014-05-15
10-K 2013-12-31 Filed 2014-03-07
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-09-19
8-K 2020-08-26 Bankruptcy, Regulation FD, Exhibits
8-K 2020-08-10 Earnings, Regulation FD, Exhibits
8-K 2020-06-29 Other Events
8-K 2020-06-22
8-K 2020-06-10
8-K 2020-06-05
8-K 2020-06-03
8-K 2020-05-31
8-K 2020-05-14
8-K 2020-05-08
8-K 2020-04-30
8-K 2020-03-31
8-K 2020-03-27
8-K 2020-03-02
8-K 2020-02-27
8-K 2020-01-03
8-K 2019-12-13
8-K 2019-11-08
8-K 2019-09-27
8-K 2019-09-05
8-K 2019-09-01
8-K 2019-08-12
8-K 2019-08-11
8-K 2019-07-11
8-K 2019-07-02
8-K 2019-05-16
8-K 2019-05-13
8-K 2019-05-02
8-K 2019-04-26
8-K 2019-03-11
8-K 2019-03-05
8-K 2019-02-20
8-K 2018-10-30
8-K 2018-08-02
8-K 2018-06-27
8-K 2018-06-14
8-K 2018-05-16
8-K 2018-05-03
8-K 2018-03-01
8-K 2018-01-22

JASN 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 ex-31103272020.htm
EX-31.2 ex-31203272020.htm
EX-32.1 ex-32103272020.htm
EX-32.2 ex-32203272020.htm

Jason Industries Earnings 2020-03-27

Balance SheetIncome StatementCash Flow
710567425283140-12012201420172020
Assets, Equity
1951491035711-352012201420172020
Rev, G Profit, Net Income
18010836-36-108-1802012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 27, 2020

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  __________ to __________ 

Commission File Number: 001-36051

jasn-20200327_g1.jpg
JASON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

Delaware 46-2888322
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
833 East Michigan Street, Suite 900
Milwaukee, Wisconsin
 53202
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:  (414) 277-9300

Not Applicable
(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No 
As of June 5, 2020, there were 29,250,911 shares of common stock of the Company issued and outstanding.





EXPLANATORY NOTE

As previously disclosed in the Current Report on Form 8-K filed by Jason Industries Inc. (the “Company”) with the Securities and Exchange Commission on May 11, 2020, the filing of the Company’s Quarterly Report on Form 10-Q for the period ending March 27, 2020 (the “Quarterly Report”) was delayed due to the ongoing COVID-19 pandemic. The Company is relying on an extension granted by the Securities and Exchange Commission’s Order under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions From the Reporting and Proxy Delivery Requirements for Public Companies dated March 25, 2020 (Release No. 34-88465). Specifically, the Company disclosed that it would be unable to file the Quarterly Report by its original due date and expected to file the Quarterly Report by no later than June 25, 2020.
The Company’s operations and business have experienced significant disruptions due to the unprecedented conditions surrounding the ongoing COVID-19 pandemic together with the various measures that federal, state, and local jurisdictions have taken in response to the crisis. In response to these measures, the Company has implemented work-from-home arrangements for the Company’s headquarters and other offices globally. The work to adapt the Company’s operating practices to protect the safety of its employees, business partners and the community has been substantial. In connection with the preparation of the Quarterly Report, the Company experienced disruptions in its normal processes and interactions with its accounting personnel and others involved in the preparation of the Quarterly Report.
1





JASON INDUSTRIES, INC.
TABLE OF CONTENTS

   
   
   
   
   

2




PART I – FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
Jason Industries, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts) (Unaudited)
 Three Months Ended
 March 27, 2020March 29, 2019
Net sales$84,032  $92,916  
Cost of goods sold65,857  69,320  
Gross profit18,175  23,596  
Selling and administrative expenses24,470  19,069  
Loss on disposals of property, plant and equipment-net21  8  
Restructuring  754  1,366  
Operating (loss) income(7,070) 3,153  
Interest expense-net(7,455) (8,205) 
Equity income25  84  
Other income-net253  64  
Loss from continuing operations before income taxes(14,247) (4,904) 
Tax (benefit) provision(557) 349  
Net loss from continuing operations(13,690) (5,253) 
Net loss from discontinued operations, net of tax(910) (1,803) 
Net loss(14,600) (7,056) 
Accretion of dividends on preferred stock879  812  
Net loss allocable to common shareholders of Jason Industries  $(15,479) $(7,868) 
Basic and diluted net loss per share allocable to common shareholders of Jason Industries:
Net loss per share from continuing operations$(0.50) $(0.22) 
Net loss per share from discontinued operations(0.03) (0.06) 
Basic and diluted net loss per share$(0.53) $(0.28) 
Weighted average number of common shares outstanding:
Basic and diluted28,896  27,962  
The accompanying notes are an integral part of these condensed consolidated financial statements.

3




Jason Industries, Inc.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(In thousands) (Unaudited)
Three Months Ended
Includes activities from both continuing and discontinued operationsMarch 27, 2020March 29, 2019
Net loss$(14,600) $(7,056) 
Other comprehensive loss:
Employee retirement plan adjustments, net of tax85  15  
Foreign currency translation adjustments(2,164) (1,566) 
Net change in unrealized (losses) gains on cash flow hedges, net of tax benefit of $34 and $205, respectively
(109) (637) 
Total other comprehensive loss(2,188) (2,188) 
Comprehensive loss$(16,788) $(9,244) 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4




Jason Industries, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts) (Unaudited)
March 27, 2020December 31, 2019
Assets
Current assets
Cash and cash equivalents$71,964  $84,526  
Accounts receivable-net of allowances for doubtful accounts of $1,257 at March 27, 2020 and $1,106 at December 31, 2019
44,823  33,085  
Inventories-net  51,319  49,943  
Other current assets8,363  7,433  
Total current assets176,469  174,987  
Property, plant and equipment-net of accumulated depreciation of $78,660 at March 27, 2020 and $75,925 at December 31, 2019
68,809  70,276  
Right-of-use operating lease assets20,013  20,910  
Goodwill46,809  45,684  
Other intangible assets-net64,894  64,590  
Other assets-net10,541  10,654  
Total assets$387,535  $387,101  
Liabilities and Shareholders’ Deficit
Current liabilities
Current portion of long-term debt$373,259  $5,800  
Current portion of operating lease liabilities4,385  4,275  
Accounts payable30,241  22,914  
Accrued compensation and employee benefits8,642  8,551  
Accrued interest6,723  79  
Other current liabilities16,305  13,783  
Total current liabilities439,555  55,402  
Long-term debt14,263  378,950  
Long-term operating lease liabilities18,159  19,136  
Deferred income taxes5,756  7,534  
Other long-term liabilities16,966  16,938  
Total liabilities494,699  477,960  
Commitments and contingencies (Note 17) 
Shareholders’ Deficit
Preferred stock, $0.0001 par value (5,000,000 shares authorized, 44,827 shares issued and outstanding at March 27, 2020, including 877 shares declared on February 4, 2020 and issued on April 1, 2020, and 43,950 shares issued and outstanding at December 31, 2019, including 860 shares declared on November 3, 2019 and issued on January 1, 2020)
44,827  43,950  
Jason Industries common stock, $0.0001 par value (120,000,000 shares authorized; issued and outstanding: 28,858,910 shares at March 27, 2020 and 28,508,977 shares at December 31, 2019)
3  3  
Additional paid-in capital154,629  155,023  
Retained deficit(275,792) (261,192) 
Accumulated other comprehensive loss(30,831) (28,643) 
Total shareholders’ deficit(107,164) (90,859) 
Total liabilities and shareholders’ deficit$387,535  $387,101  
The accompanying notes are an integral part of these condensed consolidated financial statements.
5



Jason Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
Three Months Ended
Includes cash flow activities from both continuing and discontinued operationsMarch 27, 2020March 29, 2019
Cash flows from operating activities
Net loss$(14,600) $(7,056) 
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation3,514  6,460  
Amortization of intangible assets1,976  2,901  
Amortization of deferred financing costs and debt discount729  737  
Non-cash operating lease expense1,261  2,043  
Equity income(25) (84) 
Deferred income taxes(1,534) (885) 
Loss on disposals of property, plant and equipment-net21  8  
Loss on divestitures835    
Dividends from joint venture  728  
Share-based compensation527  876  
Net increase (decrease) in cash, net of acquisitions and dispositions, due to changes in:
Accounts receivable(12,436) (14,806) 
Inventories(1,703) (3,338) 
Other current assets(1,107) 65  
Accounts payable6,913  8,882  
Accrued compensation and employee benefits200  1,263  
Accrued interest6,644  (3) 
Accrued income taxes721  321  
Operating lease liabilities, net(1,233) (2,126) 
Other-net763  (3,235) 
Total adjustments6,066  (193) 
Net cash used in operating activities(8,534) (7,249) 
Cash flows from investing activities
Proceeds from disposals of property, plant and equipment70  189  
Payments for property, plant and equipment(1,970) (3,468) 
Acquisition of business, net of cash acquired (3,965)   
Acquisitions of patents(1) (5) 
Net cash used in investing activities(5,866) (3,284) 
The accompanying notes are an integral part of these condensed consolidated financial statements.
Cash flows from financing activities
Payments of First and Second Lien term loans  (775) 
Proceeds from other long-term debt3,878  1,641  
Payments of other long-term debt(1,371) (1,992) 
Payments of finance lease obligation(90) (89) 
Value added tax paid from building sale  (707) 
Other financing activities-net(44) (396) 
Net cash provided by (used in) financing activities2,373  (2,318) 
Effect of exchange rate changes on cash and cash equivalents(535) (165) 
Net decrease in cash and cash equivalents(12,562) (13,016) 
Cash and cash equivalents, beginning of period84,526  58,169  
Cash and cash equivalents, end of period$71,964  $45,153  
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest$82  $7,496  
Income taxes, net of refunds$977  $1,595  
Acquisition-related transaction costs used in operating activities$62  $240  
Divestiture-related transaction costs used in operating activities$451  $  
Other strategic alternatives costs used in operating activities$3,602  $  
Non-cash lease activities:
Right-of-use operating assets obtained in exchange for operating lease obligations$422  $410  
Right-of-use finance assets obtained in exchange for finance lease obligations$  $65  
Non-cash investing activities:
Property, plant and equipment acquired through additional liabilities$1,363  $1,634  
Non-cash financing activities:
Non-cash preferred stock created from dividends declared$877  $809  
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


Jason Industries, Inc.
Condensed Consolidated Statements of Shareholders’ Deficit
(In thousands) (Unaudited)
For the three months ended March 27, 2020:Preferred StockCommon StockAdditional
Paid-In
Capital
Retained
Deficit
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Deficit
Balance at December 31, 2019$43,950  $3  $155,023  $(261,192) $(28,643) $(90,859) 
Dividends declared877  —  (879) —  —  (2) 
Share-based compensation—  —  527  —  —  527  
Tax withholding related to vesting of restricted stock units—  —  (42) —  —  (42) 
Net loss—  —  —  (14,600) —  (14,600) 
Employee retirement plan adjustments, net of tax—  —  —  —  85  85  
Foreign currency translation adjustments—  —  —  —  (2,164) (2,164) 
Net changes in unrealized losses on cash flow hedges, net of tax—  —  —  —  (109) (109) 
Balance at March 27, 2020$44,827  $3  $154,629  $(275,792) $(30,831) $(107,164) 
For the three months ended March 29, 2019:Preferred StockCommon StockAdditional
Paid-In
Capital
Retained
Deficit
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Deficit
Balance at December 31, 2018$40,612  $3  $155,533  $(180,360) $(23,571) $(7,783) 
Cumulative impact of accounting changes—  —  —  776  —  776  
Dividends declared809  —  (812) —  —  (3) 
Share-based compensation—  —  876  —  —  876  
Tax withholding related to vesting of restricted stock units—  —  (394) —  —  (394) 
Net loss—  —  —  (7,056) —  (7,056) 
Employee retirement plan adjustments, net of tax—  —  —  —  15  15  
Foreign currency translation adjustments—  —  —  —  (1,566) (1,566) 
Net changes in unrealized gains on cash flow hedges, net of tax—  —  —  —  (637) (637) 
Balance at March 29, 2019$41,421  $3  $155,203  $(186,640) $(25,759) $(15,772) 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


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




1.Description of Business and Basis of Presentation
Description of Business
Jason Industries, Inc. (“Jason Industries”), and its subsidiaries (collectively, the “Company”), is a global industrial manufacturing company with significant market share positions in each of its two segments: industrial and engineered components. The Company provides critical components and manufacturing solutions to customers across a wide range of end markets, industries and geographies through its global network of 22 manufacturing facilities and nine sales, administrative and/or warehouse facilities throughout the United States and 13 foreign countries.
The Company’s industrial segment focuses on the production 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 engineered components segment designs, engineers, and manufactures seating products used in heavy industry (construction, agriculture, and material handling), turf care, and power sports applications.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial reporting and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. For additional information, including the Company’s significant accounting policies, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2019 and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q).
The Company’s fiscal year ends on December 31. Throughout the year, the Company reports its results using a fiscal calendar whereby each three month quarterly reporting period is approximately thirteen weeks in length, ending on a Friday. The exceptions are the first quarter, which begins on January 1, and the fourth quarter, which ends on December 31. For 2020, the Company’s fiscal quarters are comprised of the three months ending March 27, June 26, September 25 and December 31. In 2019, the Company’s fiscal quarters were comprised of the three months ended March 29, June 28, September 27 and December 31.
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 and notes to the financial statements have been recast to be presented on a continuing operations basis, except where noted. On August 30, 2019 and on December 13, 2019, the Company completed the divestitures of its North American fiber solutions business and its Metalex business, respectively.
In the opinion of management, all adjustments considered necessary for a fair statement of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Interim results are not necessarily indicative of the results that may be expected for the entire fiscal year.
Impact of COVID-19
A novel strain of coronavirus (“COVID-19”) was first identified in late 2019, continued to spread throughout the world in early 2020 and was eventually declared a pandemic by the World Health Organization by the end of the first quarter of 2020. The COVID-19 pandemic has resulted in national, state and local government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, border closings, restrictions on public gatherings, quarantining of people who may have been exposed to the virus, shelter-in-place restrictions, and limitations or shutdowns of business operations. The Company has significant operations worldwide, including in the United States, Mexico and Germany, and each of these countries has been affected by the outbreak and taken measures to try to contain it, resulting in disruptions and closures at some of our manufacturing facilities and support operations. These measures have impacted and may further impact our workforce and operations, the operations of our customers and distributors, and those of our vendors and suppliers. There is considerable uncertainty regarding the impact, and expected duration, of such measures and potential future measures, and restrictions on our access to our facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers.
8


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


The Company continues to monitor and respond to the COVID-19 pandemic closely and the top priority remains the health, safety and well-being of our employees, their families and the communities in which we operate. As a result of the significant decline in demand for the Company’s products as well as disruptions resulting from restrictions imposed by local governments to contain the virus, we have experienced periodic and in some cases extended closures of our manufacturing facilities primarily during the second quarter. Within the industrial and engineered components segments, some of the markets and customers the Company serves are considered essential businesses and therefore some of our plants remained open in those jurisdictions with such essential designations. As of the date of this filing, the Company’s manufacturing operations have generally resumed production at levels supporting current market demand as local restrictions have been lifted. As the Company navigates through operating during the COVID-19 pandemic, it has modified business practices where practicable to ensure the safety of our employees such as but not limited to, developing social distancing plans for employees, expanding the number of work from home employees for roles that can work remotely and restricting employee travel.
The Company’s financial results began to be impacted by COVID-19 late in the first quarter of 2020, and COVID-19 has created significant uncertainty in the future economic outlook of the Company's businesses. While the Company's expectations for operating results in 2020 have been lowered to reflect the new economic environment, the Company's businesses are taking cost countermeasures, such as reductions in executive and salaried compensation, travel restrictions and employee furloughs, to manage operating expenses and preserve liquidity. The Company also began deferring certain lease payments for real property leases in the second quarter.
In the first quarter of 2020, changes in facts and circumstances and general market declines from COVID-19, as discussed above, have reduced the Company's expectations of near term future operating results. The Company considered these circumstances and the potential long-term impact on revenues and cash flows associated with reporting units and asset groups and determined that more likely than not an indicator of goodwill, intangible assets-net or other long-lived assets impairment did not exist. While management concluded that a triggering event did not occur during the three months ended March 27, 2020, an extended COVID-19 pandemic would further impact the expectations of future operating results and assumptions that are significant enough that an interim impairment of goodwill, intangible assets-net or other long-lived assets could be required in future periods.
Recently issued accounting standards
Accounting standards adopted in the current fiscal year
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications, hedging relationships and other transactions that reference LIBOR or another reference rate, which is expected to be discontinued if certain criteria are met. The Company adopted ASU 2020-04 effective March 12, 2020. The adoption of this guidance did not have any impact on the Company's condensed 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, 2022, with early adoption permitted. The Company is currently assessing the impact that ASU 2016-13 will have on the condensed 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 condensed consolidated
9


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


financial statements. The Company is currently assessing the impact that this standard will have on the employee benefit plan disclosures within the notes to the condensed consolidated financial statements, as well as the planned timing of adoption.
In December 2019, the FASB 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 and 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 is currently assessing the impact that these amendments will have on the condensed consolidated financial statements and related disclosures, as well as the planned timing of adoption.

2.Going Concern
The condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company faces significant challenges and uncertainties related to the COVID-19 pandemic. As a result, the Company’s available capital resources are expected to be consumed more rapidly than previously forecasted due to (a) significantly increased economic and demand uncertainty that has resulted in decreases in actual and expected future sales of the Company’s products; (b) significant disruptions to the Company’s ability to operate its manufacturing facilities due to restrictions placed on business operations, which has resulted in decreases in actual and future expected sales of the Company’s products; (c) the effect of the COVID-19 pandemic on the Company's ability to obtain parts and materials from the Company's suppliers, which has resulted in decreases in actual and expected future sales of the Company’s products; (d) the costs of continuing to staff critical production and fulfillment functions despite the significant declines in sales; (e) restructuring actions which are increasing operating expenses; (f) costs related to the strategic alternatives process, including executive and salaried retention agreements; and (g) other items affecting the Company’s forecasted level of expenditures and use of cash resources. These factors will adversely impact the Company’s ability to make a mandatory prepayment in August 2020 on its First Lien Term Loans (as defined in Note 10, “Debt and Hedging Instruments”) of the net proceeds from the 2019 sale of the Fiber Solutions business, of which $48.4 million was remaining after permitted reinvestments as of March 27, 2020. At March 27, 2020 the Company had $76.1 million of total liquidity, including $72.0 million of available cash (including $48.4 million of net proceeds from the 2019 sale of the Fiber Solutions business and $12.5 million held at our non-U.S. operations), and $4.1 million available under revolving loan facilities outside the U.S. See Note 10, “Debt and Hedging Instruments” for further discussion of mandatory prepayments of debt.
On March 31, 2020, Jason Incorporated (the “Borrower”), a subsidiary of the Company, elected to defer making the interest payment of approximately $2.3 million due on March 31, 2020 to lenders under the Second Lien Credit Agreement (as defined in Note 10, “Debt and Hedging Instruments”). This resulted in an event of default under the Second Lien Credit Agreement, with a cross-default under the First Lien Credit Agreement (as defined in Note 10, “Debt and Hedging Instruments”). Under the Intercreditor Agreement, the lenders under the Second Lien Credit Agreement are not able to exercise their rights and remedies in connection with such default for 180 days. As of March 27, 2020, $89.9 million of principal amount of loans was outstanding under the Second Lien Credit Agreement. On March 31, 2020, the Company made its quarterly interest and amortization payments to the lenders under the First Lien Credit Agreement and following these payments $283.7 million of principal amount of loans was outstanding under the First Lien Credit Agreement as of such date. As a result of the event of default, the Company is not able to draw on its Revolving Credit Facility (as defined in Note 10, “Debt and Hedging Instruments”).
Also on March 31, 2020, the Borrower and certain of the Company’s other subsidiaries entered into a forbearance agreement with certain lenders under the Borrower’s First Lien Credit Agreement, which was subsequently amended and restated on April 30, 2020, May 14, 2020, June 2, 2020, and June 3, 2020 (as amended and restated, the “Amended and Restated Forbearance Agreement”). Pursuant to the Amended and Restated Forbearance Agreement, the Forbearing Lenders agreed to forbear from exercising their rights and remedies during the Amended and Restated Forbearance Period (as described below) as a result of the failure by the Borrower to make the interest payment due on March 31, 2020 to lenders under the Second Lien Credit Agreement. The Amended and Restated Forbearance Period terminated on June 5, 2020.
On June 5, 2020 the Company entered into a Restructuring Support Agreement (the “Restructuring Support Agreement”) with certain creditors representing more than 75% of its outstanding indebtedness under its First Lien Credit Agreement. The Restructuring Support Agreement contemplates agreed-upon terms for a pre-packaged financial restructuring plan to be filed in cases commenced under chapter 11 of title 11 of the United States Code. See Note 18, “Subsequent Events” for further discussion of the terms of the Restructuring Support Agreement.
The impact of the COVID-19 pandemic on the Company’s forecasted liquidity and the factors resulting from the event of default, cross-default and terms of the Restructuring Support Agreement raise substantial doubt about the Company’s ability
10


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


to continue as a going concern for the one-year period from the date of issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

3.Discontinued Operations
North American Fiber Solutions Sale
On August 30, 2019, the Company completed the sale of its North American fiber solutions business to ACR II Motus Integrated Technologies Cooperatief U.A., Motus Pivot MX Holding B.V, Motus Pivot Holding B.V. and Motus Pivot Inc. (collectively, the “Motus Group”), pursuant to an agreement dated as of August 11, 2019, by and between two 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 was also subject to a net working capital adjustment as defined by the Fiber Sale Agreement, which was settled between the Motus Group and the Company subsequent to period end on June 2, 2020, primarily resulting in a $1.0 million reduction in the purchase price.
Metalex Sale
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 two 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 final purchase price is subject to a net working capital adjustment as defined by the Metalex Sale Agreement, which is currently in dispute between the Company and Morton Global. Morton Global has proposed a working capital adjustment that results in a further purchase price reduction of $0.6 million. The Company believes this claim lacks merit and a loss for the amount subject to dispute is not probable as of March 27, 2020. Pursuant to the Metalex 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 divestitures reduced the Company’s automotive and rail market exposures 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 businesses are reflected in the Company’s condensed consolidated financial statements as discontinued operations.
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 for the three months ended March 29, 2019.
For the Three Months Ended March 29, 2019:
North American Fiber SolutionsMetalex
Net sales$35,653  $13,410  
Cost of goods sold30,848  13,231  
Gross profit4,805  179  
Selling and administrative expenses3,931  2,123  
Restructuring207    
(Loss) income from operations667  (1,944) 
Interest expense(12) (13) 
Gain (loss) on divestiture    
Other income (loss) - net(113) (27) 
Income (loss) before income taxes542  (1,984) 
Tax (benefit) provision(135) 496  
Net income (loss) from discontinued operations, net of tax$677  $(2,480) 
11


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


For the three months ended March 27, 2020, net loss from discontinued operations was $0.9 million, which was comprised of a net loss on divestiture of $1.0 million related to the finalization of the working capital adjustment related to the sale of the North American fiber solutions business.
The following table summarizes significant cash flow disclosures for the North American fiber solutions business and the Metalex business for the three months ended March 29, 2019.
Three Months Ended
March 29, 2019
Depreciation$2,982  
Amortization of intangible assets$1,199  
Share-based compensation$153  
Payments for property, plant and equipment$1,010  


4.Acquisitions
Matchless Metal Polishing
On February 27, 2020, the Company acquired selected assets of Matchless Metal Polishing (“Matchless”), a North American manufacturer of high-quality polishing buffs, compounds, and chemicals for a preliminary cash purchase price of $5.0 million. The purchase price includes $1.0 million that is contingent upon certain performance conditions. Through the acquisition of Matchless, the Company expanded its product line offerings within North America. The business has been integrated into the Company’s industrial segment. The acquisition included the purchase of product lines, customers and selected assets and did not include manufacturing operations, with Matchless production transitioning to existing industrial facilities.
The aggregate acquisition-date fair value of the consideration transferred totaled $4.9 million, which consisted of the following:
Fair Value of Consideration TransferredFair Value
Cash$3,965  
Contingent consideration893  
Total$4,858  
The contingent consideration arrangement requires the Company to make periodic payments to the former owners of the business upon achievement of certain sales levels through March 31, 2024, up to a maximum amount of $1.0 million (undiscounted). The Company determined the acquisition-date fair value of the contingent consideration liability to be $0.9 million by discounting the $1.0 million using a risk adjusted rate over 3.4 years, which is based on the anticipated timeframe for the Company to achieve the necessary sales levels for the maximum earn-out payments. The Company has determined that the inputs used to value the contingent consideration liability falls within Level 3 of the fair value hierarchy as the valuation includes estimates of future sales that are considered unobservable.
The acquisition was accounted for as a business combination. The operating results and cash flows of Matchless are included in the Company's condensed consolidated financial statements from February 27, 2020, the date of the acquisition.
12


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


The Company has recorded a preliminary allocation of the purchase price for the tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the February 27, 2020 acquisition date. The preliminary purchase price allocation was as follows:
Preliminary Purchase Price Allocation
Inventories-net$500  
Property, plant, and equipment-net429  
Goodwill1,435  
Other intangible assets-net2,530  
Other current liabilities(36) 
Total purchase price$4,858  
The preliminary purchase price resulted in goodwill of $1.4 million in the industrial segment, all of which is deductible for tax purposes. Included within the $1.4 million of goodwill is $0.9 million of goodwill generated from contingent consideration which becomes deductible for tax purposes as the consideration is paid. Goodwill generated from Matchless is primarily attributable to expansion of polishing product line offerings within North America and leveraging current plant capacity to produce Matchless products. The preliminary allocation of the purchase price is based on the preliminary valuations performed to determine the fair value of the net assets as of the acquisition date. The amounts allocated to goodwill and intangible assets are based on preliminary valuations and are subject to adjustments to reflect the final valuations.
The preliminary values allocated to other intangible assets - net and the weighted average useful lives was as follows:
Gross Carrying AmountWeighted Average Useful Life (years)
Customer relationships$2,200  9.8
Trademarks200  1.8
Non-compete agreements130  4.8
$2,530  
The Company recognized $0.1 million of acquisition-related transaction costs that were expensed in the three months ended March 27, 2020. These costs are included in the condensed consolidated statements of operations as “Selling and administrative expenses.”
During the three months ended March 27, 2020, $0.6 million of net sales from Matchless were included in the Company's condensed consolidated statements of operations. Pro forma historical results of operations related to the acquisition of Matchless have not been presented as they are not material to the Company's condensed consolidated statements of operations.
Schaffner Manufacturing Company, Inc.
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 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 has been paid as of March 27, 2020. 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 condensed consolidated financial statements from April 1, 2019, the date of the acquisition.
The Company recognized $0.2 million of acquisition-related transaction costs that were expensed in the three months ended March 29, 2019. These costs are included in the condensed consolidated statements of operations as “Selling and administrative expenses.”
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 condensed consolidated statements of operations.

13


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


5.Net Sales
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 both the three months ended March 27, 2020 and March 29, 2019.
The engineered components segment operates principally as a supplier to Original Equipment Manufacturers (“OEM”) within the lawn and turf care, agriculture, construction and power sports 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 under 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: