Margin Expansion Continues
Announces Finishing Plant Consolidation
MILWAUKEE, Aug. 03, 2017 (GLOBE NEWSWIRE) — Jason Industries, Inc. (NASDAQ:JASN) (NASDAQ:JASNW) (“Jason” or the “Company”) today reported results for second quarter 2017.
Key financial results for the second quarter 2017 versus the year ago period include:
- Net sales of $172.5 million decreased 7.1 percent and included a negative 2.1 percent impact from the planned exit of non-core businesses in the margin expansion program and a negative 1.3 percent from foreign currency translation.
- Operating income of $9.9 million, or 5.7 percent of net sales, improved $2.8 million from 3.8 percent of net sales on improved operational results on lower sales and lower restructuring and corporate costs.
- Net loss of $3.5 million, or $0.17 diluted loss per share, increased $1.1 million or $0.04 per share, significantly impacted by a loss on the planned divestiture of the Acoustics European operations of $5.4 million net of tax, or $0.21 per share.
- Free cash flow was $14.2 million, an increase of $10.2 million, due to higher operating income, lower capital expenditures and a non-cash preferred dividend. Total liquidity was $101.1 million, an increase of $12.7 million.
On an adjusted basis, second quarter 2017 results versus the year ago period include:
- Adjusted EBITDA of $20.6 million, or 11.9 percent of net sales, improved $1.8 million from 10.1 percent of net sales, driven by margin expansion from improved operational efficiencies and lower selling and administrative expenses.
- Adjusted net income of $2.0 million, or $0.07 Adjusted earnings per share, improved $0.14 per share.
“While revenues decreased with lower volumes in certain end markets, margins improved in three of our four businesses with better operational performance. We increased our liquidity and made progress in lowering our leverage by improving operating income, generating cash and retiring debt,” said Brian Kobylinski, chief executive officer of Jason. “We also continue to gain traction with our targeted growth initiatives.”
Highlights during the quarter include:
- Total Cost Reduction and Margin Expansion program savings were $2.4 million in the second quarter with a total of $17.0 million since the inception of the program. Actions taken and announced to-date are expected to achieve $22 million in annual run-rate cost savings.
- Completed a sale leaseback of a core U.S. facility, generating $5.6 million in net proceeds.
- Repurchased $8.0 million Second Lien Term Loans for $6.1 million.
- In June, announced the closure of a Finishing manufacturing facility in Richmond, Virginia as part of the Company’s ongoing footprint rationalization. Operations will be consolidated into an existing facility in Richmond, Indiana by the end of the fourth quarter. The closure will achieve annual run-rate cost savings of $0.6 million beginning in the first quarter of 2018. As a result of this action, Jason expects to record a pre-tax restructuring charge to earnings of approximately $1.7 million in 2017 funded by the expected proceeds from sale of the facility.
- The Company expects to complete the sale of the Acoustics European operations in the third quarter of 2017 for a gross sales price of approximately $10 million. The divestiture will exit approximately $30 million of non-core revenue and will result in approximately $7 million of net cash proceeds from the sale of the business.
Key financial results within the segments for the second quarter 2017 versus the year ago period include:
- Finishing net sales of $49.8 million decreased $3.4 million, or 6.4 percent, including a negative foreign currency translation impact of 3.7 percent and a negative 2.6 percent impact from the exit of a non-core market in Brazil. Organic sales decreased 0.1 percent and were impacted by strategic decisions to exit low-margin business and products, partially offset by higher volumes in industrial end markets. Adjusted EBITDA was $7.3 million, or 14.7 percent of net sales, a decrease of $0.3 million from 14.4 percent of net sales. Adjusted EBITDA margin increased on improved pricing and lower administrative costs.
- Components net sales of $21.7 million decreased $2.9 million, or 11.9 percent, including a negative 9.9 percent impact from the exit of non-core product lines upon closure of the Buffalo Grove, Illinois facility. Organic sales decreased 2.0 percent with lower rail volumes, partially offset by increased volumes of smart utility meter components. Adjusted EBITDA was $2.5 million, or 11.3 percent of net sales, a decrease of $0.9 million from 13.5 percent of net sales, and was negatively impacted by lower volumes, unfavorable product mix, higher material costs and lower labor productivity, partially offset by savings resulting from the cost reduction program.
- Seating net sales of $44.9 million increased $0.2 million, or 0.5 percent, including a negative foreign currency translation impact of 0.5 percent. Organic sales increased 1.0 percent on improved pricing and higher volumes in the construction and power sports markets, partially offset by lower volumes in motorcycle and turf care. Adjusted EBITDA was $5.9 million, or 13.1 percent of net sales, an increase of $0.3 million from 12.6 percent of net sales, and was positively impacted by savings resulting from the cost reduction program, partially offset by material cost inflation.
- Acoustics net sales of $56.1 million decreased $7.1 million, or 11.3 percent, including a negative foreign currency translation impact of 0.3 percent. Organic sales decreased 11.0 percent due to automotive assembly plant shutdowns on declining light vehicle demand, partially offset by new platform awards. Adjusted EBITDA was $8.0 million, or 14.2 percent of net sales, an increase of $1.2 million from 10.7 percent of net sales due to improved labor and material productivity and savings resulting from the cost reduction program, partially offset by lower volumes.
- Corporate expenses of $3.1 million decreased $1.5 million on lower third-party consulting fees.
“Our ability to identify, prioritize and complete projects is increasing and we are moving toward the next wave of operational improvements and growth initiatives. While our revenues are impacted by weaker market conditions, we expect to maintain our profitability and reaffirm our EBITDA guidance for ongoing operations. We have more to do, but are encouraged by this quarter’s margin enhancement, cash flow generation and improved liquidity.”
Jason’s net sales outlook is impacted by lower than expected North American automotive production in Acoustics. The Adjusted EBITDA impact of lower volumes is expected to be offset by improved operating efficiencies and lower overall SG&A spend. The impact of the third quarter Acoustics European divestiture is expected to reduce 2017 net sales by $10 million and Adjusted EBITDA by $1 million.
For the full year 2017, Jason now expects net sales in the range of $625 to $640 million, previously $650 to $670 million. Adjusted EBITDA is now expected to be $63 to $66 million, previously $64 to $67 million, adjusted for the Acoustics European divestiture.
The Company will hold a conference call to discuss its second quarter results today at 10:00 a.m. Eastern time. A live webcast of the call may be accessed over the Internet from the Company’s Investor Relations website at investors.jasoninc.com. Participants should follow the instructions provided on the website to download and install the necessary audio applications. The conference call is also available by dialing 877-451-6152 (domestic) or 201-389-0879 (international). Participants should ask for the Jason Industries Second Quarter Earnings conference call.
A replay of the live conference call will be available beginning approximately one hour after the call. The replay will be available on the Company’s website or by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the replay passcode 13642137. The telephonic replay will be available until 11:59 pm (Eastern Time), August 10, 2017. The online replay will be available on the website immediately following the call.
About Jason Industries, Inc.
The Company is the parent company to a global family of manufacturing leaders within the finishing, components, seating, and automotive acoustics markets, including Osborn (Richmond, Ind. and Burgwald, Germany), Metalex (Libertyville, Ill.), Milsco (Milwaukee, Wis.), and Janesville Acoustics (Southfield, Mich.). Headquartered in Milwaukee, Wis., Jason employs more than 4,400 people in 13 countries.
To read the full release please visit the Jason Investor Relations website.