- Third Consecutive Quarter of Margin Expansion
- Additional Buyback of Second Lien Debt
- Narrows Full Year Guidance on the High End
MILWAUKEE, Nov. 02, 2017 — Jason Industries, Inc. (NASDAQ:JASN) (NASDAQ:JASNW) (“Jason” or the “Company”) today reported results for third quarter 2017.
Key financial results for the third quarter 2017 versus the year ago period include:
- Net sales of $155.4 million decreased 8.6 percent and included a negative 3.7 percent impact from the divestiture and planned exit of non-core businesses in the margin expansion program and a positive 1.2 percent from foreign currency translation.
- Operating income of $4.7 million, or 3.0 percent of net sales, increased $0.4 million from 2.5 percent of net sales on improved operational results on lower sales and higher restructuring costs.
- Net loss of $1.6 million, or $0.10 diluted loss per share, decreased $0.9 million or $0.03 per share, significantly impacted by a loss on the divestiture of the Acoustics European operations of $0.8 million net of tax, or $0.03 per share.
- Free cash flow was $0.4 million, an increase of $2.3 million, due to higher cash flows generated by operations and lower capital expenditures. Total liquidity was $98.3 million, an increase of $12.9 million vs prior year.
On an adjusted basis, third quarter 2017 results versus the year ago period include:
- Adjusted EBITDA of $16.1 million, or 10.4 percent of net sales, decreased $0.4 million and improved from 9.7 percent of net sales, driven by margin expansion from improved operational efficiencies.
- Adjusted net loss of $0.4 million, or $0.01 Adjusted loss per share, improved $0.05 per share.
“Our ability to execute operational improvement initiatives, self-help projects, and targeted growth initiatives resulted in margin expansion for Jason for the third consecutive quarter, and organic growth in two of our businesses,” said Brian Kobylinski, chief executive officer of Jason. “The Finishing business delivered over 4 percent organic growth, and we are encouraged by the progress resulting from our commercial focus in the business.”
Highlights during the quarter include:
- Total Cost Reduction and Margin Expansion program savings were $1.0 million in the third quarter with a total of $18.0 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 the sale of both the Acoustics European operations and the Finishing manufacturing facility in Richmond, Virginia as previously announced for combined net proceeds of $10.0 million. The Virginia facility will be fully consolidated into Finishing’s Richmond, Indiana location in the fourth quarter.
- Achieved organic growth of 4.3 percent in Finishing and 1.8 percent in Seating. Finishing organic growth was achieved through strength in industrial markets and share gains, while exiting low margin business and products.
- Seating was awarded significant new platforms by Mahindra North America (Mahindra), a world leader in tractor sales. The new business award results in supplying seats for Mahindra’s compact, mid-sized and full-sized utility tractor platforms for ten models spanning both open and cab designs. The contract includes significant volume over three years.
- Repurchased $12.0 million Second Lien Term Loans for $10.7 million.
Key financial results within the segments for the third quarter 2017 versus the year ago period include:
- Finishing net sales of $51.1 million increased $1.9 million, or 3.9 percent, including a positive foreign currency translation impact of 3.0 percent and a negative 3.4 percent impact from the exit of a non-core market in Brazil. Organic sales increased 4.3 percent and were impacted by higher volumes in industrial end markets, partially offset by strategic decisions to exit low-margin business and products. Adjusted EBITDA was $7.5 million, or 14.7 percent of net sales, an increase of $0.5 million from 14.3 percent of net sales. Adjusted EBITDA margin increased on improved pricing and continuous improvement initiatives.
- Components net sales of $19.9 million decreased $4.9 million, or 19.8 percent, including a negative 8.6 percent impact from the exit of non-core product lines upon closure of the Buffalo Grove, Illinois facility. Organic sales decreased 11.2 percent due to timing of smart utility meter volumes. Adjusted EBITDA was $2.4 million, or 12.3 percent of net sales, a decrease of $1.2 million from 14.7 percent of net sales, and was negatively impacted by lower volumes, unfavorable product mix, and higher material costs, partially offset by savings resulting from the cost reduction program.
- Seating net sales of $33.0 million increased $0.6 million, or 2.0 percent, including a positive foreign currency translation impact of 0.2 percent. Organic sales increased 1.8 percent on improved pricing and higher market volume and share gain in the construction market, partially offset by lower volumes in the motorcycle and turf care markets. Adjusted EBITDA was $2.6 million, or 8.0 percent of net sales, an increase of $0.1 million from 7.8 percent of net sales, and was positively impacted by continuous improvement initiatives and supply chain negotiation savings.
- Acoustics net sales of $51.5 million decreased $12.3 million, or 19.3 percent, including a positive foreign currency translation impact of 0.7 percent. Organic sales decreased 16.1 percent due to automotive assembly plant shutdowns on declining light vehicle demand and temporary 2016 takeover volumes related to a competitor bankruptcy. Adjusted EBITDA was $6.6 million, or 12.9 percent of net sales, a decrease of $0.8 million from 11.6 percent of net sales due to improved labor and material productivity, partially offset by lower volumes.
- Corporate expenses of $3.1 million decreased $1.0 million on lower third-party consulting fees and lower administration expenses.
“We began the year with a renewed focus on operational execution, cash generation, and leverage reduction and these goals remain clear as we head into the fourth quarter. We have executed on many initiatives through the first three quarters of 2017, allowing us to repurchase additional high-interest second lien debt while maintaining stable liquidity levels. With this improved execution we are confident in narrowing our 2017 guidance to the high end of our previous range.”
For the full year 2017, Jason is narrowing guidance to net sales of $630 to $640 million and adjusted EBITDA of $64 to $66 million, on the high end of the previous ranges of $625 to $640 million and $63 to $66 million, respectively. Jason is reaffirming free cash flow guidance of $9 to $13 million, which includes approximately $6 million of cash restructuring.
The Company will hold a conference call to discuss its third 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 Third Quarter 2017 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), November 9, 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.
Forward Looking Statements
This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “anticipate,” “believe,” “expect,” “estimate,” “plan,” “guidance,” and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Such forward-looking statements include projected financial information. Such forward-looking statements with respect to revenues, earnings, performance, strategies, prospects and other aspects of the Company’s businesses are based on current expectations that are subject to risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. Such factors include, but are not limited to, the level of demand for the Company’s products; competition in the Company’s markets; the Company’s ability to grow and manage growth profitably; the Company’s ability to access additional capital; changes in applicable laws or regulations; the Company’s ability to attract and retain qualified personnel; the possibility that the Company may be adversely affected by other economic, business and/or competitive factors; and other risks and uncertainties identified in the Company’s most recent Annual Report on Form 10-K, as such may be amended or supplemented by subsequent Quarterly Reports on Form 10-Q or other reports filed with the Securities and Exchange Commission.
The forward-looking statements contained in this press release are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you review and consider this press release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual results and cause them to differ materially from those anticipated in the forward-looking statements.
Any forward-looking statement made by us in this press release speaks only as of the date on which we make it. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
Non-GAAP and Other Company Information
Included in this press release are certain non-GAAP financial measures designed to complement the financial information presented in accordance with generally accepted accounting principles in the United States of America because management believes such measures are useful to investors. Because the Company’s calculations of these measures may differ from similar measures used by other companies, you should be careful when comparing the Company’s non-GAAP financial measures to those of other companies. In this earnings release, we disclose the following non-GAAP financial measures, and we reconcile these non-GAAP financial measures to the most directly comparable GAAP financial measures: EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings Per Share, Net Debt to Adjusted EBITDA, and Free Cash Flow.
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin – The Company defines EBITDA as net income (loss) before interest expense, provision (benefit) for income taxes, depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA, excluding the impact of operational restructuring charges and non-cash or non-operational losses or gains, including goodwill and long-lived asset impairment charges, gains or losses on disposal of property, plant and equipment, integration and other operational restructuring charges, transactional legal fees, other professional fees, purchase accounting adjustments, and non-cash share based compensation expense. The Company defines Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of net sales.
Management believes that Adjusted EBITDA provides a more clear picture of the Company’s operating results by eliminating expenses and income that are not reflective of the underlying business performance. The Company uses this metric to facilitate a comparison of operating performance on a consistent basis from period to period and to analyze the factors and trends affecting its segments. The Company’s internal plans, budgets and forecasts use Adjusted EBITDA as a key metric and the Company uses this measure to evaluate its operating performance and segment operating performance and to determine the level of incentive compensation paid to its employees.
Adjusted Net Income and Adjusted Earnings Per Share – The Company defines Adjusted Net Income and Adjusted Earnings Per Share (calculated on a diluted basis) as net income and earnings per share (as defined by GAAP), excluding the impact of operational restructuring charges and non-cash or non-operational losses or gains, including goodwill and long-lived asset impairment charges, gains or losses on disposal of property, plant and equipment, integration and other operational restructuring charges, transactional legal fees, other professional fees, purchase accounting adjustments, and non-cash share based compensation expense, net of their income tax impact. The tax rates used to calculate adjusted net income and adjusted earnings per share are based on a transaction specific basis. Adjusted earnings per share includes the impact of share based compensation to the extent it is dilutive in each period. Adjusted earnings per share includes the impact to Jason Industries common shares upon conversion of JPHI Holdings Inc. rollover shares and conversion of preferred stock. Management believes that Adjusted Net Income and Adjusted Earnings Per Share are useful in assessing the Company’s financial performance by eliminating expenses and income that are not reflective of the underlying business performance.
Net Debt to Adjusted EBITDA – The Company defines Net Debt to Adjusted EBITDA as current and long-term debt plus debt discounts less cash and cash equivalents, divided by pro forma Adjusted EBITDA for the trailing twelve months. Pro forma Adjusted EBITDA is calculated as Adjusted EBITDA as reported plus Adjusted EBITDA of acquisitions prior to the date of the acquisition during the trailing twelve months. Management believes that Net Debt to Adjusted EBITDA is useful in assessing the Company’s financial leverage.
Free Cash Flow – The Company defines Free Cash Flow as net cash flows from operating activities (as defined by GAAP) less capital expenditures and cash dividends on preferred stock. Management believes that Free Cash Flow is useful in assessing our ability to generate cash from business operations that is available for strategic capital decisions.
In addition to these non-GAAP financial measures, we also use the term “organic sales” to refer to GAAP net sales from existing operations excluding (i) sales from acquired businesses recorded prior to the first anniversary of the acquisition, (ii) sales from divested businesses or exited non-core businesses, and (iii) the impact of foreign currency translation. The impact of foreign currency translation is calculated as the difference between (a) the period-to-period change in results (excluding acquisitions, divestitures, and exited non-core businesses) and (b) the period-to-period change in results (excluding acquisitions, divestitures, and exited non-core businesses) after applying current period average foreign exchange rates to the prior year period. We use the term “organic sales growth” to refer to the measure of comparing current period organic sales with the corresponding prior year period organic sales.
For the full earnings announcement please visit our Investor Relations site.